Document:

Exhibit
10.2 (i)

 

EXECUTION
COPY

 

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

 

among

 

 

NORTHWESTERN CORPORATION, 

as Borrower,

 

 

The Several Lenders from Time to Time Parties
Hereto,

 

 

and

 

 

CREDIT SUISSE FIRST BOSTON, 

acting through its Cayman Islands Branch, 

as Administrative Agent, 

Lead Arranger and Sole Book Runner

 

 

Originally Dated as of December 17, 2002

 

And Amended and Restated as of November 10, 2003

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1.

  	
   

  	
   

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
   

  	
  Defined
  Terms

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
   

  	
  Other Definitional
  Provisions

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2.

  	
   

  	
   

  	
  AMOUNT AND TERMS OF COMMITMENTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
   

  	
  Commitments and Loans

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
   

  	
  Evidence of Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
   

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
   

  	
  [Intentionally
  Omitted]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.5

  	
   

  	
  Repayment
  of Loans

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.6

  	
   

  	
  Optional and Mandatory Prepayments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.7

  	
   

  	
  Interest
  Rate Conversion and Continuation Options

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.8

  	
   

  	
  Maximum Amounts
  of Eurodollar Tranches

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.9

  	
   

  	
  Interest
  Rates; Default Rate Payment Dates

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.10

  	
   

  	
  Computation of Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.11

  	
   

  	
  Inability to
  Determine Interest Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.12

  	
   

  	
  Pro
  Rata Treatment and Payments; Funding Reliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.13

  	
   

  	
  Illegality

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.14

  	
   

  	
  Requirements of Law

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.15

  	
   

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.16

  	
   

  	
  Indemnity

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.17

  	
   

  	
  Discretion
  of Lender as to Manner of Funding

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.18

  	
   

  	
  Change of
  Lending Office; Replacement Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.19

  	
   

  	
  Ratification
  of Collateral Documents; Priority

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.20

  	
   

  	
  No Discharge; Survival
  of Claims

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3.

  	
   

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
   

  	
  Financial Condition

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
   

  	
  No
  Change

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
   

  	
  Corporate
  Existence; Compliance with Law

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
   

  	
  Corporate
  Power; Authorization; Enforceable Obligations

  	
   

  

 

i

 

	
   

  	
  3.5

  	
   

  	
  No Legal Bar

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.6

  	
   

  	
  No Material Litigation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.7

  	
   

  	
  No Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.8

  	
   

  	
  Ownership of Property;
  Liens

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.9

  	
   

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.10

  	
   

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.11

  	
   

  	
  No Burdensome Restrictions

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.12

  	
   

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.13

  	
   

  	
  Margin Stock

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.14

  	
   

  	
  ERISA

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.15

  	
   

  	
  Holding
  Company; Investment Company Act; Other Regulations

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.16

  	
   

  	
  Purpose of Loans

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.17

  	
   

  	
  Environmental Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.18

  	
   

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.19

  	
   

  	
  Accuracy and
  Completeness of Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.20

  	
   

  	
  Leaseholds, Permits, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.21

  	
   

  	
  No Restrictive Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.22

  	
   

  	
  [Intentionally
  Omitted]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.23

  	
   

  	
  Montana First
  Mortgage Indenture

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.24

  	
   

  	
  South Dakota
  First Mortgage Indenture

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.25

  	
   

  	
  Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4.

  	
   

  	
   

  	
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
   

  	
  Conditions to Closing Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
   

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
   

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5.

  	
   

  	
   

  	
  AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
   

  	
  Financial
  Statements

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
   

  	
  Certificates; Other
  Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
   

  	
  Payment and
  Performance of Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
   

  	
  Maintenance of Existence

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
   

  	
  Maintenance of
  Property; Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.6

  	
   

  	
  Inspection
  of Property; Books and Records; Discussions

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.7

  	
   

  	
  Notices

  	
   

  

 

ii

 

	
   

  	
  5.8

  	
   

  	
  Environmental Laws

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.9

  	
   

  	
  ERISA

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.10

  	
   

  	
  Use of Proceeds

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.11

  	
   

  	
  Margin Stock

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.12

  	
   

  	
  Maintain
  Ownership of the Utility Business

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.13

  	
   

  	
  Bankruptcy Court

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.14

  	
   

  	
  Credit Ratings

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.15

  	
   

  	
  Excluded Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.16

  	
   

  	
  Bank One Credit Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6.

  	
   

  	
   

  	
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
   

  	
  Financial Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
   

  	
  Limitation on
  Fundamental Changes

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
   

  	
  Limitation
  on Transactions with Affiliates

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4

  	
   

  	
  Limitation on Liens

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.5

  	
   

  	
  Amendments of
  Organizational Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.6

  	
   

  	
  Limitation on
  Guarantee Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.7

  	
   

  	
  Limitation on Sale of
  Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.8

  	
   

  	
  Limitation on Investments,
  Loans and Advances

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.9

  	
   

  	
  Limitation on Dividends and
  Stock Repurchases

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.10

  	
   

  	
  Limitation on Indebtedness or
  Mandatory Redeemable Stock

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.11

  	
   

  	
  Limitation on Sales and
  Leasebacks and Operating Leases

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.12

  	
   

  	
  Limitation on Negative Pledge
  Clauses; Payment Restrictions

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.13

  	
   

  	
  Limitation on Businesses

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.14

  	
   

  	
  Limitation on Certain Prepayments
  and Amendments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.15

  	
   

  	
  Limitations on Subsidiaries’ Equity
  Interests

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.16

  	
   

  	
  Limitation on Release of Mortgaged
  Property; Limitation in Respect of Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.17

  	
   

  	
  Limitation on Subjecting Property, or
  Other Assets to the Lien of the Other Indenture

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.18

  	
   

  	
  Prohibition on Designating Class “A”
  Mortgages or Permitting Qualified Lien Bonds to Exist

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.19

  	
   

  	
  Limitation on Amendments or Supplements
  to the Indentures

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.20

  	
   

  	
  Prohibition on Second Mortgage Bonds

  	
   

  

 

iii

 

	
   

  	
  6.21

  	
   

  	
  Financial Contracts

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.22

  	
   

  	
  Chapter 11 Claims

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.23

  	
   

  	
  Bank One Credit Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7.

  	
   

  	
   

  	
  EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
   

  	
  Events of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8.

  	
   

  	
   

  	
  THE AGENTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
   

  	
  Appointment

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
   

  	
  Delegation of Duties

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.3

  	
   

  	
  Exculpatory Provisions

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.4

  	
   

  	
  Reliance
  by Agents

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.5

  	
   

  	
  Notice of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.6

  	
   

  	
  Non-Reliance
  on Agents and Other Lenders

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.7

  	
   

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.8

  	
   

  	
  Agent in Its Individual Capacity

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.9

  	
   

  	
  Successor Administrative Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9.

  	
   

  	
   

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
   

  	
  Amendments and Waivers

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
   

  	
  Notice

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.3

  	
   

  	
  No Waiver;
  Cumulative Remedies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.4

  	
   

  	
  Survival
  of Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.5

  	
   

  	
  Payment
  of Expenses and Taxes; Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.6

  	
   

  	
  Successors and Assigns; Participations
  and Assignments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.7

  	
   

  	
  Adjustments; Setoff

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.8

  	
   

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.9

  	
   

  	
  Effectiveness

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.10

  	
   

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.11

  	
   

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.12

  	
   

  	
  Integration

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.13

  	
   

  	
  GOVERNING
  LAW

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.14

  	
   

  	
  Submission
  To Jurisdiction Waivers

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.15

  	
   

  	
  Acknowledgments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.16

  	
   

  	
  Waivers of Jury Trial

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.17

  	
   

  	
  Conflict with Orders

  	
   

  

 

iv

 

	
   

  	
  9.18

  	
   

  	
  Waiver of Defaults under Original Loan
  Agreement

  	
   

  

 

v

 

EXHIBITS AND SCHEDULES

 

	
  Exhibit A-1

  	
  Form of Term Note

  
	
  Exhibit A-2

  	
  Form of QFL Note

  
	
  Exhibit B

  	
  Form of Notice of Interest Rate Conversion

  
	
  Exhibit C

  	
  Form of Closing Certificate

  
	
  Exhibit D

  	
  Form of Assignment and Assumption Agreement

  
	
   

  	
   

  
	
   

  	
   

  
	
  Schedule I

  	
  Lending Offices and Commitments of Lenders

  
	
  Schedule P

  	
  Permitted Pre-Petition Payments

  
	
  Schedule 3.4a

  	
  First Mortgage Approvals

  
	
  Schedule 3.4b

  	
  Required Consents of Governmental Authorities

  
	
  Schedule 3.8

  	
  Exceptions to Title to Borrower’s Properties

  
	
  Schedule 3.12

  	
  Taxes

  
	
  Schedule 3.14

  	
  ERISA

  
	
  Schedule 3.15

  	
  Regulations Limiting Indebtedness

  
	
  Schedule 3.17

  	
  Environmental Matters

  
	
  Schedule 3.25

  	
  Subsidiaries

  
	
  Schedule 6.3

  	
  Transactions with Affiliates

  
	
  Schedule 6.4

  	
  Liens Securing Debt for Borrowed Money

  
	
  Schedule 6.6

  	
  Guarantee Obligations

  
	
  Schedule 6.7

  	
  Asset Sales

  
	
  Schedule 6.8

  	
  Investments

  
	
  Schedule 6.10

  	
  Indebtedness, Mandatory Redeemable Stock and Preferred Stock

  

 

vi

 

AMENDED AND RESTATED CREDIT
AGREEMENT, dated as of November 10, 2003, among NORTHWESTERN CORPORATION, a
Delaware corporation, as debtor and debtor in possession under Chapter 11 of
the Bankruptcy Code (together with its successors and assigns, the “Borrower”),
the several banks and other financial institutions from time to time party
hereto (the “Lenders”), and CREDIT SUISSE FIRST BOSTON, acting through
its Cayman Islands Branch, as Administrative Agent (in such capacity the “Administrative
Agent”), Lead Arranger and Sole Book Runner.

 

PRELIMINARY
STATEMENTS

 

1.             The Borrower,
the Administrative Agent and certain lenders are parties to a Credit Agreement
dated as of December 17, 2002, as amended (the “Original Loan Agreement”),
pursuant to which the Lenders extended credit to the Borrower in the form of
term loans in an aggregate principal amount of $390,000,000.  The Loans are secured by certain first
mortgage bonds to, and registered in the name of, the Collateral Agent for the
ratable benefit of the Lenders (it being understood that payments on the Loans
shall be deemed payments on such first mortgage bonds and payments on such
first mortgage bonds shall be applied to the payment of the Loans).

 

2.             On September
14, 2003 (the “Petition Date”), the Borrower filed a voluntary petition
with the Bankruptcy Court initiating the Case and has continued in possession
of its assets and in the management of its business pursuant to Sections 1107
and 1108 of the Bankruptcy Code.

 

3.             In connection
with the commencement of the Case, the parties hereto desire to assume, amend,
restate and modify, but not extinguish, the Original Loan Agreement in its
entirety as hereinafter set forth, and waive any Defaults or Events of Default
that may exist under the Original Loan Agreement arising solely from the
commencement of the Case.

 

4.             In
consideration of the foregoing premises and the mutual covenants herein
contained and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree to amend and restate the Original Loan Agreement
as follows:

 

ARTICLE 1.  DEFINITIONS

 

1.1           Defined Terms.  As used in this Agreement, the following
terms shall have the following meanings:

 

“Administrative Agent”
shall have the meaning ascribed thereto in the heading hereto and shall include
such other Lender or financial institution as shall have subsequently been
appointed as the successor Administrative Agent pursuant to Section 8.9.

 

“Affected Lender”
shall have the meaning ascribed thereto in Section 2.18.

 

“Affiliate” shall
mean, as to any Person, any other Person which, directly or indirectly, is in
control of (including all directors and officers of such Person), is controlled
by, or is under

 

 

common control with, such
Person.  For purposes of this
definition, “control” of a Person shall mean the power, directly or indirectly,
to direct or cause the direction of the management and policies of such Person,
whether by ownership of voting securities, by contract or otherwise.

 

“Agents” shall have
the meaning ascribed thereto in Section 8.1.

 

“Agreement” shall
mean this Amended and Restated Credit Agreement, as amended, supplemented or
otherwise modified from time to time.

 

“Alternate Base Rate”
shall mean, on any particular date, a rate of interest per annum equal to the
higher of

 

(a)           the rate of interest most
recently announced by CSFB as its prime rate in effect at its principal office
in New York City (which rate is not necessarily intended to be the lowest rate
of interest charged by CSFB in connection with extensions of credit); and

 

(b)           the Federal Funds Rate for
such date plus 0.50%.

 

“Alternate Base Rate
Loans” shall mean Loans the rate of interest applicable to which is based
upon the Alternate Base Rate.

 

“Applicable Prepayment
Premium” shall mean, as of any date of determination, an amount equal to
(a) during the period from and after the Closing Date up to the date that is
the first anniversary of the Closing Date, 1.00% times the outstanding principal balance of the Loans on the
date immediately prior to the date of determination, and (b) during the period
from and including the date that is the first anniversary of the Closing Date
up to the Maturity Date, 0.50% times
the outstanding principal balance of the Loans on the date immediately prior to
the date of determination.

 

“Approved Fund” shall
mean, with respect to any Lender that is a fund or commingled investment
vehicle that invests in commercial loans, any other fund that invests in
commercial loans and is managed or advised by the same investment advisor as
such Lender or by an Affiliate of such investment advisor.

 

“Arranger” shall mean
CSFB and its successors.

 

“Asset Disposition”
shall mean (i) any sale, lease or other disposition (including (x) any such
transaction effected by way of merger or consolidation and (y) any
sale-leaseback transaction, whether or not involving a Financing Lease) (any
such transaction, a “disposition”), by the Borrower or any of its Subsidiaries,
of any asset subject to the Lien of an Indenture (other than any disposition of
any asset released from the Lien of an Indenture as described in clause (i),
(ii) or (iv) of Section 6.16), and (ii) receipt by the Borrower or any
of its Subsidiaries of any proceeds of insurance, condemnation awards (or
payments in lieu thereof) or indemnity payments payable by reason of theft,
loss, physical destruction or damage, taking or similar event with respect to
any equipment, fixed asset, real property or other asset subject to the Lien of
an Indenture (other than as permitted in clause (iv) of Section 6.16).

 

2

 

“Assignee” shall have
the meaning ascribed thereto in Section 9.6(c).

 

“Assignment and
Assumption Agreement” shall have the meaning ascribed thereto in Section
9.6(c).

 

“Bank One Claim”
shall mean the claim, in an aggregate principal amount not to exceed $100,000,000,
together with all interest, fees and other amounts due with respect thereto
pursuant to the Bank One Credit Documents (as modified and amended to the
extent permitted under this Agreement), without the prior written consent of
the Administrative Agent and the Required Lenders, of the secured parties under
the Bank One Credit Documents, which claim shall be senior to the Superpriority
Claim of the Administrative Agent and the Lenders against the Borrower.

 

“Bank One Credit
Agreement” shall mean the Secured Superpriority Debtor in Possession Credit
and Guaranty Agreement dated as of September 19, 2003, among NorthWestern
Corporation, a debtor and debtor in possession, as borrower, the other loan
parties party thereto as guarantors, the lenders party thereto, Bank One, N.A.,
as initial lender, agent and LC issuer, and Banc One Capital Markets, Inc., as
lead arranger and sole book runner, as the same may be amended, modified or
supplemented from time to time.

 

“Bank One Credit
Documents” shall mean the Bank One Credit Agreement and all other
documents, instruments and agreements from time to time delivered in accordance
with or otherwise relating to the Bank One Credit Agreement.

 

“Bank One Debt” shall
mean Indebtedness under the Bank One Credit Documents.

 

“Bankruptcy Code”
shall mean Title 11 of the U.S. Code (11 U.S.C. § 101 et  seq.),
as amended, reformed, or otherwise modified from time to time, and any rule or
regulation issued thereunder.

 

“Bankruptcy Court”
shall mean the United States Bankruptcy Court for the District of Delaware or
any other court having jurisdiction over the Case from time to time.

 

“Benefited Lender”
shall have the meaning ascribed thereto in Section 9.7(a).

 

“Blue Dot” shall
mean, collectively, Blue Dot Services, Inc., a Delaware corporation and an
indirect wholly owned subsidiary of the Borrower, and its Subsidiaries.

 

“Bond Collateral
Agreement” shall mean a bond collateral agreement between the Borrower and
the Collateral Agent for the benefit of the Secured Parties (as therein defined)
in form and substance reasonably satisfactory to the Borrower and the
Collateral Agent.

 

“Borrower” shall have
the meaning ascribed thereto in the heading hereto.

 

“Business” shall have
the meaning ascribed thereto in Section 3.17(a).

 

“Business Day” shall
mean a day other than a Saturday, Sunday or other day on which commercial banks
in New York City are authorized or required by law to close; provided,

 

3

 

however, that, when used in connection with a Eurodollar Loan, the
term “Business Day” shall also exclude any day on which banks are not
open for dealings in Dollars in the interbank market in London, England.

 

“Capital Expenditures”
of any Person shall mean, for any period, without duplication, all expenditures
(whether paid in cash or other consideration) during such period that, in
accordance with GAAP, are or should be included in additions to property, plant
and equipment or similar items reflected in the statement of cash flows for
such period for such Person.

 

“Capital Stock” shall
mean any and all shares, interests, participations or other equivalents
(however designated) of capital stock of a corporation, any and all equivalent
ownership interests in a Person (other than a corporation) and any and all
warrants or options to purchase any of the foregoing.

 

“Carve-Out” shall
mean, with respect to the Case, (a) the unpaid fees of the clerk of the
Bankruptcy Court and the United States Trustee pursuant to 28 U.S.C. § 1930,
(b) the unpaid fees and expenses of professionals incurred by the Borrower and
any statutory committees appointed in the Case disclosed to the Administrative
Agent prior to the occurrence of a Default or an Event of Default and allowed
by an order of the Bankruptcy Court, whether paid prior to or after the
occurrence of a Default or an Event of Default, and (c) payment of any unpaid
fees and expenses of professionals incurred by the Borrower and any statutory
committees appointed in the Case and disclosed to the Administrative Agent
after the occurrence of a Default or an Event of Default and allowed by an
order of the Bankruptcy Court not to exceed $5,000,000 in the aggregate, in
each case exclusive of any retainers received by such professionals in
connection with the Case (it being understood and agreed that the Carve-Out
shall not constitute in any manner a carve-out with respect to the security
interests of the Administrative Agent and the Secured Parties in the Collateral
granted pursuant to the Loan Documents).

 

“Case” shall mean the
bankruptcy case commenced by the voluntary petition for relief under Chapter 11
of the Bankruptcy Code filed by the Borrower in the Bankruptcy Court on
September 14, 2003, and assigned Case No. 03-12872(CGC).

 

“Cash Equivalents”
shall mean (a) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed or insured by the United States
Government or any agency thereof, (b) certificates of deposit and eurodollar
time deposits with maturities of one year or less from the date of acquisition
and overnight bank deposits of any Lender and certificates of deposit with
maturities of one year or less from the date of acquisition and overnight bank
deposits of any other commercial bank having capital and surplus in excess of
$500,000,000, (c) commercial paper of any issuer rated at least A-2 by Standard
& Poor’s or P-2 by Moody’s, (d) additional money market investments with
maturities of one year or less from the date of acquisition rated at least A1
or AA by Standard & Poor’s or P-1 or Aa by Moody’s and (e) tax-exempt debt
obligations of any State of the United States or of any county or other
municipal government subdivision of any State of the United States with
maturities of one year or less from the date of acquisition rated at the
highest investment grade rating by Standard & Poor’s or by Moody’s, or
publicly traded or open-end bond funds that invest exclusively in such
tax-exempt debt obligations.

 

4

 

“Change of Control”
shall mean the occurrence of any of the following:

 

(a)           except in connection with the issuance of any
Capital Stock pursuant to a Permitted Reorganization Plan, any Person or
“group” (within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934) (i) shall have acquired beneficial ownership of 40% or more of the
aggregate outstanding classes of Capital Stock having voting power in the
election of directors of the Borrower or (ii) shall obtain the power (whether
or not exercised) to elect a majority of the Borrower’s directors;

 

(b)           except in connection with a Permitted Reorganization
Plan, a majority of the persons who comprised the Board of Directors of the
Borrower on the Original Signing Date shall be replaced, unless such replacement
shall have been approved by at least two-thirds of the Board of Directors of
the Borrower then still in office who either were members of such Board of
Directors on the Original Signing Date or whose election as a member of such
Board of Directors was previously so approved; or

 

(c)           the Borrower shall be liquidated or dissolved.

 

“Closing Date” shall
mean the date on which the conditions precedent set forth in Section 4.1
shall be satisfied or waived by the Required Lenders.

 

“Code” shall mean the
Internal Revenue Code of 1986, as amended from time to time.

 

“Collateral” shall
have the meaning ascribed thereto in the Collateral Documents.

 

“Collateral Agent”
shall mean CSFB as collateral agent under the Bond Collateral Agreement.

 

“Collateral Documents”
shall mean a collective reference to the First Mortgage Bonds, the Bond
Collateral Agreement, the Supplemental Indentures and such other documents
executed and delivered in connection with the attachment and perfection of the
Collateral Agent’s security interest and liens arising thereunder, including,
without limitation, UCC financing statements filed in connection therewith.

 

“Commitment” shall
mean, as to any Lender, the obligation of such Lender to make a Loan to the
Borrower in a principal amount not to exceed the amount set forth opposite such
Lender’s name on Schedule I. 
As of the Original Closing Date, the aggregate amount of the Commitments
was $390,000,000.

 

“Commitment Percentage”
shall mean, as to any Lender at any time, the percentage which such Lender’s
Commitment then constitutes of the aggregate Commitments (or, at any time after
the Original Closing Date, the percentage which the aggregate principal amount
of such Lender’s Loans then outstanding constitutes of the aggregate principal
amount of the Loans then outstanding).

 

“Commonly
Controlled Entity” shall
mean an entity, whether or not incorporated, which is under common control with
the Borrower and/or any Subsidiary within the meaning of Section

 

5

 

4001(a)(14) of ERISA or is
part of a group which includes the Borrower and which is treated as a single
employer under Section 414 of the Code.

 

“Compliance Certificate”
shall have the meaning ascribed thereto in Section 5.2(b).

 

“Consolidated EBITDAR”
shall mean, with reference to any period, Consolidated Net Income (provided,
however, that Consolidated Net Income shall not include the amount of
insurance proceeds received in reimbursement of attorney and other professional
fees incurred in respect of securities litigation involving the Borrower and
its Subsidiaries (including the Excluded Subsidiaries)) plus, to the extent
deducted from revenues in determining Consolidated Net Income, (a) Consolidated
Interest Expense, (b) expense for taxes paid or accrued net of tax refunds
received during such period or expected to be received within 60 days
thereafter, (c) depreciation, (d) amortization and other non-cash charges, (e)
extraordinary losses (as determined in accordance with GAAP) incurred other
than in the ordinary course of business and (f) fees, expenses and
non-recurring restructuring charges related to the Case and this Agreement in
an aggregate amount not to exceed $40,000,000, minus, to the extent included in
Consolidated Net Income, extraordinary gains (as determined in accordance with
GAAP) realized other than in the ordinary course of business, all calculated
for the Borrower and its Subsidiaries on a consolidated basis for such period
(unless otherwise stated).

 

“Consolidated Group”
shall mean the Borrower and its Consolidated Subsidiaries.

 

“Consolidated Interest
Expense” shall mean, with reference to any period, the interest expense of
the Consolidated Group calculated on a consolidated basis for such period.

 

“Consolidated Net Income”
shall mean, with reference to any period, the net income (or loss) of the
Consolidated Group calculated on a consolidated basis for such period.

 

“Consolidated Recourse
Interest Expense” shall mean, for any period, the aggregate amount of
interest expense of the Consolidated Group in respect of Debt for Borrowed
Money minus, to the extent
included therein, (a) the aggregate amount of interest accrued on Non-Recourse
Debt, (b) non-cash charges, determined on a consolidated basis in accordance
with GAAP and (c) payments made in the form of dividends under existing
mandatorily redeemable preference securities of any trust which is a Subsidiary
(or under any refinancing thereof on substantially similar terms).

 

“Consolidated Subsidiary”
shall mean, at any time, any Subsidiary or other Person the accounts of which
are consolidated with the Borrower in its consolidated financial statements as
of such time; provided that in any event, other than in connection with
the determination of Consolidated EBITDAR, the term “Consolidated Subsidiary”  shall not include any Excluded Subsidiary.

 

“Contractual Obligation”
shall mean as to the Borrower or any Subsidiary, any provision of any security
issued by the Borrower or any Subsidiary or of any agreement, instrument or other
undertaking to which the Borrower or any Subsidiary is a party or by which it
or any of its property is bound.

 

“Cornernorth” shall
mean, collectively, Cornernorth, LLC and its Subsidiaries.

 

6

 

“CSFB” shall mean
Credit Suisse First Boston.

 

“Debt for Borrowed Money”
shall mean, as to any Person, without duplication, (a) all obligations of such
Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all Financing Lease
obligations of such Person, and (d) all obligations of such Person under
synthetic leases, tax retention operating leases, off-balance sheet loans or
other off-balance sheet financing products that, for tax purposes, are
considered indebtedness for borrowed money of the lessee but are classified as
operating leases under GAAP.

 

“Default” shall mean
any of the events specified in Section 7.1, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.

 

“Dollars” and “$”
shall mean dollars in lawful currency of the United States of America.

 

“Domestic Lending Office”
shall mean, initially, the office of each Lender designated as such in Schedule
I (or the office of an Assignee designated pursuant to an Assignment and
Assumption Agreement), and thereafter, such other office of such Lender, if
any, which shall be making or maintaining Alternate Base Rate Loans as may be
designated from time to time by notice from such Lender to the Borrower and the
Administrative Agent.

 

“Emergence Time”
shall mean the substantial consummation (as defined in Section 1101 of the
Bankruptcy Code) of a Permitted Reorganization Plan that is confirmed pursuant
to a final, non-appealable order entered by the Bankruptcy Court, but in no
event shall such date be later than the effective date of such Permitted
Reorganization Plan.

 

“Environmental Laws”
shall mean any and all foreign, Federal, state, local or municipal laws, rules,
orders, regulations, statutes, ordinances, codes, decrees, judgments, permits,
licenses, registrations or authorizations or requirements of any Governmental
Authority or other Requirements of Law (including common law) regulating,
relating to or imposing liability or standards of conduct concerning the health
and safety of humans and other living organisms as it relates to exposures to
Materials of Environmental Concern, protection of natural resources or the
environment, including the manufacture, distribution in commerce, and use of,
or Release to the environment of, Materials of Environmental Concern, as now or
may at any time hereafter be in effect.

 

“Equity Issuance”
shall mean the issuance of any Capital Stock by the Borrower other than (i)
Capital Stock issued in the ordinary course of business in connection with
director or employee stock purchase plans and arrangements and other director
or employee compensation arrangements and (ii) Capital Stock issued in the
ordinary course of business under any dividend reinvestment and stock purchase
plan maintained by the Borrower.

 

“ERISA” shall mean
the Employee Retirement Income Security Act of 1974, as amended from time to
time.

 

“Eurodollar Base Rate”
shall mean, with respect to any Eurodollar Loan for any Interest Period, the
rate per annum determined by the Administrative Agent at approximately 11:00
a.m.

 

7

 

(London time) on the date
which is two Business Days prior to the beginning of such Interest Period by reference
to the British Bankers’ Association Interest Settlement Rates for deposits in
Dollars (as set forth by any service selected by the Administrative Agent which
has been nominated by the British Bankers’ Association as an authorized
information vendor for the purpose of displaying such rates) for a period equal
to such Interest Period; provided that, to the extent that an interest
rate is not ascertainable pursuant to the foregoing provisions of this
definition, the “Eurodollar Rate” shall be the interest rate per annum
determined by the Administrative Agent to be the average of the rates per annum
at which deposits in Dollars are offered for such Interest Period to major
banks in the London interbank market in London, England by the Administrative Agent
at approximately 11:00 a.m.  (London
time) on the date which is two Business Days prior to the beginning of such
Interest Period.  Each determination by
the Administrative Agent pursuant to this definition shall be conclusive absent
manifest error.

 

“Eurodollar Loans”
shall mean Loans the rate of interest applicable to which is based upon the
Eurodollar Rate.

 

“Eurodollar Office”
shall mean, initially, the office of each Lender designated as such in Schedule
I (or the office of an Assignee designated pursuant to an Assignment and
Assumption Agreement), and thereafter, such other office of such Lender, if
any, which shall be making or maintaining Eurodollar Loans as may be designated
from time to time by notice from such Lender to the Borrower and the Administrative
Agent.

 

“Eurodollar Rate”
shall mean with respect to each day during each Interest Period pertaining to a
Eurodollar Loan, a rate per annum determined for such day in accordance with
the following formula:

 

	
  Eurodollar Base Rate

  
	
  1.00 - Eurodollar Reserve Requirements

  

 

“Eurodollar Reserve
Requirements” shall mean, for any day as applied to a Eurodollar Loan, the
aggregate (without duplication) of the rates (expressed as a decimal) of
reserve requirements in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves) under any regulations of
the Board of Governors of the Federal Reserve System or other Governmental
Authority having jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D of such Board) maintained by a
member bank of such System.

 

“Eurodollar Tranche”
shall mean all Loans which consist of Eurodollar Loans incurred on the Original
Closing Date (or which result from continuations or conversions on a given date
after the Original Closing Date) and have the same Interest Period.

 

“Event of Default” shall
mean any of the events specified in Section 7.1; provided that
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.

 

“Excluded Subsidiaries”
shall mean, collectively, Blue Dot, Cornernorth, Expanets and Clark Fork and
Blackfoot, LLC.

 

8

 

“Expanets” shall
mean, collectively, Expanets, Inc., a Delaware corporation and an indirect
subsidiary of the Borrower, and its Subsidiaries.

 

“Facility” shall mean
the credit facility provided to the Borrower on the terms and conditions set
forth in this Agreement.

 

“Federal Funds Rate”
shall mean for any particular date, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business Day, the
Federal Funds Rate for such day shall be the average rate charged to the
Administrative Agent (in its individual capacity) on such day on such
transactions as determined by the Administrative Agent.

 

“FERC” shall mean the
Federal Energy Regulatory Commission.

 

“Final Order” shall
mean an order of the Bankruptcy Court in the Case, entered in any event not
later than December 11, 2003, acceptable in all respects to the Administrative
Agent and the Lenders on an application or motion by the Borrower, such motion
to be satisfactory in form and substance to the Lenders, which order shall have
been entered on such notice to such parties as shall be satisfactory to the
Administrative Agent and the Lenders, approving the Facility on a final basis
and confirming the granting of the Liens described in Section 2.19 and
the other Loan Documents, and which order has not been stayed, reversed,
modified, vacated or overturned.

 

“Financial Contract”
of a Person shall mean (a) any exchange-traded or over-the-counter futures,
forward, swap or option contract or other financial instrument with similar
characteristics or (b) any Rate Management Transaction.

 

“Financing Lease”
shall mean any lease of property, real or personal, the obligations of the
lessee in respect of which are required in accordance with GAAP to be
capitalized on a balance sheet of the lessee.

 

“Financing Lease
Obligations” of any Person shall mean the aggregate amount of the
obligations of such Person under Financing Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with GAAP.

 

“First Mortgage Approvals”
shall have the meaning ascribed thereto in Section 3.4.

 

“First Mortgage Bonds”
shall mean the first mortgage bonds issued, pursuant to the Indentures, to and
registered in the name of the Collateral Agent.

 

“Foreign Subsidiaries”
shall mean, collectively, Risk Partners Assurance, Ltd., a Bermuda company, and
Canadian-Montana Pipe Line Corporation, a Canadian company.

 

9

 

“GAAP” shall mean
generally accepted accounting principles in the United States of America as in
effect from time to time consistent with those utilized in preparing the
audited financial statements referred to in Section 3.1; provided
that, after the Emergence Time, in the event that any change in accounting
principles required by the promulgation of any rule, regulation, pronouncement
or opinion by the Financial Accounting Standards Board of the American
Institute of Certified Public Accountants (or successor thereto or any agency
with similar functions) results in a change in the calculation of any of the
financial covenants hereunder, the Required Lenders and the Borrower will in
good faith enter into negotiations in order to reevaluate such financial
covenants in light of such change; and provided, further, that
this provision shall not operate as a waiver of any right, remedy, power or
privilege available to any Lender under any provision of any Loan Document or
pursuant to any applicable law.

 

“Governmental Authority”
shall mean any national government (United States or foreign), any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any agency, authority, instrumentality, or regulatory body of
any thereof.

 

“Granting Lender”
shall have the meaning ascribed thereto in Section 9.6(f).

 

“Guarantee Obligation”
shall mean as to any Person (the “guaranteeing person”),  any
obligation of the guaranteeing person (including, without limitation, any
reimbursement, counter-indemnity or similar obligation), guaranteeing or in
effect guaranteeing any Indebtedness, lease, dividend or other similar
obligation (the “primary obligation”) of any other third Person (the “primary
obligor”) in any manner, whether directly or indirectly, including, without
limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of any such primary obligation or (y) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth, liquidity or solvency of the primary obligor, (iii)
to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (iv) otherwise to assure
or hold harmless the owner of any such primary obligation against loss in
respect thereof; provided that the term Guarantee Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business.  The amount of any
Guarantee Obligation of any guaranteeing person as of any date of determination
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guarantee Obligation shall be
such guaranteeing person’s maximum reasonably anticipated liability in respect
thereof as determined by the Borrower in good faith.

 

“Indebtedness” of any
Person at any date shall mean, without duplication, (a) Debt for Borrowed
Money of such Person, (b) all indebtedness of such Person for the deferred
purchase price of property or services (other than current trade liabilities
incurred in the ordinary course of

 

10

 

business and payable in
accordance with customary practices), (c) all outstanding reimbursement
obligations of such Person in respect of outstanding letters of credit,
acceptances and similar obligations issued or created for the account of such
Person, (d) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable for
the payment thereof, (e) liabilities arising under Rate Management Transactions
(other than interest rate caps) of such Person and (f) all Guarantee
Obligations of such Person.

 

“Indentures” shall
mean collectively the Montana First Mortgage Indenture and the South Dakota
First Mortgage Indenture.

 

“Insolvency” shall
mean with respect to any Multiemployer Plan, the condition that such plan is
insolvent within the meaning of Section 4245 of ERISA.

 

“insolvent” shall
mean pertaining to a condition of Insolvency.

 

“Intellectual Property”
shall have the meaning set ascribed thereto in Section 3.10.

 

“Interest Payment Date”
shall mean (a) as to any Alternate Base Rate Loan, the last Business Day of
each March, June, September and December to occur while such Loan is
outstanding, (b) as to any Eurodollar Loan having an Interest Period of three
months or less, the last day of such Interest Period, and (c) as to any
Eurodollar Loan having an Interest Period longer than three months, each day
which is three months, or a whole multiple thereof, after the first day of such
Interest Period and the last day of such Interest Period.

 

“Interest Period”
with respect to any Eurodollar Loan shall mean:

 

(a)           initially,
the period commencing on the borrowing or conversion date, as the case may be,
with respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its Notice of Interest Rate
Conversion given with respect thereto; and

 

(b)           thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to the last day of
the then current Interest Period with respect thereto;

 

provided that, the foregoing provisions
relating to Interest Periods are subject to the following:

 

(i)            if any Interest Period
pertaining to a Eurodollar Loan would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day (and, with respect to payments of principal and interest thereon,
shall be payable at the then applicable rate during such extension) unless the
result of such extension would be to carry such Interest Period into another
calendar month in which event such Interest Period shall end on the immediately
preceding Business Day;

 

11

 

(ii)           no Interest Period shall be
selected which would extend beyond the Maturity Date;

 

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

 

(iv)          the Borrower shall select
Interest Periods so as not to require a payment or prepayment of any Eurodollar
Loan during an Interest Period for such Loan.

 

“Interim Order” shall
have the meaning set forth in Section 4.1(b).

 

“Investment” shall
have the meaning ascribed thereto in Section 6.8.

 

“ISO” shall mean any
“Independent System Operator” or similar entity approved by FERC to manage
transmission systems owned by the Borrower.

 

“Lender” shall have the
meaning ascribed thereto in the heading hereto.

 

“Lien” shall mean any
mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), charge or other security interest or any preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement and any Financing Lease having substantially the same
economic effect as any of the foregoing and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction, other than any such filing in connection with any true lease or
operating lease).

 

“Loan Documents”
shall mean collectively, this Agreement, the Collateral Documents, the Notes
and each other agreement, instrument or certificate issued, executed and
delivered to the Administrative Agent, the Collateral Agent, or the Lenders
hereunder or thereunder or pursuant hereto or thereto (in each case as the same
may be amended, restated, supplemented, extended, renewed or replaced from time
to time), and “Loan Document” means any one of them.

 

“Loans” shall mean
the loans made by the Lenders to the Borrower pursuant to this Agreement.

 

“Mandatory Redeemable
Stock” shall mean, with respect to any Person, any share of such Person’s
Capital Stock, to the extent that it is (a) redeemable, payable or required to
be purchased or otherwise retired or extinguished, or convertible into any
Indebtedness or other liability, obligation, covenant or duty of or binding
upon, or any term or condition to be observed by or binding upon such Person or
any of its assets, (i) at a fixed or determinable date, whether by operation of
a sinking fund or otherwise, (ii) at the option of any other Person or (iii)
upon the occurrence of a condition not solely within the control of such Person

 

12

 

such as a redemption
required to be made utilizing future earnings, or (b) convertible into
Capital Stock which has the features set forth in clause (a).

 

“Material Adverse Effect”
shall mean a material adverse effect on (a) the business, operations, property,
condition (financial or otherwise) or prospects of the Borrower and its
Consolidated Subsidiaries (taken as a whole), (b) the validity or
enforceability of this Agreement, any of the Notes, any of the First Mortgage
Bonds, any of the other Loan Documents or either Indenture, or the rights or
remedies of the Administrative Agent, the Collateral Agent, or the Lenders
hereunder or thereunder (or the trustee under an Indenture), (c) the property
(taken as a whole) subject to the Lien of an Indenture, or (d) the perfection,
priority or enforceability of the Lien of the Montana First Mortgage Indenture,
the South Dakota Indenture or any other Collateral Document.

 

“Materials of
Environmental Concern” shall mean any gasoline or petroleum (including
crude oil or any fraction thereof) or petroleum products or any other
pollutant, contaminant, hazardous substance, hazardous waste, special waste,
toxic substance, radioactive material, or other compound, element, material or
substance in any form whatsoever (including products) regulated, restricted or
addressed by or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.

 

“Maturity Date” shall
mean December 1, 2006.

 

“Montana First Mortgage
Indenture” shall mean the Mortgage and Deed of Trust dated October 1, 1945
from the Borrower (as successor to Montana Power) to the trustee named therein,
as supplemented and amended to the date hereof.

 

“Montana Power” shall
mean The Montana Power, L.L.C., a Montana limited liability company, acquired
by the Borrower on February 15, 2002.

 

“Montana Utility Business”
shall mean the regulated electric and natural gas transmission and distribution
assets and businesses owned and operated by the Borrower in the State of
Montana or otherwise subject to the Lien of the Montana First Mortgage Indenture.

 

“Moody’s” shall mean
Moody’s Investors Service, Inc.

 

“Multiemployer Plan”
shall mean a plan which is a “multiemployer plan” as defined in Section 3(37)
or 4001(a)(3) of ERISA.

 

“Net Cash Proceeds”
shall mean, with respect to any Reduction Event, an amount equal to the cash
proceeds received by the Borrower from or in respect of such Reduction Event
(including any cash received by way of deferred payment pursuant to a
promissory note, receivable or otherwise, but only as and when received), less
(a) any investment banking and underwriting fees and any other fees and
expenses reasonably incurred by such Person in respect of such Reduction Event,
and (b) if such Reduction Event is a disposition of assets, (i) the amount of
any Debt for Borrowed Money secured by a Lien on any asset disposed of in such
Reduction Event to the extent such Lien is senior to the Lien of the applicable
Indenture and discharged from the proceeds thereof and (ii) any taxes actually
paid or to be payable by such Person (as estimated by a senior financial or
accounting officer of the Borrower, giving effect to

 

13

 

the overall tax position of
the Borrower) in respect of such Reduction Event; provided that the term
Net Cash Proceeds shall not include any cash proceeds to the extent such cash
proceeds are (and remain) subject to the Lien of an Indenture or a Lien granted
under the Orders.

 

“Net Worth” shall
mean, as of any time of determination, the sum of shareholders’ equity and
preferred stock (including mandatorily redeemable preferred stock of subsidiary
trusts), preference stock and preferred securities of the Borrower and its
Consolidated Subsidiaries on the last day of the fiscal quarter immediately
preceding such time of determination.

 

“Non-Excluded Taxes”
shall have the meaning ascribed thereto in Section 2.15(a).

 

“Non-Material Foreign
Subsidiary” shall mean (a) prior to the Emergence Time, any Foreign
Subsidiary and (b) from and after the Emergence Time, as at any time of determination,
a Foreign Subsidiary which, in the aggregate, as at the end of the fiscal
quarter immediately preceding such time of determination, shall have a net
worth (calculated as the stockholder’s equity of such Foreign Subsidiary
disregarding any liabilities of such Foreign Subsidiary to an Affiliate) less
than 10% of the Net Worth of the Borrower and its Consolidated Subsidiaries as
at the end of such fiscal quarter, and net income less than 10% of the
Consolidated Net Income for the four fiscal quarter period ending at the end of
such fiscal quarter, as determined in accordance with GAAP.

 

“Non-Recourse Debt”
shall mean any Indebtedness as to which the Borrower has no direct or indirect
liability whether as primary obligor, guarantor, surety, provider of collateral
security or through any other right or arrangement of any nature (including any
election by the holder of such Indebtedness) providing direct or indirect
assurance of payment or performance of any such obligations in whole or in part
(other than direct or indirect liability which by its terms may be payable
solely in Capital Stock (other than Mandatory Redeemable Stock) of the
Borrower).

 

“NorthWestern Energy”
shall mean the regulated electric and natural gas transmission and distribution
assets and businesses owned and operated by the Borrower (formerly known as
NorthWestern Public Service and including, without limitation, the regulated
electric and natural gas transmission and distribution assets and business
formerly owned and operated by Montana Power), historically reported under the
headings titled “Electric” and “Natural Gas” on the SEC Reports of the Borrower
filed annually with the SEC.

 

“Note” shall mean, as
applicable, a Term Note or a QFL Note.

 

“Notice of Interest Rate
Conversion” shall have the meaning ascribed thereto in Section 2.7.

 

“Obligations” shall
mean the unpaid principal of and interest on (including, without limitation,
interest accruing after the maturity of the Loans and interest accruing after
the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrower or any
Subsidiary, as applicable, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding and whether the
Administrative Agent, for the benefit of the Lenders, is oversecured or
undersecured with respect to such Loans) the Notes and all other obligations
and liabilities of the Borrower to the Administrative Agent,

 

14

 

the Collateral Agent and the
Lenders, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement, the Notes, the other Loan Documents or any
other document made, delivered or given in connection therewith or herewith,
whether on account of principal, interest, fees, indemnities, costs, expenses
(including, without limitation, all fees and disbursements of counsel to the
Administrative Agent, the Collateral Agent or the Lenders that are required to
be paid by the Borrower pursuant to the terms of this Agreement or any other
Loan Document) or otherwise.

 

“Orders” shall mean
the Interim Order and the Final Order.

 

“Original Closing Date”
shall mean the closing date under the Original Loan Agreement.

 

“Original Loan Agreement”
shall have the meaning ascribed thereto in the preamble hereto.

 

“Original Signing Date”
shall mean December 17, 2002.

 

“Participant” shall
have the meaning ascribed thereto in Section 9.6(b).

 

“PBGC” shall mean the
Pension Benefit Guaranty Corporation established pursuant to Subtitle A of
Title IV of ERISA or any successor thereto.

 

“Pension Plan” shall
mean any single-employer plan, as defined in Section 4001(a)(15) of ERISA,
which the Borrower, any Subsidiary or any Commonly Controlled Entity maintains,
administers, contributes to or is required to contribute to, or under which the
Borrower, any Subsidiary or any Commonly Controlled Entity has any liability.

 

“Permitted Financial
Contracts” shall mean Financial Contracts consisting of contracts to
purchase or sell natural gas or electricity entered into by the Borrower in the
ordinary course of business consistent with past practice and not for
speculative purposes.

 

“Permitted Liens”
shall mean, collectively, the following:

 

(a)           Liens for taxes, assessments, governmental charges
or levies not yet due or which are being contested in good faith by appropriate
proceedings; provided that adequate reserves with respect thereto are
maintained on the books of the Borrower or its Consolidated Subsidiaries, as
the case may be, in conformity with GAAP;

 

(b)           Landlord liens for rent not yet due and payable and
statutory Liens of carriers’, warehousemen’s, mechanics’, materialmen’s,
repairmen’s or other similar nonconsensual Liens imposed by law arising in the
ordinary course of business securing obligations which, after the Emergence
Time, are not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings;

 

15

 

(c)           pledges or deposits in connection with workers’
compensation, unemployment insurance and other social security legislation, or
to secure the performance of tenders, bids, leases, contracts (other than for
the repayment of Indebtedness), statutory obligations and other similar
obligations;

 

(d)           letters of credit or deposits securing liability to
insurance carriers under insurance or self- insurance arrangements, and letters
of credit or deposits to secure true operating leases in the ordinary course;

 

(e)           easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business which, in the
aggregate, do not in any case materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
business of the Borrower;

 

(f)            any attachment or judgment Lien not constituting an
Event of Default under Section 7.1(h);

 

(g)           Liens solely on assets of a Subsidiary incurring
Indebtedness, which Liens secure such Indebtedness;

 

(h)           the Lien of each Indenture, as such Indenture may be
amended or supplemented from time to time in accordance with the terms hereof,
securing first mortgage bonds permitted to be outstanding pursuant to clause
(b) of Section 6.10;

 

(i)            Liens on accounts receivables or inventory of the
Borrower and its Subsidiaries (provided such assets are not subject to
the Lien of either Indenture) securing Indebtedness permitted to be outstanding
pursuant to clause (j) of Section 6.10;

 

(j)            Liens on assets of the Borrower not subject to the
Lien of either Indenture securing Indebtedness permitted to be outstanding
pursuant to clause (k) of Section 6.10;

 

(k)           any Lien vested in any licensor or permitter for
obligations or acts to be performed, the performance of which obligations or
acts is required under licenses or permits, so long as the performance of such
obligations or acts is not delinquent or is being contested in good faith and
by appropriate proceedings;

 

(l)            any controls, restrictions, obligations, duties or
other burdens imposed by any federal, state, municipal or other law, or by any
rule, regulation or order of any Governmental Authority, upon any property of
the Borrower or the operation or use thereof or upon the Borrower with respect
to any of its property or the operation or use thereof or with respect to any
franchise, grant, license, permit or public purpose requirement, or any rights
reserved

 

16

 

to
or otherwise vested in any Governmental Authority to impose any such controls,
restrictions, obligations, duties or other burdens;

 

(m)          any right which any Governmental Authority may have
by virtue of any franchise, license, contract or statute to purchase, or
designate a purchaser of or order the sale of, any property of the Borrower
upon payment of cash or reasonable compensation therefor or to terminate any
franchise, license or other rights or to regulate the property and business of
the Borrower;

 

(n)           party-wall agreements and agreements, in each case
existing on the date hereof, for and obligations relating to the joint or
common use of property owned solely by the Borrower or owned by the Borrower in
common or jointly with one or more parties;

 

(o)           Liens existing on the date hereof securing
Indebtedness incurred by a Person, other than the Borrower which Indebtedness
has been neither assumed nor guaranteed by the Borrower nor on which it
customarily pays interest, existing on property which the Borrower owns jointly
or in common with such Person or such Person and others, if there is a bar
against partition of such property which would preclude the sale of such
property by such other Person or the holder of such Lien without the consent of
the Borrower;

 

(p)           cash or cash equivalent collateral in an aggregate
amount not to exceed $40,000,000 at any time securing reimbursement and other
obligations of the type permitted under clause (g) of Section 6.10 (and
related fee and expense indemnity obligations);

 

(q)           prior to the Emergence Time, Liens securing
Indebtedness under the Bank One Credit Agreement in an aggregate principal
amount not to exceed $100,000,000, together with all interest, fees and other
amounts due with respect thereto pursuant to the Bank One Credit Documents (as
modified and amended to the extent permitted under this Agreement);

 

(r)            adequate protection Liens approved by the Bankruptcy
Court and not inconsistent with the Orders on any asset of the Borrower which
replaces an asset that was, on the Petition Date, subject to a valid,
enforceable, perfected, and nonavoidable Lien, provided such Lien is in
favor of the Person holding such pre-petition Lien, is of the same priority as
the Lien being replaced and secures a claim in an amount not exceeding the
claim secured by such pre-petition Lien;

 

(s)           Liens in favor of the Collateral Agent and the other
Secured Parties securing the Obligations;

 

(t)            Liens existing on the date hereof securing Debt for
Borrowed Money as set forth in Schedule 6.4 hereto;

 

17

 

(u)           Liens securing purchase money Indebtedness or
Financing Lease Obligations permitted by Section 6.10; and

 

(v)           other Liens not securing Indebtedness existing on
the date hereof.

 

“Permitted Pre-Petition
Payments” shall mean Pre-Petition Payments by the Borrower on account of
pre-petition claims against the Borrower with respect to critical vendors,
employee wages and benefits, taxes and payment of regularly scheduled
principal, interest and other recoverable costs and expenses on the senior
secured Indebtedness of the Borrower set forth on Schedule P, such
payments to be approved by the Administrative Agent or the Bankruptcy Court,
and any other Pre-Petition Payments authorized by the Orders.

 

“Permitted Reorganization
Plan” shall mean a Reorganization Plan that either (a) provides for the
conversion of all or substantially all of the senior unsecured and subordinated
Indebtedness of the Borrower and its Subsidiaries to equity and does not
provide for any other Change of Control or for a liquidation of the Borrower,
or (b) is otherwise reasonably acceptable to the Administrative Agent and the
Required Lenders (provided that the approval of the Administrative Agent and
the Required Lenders shall not be unreasonably withheld), and, in the case of
both clauses (a) and (b), such Reorganization Plan does not alter, amend or
modify in any way the terms of this Agreement.

 

“Person” shall mean
an individual, partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority, ISO or other entity of whatever nature.

 

“Petition Date” shall
have the meaning ascribed thereto in the preamble hereto.

 

“Plan” shall mean at
a particular time, any employee benefit plan which is defined in Section 3(2)
of ERISA and in respect of which the Borrower or any Subsidiary is, an
“employer” as defined in Section 3(5) of ERISA.

 

“Pre-Petition Payment”
shall mean a payment (by way of adequate protection or otherwise) of principal
or interest or otherwise on account of any pre-petition Indebtedness or trade
payable or other pre-petition claims against the Borrower.

 

“Properties” shall
have the meaning ascribed thereto in Section 3.17(a).

 

“QFL Note” shall have
the meaning ascribed thereto in Section 2.15(c).

 

“Qualified Foreign Lender”
shall have the meaning ascribed thereto in Section 2.15(c).

 

“Rate Management
Obligations” of a Person shall mean any and all obligations of such Person,
whether absolute or contingent and howsoever and whensoever created, arising,
evidenced or acquired (including all renewals, extensions, and modifications
thereof and substitutions therefor), under (a) any and all Rate Management
Transactions and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Management Transactions.

 

18

 

“Rate Management
Transaction” shall mean any transaction (including an agreement with
respect thereto) now existing or hereafter entered into by the Borrower or any
of its Subsidiaries (other than Excluded Subsidiaries) which is a rate swap,
basis swap, forward rate transaction, commodity swap, commodity option, equity
or equity index swap, equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap transaction, floor transaction,
collar transaction, forward transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of these transactions) or
any combination thereof, whether linked to one or more interest rates, foreign
currencies, commodity prices, equity prices or other financial measures.

 

“Reduction Event”
shall mean any Asset Disposition or Equity Issuance; provided that in
any event the term “Reduction Event” shall not include any Asset
Disposition or Equity Issuance effected in connection with a Permitted
Reorganization Plan.

 

“Register” shall have
the meaning ascribed thereto in Section 9.6(d).

 

“Regulation D, T, U or X”
shall mean Regulation D, T, U or X, respectively, of the Board of Governors of
the Federal Reserve System as in effect from time to time, or any successor
regulation.

 

“Release” shall mean
any release, pumping, pouring, emptying, injecting, escaping, leaching,
migrating, dumping, seepage, spill, leak, flow, discharge, disposal or
emission.

 

“Reorganization”
shall mean with respect to any Multiemployer Plan, the condition that such plan
is in reorganization within the meaning of Section 4241 of ERISA.

 

“Reorganization Plan”
shall mean a Chapter 11 plan of reorganization in the Case.

 

“Replaced Note” shall
have the meaning ascribed thereto in Section 2.15(c).

 

“Replacement Lender”
shall have the meaning ascribed thereto in Section 2.18.

 

“Reportable Event”
shall mean any of the events set forth in Section 4043(c) of ERISA other than
those events for which the notice requirement has been waived under applicable
regulations.

 

“Required Lenders”
shall mean, at any time, Lenders having Loans representing 51% or more of the
aggregate of all Loans outstanding at such time.

 

“Requirement of Law” as
to any Person shall mean the articles of organization and by-laws or other
organizational or governing documents of such Person, and any law, treaty, rule
or regulation or determination of an arbitrator or a court or other
Governmental Authority (including, without limitation, the Public Utility
Holding Company Act of 1935, as amended, any of the foregoing relating to
employee health and safety or public utilities and any Environmental Law), in
each case, applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.

 

19

 

“Responsible Officer”
shall mean, with respect to a Person, the chairman of the board of directors,
the chief executive officer, the chief restructuring officer or the president
of such Person or, with respect to financial matters, the chief financial
officer, the treasurer or the chief accountant of such Person, or any other
officer of such Person designated as a Responsible Officer by any of the
foregoing.

 

“Restricted Payment”
shall have the meaning ascribed thereto in Section 6.9.

 

“SEC” shall mean the
Securities and Exchange Commission.

 

“SEC Reports” shall
mean the reports filed by the Borrower with the SEC on Form 10-K, Form 10-Q or
Form 8-K or any successor Form.

 

“Secured Parties”
shall mean the Administrative Agent, the Collateral Agent and the Lenders.

 

“Single Employer Plan”
shall mean a Plan maintained by the Borrower or any Commonly Controlled Entity
for employees of the Borrower or any Commonly Controlled Entity.

 

“South Dakota First
Mortgage Indenture” shall mean the General Mortgage Indenture and Deed of
Trust dated as of August 1, 1993 between the Borrower and The Chase Manhattan
Bank, as trustee, as supplemented and amended to the date hereof.

 

“South Dakota Utility
Business” shall mean the regulated electric and natural gas transmission
and distribution assets and businesses owned and operated by the Borrower in
the States of South Dakota and Nebraska or otherwise subject to the Lien of the
South Dakota First Mortgage Indenture.

 

“SPC” shall have the
meaning ascribed thereto in Section 9.6(f).

 

“Special Purpose
Subsidiary” shall mean a direct or indirect Subsidiary of the Borrower,
formed solely for the purpose of acquiring and owning certain assets and
issuing Indebtedness which is secured solely by such assets (or the assets of
one or more other Special Purpose Subsidiaries) and as to which the Borrower
and each other Subsidiary (other than any Special Purpose Subsidiary) has no
Guarantee Obligation or other liability or obligation to contribute additional
equity or for which the Borrower or any other Subsidiary (other than a Special
Purpose Subsidiary) has general partner liability or other derivative liability
by operation of law or contract.  The
term “Special Purpose Subsidiary” shall also include any Subsidiary whose
assets consist solely of equity interests in another Special Purpose Subsidiary
and, other than having general partner liability, otherwise meets the
requirements of the preceding sentence.

 

“Standard & Poor’s”
shall mean Standard & Poor’s Rating Group, a division of The McGraw-Hill
Companies, Inc.

 

“Subsidiary” shall
mean, as to any Person, a corporation, company, partnership or other entity of
which shares of stock or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only by
reason of the occurrence of a contingency) to elect a majority of the board of
directors or other managers of such

 

20

 

corporation, company,
partnership or other entity are at the time owned, or the management of which
is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. 
Unless otherwise expressly stated herein all references to any
Subsidiary are to direct or indirect subsidiaries of the Borrower; provided
that in no event, other than in connection with the determination of
Consolidated EBITDAR, shall any Excluded Subsidiary or any Non-Material Foreign
Subsidiary be deemed a Subsidiary of the Borrower.

 

“Superpriority Claim”
shall mean a claim against the Borrower in the Case which is an administrative
expense claim having priority over any or all administrative expenses of the
kind specified in Sections 503(b) or 507(b) of the Bankruptcy Code.

 

“Supplemental Indentures”
shall mean collectively the supplemental indentures to the Indentures pursuant
to which, among other things, the First Mortgage Bonds are issued.  The Supplemental Indentures are sometimes
called, as applicable, the Montana Supplemental Indenture and the South Dakota
Supplemental Indenture herein.

 

“Term Note” shall
have the meaning ascribed thereto in Section 9.6(h).

 

“Transactions” shall
mean, collectively, (a) borrowings hereunder, (b) the authorization, issuance
and delivery of the First Mortgage Bonds to the Collateral Agent, (c) the
granting of security interests pursuant to the Collateral Documents and (d) any
other transactions related or entered into in connection with any of the
foregoing or otherwise in connection with any of the Loan Documents.

 

“Transferee” shall
have the meaning ascribed thereto in Section 9.6(g).

 

“Type” shall mean as
to any Loan, its nature as an Alternate Base Rate Loan or a Eurodollar Loan, as
the context may require.

 

“Unfunded Liabilities”
shall mean the amount (if any) by which the present value of all vested and
unvested accrued benefits under all Single Employer Plans exceeds the fair
market value of all such Plan assets allocable to such benefits, all determined
as of the then most recent valuation date for such Plan using PBGC actuarial
assumptions for single employer plan terminations.

 

“Utility Business”
shall mean the utility business and operations of the Borrower conducted
through NorthWestern Energy.

 

“Wholly-Owned Subsidiary”
of any Person shall mean any Subsidiary 100% of whose Capital Stock is at the
time owned by such Person directly or indirectly through other Wholly Owned
Subsidiaries (other than qualifying directors’ shares).

 

1.2           Other
Definitional Provisions.  (a)  Unless
otherwise specified therein, all terms defined in this Agreement shall have
their respective defined meanings when used in the Notes or any certificate or
other document made or delivered pursuant hereto.

 

(b)           As used herein, in the Notes and in any certificate
or other document made or delivered pursuant hereto, accounting terms relating
to the Borrower or any Subsidiary not

 

21

 

defined
in Section 1.1 and accounting terms partly defined in Section 1.1,
to the extent not defined, shall have the respective meanings given to them
under GAAP.

 

(c)           The words “hereof,” “herein” and “hereunder” and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Article, Section, Schedule and Exhibit references are to this Agreement unless
otherwise specified.

 

(d)           The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.

 

(e)           The words “include,” “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  The word “or” shall not be exclusive.  The word “will” shall be construed to have
the same meaning and effect as the word “shall”.

 

(f)            Unless the context requires otherwise (i) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (ii) any reference herein to any Person shall be construed
to include such Person’s successors and assigns, and (iii) the words “asset”
and “property” shall be construed to have the same meaning and effect and to
refer to any and all tangible and intangible assets and properties, including
cash, securities, accounts and contract rights.

 

ARTICLE 2.  AMOUNT AND TERMS OF COMMITMENTS

 

2.1           Commitments and Loans.  This Agreement shall become effective on the
Closing Date and shall operate as an assumption of, and to amend, restate and
modify, but not extinguish, the Original Loan Agreement.  The Commitments of the Lenders as of the
Closing Date are set forth in full on Schedule I hereto. The Loans (i)
at the option of the Borrower may be maintained as, or converted into,
Alternate Base Rate Loans or Eurodollar Loans in accordance with the provisions
hereof and (ii) shall be repaid in accordance with the provisions hereof, but
once repaid, may not be reborrowed.

 

2.2           Evidence of Indebtedness.  (a)  Each
Lender shall maintain in accordance with its usual practice an account or
accounts evidencing indebtedness of the Borrower to such Lender resulting from
the Loan made by such Lender, including, without limitation, the amounts of
principal and interest payable and paid to such Lender from time to time under
this Agreement.

 

(b)           The Administrative Agent shall maintain the Register
pursuant to Section 9.6(d) and a subaccount therein for each
Lender, in which shall be recorded (i) the amount of the Loan made by each
Lender through the Administrative Agent hereunder, the type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable from the Borrower to each Lender hereunder and (iii)
both the amount of any sum received by the Administrative Agent hereunder from
the Borrower and each Lender’s share thereof.

 

22

 

(c)           The entries made in the Register and the accounts of
each Lender maintained pursuant to Section 9.6(d) shall, to the extent
permitted by applicable law, be prima facie evidence of the existence
and amount of the obligations of the Borrower therein recorded; provided,
however, that the failure of any Lender or the Administrative Agent to
maintain the Register or any such account, or any error therein, shall not in
any manner affect the obligation of the Borrower to repay (with applicable
interest) the Loans actually made to the Borrower by such Lender in accordance
with the terms of this Agreement.

 

2.3           [Intentionally Omitted]

 

2.4           [Intentionally Omitted].

 

2.5           Repayment of Loans.  On the last Business Day of each March, June,
September and December prior to the Maturity Date, the Borrower shall make
quarterly principal payments on the Loans, each quarterly payment in an amount
equal to one quarter of one percent (0.25%) of the original aggregate principal
amount of the Loans.  The Borrower shall
repay the then outstanding aggregate principal amount of the Loans on the
Maturity Date, together with accrued and unpaid interest thereon as provided
herein.  Any prepayments of the Loans
pursuant to Section 2.6 shall be applied in inverse chronological order
to the principal amounts due pursuant to this Section.

 

2.6           Optional and Mandatory
Prepayments.  (a)  Optional Prepayment.  The Borrower may, upon written notice
delivered to the Administrative Agent at least 10 days (but not more than 30
days) prior to the proposed date of prepayment (which notice shall state the
date of such proposed prepayment, the aggregate principal amount of the Loans
to be prepaid and the prepayment price thereof), prepay the outstanding
principal amounts of all of the Loans in whole (but not in part), together with
accrued interest to the date of such prepayment on the principal amount prepaid
and any Applicable Prepayment Premium. 
Except as provided in this Section 2.6(a), the Borrower shall not
have the right to optionally prepay the Loans.

 

(b)           [Intentionally Omitted]

 

(c)           Mandatory Offer of Prepayment.  If the Borrower or any of its Subsidiaries
shall at any time, or from time to time, after the Closing Date receive Net
Cash Proceeds in respect of any Reduction Event which, individually or in the
aggregate for all prior Reduction Events not the subject of a mandatory offer
of prepayment, exceeds $10,000,000, then, on the first Business Day immediately
succeeding the date of such receipt, such Net Cash Proceeds shall be applied to
the prepayment of any Loans then outstanding to the extent and in the manner as
provided below in this Section 2.6(c). 
At least 10 days (but not more than 30 days) prior to any proposed
Reduction Event, the Borrower shall give written notice to the Administrative
Agent stating the date of the proposed Reduction Event together with a
certificate signed by a Responsible Officer of the Borrower setting forth in
reasonable detail the calculation of the Net Cash Proceeds therefrom and shall
offer to prepay the outstanding principal amounts of the Loans comprising part
of the same borrowing in an amount equal to, in the case of an Asset
Disposition, 100% of the Net Cash Proceeds therefrom or, in the case of an
Equity Issuance, 50% of the Net Cash Proceeds therefrom, as applicable,
together with accrued interest to the date of such prepayment on the principal
amount prepaid; provided, however, that no

 

23

Lender shall be obligated to
accept such offer.  Any Lender may in
its discretion accept such offer by written notice to the Administrative Agent
(which notice shall also state the maximum principal amount of prepayment such
Lender is willing to accept).  To the
extent one or more Lenders accepts any such offer and one or more Lenders
rejects such offer, the amounts that would have been allocable to the rejecting
Lenders may (if and to the extent accepted by the accepting Lenders) be paid to
accepting Lenders in accordance with their Commitment Percentages.  Any Lender that shall have failed to respond
to an offer described in this Section 2.6(c) shall be deemed to
have rejected such offer.  If for any
reason the proposed Reduction Event is delayed by more than 15 days, the
Borrower shall resend the notice and offer provided for in this Section
2.6(c).

 

(d)           [Intentionally
Omitted]

 

(e)           Additional Amounts.  Each prepayment of Loans pursuant to this Section
2.6 shall be accompanied by payment in full of all accrued interest
thereon, to and including the date of such prepayment, together with any
additional amounts owing pursuant to Section 2.16 and any outstanding
fees and expenses due and owing with respect to the amount prepaid.

 

2.7           Interest Rate Conversion and
Continuation Options.  (a)  The Borrower may elect from time to time to
convert Eurodollar Loans to Alternate Base Rate Loans by giving the
Administrative Agent prior irrevocable notice of such election substantially in
the form of Exhibit B (a “Notice of Interest Rate Conversion”)
(which notice must be received by the Administrative Agent by at least 10:00
a.m., New York City time, two Business Days prior to such election); provided
that any such conversion of Eurodollar Loans may be made only on the last day
of an Interest Period with respect thereto. 
The Borrower may elect from time to time to convert Alternate Base Rate
Loans to Eurodollar Loans by giving the Administrative Agent prior irrevocable
notice of such election (which notice must be received by the Administrative
Agent by at least 10:00 a.m., New York City time, three Business Days prior to
such election).  Any such Notice of
Interest Rate Conversion to Eurodollar Loans shall specify the length of the
initial Interest Period or Interest Periods therefor.  Upon receipt of any such notice, the Administrative Agent shall
promptly notify each Lender thereof. 
All or any part of the outstanding Eurodollar Loans and Alternate Base
Rate Loans may be converted as provided herein; provided that (i) no
Loan may be converted into a Eurodollar Loan when any Default has occurred and
is continuing, (ii) no Loan may be converted into a Eurodollar Loan after the
date that is one month prior to the Maturity Date and (iii) such conversion
shall be in an aggregate principal amount of $5,000,000 or a whole multiple of
$1,000,000 in excess thereof.

 

(b)           Any Eurodollar Loans
may be continued as such upon the expiration of the then current Interest
Period with respect thereto by the Borrower giving notice to the Administrative
Agent, in accordance with the applicable provisions of the term “Interest
Period” set forth in Section 1.1 of the length of the next Interest
Period to be applicable to such Loans; provided that (i) no Eurodollar
Loan may be continued as such when any Default has occurred and is continuing
and (ii) no Eurodollar Loan which is a Loan may be continued as a Eurodollar
Loan after the date that is one month prior to the Maturity Date; provided,
further, that if the Borrower shall fail to give any required notice as
described above in this paragraph, or if such continuation is not permitted
pursuant to the preceding proviso, such Loans shall be automatically converted
to Alternate Base Rate Loans on the last day of such then expiring

 

24

 

Interest Period.  The Administrative Agent agrees to notify the Lenders of any
notice of continuation referred to herein received by the Administrative Agent.

 

2.8           Maximum Amounts of Eurodollar
Tranches.  All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and shall be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Eurodollar Tranche shall be equal to $5,000,000 or
a whole multiple of $1,000,000 in excess thereof.  There shall not be more than five Eurodollar Tranches at any one
time outstanding.

 

2.9           Interest Rates; Default Rate Payment
Dates.  (a)  Each Eurodollar Loan shall bear interest for
each day during each Interest Period with respect thereto at a rate per annum
equal to the Eurodollar Rate determined for the first day of such Interest
Period (subject to daily adjustments, if any, required by changes in the
Eurodollar Reserve Requirements) plus 5.50%.

 

(b)           Each Alternate Base
Rate Loan shall bear interest at a rate per annum equal to the Alternate Base
Rate plus 3.50%.

 

(c)           If an Event of Default
has occurred and is continuing, the Loans shall bear interest at a rate per
annum equal to the rate that would otherwise be applicable thereto pursuant to
the foregoing provisions of this Section plus 2% from the date of
occurrence of such Event of Default until the date such Event of Default is
cured or waived (after as well as before judgment).  In addition, should any interest on such Loans or any fees or
other amount (other than principal) payable hereunder not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest (to the extent permitted by law in the case of
interest on interest) at a rate per annum as determined pursuant to the
preceding sentence which would be applicable to an Alternate Base Rate Loan, in
each case, from the date of such nonpayment until such amount is paid in full
(after as well as before judgment).

 

(d)           Interest shall be
payable in arrears on each Interest Payment Date; provided that interest
accruing pursuant to Section 2.9(c) shall be payable from time to time
on demand.

 

2.10         Computation of Interest.  (a) 
The Alternate Base Rate interest (when calculated based upon the prime
rate) shall be calculated on the basis of a 365/366 day year and all other
interest shall be calculated on the basis of a 360-day year for the actual days
elapsed.  The Administrative Agent shall
as soon as practicable notify the Borrower and the Lenders of each
determination of a Eurodollar Rate.  Any
change in the interest rate on a Loan resulting from a change in the Alternate
Base Rate or the Eurodollar Reserve Requirements shall become effective as of
the opening of business on the day on which such change becomes effective.  The Administrative Agent shall, as soon as
practicable, notify the Borrower and the Lenders of the effective date and the
amount of each such change in interest rate.

 

(b)           Each determination of
an interest rate by the Administrative Agent pursuant to any provision of this
Agreement shall be conclusive and binding on the Borrower

 

25

 

and the Lenders in the absence of manifest error.  The Administrative Agent, at the request of
the Borrower, shall deliver to the Borrower a statement showing the quotations
used by the Administrative Agent in determining any interest rate pursuant to Section
2.10(a).

 

2.11         Inability to Determine Interest Rate.  If prior to the first day of any Interest
Period:

 

(a)           the Administrative
Agent shall have reasonably determined (which determination shall be conclusive
and binding upon the Borrower) that, by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate for such Interest Period, or

 

(b)           the Administrative
Agent shall have received notice from the Required Lenders that the Eurodollar
Rate determined or to be determined for such Interest Period will not
adequately and fairly reflect the cost to such Lenders (as conclusively
certified by such Lenders) of making or maintaining its affected Loans during
such Interest Period, the Administrative Agent shall give telecopy or
telephonic notice thereof to the Borrower and the Lenders as soon as
practicable thereafter.  If such notice
is given, (x) any Eurodollar Loans requested to be made on the first day of
such Interest Period shall be made as Alternate Base Rate Loans, (y) any Loans
that were to have been converted on the first day of such Interest Period to
Eurodollar Loans shall be continued as Alternate Base Rate Loans and (z) any
outstanding Eurodollar Loans shall be converted, on the first day of such
Interest Period, to Alternate Base Rate Loans. 
Until such notice has been withdrawn by the Administrative Agent, no
further Eurodollar Loans shall be made or continued as such, nor shall the
Borrower have the right to convert Alternate Base Rate Loans to Eurodollar
Loans.

 

2.12         Pro Rata Treatment and Payments;
Funding Reliance.  (a)  The borrowing by the Borrower of Loans from
the Lenders hereunder and any reduction of the Commitments of the Lenders shall
be made pro rata according to the respective Commitment Percentages of the
Lenders.  Except as provided in Section
2.6, each payment (including each prepayment) by the Borrower on account of
principal of and interest on the Loans of any one Type shall (except as may be
required as a result of Section 2.16) be made pro rata according to the
respective outstanding principal amounts of the Loans of such Type then held by
the Lenders.  All payments (including
prepayments) to be made by the Borrower hereunder and under the Notes, whether
on account of principal, interest, fees or otherwise, shall be made without
setoff or counterclaim and shall be made prior to 12:00 noon, New York City
time, on the due date thereof to the Administrative Agent, for the account of
the Lenders, at the Administrative Agent’s office specified in Section 9.2,
in Dollars and in immediately available funds. 
The Administrative Agent shall distribute such payments to the Lenders
promptly upon receipt in like funds as received.  If any payment hereunder (other than payments on the Eurodollar
Loans) becomes due and payable on a day other than a Business Day, such payment
shall be extended to the next succeeding Business Day, and, with respect to
payments of principal and interest thereon, shall be payable at the then
applicable rate during such extension.

 

(b)           Unless the
Administrative Agent shall have been notified in writing by any Lender prior to
a borrowing that such Lender will not make available to the Administrative
Agent the amount that would constitute its Commitment Percentage of such
borrowing, the

 

26

 

Administrative Agent may assume that such Lender is making such amount
available to the Administrative Agent, and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower a corresponding
amount.  If the Administrative Agent
makes such amount available to the Borrower and if such amount is not made
available to the Administrative Agent by the required time on the Borrowing
Date therefor, such Lender shall pay to the Administrative Agent, on demand,
such amount with interest thereon at a rate equal to the daily average Federal
Funds Rate for the period until such Lender makes such amount immediately
available to the Administrative Agent. 
A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this Section shall be conclusive in the
absence of manifest error.  If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender’s Loan included in such borrowing.  If such Lender’s Commitment Percentage of
such borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon at the rate
per annum applicable to the applicable Loan, on demand, from the Borrower.  The obligations of the Lenders hereunder are
several and no Lender shall be responsible for any other Lender’s failure to
make Loans as required hereunder.

 

2.13         Illegality.  Notwithstanding any other provision herein,
if the adoption of or any change in any Requirement of Law after the Original
Signing Date or in the interpretation or application thereof shall make it
unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by
this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert Alternate Base Rate Loans
to Eurodollar Loans shall forthwith be suspended until such condition shall
cease to exist and (b) such Lender’s Loans then outstanding as Eurodollar
Loans, if any, shall be converted automatically to Alternate Base Rate Loans on
the respective last days of the then current Interest Periods with respect to
such Loans or within such earlier period as required by law.  If any such conversion of a Eurodollar Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, the Borrower shall pay to such Lender such amounts, if
any, as may be required pursuant to Section 2.16.

 

2.14         Requirements of Law.  (a) 
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the Original Signing
Date:

 

(i)            shall subject any Lender to any tax of any
kind whatsoever with respect to this Agreement, its Notes, any Eurodollar Loan,
or its obligation to make Eurodollar Loans, or change the basis of taxation of
payments to such Lender in respect thereof (except for Non-Excluded Taxes
covered by Section 2.15 and changes in the rate of tax on the overall
net income of such Lender);

 

(ii)           shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of, advances,
loans or other extensions of credit by, or any other acquisition of funds by,
any

 

27

 

office of such Lender which is not otherwise included in the
determination of the Eurodollar Rate hereunder; or

 

(iii)          shall impose on such Lender any other
condition;

 

and the result of any of the foregoing is to increase the cost to such
Lender, by an amount which such Lender reasonably deems to be material, of
making, converting into, continuing or maintaining Eurodollar Loans, or to
reduce any amount receivable hereunder in respect thereof, then, in any such
case, the Borrower shall promptly pay such Lender, upon its demand, any
additional amounts necessary to compensate such Lender for such increased cost
or reduced amount receivable.  If any
Lender becomes entitled to claim any additional amounts pursuant to this
Section, it shall promptly notify the Borrower through the Administrative
Agent, of the event by reason of which it has become so entitled.  A certificate as to any additional amounts
payable pursuant to this Section submitted by such Lender through the
Administrative Agent to the Borrower shall be in writing and accompanied by
calculations in reasonable detail demonstrating the basis for such Lender’s
claim and shall be considered conclusive in the absence of manifest error.  This covenant shall survive the termination
of this Agreement and the payment of the Obligations hereunder.

 

(b)           If any Lender shall
have determined that the adoption of or any change in any Requirement of Law
regarding capital adequacy or in the interpretation or application thereof or
compliance by such Lender or any corporation controlling such Lender with any
request or directive regarding capital adequacy (whether or not having the
force of law) from any Governmental Authority made subsequent to the Original
Signing Date has or shall have the effect of reducing the rate of return on
such Lender’s or the corporation’s capital as a consequence of its obligations
hereunder to a level below that which such Lender or such corporation could
have achieved but for such change or compliance (taking into consideration such
Lender’s or such corporation’s policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Borrower (with a copy to the Administrative
Agent) of a written request therefor accompanied by calculations in reasonable
detail demonstrating the basis for such Lender’s claims, the Borrower shall pay
to such Lender the additional amount or amounts as will compensate such Lender
for such reduction.  This covenant shall
survive the termination of this Agreement and the payment of the Obligations
hereunder.

 

2.15         Taxes.  (a) 
Any and all payments made by the Borrower to or for the account of the
Administrative Agent or any Lender under this Agreement, the Notes or the other
Loan Documents shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, and
all liabilities with respect thereto, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding net
income taxes and franchise taxes (imposed in lieu of net income taxes) imposed
on the Administrative Agent or any Lender by a jurisdiction under the Laws of
which such Lender or its applicable lending office, or the Administrative
Agent, as the case may be, is organized or maintained.  If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions, withholdings or liabilities (“Non-Excluded
Taxes”) are required to be deducted or withheld from or in respect of any
amounts payable to the Administrative Agent or any Lender hereunder or

 

28

 

under the Notes, (i) the amounts so payable
to the Administrative Agent or such Lender shall be increased to the extent
necessary, so that after making all required deductions or withholdings
(including deductions or withholdings applicable to additional sums payable
under this Section 2.15), the Administrative Agent or such Lender
receives an amount equal to the sum it would have received had no such
deductions or withholdings been made, (ii) the Borrower shall make such
deductions or withholdings, and (iii) the Borrower shall pay the full amount
deducted or withheld to the relevant Governmental Authority in accordance with
applicable law; provided that the Borrower shall not be required to
increase any such amounts payable to any Lender if such Lender fails to comply
with the applicable requirements of paragraph (b) of this Section.  Whenever any Non-Excluded Taxes are payable
by the Borrower, as promptly as possible thereafter, the Borrower shall send to
the Administrative Agent for its own account or for the account of such Lender,
as the case may be, a certified copy of an original official receipt received
by the Borrower showing payment thereof. 
The Borrower agrees to indemnify and hold harmless each Lender and the
Administrative Agent from the full amount of Non-Excluded Taxes (including,
without limitation, any such taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 2.15) paid or incurred by such Lender
or the Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto.  The covenants in this Section
shall survive the termination of this Agreement and the payment of the Notes
and payment of the Obligations hereunder.

 

(b)           Each Lender shall:

 

(i)            deliver to the Borrower and the
Administrative Agent (A) in the case of a Lender that is not incorporated
under the laws of the United States or any state thereof, either (x) two duly
completed copies of United States Internal Revenue Service Form W-8BEN or
W-8ECI, as applicable, or successor applicable forms, as the case may be, or,
(y) if such Lender is not a “bank” within the meaning of Section 881(c)(3)(A)
of the Code and intends to claim exemption from U.S.  Federal withholding tax under Section 871(h) or Section 881(c) of
the Code with respect to payments of “portfolio interest”, a Form W-8BEN, or
any subsequent versions thereof or successors thereto together with a
certificate executed by such Lender representing that (1) such Lender is not a
bank for purposes of Section 881(c) of the Code, is not a 10 percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrower and is not a controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code), and claiming complete
exemption from U.S.  Federal withholding
tax on payments of interest by the Borrower under this Agreement, the Notes and
the other Loan Documents and (2) the Lender has received in replacement of any
Note held by or assigned to it, a QFL Note in accordance with Section
2.15(c), and (B) in the case of any other Lender, an Internal Revenue
Service Form W-9, as applicable, or successor applicable form, as the case may
be;

 

(ii)           deliver to the Borrower and the
Administrative Agent two further copies of any such form or certification on or
before the date that any such form or certification expires or becomes obsolete
and after the

 

29

 

occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and

 

(iii)          obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be requested by the
Borrower or the Administrative Agent;

 

unless in any such case an event (including, without limitation, any
change in treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders such form
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent. 
Such Lender shall certify (i) in the case of a Form W-8BEN or W-8ECI, as
applicable, that it is entitled to receive payments under this Agreement at a
reduced rate of withholding, or without deduction or withholding, as the case
may be, of any United States federal income taxes and (ii) in the case of a
Form W-9, that it is entitled to an exemption from United States backup
withholding tax.  Each Person that shall
become a Lender or a Participant pursuant to Section 9.6 shall, upon the
effectiveness of the related transfer, be required to provide all the
applicable forms and statements required pursuant to this Section; provided
that, in the case of a Participant, such Participant shall furnish all such
required forms and statements to the Lenders from which the related
participation shall have been purchased.

 

(c)           Any Lender that is not
a “bank” within the meaning of Section 881(c)(3)(A) of the Code and satisfies
the requirements of Section 2.15(b)(i)(A)(y) (a “Qualified Foreign
Lender”) shall, upon receipt of the written request of the Administrative
Agent or the Borrower and may, upon its own written request to the
Administrative Agent, exchange any Note held by or assigned to it for a
qualified foreign lender note (a “QFL Note”).  A QFL Note shall be substantially in the form attached hereto as Exhibit
A-2 and shall contain the following legend, “This Note is a QFL Note, and
as such, ownership of the obligation represented by such QFL Note may be
transferred only in accordance with Section 2.15 of the Credit
Agreement.” Any QFL Note issued in replacement of any existing Note pursuant to
this Section 2.15(c) shall be (1) dated the Original Closing Date, (ii)
issued in the name of the entity in whose name such existing Note was issued
and (iii) issued in the same principal amount as such existing Note.  Any Note replaced pursuant to this Section
is sometimes referred to herein as a “Replaced Note”.

 

(d)           The Borrower agrees
that, upon the request of, or delivery of a request to, a Qualified Foreign
Lender pursuant to paragraph (c) of this Section, it shall execute and deliver
a QFL Note to the Administrative Agent in replacement of the Replaced Note
surrendered in connection with such request conforming to the requirements of
this paragraph.  Each Qualified Foreign
Lender shall surrender its Note in connection with any replacement pursuant to
this Section 2.15.  Upon receipt
by the Administrative Agent, in connection with any replacement, of a QFL Note
and the existing Note to be replaced by such QFL Note in accordance with this
paragraph, the Administrative Agent shall forward the QFL Note to the Lender
which has surrendered its Note for replacement by such QFL Note and shall
forward the surrendered Note to the Borrower marked “canceled”.  Once issued, QFL Notes (i) shall be deemed
to and shall be “Notes” for all purposes under the Loan Documents, (ii) may not
be exchanged for Notes which are not QFL Notes, notwithstanding anything to the
contrary in the Loan Documents and (iii)

 

30

 

shall at all times thereafter be QFL Notes,
including, without limitation, following any transfer or assignment thereof.

 

(e)           Notwithstanding
anything to the contrary in the Loan Documents, the QFL Notes are registered
obligations as to both principal and interest with the Borrower and transfer of
the obligations underlying such QFL Note may be effected only by surrender of
the QFL Note to the Borrower and either reissuance by the Borrower of such QFL
Note to the transferee or issuance by the Borrower of a new QFL Note to the
transferee.  A QFL Note shall only
evidence the Lender’s or an assignee’s right, title and interest in and to the
related obligation, and in no event is a QFL Note to be considered a bearer
instrument or obligation.  This Section
2.15 shall be construed so that the obligations underlying the QFL Notes
are at all times maintained in “registered form” within the meaning of Sections
871(h)(2) and 881(c)(2) of the Code.

 

2.16         Indemnity.  The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in payment
when due of the principal amount of or interest on any Eurodollar Loan, (b) default
by the Borrower in making a borrowing of, conversion into or continuation of
Eurodollar Loans after the Borrower has given a notice requesting the same, (c)
default by the Borrower in making any prepayment after the Borrower has given a
notice thereof or (d) the making of a prepayment or conversion of Eurodollar
Loans on a day which is not the last day of an Interest Period with respect
thereto including, without limitation, in each case, any such loss or expense
arising from the redeployment of funds obtained by it or from fees payable to
terminate the deposits from which such funds were obtained.  This covenant shall survive the termination
of this Agreement and the payment of the Obligations hereunder.

 

2.17         Discretion of Lender as to Manner of
Funding.  Notwithstanding any
other provisions of this Agreement (but subject to Section 2.18), each
Lender shall be entitled to fund and maintain its funding of all or any part of
its Loans in any manner it sees fit, it being understood that for the purposes
of this Agreement all determinations hereunder shall be made assuming each
Lender had actually funded and maintained each Eurodollar Loan through the
purchase of deposits of Dollars in the London interbank market having a
maturity corresponding to each Loan’s Interest Period and bearing an interest
rate equal to the Eurodollar Rate for such Interest Period.

 

2.18         Change of Lending Office;
Replacement Lender.  (a)  Each Lender agrees that if it makes any
demand for payment under Section 2.14 or Section 2.15 or if any
adoption or change of the type described in Section 2.13 shall occur
with respect to it, such Lender will use reasonable efforts (consistent with
its internal policy and legal and regulatory restrictions and so long as such
efforts would not be disadvantageous to it as determined in its sole
discretion) to designate a different lending office if the making of such a
designation would reduce or obviate the need for the Borrower to make payments
under Section 2.14 or Section 2.15, or would eliminate or reduce
the effect of any adoption or change described in Section 2.13.

 

(b)           In determining the
amount of any claim for reimbursement or compensation hereunder, each Lender
will use reasonable methods of calculation consistent with such methods customarily
employed by such Lender in similar situations.

 

31

 

(c)           Each Lender will notify
the Borrower and the Administrative Agent of any event giving rise to a claim
under Sections 2.13, 2.14, 2.15 or 2.16 promptly
after the occurrence thereof, which notice shall be accompanied by a
certificate of such Lender setting forth in reasonable detail the circumstances
of such claim.

 

(d)           If any Lender, other
than (in its capacity as a Lender) the Administrative Agent (an “Affected
Lender”), seeks payment or indemnification from the Borrower pursuant to Section
2.14 or Section 2.15(a) (without prejudice to any amounts then due
to such Lender under such Sections) that are not applicable to all Lenders,
then the Borrower may designate another Lender or another bank or financial
institution acceptable to the Administrative Agent to assume, in accordance
with Section 9.6, all (but not less than all) the Commitments, Loans and
other rights and obligations of such Affected Lender hereunder (a “Replacement
Lender”), in each case, on a date mutually acceptable to the Replacement
Lender, the Affected Lender, the Borrower and the Administrative Agent, without
recourse upon, warranty by, or expense to, such Affected Lender or the Administrative
Agent, for a purchase price equal to the outstanding principal amount of the
Loans of such Affected Lender plus all interest accrued thereon and all
other amounts owing to such Affected Lender hereunder, or such other purchase
price as may be mutually agreed upon between the Affected Lender and the
Replacement Lender, upon such assumption and purchase by the Replacement
Lender, such Replacement Lender shall be deemed a “Lender” for purposes of this
Agreement and the other Loan Documents and such Affected Lender shall cease to
be a “Lender” for such purposes and shall no longer have any obligations
hereunder.

 

2.19         Ratification of Collateral
Documents; Priority.  The
Borrower hereby ratifies and confirms that the Collateral Agent, on behalf of
the Secured Parties, has a continuing security interest in all of the
collateral granted to the Collateral Agent and described in the Collateral
Documents.  In addition, the Borrower
hereby covenants, represents and warrants that, upon entry of the Interim Order
and the Final Order (when entered), at all times after the Petition Date
through the Emergence Time, the Obligations of the Borrower hereunder and under
the Loan Documents, pursuant to Section 364(c)(1) of the Bankruptcy Code, shall
at all times constitute allowed administrative expense claims in the Case
having priority over all administrative expenses of the kind specified in
Sections 503(b) or 507(b) of the Bankruptcy Code and any and all expenses and
claims of the Borrower, whether heretofore or hereafter incurred, including but
not limited to the kind specified in Sections 105, 326, 328, 330, 331, 503(b),
506(c), 507(a), 507(b), 726, 1112 or 1114 of the Bankruptcy Code, subject only
to the priority of the Carve-Out and the Bank One Claim.  Notwithstanding anything in any Loan
Document, no portion of the Carve-Out shall be utilized for the payment of
professional fees and disbursements incurred in connection with any challenge
to the amount, extent, priority, validity, perfection or enforcement of the
indebtedness of the Borrower owing to the Administrative Agent or the Lenders
or to the Collateral.  The
Administrative Agent and the Lenders agree that (a) so long as no Default or
Event of Default shall have occurred, the Borrower shall be permitted to pay
compensation and reimbursement of expenses allowed and payable under 11 U.S.C.
§ 330 and 11 U.S.C. § 331, as the same may be due and payable, and the same
shall not reduce the Carve-Out and (b) the amount of any retainers received by
any professionals retained in the Case shall not reduce the Carve-Out.

 

32

 

2.20         No Discharge; Survival of Claims.  The Borrower hereby agrees that (a) its
obligations hereunder shall not be discharged by the entry of an order
confirming a Reorganization Plan (and the Borrower, pursuant to Section
1141(d)(4) of the Bankruptcy Code, hereby waives any such discharge) and (b)
the Superpriority Claim granted to the Collateral Agent and the other Secured
Parties pursuant to the Orders and described in Section 2.19 and the
Liens granted to the Collateral Agent for the benefit of the Secured Parties
pursuant to the Loan Documents and the Orders and described in Section 2.19
shall not be affected in any manner by the entry of an order confirming a
Reorganization Plan.

 

ARTICLE 3.  REPRESENTATIONS AND
WARRANTIES

 

To induce the
Administrative Agent and the Lenders to enter into this Agreement and to make
or participate in extensions of credit hereunder, the Borrower hereby
represents and warrants to the Administrative Agent and each Lender as of the
date hereof:

 

3.1           Financial Condition.  (a) 
The consolidated balance sheets of the Borrower and its Consolidated
Subsidiaries as of December 31, 2002 and the related consolidated statements of
income, retained earnings and cash flows for the fiscal year ended on such
date, and the unaudited consolidated balance sheets of the Borrower and its
Consolidated Subsidiaries as of June 30, 2003; and the related consolidated
statements of income, retained earnings and cash flows for the period ending as
of such date, reported on, in the case of the 2002 annual audited financial
statements, by Deloitte & Touche LLP, copies of which have heretofore been
furnished to the Lenders, present fairly the consolidated financial condition
of the Borrower and its Consolidated Subsidiaries as at such date, and the
results of their operations and their retained earnings and cash flows for each
of the fiscal periods then ended.  All
such financial statements, including the related schedules and notes thereto
relating to the audited financials, have been prepared in accordance with GAAP
applied consistently throughout the periods involved.

 

(b)           All balance sheets, all
statements of income and shareholders equity and of cash flows and all other
financial information which shall hereafter be furnished by or on behalf of or
the Borrower to the Administrative Agent for the purposes of, or in connection
with, this Agreement or any transaction contemplated hereby have been or will
be prepared in accordance with GAAP consistently applied throughout the periods
involved (except as disclosed therein) and do or will present fairly (subject
to normal year-end adjustment and the absence of footnotes in the case of
financial statements for any fiscal quarter) the financial condition of the
Borrower and its Consolidated Subsidiaries, as the case may be, as at the dates
thereof and the results of their operations and their shareholders equity and
cash flows for the periods then ended.

 

3.2           No
Change.  Other than changes
which customarily occur as a result of events leading up to and following the
commencement of a proceeding under Chapter 11 of the Bankruptcy Code and the
commencement of the Case, since December 31, 2002, there has been no
development or event which has had, or could reasonably be expected to have, a
Material Adverse Effect.

 

3.3           Corporate Existence; Compliance
with Law.  Each of the Borrower
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the

 

33

 

jurisdiction of its organization, (b) has the
corporate or limited liability company power and authority, and the legal right
to own and operate its property, to lease the property it operates as lessee
and to conduct the business in which it is currently engaged, (c) is duly
qualified as a foreign corporation or limited liability company and (to the
extent such concept applies to such entity) in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification except to the extent that
the failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect and (d) is in compliance with all
Requirements of Law, except to the extent that the failure to comply therewith
could not reasonably be expected to have a Material Adverse Effect (in the case
of each of clauses (a) through (d), with respect to the Borrower, subject to
the entry by the Bankruptcy Court of the Interim Order or the Final Order (when
entered)).

 

3.4           Corporate Power; Authorization;
Enforceable Obligations.  The
Borrower has the corporate power and authority, and the legal right, to make,
deliver and perform the Indentures and the Loan Documents and to authorize the
execution, delivery and performance of the Loan Documents, and to borrow
hereunder (in each case, subject to the entry by the Bankruptcy Court of the
Interim Order or the Final Order (when entered)).  The Borrower has taken all necessary corporate action to
authorize the borrowings on the terms and conditions set forth in this
Agreement and in the Notes and to execute, deliver and perform its obligations
under the Indentures and the Loan Documents (in each case, subject to the entry
by the Bankruptcy Court of the Interim Order or the Final Order (when
entered)).  As of the Original Closing
Date, set forth on Schedule 3.4a are all consents or authorizations of,
filings with, notices to or other acts by or in respect of, any Governmental
Authority or any other Person required in connection with the authorization,
execution, or issuance of any First Mortgage Bond, the authorization, delivery,
performance or validity of any Supplemental Indenture, or the execution,
delivery, performance, validity or enforceability of the Bond Collateral
Agreement or any Collateral Document related thereto, and in each case any
application therefor (collectively, the “First Mortgage Approvals”).  No consent or authorization of, filing with,
notice to or other act by or in respect of, any Governmental Authority or any
other Person is required in connection with the borrowings hereunder, or with
the execution, delivery, performance, validity or enforceability of the Loan
Documents other than (w) the Interim Order and the Final Order (when entered),
(x) First Mortgage Approvals, (y) as set forth on Schedule 3.4b, or (z)
any consents, authorizations and filings in connection with the foregoing that,
if not obtained, could not reasonably be expected to have a Material Adverse
Effect.  On or before the Original
Closing Date, the Administrative Agent and each Lender had received complete
and current copies of all consents, authorizations and filings listed on Schedule
3.4b  and complete and current
copies of all First Mortgage Approvals. 
No such consent, authorization or filing is or shall be conditioned upon
or otherwise imposes any materially burdensome or adverse condition.  This Agreement and the Indentures have been,
and each other Loan Document when executed and delivered will be, duly executed
and delivered on behalf of the Borrower (in each case, subject to the entry by
the Bankruptcy Court of the Interim Order and the Final Order (when entered)).  This Agreement and the Indentures
constitute, and each other Loan Document when executed and delivered will
constitute, a legal, valid and binding obligation of the Borrower enforceable
against the Borrower, in accordance with their respective terms and the Orders
(in each case, subject to the entry by the Bankruptcy Court of the Interim
Order and the Final Order (when entered)), except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,

 

34

 

moratorium or similar laws affecting the
enforcement of creditors’ rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).

 

3.5           No
Legal Bar.  The execution,
delivery and performance of the Loan Documents, the borrowings hereunder and
the use of the proceeds thereof, will not violate any Requirement of Law or
Contractual Obligation of the Borrower or any Subsidiary which violation could
reasonably be expected to have a Material Adverse Effect, will not accelerate
or result in the acceleration of any payment obligations of the Borrower or
such Subsidiary and will not result in, or require, the creation or imposition
of any Lien on any of the respective properties or revenues of the Borrower or
any such Subsidiary pursuant to any such Requirement of Law or Contractual
Obligation (other than Liens pursuant to the Indentures or the Collateral
Documents) (in each case, with respect to the Borrower, subject to the entry by
the Bankruptcy Court of the Interim Order or the Final Order).

 

3.6           No Material Litigation.  Other than the Case and except as disclosed
in the Borrower’s public filings filed with the SEC prior to the date hereof,
no litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Borrower,
threatened by or against the Borrower, any of its Subsidiaries, any Excluded
Subsidiary or any Foreign Subsidiary or against any of the respective
properties or revenues of the Borrower, any of its Subsidiaries, any Excluded
Subsidiary or any Foreign Subsidiary which could reasonably be expected to have
a Material Adverse Effect.

 

3.7           No
Default.  From and after the
Closing Date after giving effect to the waivers contained in this Agreement, no
Default or Event of Default has occurred and is continuing.

 

3.8           Ownership of Property; Liens.  Except as set forth in Schedule 3.8,
each of the Borrower and its Subsidiaries has good record and marketable title
in fee simple to, or a valid leasehold interest in, all its material real
property, and good title to, or a valid leasehold interest in, all its other
material property.  None of such
property is subject to any Lien other than Permitted Liens.

 

3.9           [Intentionally
Omitted].

 

3.10         Intellectual Property.  Each of the Borrower and its Subsidiaries
owns, or is licensed to use, all patents, trademarks, trade names, copyrights,
technology, know-how, processes, logos and insignia necessary for the conduct
of its business as currently conducted except for those which the failure to
own or license could not reasonably be expected to have a Material Adverse
Effect (the “Intellectual Property”). 
No claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property which could reasonably be
expected to have a Material Adverse Effect, nor does the Borrower or any
Consolidated Subsidiary know of any valid basis for any such claim.  The use of such Intellectual Property by the
Borrower or any Subsidiary does not infringe on the rights of any Person,
except for such claims and infringements that, in the aggregate, could not reasonably
be expected to have a Material Adverse Effect.

 

35

 

3.11         No Burdensome Restrictions.  No Requirement of Law or Contractual
Obligation of the Borrower, any Subsidiary or any Excluded Subsidiary could
reasonably be expected to have a Material Adverse Effect after the Emergence
Time.

 

3.12         Taxes.  Except as set forth in Schedule 3.12,
each of the Borrower and the Subsidiaries has filed or caused to be filed all
federal, state and other material tax returns which are required to be filed
and has paid all taxes (including interest and penalties) shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any tax, fee or other charge
the amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Borrower or such Subsidiary, as the
case may be, or, with respect to the Borrower prior to the Emergence Time,
except to the extent non-payment is permitted by the Bankruptcy Code); and no
tax Lien has been filed, and, to the knowledge of the Borrower, no claim is
being asserted, with respect to any such tax, fee or other charge.

 

3.13         Margin
Stock.  (a)  The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U), and no proceeds of any extension of
credit hereunder will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock, except in compliance with applicable law and regulations.

 

(b)           Following application
of the proceeds of each extension of credit hereunder, not more than 25% of the
value of the consolidated assets of the Borrower and its Consolidated
Subsidiaries that are subject to the provisions of Section 6.3 will be
comprised of margin stock.

 

3.14         ERISA.  Except as disclosed in Schedule 3.14,
neither the Borrower nor any Subsidiary maintains, contributes to or has
material obligations with respect to, any welfare plan (as defined in
Section(3)(1) of ERISA) which provides benefits to employees after termination
of employment other than as required by Part 6 of Title I of ERISA or similar
state laws regarding continuation of benefits. 
Each Plan has complied and is in compliance in all respects with the
applicable provisions of ERISA and the Code except where failure to do so could
not reasonably be expected to have a Material Adverse Effect.  The Borrower and each Subsidiary have not
breached any of the responsibilities, obligations or duties imposed on it by
ERISA, the Code, or regulations promulgated thereunder with respect to any
Plan, which breach could reasonably be expected to have a Material Adverse
Effect.  Neither the Borrower nor any
Subsidiary nor any fiduciary of any Plan who is an officer or an employee of
the Borrower or any Subsidiary has engaged in a nonexempt prohibited
transaction described in Section 406 of ERISA or 4975 of the Code with respect
to a Plan which could reasonably be expected to have a Material Adverse
Effect.  With respect to any employee
benefit plan (as defined in Section 3(3) of ERISA) currently or formerly
maintained or contributed to by any Commonly Controlled Entity, no liability
exists and no event has occurred which could subject the Borrower or any
Subsidiary to any liability which could reasonably be expected to have a
Material Adverse Effect, except as disclosed in Schedule 3.14.  Except as disclosed in Schedule 3.14,
none of the Borrower or any Subsidiary has any liability, direct or indirect,
contingent (including, without

 

36

 

limitation, any such liability in connection
with a Multiemployer Plan) or otherwise, under Title IV of ERISA or under
Section 412 of the Code which could reasonably be expected to have a Material
Adverse Effect.

 

3.15         Holding Company; Investment Company
Act; Other Regulations.  The
Borrower is not (a) an “investment company” or a company “controlled” by an
“investment company”, within the meaning of the Investment Company Act of 1940,
as amended, or (b) except as described on Schedule 3.15, subject to
regulation under any Federal or state statute, regulation, decree or order
which limits its ability to incur Indebtedness or conditions such ability upon
any act, approval or consent of any Governmental Authority or an ISO.  The Borrower is either (i) not a “holding
company”, a “subsidiary company” of a “holding company”, or an “affiliate” of a
“holding company”, as each such term is defined in the Public Utility Holding
Company Act of 1935, as amended, or (ii) exempt from registration as a holding
company under the Public Utility Holding Company Act of 1935, as amended, by
reason of filing an application on Form U-1 in good faith seeking an order of
exemption pursuant to Section 3(a)(3) of that Act, and the Borrower has not received
notice from the SEC challenging or otherwise calling into question such
exemption.

 

3.16         Purpose
of Loans.  The proceeds of Loans
have been used solely for general corporate purposes of the Borrower, its
Subsidiaries, the Excluded Subsidiaries and the Foreign Subsidiaries as
permitted hereunder (in compliance with all applicable legal and regulatory
requirements), including, without limitation, the refinancing of certain
Indebtedness.

 

3.17         Environmental Matters.  Except as set forth on Schedule 3.17
or as disclosed in the Borrower’s public filings filed with the SEC prior to
the date hereof,

 

(a)           The facilities and
properties owned, leased or operated by the Borrower, its Subsidiaries, any
Excluded Subsidiary or any Foreign Subsidiary (the “Properties”) and all
operations at the Properties are in, and have been in, compliance in all
material respects with all applicable Environmental Laws, and there is no
contamination in, at, under, from or about the Properties or violation of any
Environmental Law or other circumstance or condition, with respect to the
Properties or the business operated by the Borrower, its Subsidiaries, any
Excluded Subsidiary or any Foreign Subsidiary, or, to the Borrower’s knowledge,
any predecessor of any of them (the “Business”) which in either case
could reasonably be expected to result in any claims, liability, investigation
or cost pursuant to any Environmental Law and to have a Material Adverse
Effect.

 

(b)           None of the Borrower,
any Subsidiary, any Excluded Subsidiary, or any Foreign Subsidiary, or, to the
Borrower’s knowledge, any predecessor of any of them, has received any notice
of violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with Environmental Laws
with regard to any of the Properties or the Business which remains unresolved
or outstanding, nor do the Borrower or any such Subsidiary have knowledge or
reason to believe that any such notice will be received or is being threatened,
in each case which could reasonably be expected to have a Material Adverse
Effect.

 

37

 

(c)           There has been no
Release or threat of Release of Materials of Environmental Concern at or from
any of the Properties, or arising from or related to the operations of the
Borrower, any Subsidiary, any Excluded Subsidiary, or any Foreign Subsidiary,
or any predecessor of any of them, in connection with any of the Properties or
otherwise in connection with the Business that could reasonably be expected to
have a Material Adverse Effect.

 

3.18         Insurance.  All policies of insurance of any kind or
nature currently maintained by or issued to the Borrower or any Subsidiary,
including, without limitation, policies of life, fire, theft, product
liability, public liability, property damage, other casualty, employee
fidelity, worker’s compensation, employee health and welfare, title, property
and liability insurance, are in full force and effect in all material respects
and are of a nature and provide such coverage as is sufficient and as is
customarily carried by companies of similar size and character.

 

3.19         Accuracy and Completeness of
Information.  All information,
reports and other papers and data (other than projections) with respect to the
Borrower, any of its Subsidiaries or any Excluded Subsidiary furnished to the
Lenders by the Borrower, or on behalf of the Borrower, and all SEC Reports
were, at the time furnished, complete and correct in all material respects, or
have been subsequently supplemented by other information, reports or other
papers or data, to the extent necessary to give the Lenders a true and accurate
knowledge of the subject matter in all material respects.  All projections with respect to the Borrower
or any of its Subsidiaries furnished by the Borrower, were prepared and
presented in good faith by the Borrower based upon facts and assumptions that
the Borrower believed to be reasonable in light of current and foreseeable
conditions, it being understood that projections are subject to significant
uncertainties and contingencies, many of which are beyond the control of the
Borrower and that no assurance can be given that the financial results set
forth in such projections will actually be realized and the Borrower shall be under
no obligation to update such projections. 
No document furnished or statement made in writing to the Lenders by or
on behalf of the Borrower in connection with the negotiation, preparation or
execution of this Agreement and no SEC Report contains any untrue statement of
a material fact, or omits to state any such material fact necessary in order to
make the statements contained therein not misleading, in either case which has
not been corrected, supplemented or remedied by subsequent documents furnished
or statements made in writing to the Lenders.

 

3.20         Leaseholds, Permits, etc.  The Borrower possesses or has the right to
use, all leaseholds, easements, franchises and permits and all authorizations
and other rights which are material to and necessary for the conduct of the
Business and its business.  All the
foregoing are in full force and effect, and each of the Borrower and the
Subsidiaries is in substantial compliance with the foregoing without any known
conflict with the valid rights of others, except for such noncompliance with
the foregoing which could not reasonably be expected to have a Material Adverse
Effect and except for defaults arising solely from events customarily leading
up to and following the commencement of a proceeding under Chapter 11 of the
Bankruptcy Code or the commencement of the Case itself.  No event has occurred which permits, or
after notice or lapse of time or both would permit, the revocation or
termination of any such leasehold, easement, franchise, license or other right,
which termination or revocation, considered as a whole, could reasonably be
expected to have a Material Adverse Effect, except for events

 

38

 

customarily leading up to and following the
commencement of a proceeding under Chapter 11 of the Bankruptcy Code or the
commencement of the Case itself.

 

3.21         No Restrictive Covenants.  No Subsidiary of the Borrower is party to,
or otherwise bound by, any agreement or other arrangement that prohibits such
Subsidiary from making any payments, directly or indirectly, to the Borrower,
by way of dividends, advances, repayment of loans or advances, reimbursements
of management or other intercompany charges, expenses and accruals or other
returns on investment, or any other agreement or arrangement that restricts the
ability of such Subsidiary to make any payment, directly or indirectly, to the
Borrower, other than prohibitions and restrictions permitted to exist under Section
6.12 or under the Bank One Credit Documents.

 

3.22         [Intentionally Omitted]

 

3.23         Montana First Mortgage Indenture.

 

(a)           The First Mortgage
Bonds issued under the Montana First Mortgage Indenture, as supplemented prior
to the Original Closing Date and as further supplemented by the Twenty-Third
Supplemental Indenture (the “Montana Supplemental Indenture”), have been
duly executed, authenticated, issued and delivered, and constitute valid and
legally binding obligations of the Borrower, entitled to the security and
benefits provided by the lien of such Indenture (except to the extent that
enforceability of such lien may be limited by the effect of certain laws of the
jurisdictions in which the physical properties covered thereby are located upon
the remedies provided in such Indenture, which limitations, however, do not
make the remedies afforded inadequate for the realization of the security and
benefits provided by such Indenture, and except as enforceability of such lien
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors’ rights).

 

(b)           The Montana First
Mortgage Indenture, as heretofore supplemented, constitutes a legally valid and
directly enforceable first mortgage lien for the equal and proportionate
security of the first mortgage bonds issued or to be issued thereunder, upon
substantially all of the physical properties and franchises of the Borrower
which are specifically described therein as subject to the lien thereof and
which are used or useful in the conduct of the Montana Utility Business, free
from all prior liens, charges or encumbrances (except to the extent that
enforceability of such lien may be limited by the effect of certain laws of the
jurisdictions in which the physical properties covered thereby are located upon
the remedies provided in such Indenture, as heretofore supplemented, which
limitations, however, do not make the remedies afforded inadequate for the
realization of the security and benefits provided by such Indenture, and except
as enforceability of such lien may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors’ rights or except as expressly permitted by the terms of the Montana
First Mortgage Indenture) and the after-acquired property clause in such
Indenture subjects to the lien thereof all after-acquired utility property of
the Montana Utility Business as provided therein (except such thereof as is
expressly excepted from the lien of such Indenture).

 

(c)           The Montana First Mortgage
Indenture, as heretofore supplemented (including any necessary related
financing statements), has been filed and recorded wherever and

 

39

 

to the extent necessary to perfect the lien
thereof upon the properties now owned by the Borrower and intended to be
subject thereto; all fees or taxes in connection therewith have been paid and
no other filing or recordation is presently necessary in order to perfect the
lien of such Indenture on such properties.

 

(d)           No filing or recording
of the Montana Supplemental Indenture is necessary to perfect the lien of the
Montana First Mortgage Indenture upon the properties now owned by the Borrower
and intended to be subject thereto or to extend such lien for the benefit of
the First Mortgage Bonds issued thereunder; no re-recording or refiling of such
Indenture or any other instruments or documents (except for periodic filings
which extend the effectiveness of financing statements) is required to preserve
and protect the lien of such Indenture; and under the present laws of the
States in which the property intended to be subject to the lien of such
Indenture is located, no further supplemental indentures or other instruments
or documents are required to be executed, filed and/or recorded to extend the
lien of such Indenture to after-acquired property other than as may be required
by applicable real property laws.

 

(e)           The Borrower has good
and marketable title to all properties owned by it which are subject to the
Montana First Mortgage Indenture, subject only (a) to the lien of such
Indenture, (b) to Excepted Encumbrances (as defined in such Indenture) which
are Permitted Liens hereunder and (c) to minor exceptions and defects which do
not, in the aggregate, materially interfere with the use by the Borrower of
such properties for the purposes for which they are held, materially detract
from the value of said properties or in any material way impair the security
afforded by such Indenture.

 

3.24         South Dakota First Mortgage Indenture.

 

(a)           The First Mortgage
Bonds issued under the South Dakota First Mortgage Indenture, as supplemented
prior to the Original Closing Date and as further supplemented by a
Supplemental Indenture creating the South Dakota First Mortgage Bonds (the “South
Dakota Supplemental Indenture”), have been duly executed, authenticated,
issued and delivered, and constitute valid and legally binding obligations of
the Borrower, entitled to the security and benefits provided by the lien of
such Indenture (except to the extent that enforceability of such lien may be
limited by the effect of certain laws of the jurisdictions in which the
physical properties covered thereby are located upon the remedies provided in
such Indenture, which limitations, however, do not make the remedies afforded
inadequate for the realization of the security and benefits provided by such
Indenture, and except as enforceability of such lien may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors’ rights).

 

(b)           The South Dakota First
Mortgage Indenture, as heretofore supplemented, constitutes a legally valid and
directly enforceable first mortgage lien for the equal and proportionate
security of the first mortgage bonds issued or to be issued thereunder, upon
substantially all of the physical properties and franchises of the Borrower
which are specifically described therein as subject to the lien thereof and
which are used or useful in the conduct of the South Dakota Utility Business,
free from all prior liens, charges or encumbrances (except to the extent that
enforceability of such lien may be limited by the effect of certain laws of the
jurisdictions in which the physical properties covered thereby are located upon
the remedies

 

40

 

provided in such Indenture, as heretofore
supplemented, which limitations, however, do not make the remedies afforded
inadequate for the realization of the security and benefits provided by such
Indenture, and except as enforceability of such lien may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights or except as expressly permitted
by the terms of the South Dakota First Mortgage Indenture) and the
after-acquired property clause in such Indenture subjects to the lien thereof
all after-acquired property of the South Dakota Utility Business as provided
therein (except such thereof as is expressly excepted from the lien of such
Indenture).

 

(c)           The South Dakota First
Mortgage Indenture, as heretofore supplemented (including any necessary related
financing statements), has been filed and recorded wherever and to the extent
necessary to perfect the lien thereof upon the properties now owned by the
Borrower and intended to be subject thereto; all fees or taxes in connection
therewith have been paid and no other filing or recordation is presently
necessary in order to perfect the lien of such Indenture on such properties.

 

(d)           No filing or recording
of the South Dakota Supplemental Indenture is necessary to perfect the lien of
the South Dakota First Mortgage Indenture upon the properties now owned by the
Borrower and intended to be subject thereto or to extend such lien for the
benefit of the First Mortgage Bonds to be issued thereunder; no re-recording or
refiling of such Indenture or any other instruments or documents (except for
periodic filings which extend the effectiveness of financing statements) is
required to preserve and protect the lien of such Indenture; and under the
present laws of the States in which the property intended to be subject to the
lien of such indenture is located, no further supplemental indentures or other
instruments or documents are required to be executed, filed and/or recorded to
extend the lien of such Indenture to after-acquired property other than as may
be required by applicable real property law.

 

(e)           The Borrower has good
and marketable title to all properties owned by it which are subject to the
South Dakota First Mortgage Indenture, subject only (a) to the lien of such
Indenture, (b) to Permitted Liens (as defined in such Indenture) which are
Permitted Liens hereunder and (c) to minor exceptions and defects which do not,
in the aggregate, materially interfere with the use by the Borrower of such
properties for the purposes for which they are held, materially detract from
the value of said properties or in any material way impair the security
afforded by such Indenture.

 

3.25         Subsidiaries.  Set forth on Schedule 3.25 are all of
the Subsidiaries of the Borrower, which schedule correctly sets forth, as of
the date hereof, the percentage ownership (direct and indirect) of the Borrower
in each class of capital stock or other equity interests of each of its
Subsidiaries and also identifies the direct owner thereof.  All outstanding shares of capital stock of
each Subsidiary of the Borrower has been duly and validly issued, are fully
paid and non-assessable and have been issued free of any preemptive
rights.  No Subsidiary of the Borrower
has outstanding any securities convertible into or exchangeable for its Capital
Stock or outstanding any right to subscribe for or to purchase, or any options
or warrants for the purchase or, or any agreement providing for the issuance
(contingent or otherwise) of or any tails, commitments or claims of any
character relating to, its Capital Stock or any stock appreciation or similar
rights.

 

41

 

ARTICLE 4.  CONDITIONS
PRECEDENT

 

4.1           Conditions to Closing Date.  The occurrence of the Closing Date is
subject to the satisfaction of the following conditions precedent:

 

(a)           Documents.  The Administrative Agent shall have received
each of the following documents, each of which shall be satisfactory to the
Administrative Agent (and to the extent specified below, to each Lender) in
form and substance:

 

(i)            Executed Counterparts.  From each party hereto either (i) multiple
counterparts of this Agreement, signed on behalf of such party or (ii) written
evidence satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page to this Agreement) that such party has
signed a counterpart of this Agreement);

 

(ii)           Corporate Documents.  Such documents and certificates as the
Administrative Agent or its counsel may reasonably request, certified as of the
Closing Date as complete and correct copies thereof by the Secretary or an
Assistant Secretary of the Borrower, relating to (i) the organization,
existence and good standing of the Borrower, (ii) the authorization of the
execution, delivery and performance by the Borrower of this Agreement, and of
the borrowings hereunder by the Borrower, and (iii) certificates as to the
incumbency and signature of each individual signing this Agreement and any
other agreement or document contemplated hereby on behalf of the Borrower; and
and

 

(iii)          Other Documents.  Such other documents as the Administrative
Agent or any Lender or counsel to CSFB may reasonably request.

 

(b)           Bankruptcy Court
Approvals.           The
Bankruptcy Court shall have entered an order (the “Interim Order”), in
any event not later than November 15, 2003, acceptable in all respects to the
Administrative Agent and the Lenders on an application or motion by the
Borrower, such motion to be satisfactory in form and substance to the Lenders,
which Interim Order shall have been entered on such notice to such parties as
may be satisfactory to the Administrative Agent and the Lenders, approving the
Facility and granting the priority described in Section 2.19 and the
other Loan Documents, which Interim Order shall, among other things, (i)
approve the Facility, (ii) lift the automatic stay to permit the Borrower to
perform its obligations, and the Administrative Agent and the Secured Parties
to exercise their rights and remedies with respect to, the Facility, and (iii)
have not been reversed, vacated, modified, amended or stayed; and all motions
and other documents to be filed with and submitted to the Bankruptcy Court in
connection with the Facility and the approval thereof shall be in form and
substance reasonably satisfactory to the Administrative Agent and the Lenders.

 

(c)           Closing Expenses.  The Administrative Agent shall have received
reimbursement of all costs and expenses (including the fees and expenses of
counsel to the Administrative Agent to the extent invoiced).

 

42

 

(d)           Closing Certificate.  The Administrative Agent shall have received
a closing certificate of the Borrower substantially in the form of Exhibit C,
dated as of the Closing Date and satisfactory in form and substance to the
Administrative Agent.

 

(e)           Outside Closing Date.  The Closing Date shall have occurred and
each of the conditions precedent set forth in this Section 4.1 shall
have been satisfied on or prior to November 30, 2003.

 

(f)            Representations and
Warranties.  Each of the
representations and warranties made by the Borrower in or pursuant to the Loan
Documents (except to the extent applicable to an earlier date) shall be true
and correct in all material respects on and as of such date as if made on and
as of such date (both before and after giving effect to such Transactions as
shall be required to occur on or prior to the Closing Date).

 

(g)           No Default.  After giving effect to the waivers contained
in this Agreement, no Default or Event of Default shall have occurred and be
continuing on such date or after giving effect to the Transactions to be
consummated on such date.

 

(h)           Schedules to this
Agreement.  The Borrower shall have
delivered to the Administrative Agent and the Lenders updated Schedules to this
Agreement, and the Administrative Agent and the Lenders shall be reasonably
satisfied in form and substance with such updated Schedules.

 

(i)            Additional Matters.  All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions and the other transactions contemplated by this Agreement, and the
other Loan Documents shall be reasonably satisfactory in form and substance to
the Administrative Agent, and the Administrative Agent shall have received such
other documents, instruments and legal opinions in respect of any aspect or
consequence of the Transactions and the other transactions contemplated hereby
or thereby as it shall reasonably request.

 

4.2           [Intentionally
Omitted]

 

4.3           [Intentionally
Omitted].

 

ARTICLE 5.  AFFIRMATIVE COVENANTS

 

The Borrower
hereby agrees that for so long as any of the Commitments remains in effect, any
Note remains outstanding and unpaid or any Obligation is owing to any Lender,
the Collateral Agent or the Administrative Agent hereunder or under any other
Loan Document, the Borrower shall and shall cause each of its Subsidiaries to:

 

5.1           Financial Statements.  Furnish to each Lender:

 

(a)           as soon as available,
but in any event within 90 days after the end of each fiscal year of the
Borrower, a copy of the consolidated balance sheet of the Borrower and the

 

43

 

Consolidated Subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income, retained earnings and cash
flows for such year, setting forth in each case in comparative form the figures
as of the end of and for the previous year, reported on without a “going
concern” or like qualification or exception, or qualification arising out of
the scope of the audit (other than, at any time after the Petition Date through
the Emergence Time, with respect to the Case or a “going concern” or like
qualification or exception), by Deloitte & Touche LLP or other independent
certified public accountants of nationally recognized standing; provided
that the submission of the Borrower’s report on Form 10-K shall satisfy the
foregoing requirements;

 

(b)           as soon as available,
but in any event not later than 45 days after the end of each quarterly period
for each of the first three (3) fiscal quarters of each fiscal year of the
Borrower, the unaudited consolidated balance sheet of the Borrower and the
Consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income, retained earnings and cash flows
of the Borrower and the Subsidiaries for such quarter and the portion of the fiscal
year through the end of such quarter and setting forth the actual figures for
the corresponding date or period in the previous year, certified by the chief
financial officer, treasurer or chief accountant of the Borrower as being
fairly stated in all material respects (subject to normal year-end audit
adjustments); provided that the submission of the Borrower’s report on
Form 10-Q shall satisfy the foregoing requirements; and

 

(c)           prior to the Emergence
Time, as soon as available, but in any event not later than 20 days after the
end of each fiscal month of the Borrower, the unaudited consolidated balance
sheet of the Borrower and the Consolidated Subsidiaries as at the end of such
month and the related unaudited consolidated profit and loss and reconciliation
of surplus statements and a statement of cash flows of the Borrower and the
Subsidiaries for the period from the beginning of the applicable fiscal year of
the Borrower to the end of such fiscal month, certified by the chief financial
officer, treasurer or chief accountant of the Borrower as being fairly stated
in all material respects (subject to normal year-end audit adjustments),

 

all
such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).

 

5.2           Certificates; Other Information.  Furnish to each Lender:

 

(a)           concurrently with the
delivery of the financial statements referred to in Section 5.1(a), a
certificate of the independent certified public accountants reporting on such
financial statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default with respect to
the covenants set forth in Section 6.1, except as specified in such
certificate, together with any management letter prepared by said accountants;

 

(b)           concurrently with the
delivery of the financial statements referred to in Section 5.1(a) or (b),
a compliance certificate of the chief financial officer, treasurer or chief
accountant of the Borrower, in form and substance satisfactory to the
Administrative Agent (the 

 

44

 

“Compliance Certificate”), (i) showing compliance by the
Borrower and the Subsidiaries with the covenants contained in Section 6.1
and (ii) setting forth the description of any Reduction Event occurring during
such period and the aggregate amount of Net Cash Proceeds received during such
period with respect to any Reduction Event;

 

(c)           within five (5)
Business Days after the filing thereof, copies of all reports which the
Borrower sends to any of its stockholders, and copies of all registration
statements, reports on Form 10-K, Form 10-Q or Form 8-K (or, in each case, any
successor form) and other material reports which the Borrower or any Subsidiary
files with the SEC or any successor or analogous Governmental Authority (other
than public offerings of securities under employee benefit plans or dividend
reinvestment plans);

 

(d)           within five (5) days
after either of Moody’s or Standard & Poor’s has raised or lowered its
credit rating of any of the First Mortgage Bonds or the credit facility
evidenced by the Loan Documents a notice to the Administrative Agent as to such
effect;

 

(e)           concurrently with the
delivery thereof or promptly after receipt thereof, a copy of all notices to
the trustee or the Borrower under either Indenture;

 

(f)            prior to the Emergence
Time, on the first Business Day of the month of January and June, a certificate
of good standing for the Borrower from the appropriate governmental officer in
its jurisdiction of incorporation;

 

(g)           as soon as possible and
in any event within five Business Days of filing thereof, copies of all tax
returns filed by the Borrower or any of its Subsidiaries (other than Excluded
Subsidiaries) with the U.S. Internal Revenue Service;

 

(h)           as soon as possible and
in any event within 270 days after the close of the fiscal year of the
Borrower, a statement of the Unfunded Liabilities of each Single Employer Plan,
certified as correct by an actuary enrolled under ERISA;

 

(i)            as soon as possible
and in any event within 10 days after the Borrower knows that any Reportable
Event has occurred with respect to any Plan, a statement, signed by the chief
financial officer, treasurer or chief accountant of the Borrower, describing
said Reportable Event and the action which the Borrower proposes to take with
respect thereto;

 

(j)            as soon as possible
and in any event within five (5) Business Days of filing therewith with the
PBGC, the U.S. Internal Revenue Service or any other governmental entity, a
copy of each annual report or other filing with respect to any Plan;

 

(k)           as soon as possible and
in any event within five (5) Business Days after receipt by the Borrower or any
of its Subsidiaries, a copy of (i) any notice or claim to the effect that the
Borrower or any such Subsidiary is or may be liable to any Person as a result
of the release by the Borrower or any such Subsidiary, or any other Person, of
any toxic or hazardous waste or substance into the environment, and (ii) any
notice alleging any violation of any federal, state or local environmental,
health or safety law or regulation by the Borrower or any such Subsidiary;

 

45

 

(l)            prior to the Emergence
Time, not later than 6:00 p.m., New York City time, on each Wednesday, the
unaudited weekly cash flow reports of the Borrower and its Subsidiaries on a
consolidated basis and as of the end of such week, the forecast of cash
receipts and disbursements for the Borrower and its Subsidiaries for the
ensuing 13-week period, and the Borrower’s explanations, reasonably acceptable
to the Administrative Agent, of the variances between the items set forth on
such unaudited weekly cash flow reports and the prior week’s forecast for such
week; and

 

(m)          promptly, such
additional financial and other information as the Administrative Agent or any
Lender may from time to time reasonably request.

 

5.3           Payment and Performance of
Obligations.  Perform in all
respects, material to the Borrower and its Subsidiaries taken as a whole, all
of its obligations under the terms of all material agreements, indentures,
mortgages, security agreements and other debt instruments to which it is party
or bound, including, without limitation, pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all
taxes, fees or other charges imposed on it or on any of its properties by any
Governmental Authority and all its other obligations of whatever nature,
material to the Borrower and its Subsidiaries taken as a whole, except, in each
case, (a) where the amount or validity thereof is currently being diligently
contested in good faith and reserves in conformity with GAAP with respect
thereto have been provided on the books of the Borrower or any of its
Subsidiaries, as the case may be (and, with respect to the Borrower, except as
such non-performance is permitted by the Bankruptcy Code), (b) with respect to
the Borrower, the foregoing shall only apply with respect to obligations
arising after the Petition Date under executory contracts assumed in the Case
or entered into after the Petition Date or ordered by the Bankruptcy Court to
be paid, and (c) prior to the Emergence Time, with respect to the Borrower, as
such non-performance is permitted by the Bankruptcy Code.

 

5.4           Maintenance of Existence.  Renew and keep in full force and effect its
corporate existence, take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business except to the extent such failure to maintain could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect (subject,
in the case of the Borrower, to the Interim Order or the Final Order (when
entered)) and comply with all Contractual Obligations and Requirements of Law
except to the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect or except,
with respect to the Borrower, during the period after the Petition Date through
the Emergence Time, as such non-compliance is permitted by the Bankruptcy Code.

 

5.5           Maintenance of Property; Insurance.  Keep all property useful and necessary in
its business in good working order and condition (ordinary wear and tear, and
casualties, excepted), maintain with financially sound and reputable insurance
companies, having a Financial Strength rating of at least A by A.M. Best
Company, insurance on all its property in at least such amounts and against at
least such risks as are usually insured against in the same general area by
companies engaged in the same or a similar business, and furnish to the
Administrative Agent, upon request, full information as to the insurance
carried including

 

46

 

certified copies of policies and certificates of insurance from a
recognized insurance broker reasonably acceptable to the Required Lenders.

 

5.6           Inspection of Property; Books and
Records; Discussions.  Keep
proper books of records and accounts, in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities; and
permit after reasonable notice representatives of the Administrative Agent or
any Lender to visit and inspect any of its properties and examine and make
abstracts from any of its books and records at any reasonable time and as often
as may reasonably be desired, and to discuss the business, operations,
properties and financial and other condition of the Borrower and each
Subsidiary with officers and employees of the Borrower and such Subsidiary and
with their independent certified public accountants (provided that, so
long as no Default shall have occurred and be continuing, the Borrower shall be
provided with the opportunity to be present during any such communication with
its accountants).

 

5.7           Notices.  (a)  Promptly give notice
to the Administrative Agent of:

 

(i)            the occurrence of any Default or Event of
Default (which notice shall be delivered within five (5) days after the
Borrower knows of any such Default or Event of Default);

 

(ii)           the assertion by the holder of any
post-petition Indebtedness of the Borrower or Indebtedness of the Borrower
assumed in the Case, in each case in excess of $250,000, that any default
exists with respect thereto or that the Borrower is not in compliance
therewith;

 

(iii)          the assertion by the holder of any
Indebtedness of any Subsidiary of the Borrower in excess of $250,000 that any
default exists with respect thereto or that any such Subsidiary is not in
compliance therewith;

 

(iv)          receipt of any written notice that the
Borrower or any of its Subsidiaries is subject to any investigation by any
Governmental Authority with respect to any potential or alleged violation of
any applicable Environmental Law or of imposition of any Lien against any
property of any such Person for any liability with respect to damages arising
from, or costs resulting from, any violation of any Environmental Laws;

 

(v)           any default or event of default under any
Contractual Obligation of the Borrower or any of its Subsidiaries, which, if
not cured, could reasonably be expected to have a Material Adverse Effect
(which notice shall be delivered within 10 days after the Borrower knows of any
such default or event of default);

 

(vi)          receipt of any notice of any litigation,
investigation or proceeding commenced or threatened against the Borrower (to
the extent not stayed during the pendency of the Case) or any Subsidiary of the

 

47

 

Borrower, which (A) seeks damages in excess of $250,000, (B) seeks
injunctive relief, (C) is asserted or instituted against any Plan, its
fiduciaries or its assets, (D) alleges criminal misconduct by any such Person
or (E) alleges the violation of any law regarding, or seeks remedies in
connection with, any Environmental Laws;

 

(vii)         any Lien (other than Permitted Liens) or claim
made or asserted against any of the Collateral;

 

(viii)        commencement of any proceedings against the
Borrower or any Subsidiary of the Borrower contesting any tax, fee, assessment,
or other governmental charge in excess of $250,000;

 

(ix)           the fact that the Borrower or any Subsidiary
of the Borrower has entered into a Rate Management Transaction or an amendment
to a Rate Management Transaction, together with copies of all agreements
evidencing such Rate Management Transaction or amendments thereto (which shall
be delivered within two Business Days);

 

(x)            any material labor dispute to which the
Borrower or any Subsidiary may become a party and which involves any group of
employees, any strikes or walkouts relating to any of its plants or facilities
and the expiration or termination of any labor contract to which the Borrower
or such Subsidiary is a party or by which the Borrower or such Subsidiary is
bound and which dispute could reasonably be expected to have a Material Adverse
Effect on the operations of the Borrower or such Subsidiary (which notice shall
be delivered within 10 days after the Borrower knows of any such events); or

 

(xi)           any other development, financial or
otherwise, which could reasonably be expected to have a Material Adverse
Effect.

 

Each
notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect
thereto.  For the purposes of this Section
5.7(a), the Borrower shall be deemed to have knowledge when any officer of
the Borrower charged with responsibility for any matter that is the subject of
such notice requirement knows or should have known that such notice was
required.

 

(b)           At least ten (10) days
prior to such event, give notice to the Administrative Agent of the occurrence
of any Reduction Event (i) the Net Cash Proceeds of which are (or are scheduled
to be) in excess of $5,000,000 or (ii) together with any other concurrent or
prior Reduction Event for which notice has not been given hereunder the
aggregate Net Cash Proceeds of which are (or are scheduled to be) in excess of
$10,000,000.

 

5.8           Environmental Laws.  (a)  Comply and cause its
Subsidiaries to comply in all material respects with all applicable
Environmental Laws and obtain and comply and cause its Subsidiaries to obtain
and comply in all material respects with and maintain and cause its

 

48

 

Subsidiaries to maintain any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws except to the extent that failure to do so could not be reasonably
expected to have a Material Adverse Effect.

 

(b)           Conduct and complete
all investigations, studies, sampling and testing, and all remedial, removal
and other actions required under Environmental Laws and promptly comply in all
material respects with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws except to the extent that the same are
being contested in good faith by appropriate proceedings and the pendency of
such proceedings could not reasonably be expected to have a Material Adverse
Effect.

 

(c)           Defend, indemnify and
hold harmless the Administrative Agent, the Collateral Agent and the Lenders,
and their respective parents, subsidiaries, affiliates, employees, agents,
officers and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature (whether arising under theories of negligence, strict or absolute
liability, or otherwise) known or unknown, contingent or otherwise, arising out
of, or in any way relating to the violation of, noncompliance with or liability
under any Environmental Laws in each instance occurring at, or involving the
operation of any facility by the Borrower or its Subsidiaries, or arising out
of, or relating to the operations of the Borrower or any Subsidiary, or the
Business or the Properties, applicable to the operations of the Borrower or any
Subsidiary or the Business or the Properties, or any orders, requirements or
demands of Governmental Authorities related thereto, including, without
limitation, reasonable attorney’s and consultant’s fees, investigation and
laboratory fees, response costs, court costs and litigation expenses, except to
the extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor.  This indemnity shall continue in full force
and effect regardless of the termination of this Agreement.

 

5.9           ERISA.  Establish, maintain and operate and cause
each of its Subsidiaries to establish, maintain and operate all Plans to comply
in all material respects with the applicable provisions of ERISA, the Code, and
all other applicable laws, and the regulations and interpretations thereunder
and the respective requirements of the governing documents for such Plans
except to the extent that failure to do so could not reasonably be expected to
have a Material Adverse Effect.

 

5.10         Use
of Proceeds.  Use the proceeds
of the Loans solely for the purposes set forth in Section 3.16.

 

5.11         Margin
Stock.  Not permit the
aggregate value of margin stock (as defined in Regulation U) at any time owned
or held by the Borrower or any of its Subsidiaries to exceed an amount equal to
25% of the value of all consolidated assets subject at such time to any
“arrangement” (as such term is used in the definition of “indirectly secured”
in Section 221.2 of Regulation U).

 

5.12         Maintain Ownership of the Utility
Business.  (a) Maintain
ownership, directly (and not through any Subsidiary), of all or substantially
all of the assets of the Utility Business, (b) maintain the Lien of the Montana
First Mortgage Indenture on all or substantially all of the assets of the
Montana Utility Business and (c) maintain the Lien of the South Dakota

 

49

 

First Mortgage Indenture on all or substantially all of the assets of
the South Dakota Utility Business.

 

5.13         Bankruptcy
Court.  Use commercially reasonable
efforts to obtain the approval of the Bankruptcy Court of this Agreement and
the other Loan Documents.  The Borrower
will deliver to the Administrative Agent, the Administrative Agent’s counsel
and the Lenders all material pleadings, motions and other documents filed on
behalf of the Borrower or any of its Subsidiaries with the Bankruptcy Court.

 

5.14         Credit
Ratings.  Use its best efforts
to obtain a re-rating for the Facility from, at the Administrative Agent’s
option, Moody’s, Standard & Poor’s and/or Fitch, Inc. prior to January 3,
2004, and in any event continue to use such best efforts until the re-rating(s)
are obtained, and thereafter to maintain such re-rating(s).

 

5.15         Excluded Subsidiaries.  (i) Maintain, and cause to be maintained,
the books and records and bank accounts of the Consolidated Group separate from
the books and records and bank accounts of the Excluded Subsidiaries, and at
all times present the Excluded Subsidiaries to the public as separate and
distinct legal entities; (ii) maintain, and cause to be maintained, financial
statements of the Excluded Subsidiaries separate from those of the Consolidated
Group; (iii) cause the Excluded Subsidiaries to hold title to any assets they
own in their own respective name, and deposit all of their respective funds in
checking accounts, saving accounts, time deposits or certificates of deposit in
their respective names or invest such funds in their respective names; (iv)
cause the Excluded Subsidiaries to observe all corporate formalities under
Requirements of Law necessary to maintain their identity as entities separate
and distinct from the Consolidated Group; and (v) not commingle the assets of
Borrower or any Consolidated Subsidiary with assets of any Excluded Subsidiary.

 

5.16         Bank One Credit Documents.  Promptly provide the Administrative Agent
with true and complete copies of any and all documents and other information
delivered to any Person pursuant to, or in connection with, the Bank One Credit
Documents.

 

ARTICLE 6.  NEGATIVE
COVENANTS

 

The Borrower
hereby agrees that for so long as the Commitments remain in effect, any Note
remains outstanding and unpaid or any Obligation is owing to any Lender, the
Collateral Agent or the Administrative Agent hereunder or under any other Loan
Document, the Borrower shall not:

 

6.1           Financial Covenants.  (a)  Consolidated
EBITDAR.  Permit Consolidated
EBITDAR on the last day of any fiscal month to be less than the amount set
forth below for the applicable period:

 

50

 

	
  Applicable Amount

  	
   

  	
  Applicable
  Period

  
	
  $

  	
  17,000,000

  	
   

  	
  For the 2 fiscal month period

  ending October 31, 2003

  
	
  $

  	
  30,000,000

  	
   

  	
  For the 3 fiscal month period

  ending November 30, 2003

  
	
  $

  	
  45,000,000

  	
   

  	
  For the 4 fiscal month period

  ending December 31, 2003

  
	
  $

  	
  63,000,000

  	
   

  	
  For the 5 fiscal month period

  ending January 31, 2004

  
	
  $

  	
  80,000,000

  	
   

  	
  For the 6 fiscal month period

  ending February 29, 2004

  
	
  $

  	
  94,000,000

  	
   

  	
  For the 7 fiscal month period

  ending March 31, 2004

  
	
  $

  	
  107,500,000

  	
   

  	
  For the 8 fiscal month period

  ending April 30, 2004

  
	
  $

  	
  120,000,000

  	
   

  	
  For the 9 fiscal month period

  ending May 31, 2004

  
	
  $

  	
  128,000,000

  	
   

  	
  For the 10 fiscal month period

  ending June 30, 2004

  
	
  $

  	
  140,000,000

  	
   

  	
  For the 11 fiscal month period

  ending July 31, 2004

  
	
  $

  	
  152,000,000

  	
   

  	
  For the 12 fiscal month period

  ending each month thereafter

  

 

(b)           Capital Expenditures.  Neither the Borrower nor any Subsidiary
shall expend, or be committed to expend, in excess of the amount set forth
below for the applicable period for Capital Expenditures in the aggregate for
the Borrower and its Subsidiaries:

 

	
  Applicable Amount

  	
   

  	
  Applicable
  Period

  
	
  $

  	
  82,500,000

  	
   

  	
  For the period commencing on the Closing
  Date and continuing through the term of the Bank One Credit Agreement

  
	
  $

  	
  85,000,000

  	
   

  	
  For each fiscal year thereafter

  

 

51

 

(c)           Interest Coverage Ratio. 
From and after the date that is 91 days after the Emergence Time, permit
the ratio of (i) Consolidated EBITDAR to (ii) Consolidated Recourse Interest
Expense, in each case on the last day of any fiscal quarter of the Borrower for
the period of four fiscal quarters then ending, to be less than an amount to be
agreed upon between the Borrower, on the one hand, and the Administrative Agent
and Required Lenders, on the other hand, based upon good faith negotiations and
a review of the business plan of the Borrower, which Borrower shall be required
to deliver to the Administrative Agent on or before January 31, 2004; provided,
that, notwithstanding the foregoing, this Section 6.1(c) shall no longer
be applicable if and when the Borrower obtains a rating of at least Baa3, BBB-
and/or BBB- from Moody’s, Standard & Poor’s and/or Fitch, Inc.,
respectively (such rating agencies to be the same as determined by the
Administrative Agent in its option in accordance with Section 5.14), so
long as such rating(s) is(are) obtained within 180 days after the Emergence
Time.

 

6.2           Limitation on Fundamental Changes.  Except in connection with a Permitted
Reorganization Plan, enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all its property, business or assets or all or substantially
all of the mortgaged property under an Indenture, acquire any Capital Stock of
another Person, or acquire assets of another Person (other than any Subsidiary
having Non-Recourse Debt, any Excluded Subsidiary or any Non-Material Foreign
Subsidiary) constituting all or a material part of a business (or all or
substantially all of the assets of such Person), except (a) during the pendency
of the Case, any Subsidiary of the Borrower may merge or consolidate with or
into any other Subsidiary of the Borrower, (b) at any time after the Emergence
Time, any Person (other than any Excluded Subsidiary) may be merged or
consolidated with or into the Borrower, or (c) the Borrower may acquire assets
or Capital Stock of another Person (other than any Excluded Subsidiary)
constituting all or a material part of a business (or all or substantially all
the assets of such Person), in each of cases (b) and (c) provided that
(i) the Borrower shall be the continuing or surviving corporation, (ii) as of
the consummation of, and after giving effect to, such transaction, no Default
or Event of Default shall then exist, (iii) the Borrower shall not acquire,
directly or indirectly, any Capital Stock or assets of an Excluded Subsidiary
(except as expressly permitted pursuant to Section 6.8) nor any assets
of a Subsidiary subject to a Lien securing Non-Recourse Debt, (iv) such
transaction relates solely to the acquisition of domestic regulated utility
businesses and assets, (v) if the Borrower shall acquire Capital Stock of
another Person, such Person shall thereupon be a Subsidiary, and (vi) the
aggregate principal amount of Indebtedness incurred or assumed by the Borrower
and the Subsidiaries in connection with such transaction (together with the
aggregate principal amount of Indebtedness of such acquired Person) shall not
exceed sixty percent (60%) of the lesser of the fair value or cost of such
acquired assets (and, to the extent such Indebtedness is incurred in connection
with such transaction or in contemplation of such transaction, such
Indebtedness shall not have a scheduled maturity, or require any principal
payment, prior to six months after the Maturity Date).

 

6.3           Limitation on Transactions with
Affiliates.  Except as described
on Schedule 6.3 and except for transactions providing services
(including, without limitation, group purchases of equipment or energy) at cost
to any Subsidiary, enter into any transaction, including, without limitation,
any purchase, sale, lease or exchange of property or the rendering of any
service, with any Affiliate unless such transaction is upon fair and reasonable
terms no

 

52

 

less favorable to the Borrower than it would have obtained in a
comparable arm’s-length transaction with a Person which is not an Affiliate.

 

6.4           Limitation on Liens.  Create, incur, assume or suffer to exist,
and shall not permit any Subsidiary to create, incur, assume or suffer to
exist, any Lien upon any of its properties, assets or revenues, whether now
owned or hereafter acquired, except for Permitted Liens.

 

6.5           Amendments of Organizational
Documents.  Amend, modify or
change its articles of incorporation or bylaws that could reasonably be
expected to result in a Material Adverse Effect.

 

6.6           Limitation on Guarantee Obligations.  Create, incur, assume or suffer to exist,
and shall not permit any Subsidiary to create, incur, assume or suffer to
exist, any Guarantee Obligation except:

 

(a)           guarantees of obligations to third parties
made in the ordinary course of business in connection with relocation of
employees of the Borrower or any of its Subsidiaries;

 

(b)           Guarantee Obligations existing on the date
hereof and described in Schedule 6.6;

 

(c)           Guarantee Obligations which by their terms
(either mandatorily or at the unfettered option of the Borrower) are payable
solely in Capital Stock (other than Mandatory Redeemable Stock) of the Borrower
provided that the Borrower agrees to cause any payment under any such
outstanding obligation to be made only in such Capital Stock; and

 

(d)           Guaranteed Obligations permitted pursuant to
Section 6.10, 6.8(k)(y) or 6.8(k)(z), or issued in
connection with Indebtedness permitted pursuant to Section 6.10 so long
as such Guaranteed Obligations are not secured by the assets of the Borrower or
any of its Subsidiaries (except to the extent that the Indebtedness being
guaranteed is permitted to be secured by the assets of the Borrower or any of
its Subsidiaries).

 

6.7           Limitation
on Sale of Assets.  Other than
in connection with a Permitted Reorganization Plan, convey, sell, lease,
assign, transfer or otherwise dispose of, and shall not permit any Subsidiary
(other than any Special Purpose Subsidiary) to convey, sell, lease, assign,
transfer or otherwise dispose of any of, its property, business or assets
(including, without limitation, tax benefits, receivables and leasehold
interests but excluding the Capital Stock of any Special Purpose Subsidiary),
whether now owned or hereafter acquired except (a) for the sale or other
disposition of any property that, in the reasonable judgment of the Borrower,
has become uneconomic, obsolete or worn out and, to the extent such sale or
disposition is consummated prior to the Emergence Time, having a book value not
exceeding $5,000,000 in the aggregate for the Borrower and its Subsidiaries
since the Closing Date, and which is disposed of in the ordinary course of
business (provided that, to the extent applicable, the Borrower shall
have complied with Section 6.16); (b) for sales of inventory and
receivables made in the ordinary course of business or in connection with an
accounts receivable securitization facility; (c) that

 

53

any Subsidiary
of the Borrower may sell, lease, transfer or otherwise dispose of any or all of
its assets (upon voluntary liquidation or otherwise) to the Borrower or,
subject to Section 5.12, a Wholly-Owned Subsidiary of the Borrower and
any Subsidiary of the Borrower may sell or otherwise dispose of, or part with
control of any or all of, the stock of any Subsidiary to a Wholly-Owned
Subsidiary of the Borrower or a Subsidiary of the Borrower may merge with the
Borrower (so long as the Borrower is the surviving corporation) or, subject to Section
5.12, another Subsidiary; (d) for fair market arm’s-length sales or other
dispositions of (i) the Colstrip transmission system (consisting of two 500kv
transmission lines extending from the Colstrip generating stations to an
interconnection with Bonneville Power Administration near Townsend, Montana,
together with switchyard facilities in Colstrip and Broadview, Montana, and
substation facilities in Colstrip, Montana, and certain related real property
interests, easements and rights of way, permits and appurtenances that permit
the construction, operation and maintenance of the Colstrip transmission
lines), and (ii) the assets of, or Capital Stock in, Montana Megawatts I, LLC
and other entities formed for the Montana First Megawatts Project; (e) for the
sale or other disposition by the Borrower or any of its Subsidiaries of other
assets consummated after the Closing Date; provided that (i) such sale
or other disposition shall be made for fair value on an arm’s-length basis,
(ii) the aggregate fair market value of all such assets sold or disposed of
under this clause (e) together with assets sold or disposed of under Section
6.11 shall not exceed 10% of the consolidated tangible assets of the
Borrower and its Subsidiaries as of the Original Closing Date, (iii) prior to
the Emergence Time, the aggregate book value of all such assets sold or
disposed of under this clause (e) shall not have a book value exceeding
$5,000,000 since the Closing Date, and (iv) the Borrower shall comply with Section
2.6, if applicable; (f) sales of assets described on Schedule 6.7;
and (g) for sales of assets to the extent any such sale is expressly approved
by an order of the Bankruptcy Court which has not been stayed, vacated or
reversed; provided, that, prior to the Emergence Time,  all sales or other dispositions permitted
hereby shall be made for fair value and (other than those permitted by clause
(b) above and other than the sale of the Alberton Gorge property referenced on Schedule
6.7) shall be for consideration of at least 85% cash; provided, further,
that sales of assets of Expanets or Blue Dot shall not be subject to the 85%
cash consideration requirement if such sales are approved by an order of the
Bankruptcy Court which has not been stayed, vacated or reversed.

 

6.8                                 Limitation on Investments, Loans and
Advances.  Make, and shall not
permit any Subsidiary to make, any advance, loan, extension of credit
(excluding Guarantee Obligations but including any payment by a guarantor
thereunder) or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of, or make any other investment in, any Person
(any of the foregoing, an “Investment”), except;

 

(a)                                  extensions of trade
credit in the ordinary course of business;

 

(b)                                 Investments of the
Borrower or any Subsidiary existing on the date hereof in any Subsidiary and
(other than capital contributions) described in Schedule 6.8;

 

(c)                                  Investments of the
Borrower after the Closing Date that are acquisitions permitted pursuant to and
made in accordance with Section 6.2;

 

(d)                                 the Borrower and its
Subsidiaries may invest in, acquire and hold Cash Equivalents;

 

54

 

(e)                                  the Borrower or any
of its Subsidiaries may make travel and entertainment advances, relocation
loans and payroll advances in the ordinary course of business to officers and
employees of the Borrower or any such Subsidiary;

 

(f)                                    Investments of the
Borrower or any Subsidiary existing on the date hereof and described in Schedule
6.8 including, without limitation, the receipt of any additional securities
constituting payments in kind on such existing Investments;

 

(g)                                 Investments in
obligations arising out of bankruptcy of customers and suppliers;

 

(h)                                 Investments arising
out of non-cash consideration received in connection with sales of assets as
permitted by Section 6.7;

 

(i)                                     Investments of the
Borrower or any Subsidiary after the Closing Date of not more than $10,000,000
in the aggregate in Subsidiaries to the extent that such investments are in the
ordinary course of business and consistent with past practice;

 

(j)                                     Investments in any
of the Excluded Subsidiaries existing as of the date hereof and (other than
capital contributions) described in Schedule 6.8 (including, without
limitation, the receipt of any additional securities constituting payments in
kind on such existing Investments); and

 

(k)                                  Investments permitted
pursuant to clause (y) or (z) below;

 

provided that, notwithstanding the
foregoing, the Borrower shall not, and shall not permit any Subsidiary to, make
any Investment in any Excluded Subsidiary nor create, incur, assume or suffer
to exist any Guarantee Obligation with respect to any Excluded Subsidiary,
except:

 

(x)                                   Investments or Guarantee Obligations
of the Borrower or any Subsidiary existing on the date hereof in or with
respect to any Excluded Subsidiary described in Schedule 6.8 and the
receipt of any additional securities constituting payments in kind on such
existing investments;

 

(y)                                 any advance, loan, extension of
credit or Guarantee Obligations of the Borrower or any Subsidiary to or for the
benefit of Blue Dot in an aggregate principal amount (whether outstanding,
written down or written off but net of any actual cash returns on capital) of
not more than $25 million; provided that such advance, loan, extension
of credit or Guarantee Obligation shall be used to honor Guarantee Obligations,
for working capital, or to refinance on a secured basis the existing secured
working capital credit facility of Blue Dot; and

 

(z)                                   Investments or Guarantee Obligations
of the Borrower or any Subsidiary in or for the benefit of Expanets in an
aggregate principal amount (whether outstanding, written or written off but net
of any actual cash returns on capital) of not more than $75 million; provided
that such advance, loan, extension of credit or Guarantee Obligation shall be
used to honor Guarantee Obligations, for working capital, or to refinance on a
secured basis the existing secured working capital credit facility of Expanets.

 

55

 

6.9                                 Limitation on Dividends and Stock
Repurchases.  Other than in
connection with a Permitted Reorganization Plan, declare, and shall not permit
any Subsidiary to declare, any dividends on any shares of any class of Capital
Stock, or make, and shall not permit any Subsidiary to make, any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, retirement or other acquisition of any shares of any
class of Capital Stock (including the outstanding Capital Stock of the
Borrower), whether now or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of the Borrower or any of its Subsidiaries (all of the
foregoing being referred to herein as “Restricted Payments”); except
that Subsidiaries may pay dividends directly or indirectly to the Borrower and
except that at any time after the Emergence Time:

 

(a)                                  Subsidiaries may pay
dividends directly or indirectly to the Borrower’s Subsidiaries which are
directly or indirectly Wholly-Owned by the Borrower;

 

(b)                                 any Subsidiary may
redeem or repurchase shares of its Capital Stock to the extent required to do
so pursuant to, and upon the terms provided in, any put agreement existing on
the date hereof between such Subsidiary and any holder of such Capital Stock; provided
that if permitted pursuant to the terms of such agreement, the sole
consideration for such Capital Stock shall be Capital Stock (other than
Mandatory Redeemable Stock) of the Borrower; and

 

(c)                                  the Borrower or any
Subsidiary may make Restricted Payments (other than redemption or repurchase of
Capital Stock with respect to such agreements existing as of the date hereof as
set forth in clause (b) above) on or with respect to its Capital Stock so long
as, after giving effect to such Restricted Payments, no Default or Event of
Default shall have occurred and be continuing or shall result therefrom.

 

6.10                           Limitation on Indebtedness or
Mandatory Redeemable Stock.  Create,
incur, issue, assume or suffer to exist, and shall not permit any Subsidiary to
create, incur, issue, assume or suffer to exist, any Indebtedness or Mandatory
Redeemable Stock (including any Indebtedness or Mandatory Redeemable Stock of
any of its Subsidiaries), except:

 

(a)                                  Indebtedness of the
Borrower under this Agreement;

 

(b)                                 Indebtedness and
Mandatory Redeemable Stock outstanding on the date hereof as set forth on Schedule
6.10 hereto (but not including the Indebtedness permitted under clause (c)
below);

 

(c)                                  prior to the
Emergence Time, Indebtedness outstanding under the Bank One Credit Agreement in
an aggregate principal amount not to exceed $100,000,000, together with all
interest, fees and other amounts due with respect thereto pursuant to the Bank
One Credit Documents (as modified and amended to the extent permitted under
this Agreement);

 

(d)                                 purchase money
Indebtedness incurred in connection with the purchase of any fixed assets; provided,
that the amount of such purchase money Indebtedness shall be limited to an
amount not in excess of the purchase price of such equipment and the aggregate
of all such purchase money Indebtedness incurred during any twelve-month period
ending after the Closing

 

56

 

Date shall not
exceed (i) prior to the Emergence Time, $1,000,000, and (ii) from and after the
Emergence Time, $3,000,000;

 

(e)                                  Financing Lease
Obligations not in excess of $25,000,000 during any twelve-month period ending
prior to the Emergence Time (inclusive of any Financing Lease Obligations set
forth on Schedule 6.10), provided that the Borrower will not, nor will
it permit its Subsidiaries to make payments in respect of Financing Leases in
excess of $6,000,000 in the aggregate during any twelve-month period ending
prior to the Emergence Time;

 

(f)                                    letters of credit
to replace those letters of credit existing on the date hereof and described in
Schedule 6.10; provided however, such new letters of credit shall not be
(i) in an amount greater than the existing letters of credit being replaced or
(ii) on terms materially worse than those of the existing letters of credit
being replaced;

 

(g)                                 after the Emergence
Time, Indebtedness consisting of reimbursement obligations under surety,
indemnity, performance, release and appeal bonds and guarantees thereof and
letters of credit required in the ordinary course of business or in connection
with the enforcement of rights or claims of the Borrower or its Subsidiaries;

 

(h)                                 after the Emergence
Time, Indebtedness of Montana Megawatts I, LLC (or any related Special Purpose
Subsidiary) in an aggregate amount not to exceed $100,000,000, which proceeds
of such Indebtedness are used to finance construction and related costs of the
Montana First Megawatts project, so long as such Indebtedness constitutes
Non-Recourse Debt (except to the extent included in the amounts permitted
pursuant to clause (m) below);

 

(i)                                     after the
Emergence Time, Non-Recourse Debt of any Subsidiary;

 

(j)                                     after the
Emergence Time, Debt for Borrowed Money of the Borrower or any of its
Subsidiaries secured only by accounts receivable or inventory of the Borrower
or any of its Subsidiaries in an aggregate outstanding principal amount not to
exceed $75,000,000 at any one time, and unsecured Debt for Borrowed Money of
the Borrower or any of its Subsidiaries to fund their general working capital
needs in an aggregate outstanding principal amount not to exceed $100,000,000;

 

(k)                                  after the Emergence
Time, Debt for Borrowed Money incurred or assumed in connection with a
transaction expressly permitted pursuant to Section 6.2; provided
such Indebtedness complies with the terms of clause (vi) of Section 6.2;

 

(l)                                     after the
Emergence Time, refinancings, replacements and extensions by the obligor
thereof of any Debt for Borrowed Money under clause (b), (h), (i), or (k) above
so long as (i) the principal of the Debt for Borrowed Money so refinanced,
replaced or extended is not increased as a result thereof, (ii) in the case of
any refinancing or replacement of Non-Recourse Debt, after giving effect
thereto, such Indebtedness constitutes Non-Recourse Debt, (iii) in the case of
any refinancing or replacement of secured Indebtedness, after giving effect
thereto, the Lien (other than the Lien of an Indenture) with respect thereto is
not extended to any other assets, and (iv) in the case of any refinancing or
replacement of unsecured Indebtedness, after giving effect thereto, such
Indebtedness remains unsecured; and

 

57

 

(m)                               after the Emergence
Time, Indebtedness not otherwise permitted by the preceding clauses of this Section 6.10
not exceeding $50 million in aggregate principal amount at any one time
outstanding which Indebtedness shall not be secured by a Lien on any assets of
the Borrower (and which may include Guaranteed Obligations of the Borrower with
respect to Indebtedness of a Subsidiary);

 

provided that, notwithstanding the
foregoing, the Borrower shall not incur, issue or assume any Debt for Borrowed
Money or Mandatory Redeemable Stock after the date hereof pursuant to clauses
(k) (to the extent required pursuant to Section 6.2), or (l) above which
has a scheduled maturity, or requires any principal payment, prior to six (6)
months after the Maturity Date.

 

6.11                           Limitation on Sales and Leasebacks and
Operating Leases.  (a) Enter into
any arrangement with any Person providing for the leasing by the Borrower of
real or personal property which has been or is to be sold or transferred by the
Borrower to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of the Borrower; or (b) become liable or remain liable as lessee or
guarantor or other surety with respect to any operating lease except that the
Borrower and any of its Subsidiaries may (i) remain liable with respect to any
operating lease entered into prior to the Petition Date and (ii) become and remain
liable with respect to operating leases entered into on or after the Petition
Date so long as, prior to the Emergence Time, the aggregate amount of all such
rents paid or accrued under all such operating leases entered into after the
Petition Date shall not exceed $1,000,000 in the aggregate during any
twelve-month period ending after the Closing Date.

 

6.12                           Limitation on Negative Pledge Clauses;
Payment Restrictions.  Enter into or
suffer to exist, and shall not permit any Subsidiary to enter into or suffer to
exist, any agreement or other consensual encumbrance or restriction which
prohibits or limits the ability of the Borrower or any of its Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired, or prohibits or
limits the ability of the Borrower or any of its Subsidiaries to make loans,
payments or dividends to or investments in, or to transfer assets to, the
Borrower or any of its Subsidiaries, other than (a) any such agreement,
encumbrance or restriction contained in this Agreement, the Indentures or the
Bond Collateral Agreement, (b) any such agreement, encumbrance or restriction
(including any negative pledge) contained in any industrial revenue bonds,
purchase money mortgages, development financing, operating leases entered into
in the ordinary course of business, acquisition agreements or Financing Leases,
in each case permitted by this Agreement (in which cases, any prohibition or
limitation shall only be effective against the assets financed, acquired or
leased thereby), or contained in the Bank One Credit Documents, (c) any such
agreement, encumbrance or restriction contained in any loan agreement or other
financing document entered into with respect to Debt for Borrowed Money of
Subsidiaries (other than industrial revenue bonds, purchase money mortgages,
development financing or Financing Leases) permitted to be incurred pursuant to
Section 6.10, (d) customary provisions in any contract entered into in
the ordinary course of business (including any licensing agreement, management
agreement or franchise agreement) restricting assignments of such contract, (e)
in connection with a Permitted Reorganization Plan, or (f) any such agreement,
encumbrance or restriction (including any negative pledge) contained in the
lease financing documents for the Colstrip 4 generating unit and any
amendments, modifications or restructuring thereof entered

 

58

 

into after the
date hereof and, prior to the Emergence Time, approved by an order of the
Bankruptcy Court.

 

6.13                           Limitation on Businesses.  Enter into or engage in any business, either
directly or through any Subsidiary, except for businesses of the same general
type as those in which the Borrower and its Subsidiaries are engaged on the Closing
Date or other business activities reasonably incidental or related to any of
the foregoing.

 

6.14                           Limitation
on Certain Prepayments and Amendments.  (a) Make any optional payment or prepayment on or redemption,
defeasance or purchase of such Person’s Debt for Borrowed Money (other than
with respect to (i) Indebtedness hereunder or under the First Mortgage Bonds,
(ii) any Indebtedness to the extent such Indebtedness by the terms thereof
would otherwise have become due and payable within three months of such
payment, redemption, defeasance or purchase, (iii) any refinancing or
replacement of such Indebtedness in accordance with Section 6.10, (iv)
prepayments of Debt for Borrowed Money in an aggregate principal amount not to
exceed the aggregate principal amount of Net Cash Proceeds of Reduction Events
offered to the Lenders but not accepted as prepayments of the Loans pursuant to
Section 2.6, (v) Permitted Pre-Petition Payments), (vi) Indebtedness
secured by a Permitted Lien if the asset securing such Indebtedness has been
sold or otherwise disposed of to the extent permitted hereby, and, in no event,
greater than the fair market value of such asset, or (vii) prepayments of the
Indebtedness outstanding under the Bank One Credit Documents, or (b) amend,
modify or change, or consent to any amendment, modification or change to any of
the terms relating to the payment or prepayment of principal of or interest on,
any such Indebtedness, other than any amendment, modification or change which
would extend the maturity or reduce the amount of any payment or prepayment of
principal thereof or which would reduce the rate or extend the date for payment
of interest thereon or which would not be adverse to the Lenders.

 

6.15                           Limitations
on Subsidiaries’ Equity Interests.  Other than in connection with a Permitted Reorganization Plan,
permit any Subsidiary to issue any preferred Capital Stock or any redeemable
common stock other than (a) issuances of preferred Capital Stock in payment of
regularly accruing dividends on theretofore outstanding shares of such
preferred Capital Stock, (b) issuances of preferred Capital Stock issued to
and, so long as thereafter outstanding, held by the Borrower and (c) issuances
in consideration of acquisitions permitted under Section 6.8 of
preferred Capital Stock which ranks junior, as to the payment of dividends and
as to the distribution of assets upon any liquidation, dissolution or winding
up of such Subsidiary, to all preferred Capital Stock held by the Borrower in
such Subsidiary.

 

6.16                           Limitation
on Release of Mortgaged Property; Limitation in Respect of Insurance.  Release Mortgaged and Pledged Property (as
defined in the Montana First Mortgage Indenture) from the lien of the Montana
First Mortgage Indenture or Mortgaged Property (as defined in the South Dakota
First Mortgage Indenture) from the lien of the South Dakota First Mortgage
Indenture, other than (i) releases of such Mortgaged and Pledged Property pursuant
to and in accordance with Sections 58 and 60 of the Montana First Mortgage
Indenture; (ii) releases of such Mortgaged Property pursuant to and in
accordance with Section 8.02 of the South Dakota First Mortgage Indenture other
than clause (f) thereof; (iii) releases of property or other assets that are
disposed of in accordance with Section 6.7(d) or (e) and, if in
connection with any such

 

59

 

disposition
and the related release, the Borrower deposits with the trustee under an
Indenture cash that would otherwise constitute Net Cash Proceeds, releases of
such cash pursuant to and in accordance with such Indenture; and (iv) releases
of proceeds of insurance (and/or moneys of the Borrower in lieu thereof or in
addition thereto and for the purposes thereof) held under either Indenture in
accordance with such Indenture which reimburse the Borrower for amounts spent
in the rebuilding or renewal of property destroyed or damaged (including,
without limitation, for property rebuilt, restored or replaced) and, if
following the completion of any such rebuilding or renewal, any of such
insurance proceeds (and/or such moneys of the Borrower) remain unspent,
releases of such unspent proceeds (and/or such unspent money of the Borrower)
pursuant to and in accordance with such Indenture; provided, however,
that the Borrower shall not request or receive any proceeds of any insurance or
of any alternative method or plan of protection of the Borrower relating to
such Mortgaged Property otherwise payable to it pursuant to Section 6.07(b) of
the South Dakota First Mortgage Indenture, and so long as any First Mortgage
Bonds are outstanding, no effect shall be given to (x) Section 6.07(b) of the
South Dakota First Mortgage Indenture, (y) the language in Section 6.07(c) of
the South Dakota First Mortgage Indenture which precedes clause (i) of such
Section, or (z) the reference to Section 6.07(b) of the South Dakota First
Mortgage Indenture which appears in Section 6.07(d) of the South Dakota First
Mortgage Indenture.

 

6.17                           Limitation
on Subjecting Property, or Other Assets to the Lien of the Other
Indenture.  Subject any property or
other assets to the lien of the Montana First Mortgage Indenture or the lien of
the South Dakota First Mortgage Indenture if such property or other assets are
subject to the lien of the other Indenture.

 

6.18                           Prohibition
on Designating Class “A” Mortgages or Permitting Qualified Lien
Bonds to Exist.  Designate any Class
“A” Mortgage under the South Dakota First Mortgage Indenture or permit any
Qualified Lien Bonds to exist under the Montana First Mortgage Indenture.

 

6.19                           Limitation
on Amendments or Supplements to the Indentures.  Amend, modify or supplement the Montana
First Mortgage Indenture or the South Dakota First Mortgage Indenture, except
to (a) supplement such Indenture to establish the terms of any series of first
mortgage bonds to be issued thereunder that are permitted to be issued under Section
6.10(f), (b) amend or supplement such Indenture for the purpose of
conveying, transferring or assigning to the trustee thereunder additional
property for the purpose of subjecting such property to the lien of such
Indenture, subject to the terms of Section 6.17, or (c) amend or
supplement such Indenture, in the case of the Montana First Mortgage Indenture,
pursuant to and as permitted by Section 120 thereof or, in the case of the
South Dakota First Mortgage Indenture, pursuant and as permitted by Section
14.01 thereof, provided that in each such case such amendment or
supplement will not adversely affect the First Mortgage Bonds.

 

6.20                           Prohibition
on Second Mortgage Bonds. 
Issue any bonds (or other Debt for Borrowed Money) that is secured by a
lien (subordinate to the lien of either Indenture) on the property or other
assets subject to the lien of such Indenture.

 

6.21                           Financial
Contracts.  Enter into or
remain liable upon any Financial Contract except Permitted Financial Contracts.

 

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6.22                           Chapter
11 Claims.  Incur,
create, assume, suffer to exist or permit any other Superpriority Claim which
is pari  passu with or senior to the claims of the Administrative
Agent and the Lenders against the Borrower (other than the Bank One Claim and
the Carve-Out).

 

6.23                           Bank
One Credit Documents.  Amend,
modify, supplement or waive any term or provision of any of the Bank One Credit
Documents in any way without obtaining the prior written consent of the
Administrative Agent and the Required Lenders so as to provide for (a) any
increase in the non-default rate of interest chargeable thereunder with respect
to the Bank One Debt or the default rate of interest chargeable thereunder as
in effect on the date hereof, (b) any increase in the amount of any of the
Bank One Debt or any installment due thereunder, (c) any reduction or
acceleration of the maturity date of any payment of the Bank One Debt or
interest (other than as expressly provided in the Bank One Credit Documents as
in effect of the date hereof), (d) any increase in the amount of fees
payable under the Bank One Credit Documents, or (e) the granting or
obtaining of any collateral security or obtaining any lien on any collateral.

 

ARTICLE 7.  EVENTS OF
DEFAULT

 

7.1                                 Events
of Default.  If any of
the following events shall occur and be continuing:

 

(a)                                  The Borrower shall
fail to pay any principal of any Loan when due in accordance with the terms
hereof; or the Borrower shall fail to pay any interest on any Loan, or any fee
or any other amount payable hereunder or any other Loan Document, within three
(3) days after any such interest, fee or other amount becomes due in accordance
with the terms thereof or hereof; or

 

(b)                                 Any representation or
warranty made or deemed made by the Borrower herein or in any other Loan
Document or which is contained in any certificate, document or financial or
other statement furnished by it at any time under or in connection with this
Agreement or any such other Loan Document shall prove to have been incorrect in
any material respect on or as of the date made or deemed made; or

 

(c)                                  The Borrower shall
default in the observance or performance of any agreement contained in Article
6 (other than Section 6.12) or Section 5.7; or

 

(d)                                 The Borrower shall
default in the observance or performance of any other agreement contained in
this Agreement or any other Loan Document, and such default shall continue
unremedied for a period of 30 days; or

 

(e)                                  The Borrower or any
Subsidiary shall (A) default in any payment (regardless of amount) of principal
of, premium, if any, or interest on any Indebtedness (except, with respect to
the Borrower, at any time after the Petition Date through the Emergence Time,
any amounts for which the Borrower is not required to pay pursuant to an order
of the Bankruptcy Court) having an aggregate principal amount in excess of
$1,000,000 (or following the Emergence Time, $10,000,000) (other than the
Notes) beyond the period of grace (not to exceed 30 days), if any, provided in
the instrument or agreement under which such Indebtedness was created or (B)
default in the observance or performance of any other agreement or condition

 

61

 

(x) contained
in the Bank One Credit Documents as in effect on the date hereof or as modified
and amended to the extent permitted under this Agreement, (y) relating to any
such Indebtedness or (z) contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause, or
to permit, under the terms of the Bank One Credit Documents as in effect on the
date hereof or under the terms of such Indebtedness, the holder or holders of
such Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice, if required,
such Indebtedness to become due prior to its stated maturity; provided
that any such default by the Borrower or any Subsidiary under Non-Recourse Debt
will not constitute an Event of Default unless such default also constitutes a
default under other recourse Indebtedness of the Borrower or such Subsidiary in
an aggregate outstanding principal amount of $1,000,000 (or following the
Emergence Time, $10,000,000) or more; or

 

(f)                                    After the Emergence
Time (with respect to the Borrower) and at any time (with respect to any
Subsidiary), (i) the Borrower or any Subsidiary shall commence any case,
proceeding or other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its assets, or the
Borrower or any such Subsidiary shall make a general assignment for the benefit
of its creditors; or (ii) there shall be commenced against the Borrower or any
such Subsidiary any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
un-bonded for a period of 60 days; or (iii) there shall be commenced against
the Borrower or any such Subsidiary any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distrait or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (iv) the Borrower or any such Subsidiary shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the
Borrower or any such Subsidiary shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become due; or

 

(g)                                 (i) Any Person shall
engage in any “prohibited transaction” (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan, (ii) any “accumulated funding
deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall
exist with respect to any Pension Plan or any Lien in favor of the PBGC or a
Plan shall arise on the assets of the Borrower, any Subsidiary or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Pension Plan, which Reportable
Event or commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Required Lenders, likely to result in the termination
of such plan for purposes of Title IV of ERISA, (iv) any Pension Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower, any Subsidiary
or any Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or

 

62

 

the Insolvency
or Reorganization of, a Multiemployer Plan or (vi) any other event or condition
shall occur or exist with respect to a Pension Plan; and in each case in
clauses (i) through (vi) above, such event or condition, together with all
other such events or conditions, if any, could reasonably be expected to have a
Material Adverse Effect; or

 

(h)                                 One or more judgments
or decrees shall be entered against the Borrower or any Subsidiary involving in
the aggregate a liability (to the extent not covered by third-party insurance
as to which the insurer has acknowledged coverage) of $1,000,000 (or following
the Emergence Time, $5,000,000) or more and sufficient judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending appeal within
10 days from the entry thereof to reduce such amount to less than $1,000,000
(or following the Emergence Time, $5,000,000); or

 

(i)                                     (w) The Bond
Collateral Agreement, either Indenture or either Supplemental Indenture shall
cease, for any reason, to be in full force and effect, other than pursuant to
the terms thereof and hereof, (x) the Lien created thereby shall cease to be
enforceable and of the same effect as to perfection and priority purported to
be created thereby with respect to any significant portion of the collateral
thereunder, (y) there shall occur an “Event of Default” under either Indenture,
or (z) any material provision of any Loan Document for any reason ceases to be
valid, binding and enforceable in accordance with its terms (or the Borrower or
any of its Subsidiaries that are party thereto shall challenge the
enforceability of any Loan Document or shall assert in writing (including,
without limitation, in any pleading filed in any court), or engage in any
action or inaction based on any such assertion, that any provision of any of
the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable
in accordance with its terms); or

 

(j)                                     A Change of
Control shall occur; or

 

(k)                                  The Borrower shall
breach any provision of the Interim Order or the Final Order; or

 

(l)                                     The Case shall be
dismissed or converted to a case under chapter 7 of the Bankruptcy Code or the
Borrower shall file a motion or other pleading seeking the dismissal of the
Case under Section 1112 of the Bankruptcy Code or otherwise; a trustee under
chapter 7 or chapter 11 of the Bankruptcy Code, a responsible officer or an
examiner with enlarged powers relating to the operation of the business (powers
beyond those set forth in Section 1106(a)(3) and (4) of the Bankruptcy Code)
under Section 1106(b) of the Bankruptcy Code shall be appointed in the Case and
the order appointing such trustee, responsible officer or examiner shall not be
reversed or vacated within 30 days after the entry thereof; or an application
shall be filed by the Borrower for the approval of any other Superpriority
Claim (other than the Bank One Claim and the Carve-Out) in the Case which is pari
passu with or senior to the claims of the Administrative Agent and the
Lenders against the Borrower, or there shall arise or be granted any such pari
passu or senior Superpriority Claim; or

 

(m)                               The Bankruptcy Court
shall enter an order or orders granting relief from the automatic stay
applicable under Section 362 of the Bankruptcy Code to the holder or holders of
any security interest to permit foreclosure (or the granting of a deed in lieu
of foreclosure or the like) on any assets of the Borrower which have a value in
excess of $100,000 in the

 

63

 

aggregate,
other than in connection with any orders approving the Bank One Credit
Documents; or

 

(n)                                 An order of the
Bankruptcy Court shall be entered reversing, staying for a period in excess of
five days, vacating or (without the written consent of the Administrative Agent
and the Required Lenders) otherwise amending, supplementing or modifying any of
the Orders; or

 

(o)                                 The Borrower shall
make any Pre-Petition Payment other than Permitted Pre-Petition Payments; or

 

(p)                                 Nonpayment by the
Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) of any
Rate Management Obligation when due or the breach by the Borrower or any of its
Subsidiaries (other than Excluded Subsidiaries) in any material respect of any
term, provision or condition contained in any Rate Management Transaction or
any transaction of the type described in the definition of Rate Management
Transaction, whether or not any Lender or any Affiliate of a Lender is a party
thereto; or

 

(q)                                 Any order, judgment,
decree, ruling or similar binding action is taken by any Governmental Authority
having jurisdiction over the Borrower or any of its Subsidiaries (other than
Excluded Subsidiaries) which lowers, or has the effect of lowering, the tariff
rates charged by the Borrower and its Subsidiaries (other than Excluded
Subsidiaries) to their customers to the extent any such action could in the
reasonable determination of the Required Lenders have a Material Adverse
Effect; or

 

(r)                                    The Final Order
shall not have been entered by the Bankruptcy Court on or before December 11,
2003,

 

then, and in any such event, without further
order of or application to the Bankruptcy Court (but subject to any requirement
to give notice by the terms of the Interim Order or the Final Order, as
applicable) (A) if such event is an Event of Default specified in clause (i) or
(ii) of paragraph (f) above with respect to the Borrower, automatically the
Commitments shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement and the
Notes shall immediately become due and payable, and (B) if such event is any
other Event of Default, either or both of the following actions may be
taken:  (i) with the consent of the
Required Lenders, the Administrative Agent may, by notice to the Borrower
(during the period after the Petition Date through the Emergence Time, with a
copy to counsel for the Official Unsecured Creditors’ Committee appointed in
the Case and to the United States Trustee for the District of Delaware),
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) with the consent of the Required Lenders,
the Administrative Agent may, or upon the request of the Required Lenders the
Administrative Agent shall, by notice to the Borrower, declare the Loans
hereunder and the Notes to be due and payable forthwith, whereupon the same
shall immediately become due and payable. 
In addition, subject solely to any requirement to give notice by the
terms of the Interim Order or the Final Order, as applicable, the automatic
stay provided in Section 362 of the Bankruptcy Code shall be deemed
automatically vacated without further action or order of the Bankruptcy Court
and the Administrative Agent and the other Secured Parties may exercise any

 

64

 

and all remedies under the Loan Documents and
under applicable law available to the Administrative Agent and the other
Secured Parties.  Except as expressly
provided above in this Section, presentment, demand, protest and all other
notices of any kind are hereby expressly waived.

 

ARTICLE 8.  THE
AGENTS

 

8.1                                 Appointment.  Each Lender hereby irrevocably designates
and appoints CSFB as Administrative Agent and as Collateral Agent (for purposes
of this Article 8, collectively, the “Agents”), and to act as its agent
under this Agreement and the other Loan Documents.  Each such Lender irrevocably authorizes each Agent, to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to each Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental
thereto.  Each Lender further authorizes
and directs each Agent to execute and deliver releases (or similar agreements)
to give effect to the provisions of this Agreement and the other Loan
Documents, including specifically, without limitation, the provisions of Section
6.7 hereof.  Notwithstanding any
provision to the contrary elsewhere in this Agreement, no Agent shall have any
duties or responsibilities, except those expressly set forth herein or in
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise exist
against either Agent.  Without limiting
the generality of the foregoing, the Agents are hereby expressly authorized to
execute any and all documents (including releases) with respect to the
Collateral and the rights of the Secured Parties with respect thereto, as
contemplated by and in accordance with the provisions of this Agreement and the
Bond Collateral Agreement.

 

8.2                                 Delegation
of Duties.  Each Agent may execute
any of its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.  No Agent shall be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.

 

8.3                                 Exculpatory
Provisions.  No Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall
be (i) liable for any action lawfully taken or omitted to be taken by it or
such Person under or in connection with this Agreement or any other Loan
Document (except for its own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties, made by the Borrower or any officer or any of
them contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for
in, or received by either Agent under or in connection with, this Agreement or
any other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or the Notes or any other Loan
Document or for any failure of the Borrower to perform its obligations
hereunder or thereunder.  No Agent shall
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to

 

65

 

inspect the
properties, books or records of the Borrower, any Subsidiary or any Excluded
Subsidiary.

 

8.4                                 Reliance
by Agents.  Each Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by such Agent.  Each Agent may deem and treat the payee of
any Note or any loan account in the Register as the owner thereof for all
purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Administrative Agent.  Each Agent shall be fully justified in failing or refusing to
take any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.  Each Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement, the Notes and the other Loan
Documents in accordance with a request of the Required Lenders, and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the amounts owing
hereunder.

 

8.5                                 Notice
of Default.  No Agent
shall be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default unless such Agent has received notice from a Lender or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a “notice of default”.  In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give notice thereof to
the Lenders.  Each Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided that unless and until such
Agent shall have received such directions, such Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.

 

8.6                                 Non-Reliance
on Agents and Other Lenders.  Each
Lender expressly acknowledges that no Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by either Agent hereafter taken, including
any review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by either Agent to any Lender.  Each Lender represents to each Agent that it
has, independently and without reliance upon either Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and made its
own decision to make its Loans hereunder and enter into this Agreement.  Each Lender also represents that it will,
independently and without reliance upon either Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the

 

66

 

business,
operations, property, financial and other condition and creditworthiness of the
Borrower.  Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or furnished to the Administrative Agent for the
account of, or with a counterpart or copy for, each Lender, no Agent shall have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Borrower, any of its
Subsidiaries or any Excluded Subsidiary which may come into the possession of
either Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.

 

8.7                                 Indemnification.  The Lenders agree to indemnify each Agent in
its capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so) and their respective
directors, officers, employees and agents, ratably according to their
respective Commitment Percentages in effect on the date on which indemnification
is sought under this Section (or, if indemnification is sought after the date
upon which the Commitments shall have terminated and the Loans shall have been
paid in full, ratably in accordance with their Commitment Percentages
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of all
amounts owing hereunder) be imposed on, incurred by or asserted against such
Agent in any way relating to or arising out of this Agreement, any of the other
Loan Documents or any documents contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby or any action taken or
omitted by such Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from such Agent’s
gross negligence or willful misconduct. 
The agreements in this Section shall survive the payment of the
Obligations hereunder.

 

8.8                                 Agent
in Its Individual Capacity. 
Each Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower, any Subsidiary
and any Excluded Subsidiary as though such Agent were not an Agent hereunder
and under the other Loan Documents. 
With respect to Loans made or renewed by it and any Note issued to it,
each Agent shall have the same rights and powers under this Agreement and the
other Loan Documents as any Lender and may exercise the same as though it were
not an Agent, and the terms “Lender” and “Lenders” shall include each Agent in
its individual capacity,

 

8.9                                 Successor
Administrative Agent. 
The Administrative Agent may resign as Administrative Agent upon ten
days’ notice to the Lenders and the Borrower. 
If the Administrative Agent shall resign as Administrative Agent under
this Agreement and the other Loan Documents, then the Required Lenders shall,
with the consent of the Borrower (which consent shall not be unreasonably
withheld and shall not be required if an Event of Default shall have occurred
that is continuing) appoint a successor administrative agent, whereupon such
successor Administrative Agent shall succeed to the rights, powers and duties
of the Administrative Agent, and the term “Administrative Agent” shall mean
such successor Administrative Agent effective upon such appointment and
approval, and the former Administrative Agent’s rights, powers and duties as
Administrative Agent shall be terminated,

 

67

 

without any
other or further act or deed on the part of such former Administrative Agent or
any of the parties to this Agreement or any holders of any amounts payable
hereunder.  After any retiring or
terminated Administrative Agent’s resignation or termination, as the case may
be, as Administrative Agent, the provisions of this Section shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.

 

ARTICLE 9. 
MISCELLANEOUS

 

9.1                                 Amendments and Waivers.  Neither this Agreement, any Note or any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this Section.  The Required Lenders may, or, with the
written consent of the Required Lenders, the Administrative Agent may, from
time to time, (a) enter into with the Borrower written amendments, supplements
or modifications hereto for the purpose of adding any provisions to this
Agreement or changing in any manner the rights of the Lenders or of the
Borrower hereunder, (b) enter into with the Borrower written amendments,
supplements or modifications to the Note and the other Loan Documents for the
purpose of adding provisions to the Notes or such other Loan Documents or
changing in any manner the rights of the Lenders or the Borrower thereunder or
(c) waive, on such terms and conditions as the Required Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any
of the requirements of this Agreement, the Notes or the other Loan Documents or
any Default or Event of Default and its consequences; provided that no
such waiver and no such amendment, supplement or modification (i) shall reduce
the amount or extend the scheduled date of maturity of the Note or Loan of any
Lender or of any installment thereof, or reduce the stated rate of any interest
or fee payable hereunder or extend the scheduled date of any payment thereof or
increase the amount or extend the expiration date of any Lender’s Commitment,
in each case, without the consent of such Lender, (ii) shall amend, modify or
waive any provision of this Section, Section 2.12 in a manner that would
alter the pro rata sharing payments required by Section 2.12, Section
2.6 or 2.12 in a manner that would eliminate or limit a Lender’s
right to reject prepayments under Section 2.6, or vary any provision of
this Agreement or any other Loan Document which specifically by its terms
requires the approval or consent of all the Lenders or reduce the percentage
specified in the definition of Required Lenders, or consent to the assignment
or transfer by the Borrower of any of its rights and obligations under this
Agreement, the Notes and the other Loan Documents, or release any material
portion of the Collateral (other than in accordance with the terms of the Loan
Documents), in each case, without the written consent of all the Lenders, or
(iii) shall amend, modify or waive any provision of Article 8 or any
other provision in any Loan Document governing the rights or obligations of the
Administrative Agent or the Collateral Agent without the written consent of the
then Administrative Agent and the Collateral Agent.  Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Borrower, the Lenders, the Administrative Agent and all future holders
of the Notes.  In the case of any
waiver, the Borrower, the Lenders and the Administrative Agent shall be
restored to their former position and rights hereunder and under the
outstanding Notes and any other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing, but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereon.

 

68

 

9.2                                 Notice.  All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or, in the case of notice
by mail, when received, or, in the case of telecopy notice, when received,
addressed as follows in the case of the Borrower or the Administrative Agent,
and as set forth in Schedule I in the case of any Lender, or to such
other address as may be hereafter notified by the respective parties hereto and
any future holders of the amounts payable hereunder:

 

	
  Borrower:

  	
  NorthWestern
  Corporation

  
	
   

  	
  125 S. Dakota
  Avenue, Suite 1100

  
	
   

  	
  Sioux Falls, South
  Dakota 57104

  
	
   

  	
  Attention: William
  A. Austin, Chief Restructuring Officer

  
	
   

  	
  Facsimile: (605)
  978-2845

  
	
   

  	
   

  
	
  with a copy to:

  	
  NorthWestern
  Corporation

  
	
   

  	
  125 S. Dakota
  Avenue, Suite 1100

  
	
   

  	
  Sioux Falls, South
  Dakota 57104

  
	
   

  	
  Attention: Eric R.
  Jacobsen, Senior Vice President and General Counsel

  
	
   

  	
  Facsimile: (605)
  978-2963, and

  
	
   

  	
   

  
	
   

  	
  Paul, Hastings,
  Janofsky & Walker LLP

  
	
   

  	
  600 Peachtree Street,
  N.E., Suite 2400

  
	
   

  	
  Atlanta, Georgia
  30308

  
	
   

  	
  Attention: Jesse H.
  Austin, III, Esq.

  
	
   

  	
  Facsimile: (404)
  815-2424

  
	
   

  	
   

  
	
  Administrative
  Agent:

  	
  Credit Suisse First
  Boston

  
	
   

  	
  Eleven Madison
  Avenue

  
	
   

  	
  New York, New York
  10010-3629

  
	
   

  	
  Attention:  Agency Department Manager

  
	
   

  	
  Facsimile: (212)
  743-2155

  
	
   

  	
   

  
	
  with a copy to:

  	
  Morrison & Foerster LLP

  
	
   

  	
  1290 Avenue of the Americas, 41st Floor

  
	
   

  	
  New York, New York 10104-0050

  
	
   

  	
  Attn:  Mark B. Joachim, Esq.

  
	
   

  	
  Facsimile: (212) 468-7900

  

 

 

provided that any notice, request or demand
to or upon the Administrative Agent made under this Agreement may be made by
telephone, with prompt written confirmation thereafter of such telephonic
notice, and the Administrative Agent shall be entitled to rely on such
telephonic

 

69

 

notice; provided, further, that
any notice, request or demand to or upon the Administrative Agent and the
Lenders pursuant to Section 2.3, Section 2.6, or Section 2.7,
shall not be effective until received.

 

9.3                                 No Waiver;
Cumulative Remedies.  No failure to
exercise and no delay in exercising, on the part of the Administrative Agent or
any Lender, any right, remedy, power or privilege hereunder or under the other
Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.  The rights,
remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.

 

9.4                                 Survival
of Representations and Warranties. 
All representations and warranties made hereunder, in the other Loan
Documents and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the Notes and the making of the Loans hereunder.

 

9.5                                 Payment
of Expenses and Taxes; Indemnification. 
The Borrower agrees (a) to pay or reimburse each of (i) the
Administrative Agent, (ii) the Collateral Agent and (iii) solely with respect
to the amendment and restatement effected on the Closing Date, in an aggregate
amount not to exceed $25,000 for all of the Lenders, the Lenders, in each case
for all its reasonable out-of-pocket costs and expenses incurred in connection
with the development, preparation and execution of, and any amendment,
supplement or modification to, this Agreement, the Notes and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent and the Collateral Agent,
(b) to pay or reimburse the Administrative Agent, the Collateral Agent and each
Lender for all its costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the Notes, the
other Loan Documents and any such other documents, including, without
limitation, the fees and disbursements of counsel (including allocated costs of
internal counsel) to the Administrative Agent, the Collateral Agent and each
Lender, (c) to pay, and indemnify and hold harmless the Administrative Agent,
the Collateral Agent and each Lender from, any and all present or future stamp,
documentary or excise taxes or similar charges, any and all recording and
filing fees, and any and all liabilities with respect thereto, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or payment under, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Agreement, the Notes,
the other Loan Documents and any such other documents, and (d) to pay, and
indemnify and hold harmless the Administrative Agent, the Collateral Agent and
each Lender (including each of their respective parents, subsidiaries,
officers, directors, employees, agents and affiliates) from and against, any
and all claims, demands, liabilities, obligations, losses, damages, penalties,
actions, judgments, suits (regardless of whether such Person is a party
thereto), costs, settlements, expenses or disbursements of whatever kind or
nature arising from, in connection with or with respect to (i) the execution,
delivery, enforcement, performance and administration of this Agreement, the
Notes, the other Loan Documents, or any other documents, (ii) the proposed or
actual use of the proceeds of the Loans

 

70

 

or (iii) any
other Transaction or any transaction or document related thereto or in
connection therewith (all the foregoing in this clause (d), collectively, the “indemnified
liabilities”); provided that the Borrower shall not have any
obligation hereunder to any Lender with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of the Administrative
Agent, the Collateral Agent or such Lender. 
The agreements in this Section 9.5 shall survive repayment of the
Obligations hereunder.

 

9.6                                 Successors
and Assigns; Participations and Assignments.  (a) 
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Administrative Agent, all future holders of the
amounts owing hereunder and their respective successors and assigns, except
that the Borrower may not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of each Lender.

 

(b)                                 Any Lender may, in the
ordinary course of its commercial banking business and in accordance with
applicable law, at any time sell to one or more banks or other entities (“Participants”)
participating interests in any Loan owing to such Lender, any Note held by such
Lender, any Commitment of such Lender or any other interest hereunder and under
the other Loan Documents.  In the event
of any such sale by a Lender of a participating interest to a Participant, such
Lender’s obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Note for all purposes under this Agreement and the other Loan Documents, the
Borrower and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement and the other Loan Documents and such Lender
shall retain the sole right to enforce the obligations of the Borrower relating
to the Loans and other obligations owing to such Lender and to approve any
amendment, modification, or waiver of any provision of this Agreement (other
than amendments, modifications, or waivers (i) decreasing the amount of
principal of or the rate at which interest is payable on such Loans or Notes,
(ii) extending any scheduled principal payment date or date fixed for the
payment of interest on such Loans or Notes, (iii) extending its Commitment,
(iv) permitting any assignment or transfer of any of the Borrower’s rights or
obligations under this Agreement) or (v) releasing all or substantially all of
the Collateral.  The Borrower agrees
that if amounts outstanding under this Agreement and the Notes are due or
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall be deemed to have
the right of setoff in respect of its participating interest in amounts owing
under this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement or any Note; provided that, in purchasing such participating
interest, such Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in Section 9.7(a) as fully as
if it were a Lender hereunder.  The
Borrower also agrees that each Participant shall be entitled to the benefits of
Section 2.14, Section 2.15 and Section 2.16 with respect
to its participation in the Commitments and the Loans outstanding from time to
time as if it were a Lender; provided that, in the case of Section
2.15, such Participant shall have complied with the requirements of said
Section; and provided, further, that no Participant shall be
entitled to receive any greater amount pursuant to any such Section than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such Participant
had no such transfer occurred.

 

71

 

(c)                                  Any Lender, in the
ordinary course of its commercial banking business and in accordance with
applicable law, at any time and from time to time may, with the consent of the
Administrative Agent (which consent shall not be unreasonably withheld and
which consent shall not be required in the case of an assignment to an
affiliate or Approved Fund of such Lender), assign to any Lender or any
affiliate or Approved Fund thereof, an additional bank, financial institution,
fund or commingled investment vehicle, or other Person (an “Assignee”)
all or any part of its rights and obligations under this Agreement and the
Notes pursuant to an assignment agreement, substantially in the form of Exhibit
D (or such other form approved by the Administrative Agent’s in its sole
discretion) (an “Assignment and Assumption Agreement”), executed by such
Assignee, such assigning Lender and, in the case of an Assignee that is not
then a Lender or an affiliate or Approved Fund thereof, by the Administrative
Agent and delivered to the Administrative Agent for its acceptance and recording
in the Register; provided that (i) any such assignment must be in a
minimum amount equal to the lesser of (x) $1,000,000 and (y) the aggregate
Commitments and outstanding Loans of such Lender then in effect, and (ii) after
giving effect to any such assignment, such Lender shall have either (x) sold
all its rights and obligations hereunder and under the Notes or (y) retained at
least $1,000,000 of the aggregate Commitments and outstanding Loans.  Upon such execution, delivery, acceptance
and recording, from and after the effective date determined pursuant to such
Assignment and Assumption Agreement, (1) the Assignee thereunder shall be a
party hereto and, to the extent provided in such Assignment and Assumption
Agreement, have the rights and obligations of a Lender hereunder with a
Commitment and Loans as set forth therein and (2) the assigning Lender
thereunder, to the extent provided in such Assignment and Assumption Agreement,
shall be released from its obligations under this Agreement (and, in the case
of an Assignment and Assumption Agreement covering all or the remaining portion
of an assigning Lender’s rights and obligations under this Agreement, such
assigning Lender shall cease to be a party hereto; provided that the
provisions of Section 2.14, Section 2.15, Section 2.16 and
Section 9.5 shall continue to benefit such assigning Lender to the
extent required by such Sections).  On
or prior to the effective date determined pursuant to such Assignment and
Assumption Agreement, (i) appropriate entries shall be made in the accounts of
the assigning Lender and the Register evidencing such assignment and releasing
the Borrower from any and all obligations to the assigning Lender in respect of
the assigned Loan or Loans and (ii) appropriate entries evidencing the assigned
Loan or Loans shall be made in the accounts of the Assignee and the Register as
required by Section 9.6(d).  In
the event that any Notes have been issued in respect of the assigned Loan or
Loans, such Notes shall be marked “cancelled” and surrendered by the assigning
Lender to the Administrative Agent for return to the Borrower.

 

(d)                                 The Administrative
Agent shall maintain, at its address referred to in Section 9.2, a copy
of each Assignment and Assumption Agreement delivered to it and a register (the
“Register”) for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of the Loans owing to, each
Lender from time to time.  To the extent
permitted by applicable law, the entries in the Register shall be conclusive,
in the absence of manifest error, and the Borrower and the Administrative Agent
may (and, in the case of any Loan not evidenced by a Note, shall) treat each
Person whose name is recorded in the Register as the owner of the Loan recorded
therein as the owner thereof for all purposes of this Agreement and the other
Loan Documents, notwithstanding notice to the contrary.  Any assignment of any Loan or other
obligation hereunder not evidenced by a Note shall be effective only upon
appropriate entries with respect thereto being made in the Register.  The Register shall

 

72

 

be available
for inspection by the Borrower at any reasonable time and from time to time
upon reasonable prior notice.

 

(e)                                  Upon its receipt of
an Assignment and Assumption Agreement executed by the assigning Lender and an
Assignee (and, in the case of an Assignee that is not then a Lender or an
affiliate or Approved Fund thereof, by the Administrative Agent ) together with
payment by the assigning Lender or by the Assignee to the Administrative Agent
of a registration and processing fee of $3,500 (such fee only to be required
for an Assignee that is not then a Lender or an affiliate or Approved Fund
thereof), the Administrative Agent shall promptly accept such Assignment and
Assumption Agreement and, on the effective date determined pursuant thereto,
shall record the information contained therein in the Register and give notice
of such acceptance and recordation to the Borrower.

 

(f)                                    Notwithstanding
anything to the contrary contained herein, any Lender (a “Granting Lender”)
may grant to a special purpose funding vehicle (a “SPC”), identified as
such in writing from time to time by the Granting Lender to the Administrative
Agent and the Borrower, the option to provide to the Borrower all or any part
of any Loan that such Granting Lender would otherwise be obligated to make to
the Borrower pursuant to this Agreement; provided that (i) nothing
herein shall constitute a commitment by any SPC to make any advance hereunder,
(ii) if an SPC elects not to exercise such option or otherwise fails to provide
all or any part of such Loan, the Granting Lender shall be obligated to make
such Loan pursuant to the terms hereof. 
The making of a Loan by an SPC hereunder shall utilize the applicable
Commitment of the Granting Lender to the same extent, and as if, such Loan were
made by such Granting Lender.  Each
party hereto hereby agrees that no SPC shall be liable for any indemnity or
similar payment obligation under this Agreement (all liability for which shall
remain with the Granting Lender).  In
furtherance of the foregoing, each party hereto hereby agrees (which agreement
shall survive the termination of this Agreement) that, prior to the date that
is one year and one day after the payment in full of all outstanding commercial
paper or other senior indebtedness of any SPC, it will not institute against,
or join any other person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under the
laws of the United States or any State thereof.  In addition, notwithstanding anything to the contrary contained
in this Section 9.6(f), any SPC may (i) with notice to, but without the
prior written consent of, the Borrower and the Administrative Agent and without
paying any processing fee therefor, assign all or a portion of its interests in
any Loans to the Granting Lender or to any financial institutions (consented to
by the Borrower and the Administrative Agent) providing liquidity and/or credit
support to or for the account of such SPC to support the funding or maintenance
of Loans and (ii) disclose on a confidential basis any non-public information
relating to its Loans to any rating agency, commercial paper dealer or provider
of any surety, guarantee or credit or liquidity enhancement to such SPC.  This Section may not be amended without the
written consent of the SPC.

 

(g)                                 The Borrower
authorizes the Lenders to disclose to any Participant or Assignee (each, a “Transferee”)
and any prospective Transferee, any and all financial information in the
Lenders’ possession concerning the Borrower and its respective Affiliates which
has been delivered to the Administrative Agent or the Lenders by or on behalf
of the Borrower pursuant to this Agreement or which has been delivered to the
Administrative Agent or the Lenders by or on behalf of the Borrower in
connection with the Lender’s credit evaluation of

 

73

 

the Borrower
and its respective Affiliates prior to becoming a party to this Agreement; provided
that each such Transferee and prospective Transferee agrees in writing to be
bound by the provisions of Section 9.8.

 

(h)                                 Nothing herein shall
prohibit any Lender from pledging or assigning any Note to any Federal Reserve
Bank in accordance with applicable law. 
In order to facilitate such pledge or assignment, the Borrower hereby
agrees that, upon request of any Lender at any time and from time to time, the
Borrower shall provide to such Lender, at the Borrower’s own expense, a
promissory note in substantially the form of Exhibit A-1 (a “Term
Note”).

 

9.7                                 Adjustments;
Setoff.  (a)  If any Lender (a “Benefited Lender”)
shall at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by setoff, pursuant to events or proceedings of the nature
referred to in Section 7.1(f), or otherwise), in a greater proportion
than any such payment to or collateral received by any other Lender, if any, in
respect of such other Lender’s Loans, or interest thereon, such Benefited
Lender shall purchase for cash from the other Lenders a participating interest
in such portion of each such other Lender’s Loans, or shall provide such other
Lenders with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such Benefited Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders; provided
that if all or any portion of such excess payment or benefits is thereafter
recovered from such Benefited Lender, such purchase shall be rescinded, and the
purchase price and benefits returned, to the extent of such recovery, but
without interest.

 

(b)                                 Upon the occurrence
and during the continuance of an Event of Default, in addition to any rights
and remedies of the Lenders provided by law, each Lender shall have the right,
(without prior notice to the Borrower, any such notice being expressly waived
by the Borrower to the extent permitted by applicable law), upon any amount
becoming due and payable by the Borrower hereunder or under the Notes (whether
at the stated maturity, by acceleration or otherwise), to setoff and
appropriate and apply against such amount any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct
or indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or agency thereof to or for the credit or
the account of the Borrower.  Each
Lender agrees promptly to notify the Borrower and the Administrative Agent after
any such setoff and application made by such Lender; provided that the
failure to give such notice shall not affect the validity of such setoff and
application.

 

9.8                                 Confidentiality.  Each Lender agrees to exercise all reasonable efforts (consistent
with its customary methods for keeping information confidential) to keep any
information delivered or made available by the Borrower confidential from
anyone other than persons employed or retained by such Lender who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Loans; provided that nothing herein shall prevent any
Lender from disclosing such information (a) to any Affiliate of such Lender or
to any other Lender, (b) upon the order of any court or administrative agency,
(c) upon the request or demand of any regulatory agency or authority having
jurisdiction over such Lender, (d) that has been publicly disclosed, (e) in
connection with any litigation relating to the Loans, this

 

74

 

Agreement or
any transaction contemplated hereby to which any Lender or the Administrative
Agent may be a party, (f) to the extent reasonably required in connection with
the exercise of any remedy hereunder, (g) to such Lender’s legal counsel and
independent auditors, and (h) to any actual or proposed participant or assignee
of all or any part of its Loans hereunder, if such other Person, prior to such
disclosure, agrees, in writing, for the benefit of the Borrower to comply with
the provisions of this Section 9.8. 
Notwithstanding anything contained herein or in any other Loan Document
to the contrary, confidential information shall not include, and each party
hereto (and each employee, representative or other agent of any party hereto) may
disclose to any and all Persons, without limitation of any kind, the U.S.
federal income tax treatment and U.S. federal income tax structure of the
transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are or have been provided to such party
relating to such tax treatment or tax structure, and it is hereby confirmed
that each party hereto has been authorized to make such disclosures since the
commencement of discussions regarding the transactions contemplated hereby.

 

9.9                                 Effectiveness.  This Agreement shall become effective on the
date when counterparts hereof executed on behalf of the Borrower, the
Administrative Agent and each Lender shall have been received by the
Administrative Agent and notice thereof shall have been given by the
Administrative Agent to the Borrower.

 

9.10                           Counterparts.  This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all said counterparts taken together shall be
deemed to constitute one and the same instrument.  A set of the copies of this Agreement signed by all the parties
shall be lodged with each of the Borrower and the Administrative Agent.

 

9.11                           Severability.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

9.12                           Integration.  This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof or thereof not expressly
set forth or referred to herein or in the other Loan Documents.

 

9.13                           GOVERNING
LAW.  THIS AGREEMENT AND THE NOTES AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS
THEREOF OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE
OF NEW YORK.

 

75

 

9.14                           Submission
To Jurisdiction Waivers.  The
Borrower hereby irrevocably and unconditionally:

 

(a)                                  submits for itself
and its property in any legal action or proceeding relating to this Agreement
and the other Loan Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate courts
from any thereof;

 

(b)                                 consents that any such
action or proceeding may be brought in such courts and waives any objection
that it may now or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;

 

(c)                                  agrees that service
of process in any such action or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to the Borrower, as the case may be, at its address set
forth in Section 9.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;

 

(d)                                 agrees that nothing
contained herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other
jurisdiction; and

 

(e)                                  waives, to the
maximum extent not prohibited by law, any right it may have to claim or recover
in any legal action or proceeding referred to in this Section any special,
exemplary, punitive or consequential damages.

 

9.15                           Acknowledgments.  The Borrower hereby acknowledges that:

 

(a)                                  Neither the
Administrative Agent nor any Lender has any fiduciary relationship with or duty
to the Borrower arising out of or in connection with this Agreement or any of
the other Loan Documents, and the relationship between the Administrative Agent
and the Lenders, on the one hand, and the Borrower, on the other hand, in
connection herewith or therewith is solely that of creditor and debtor; and

 

(b)                                 no joint venture is
created hereby or by the other Loan Documents or otherwise exists by virtue of
the transactions contemplated hereby between the Administrative Agent, the
Lenders and the Borrower.

 

9.16                           Waivers
of Jury Trial.  THE
BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR THE NOTES OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.

 

76

 

9.17                           Conflict
with Orders.  In the
event of any conflict between the Loan Documents and the Orders, the terms of
the Orders shall control (unless otherwise provided therein).

 

9.18                           Waiver of Defaults under Original Loan
Agreement.  The Administrative Agent
and the Lenders hereby waive any Default or Event of Default arising under the
Original Loan Agreement solely as a result of (a) the commencement of the Case
itself, (b) the Borrower’s failure to maintain the credit ratings required
pursuant to Section 5.14 of the Original Loan Agreement, and (c) the
Borrower’s breach of representations and warranties due to incomplete
disclosure schedules delivered in connection with the closing of the Original Loan
Agreement to the extent that such disclosure schedules are corrected and true
and complete disclosure schedules are delivered in  connection with the closing of this Amended and Restated Credit
Agreement, and, in each case, waive their respective rights and remedies under
the Original Loan Agreement arising as a result thereof, including the right to
payment of any default interest pursuant to Section 2.9(c) of the
Original Loan Agreement.  The waiver effected pursuant to this Section
9.18 is limited as specified and shall not operate as a modification,
acceptance or waiver of any provision of the Original Loan Agreement, this
Agreement or any other Loan Document, except as specifically set forth herein.

 

77

 

 

IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above written.

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  NORTHWESTERN CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  William A. Austin

  
	
   

  	
   

  	
  Title: Chief Restructuring Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADMINISTRATIVE AGENT:

  
	
   

  	
   

  
	
   

  	
  CREDIT SUISSE FIRST BOSTON,

  CAYMAN ISLANDS BRANCH

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  A3 FUNDING LP

  
	
   

  	
  By: A3 Fund Management LLC, its General

  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
						

 

 

[SIGNATURE PAGE TO AMENDED AND RESTATED
CREDIT AGREEMENT]

 

 

	
   

  	
  ABLECO FINANCE LLC

  
	
   

  	
   

  
	
   

  	
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  AG CAPITAL FUNDING PARTNERS, L.P.

  
	
   

  	
   

  
	
   

  	
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  AMERICAN EXPRESS CERTIFICATE COMPANY

  
	
   

  	
   

  
	
   

  	
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  ANCHORAGE CAPITAL PARTNERS, L.P.

  
	
   

  	
   

  
	
   

  	
  By:  Anchorage Capital Group,
  L.L.C., its

  General Partner

  
	
   

  	
   

  
	
   

  	
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  Name:

  	
   

  
	
   

  	
   

  	
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  BEAL BANK, S.S.B.

  
	
   

  	
   

  
	
   

  	
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  BEAR STEARNS INVESTMENT

  PRODUCTS

  
	
   

  	
   

  
	
   

  	
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  BLACK DIAMOND 1998-1, LTD

  
	
   

  	
   

  
	
   

  	
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  BLACK DIAMOND CLO 2000-1, LTD

  
	
   

  	
   

  
	
   

  	
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  BLACK DIAMOND INTERNATIONAL

  FUNDING, LTD

  
	
   

  	
   

  
	
   

  	
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  BROOKVILLE CAPITAL MASTER

  FUND LP

  
	
   

  	
   

  
	
   

  	
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  CASPIAN CAPITAL

  
	
   

  	
   

  
	
   

  	
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  COLUMBIA FLOATING RATE

  ADVANTAGE FUND

  
	
   

  	
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  as Advisor

  
	
   

  	
   

  
	
   

  	
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  COLUMBIA FLOATING RATE LIMITED LIABILITY COMPANY

  
	
   

  	
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  as Advisor

  
	
   

  	
   

  
	
   

  	
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  DBNO CAYMAN L.P.

  
	
   

  	
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  ELF FUNDING TRUST I

  
	
   

  	
  By:  Highland Capital
  Management, L.P.

  As Collateral Manager

  
	
   

  	
   

  
	
   

  	
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  EVENT PARTNERS DEBT

  ACQUISITION, L.L.C.

  
	
   

  	
   

  
	
   

  	
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  FIDELITY ADVISORS SERIES II:

  FIDELITY ADVISOR FLOATING RATE

  HIGH INCOME FUND

  
	
   

  	
   

  
	
   

  	
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  FIRST DOMINION FUNDING I

  
	
   

  	
   

  
	
   

  	
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  Name:

  	
   

  
	
   

  	
   

  	
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  FOOTHILL INCOME TRUST, L.P.

  
	
   

  	
   

  
	
   

  	
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  GOLDMAN SACHS CREDIT PARTNERS

  LP

  
	
   

  	
   

  
	
   

  	
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  GREENWICH INTERNATIONAL, LTD

  
	
   

  	
   

  
	
   

  	
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  HIGHLAND LEGACY LIMITED

  
	
   

  	
  By:  Highland Capital
  Management, L.P.

  As Collateral Manager

  
	
   

  	
   

  
	
   

  	
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  IDS LIFE INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
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  KZH CYPRESSTREE-1 LLC

  
	
   

  	
   

  
	
   

  	
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  Name:

  	
   

  
	
   

  	
   

  	
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  KZH ING-2 LLC

  
	
   

  	
   

  
	
   

  	
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  Name:

  	
   

  
	
   

  	
   

  	
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  KZH STERLING LLC

  
	
   

  	
   

  
	
   

  	
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  Name:

  	
   

  
	
   

  	
   

  	
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  LONG LANE MASTER TRUST IV

  
	
   

  	
  By:  Fleet National Bank as
  Trust

  Administrator

  
	
   

  	
   

  
	
   

  	
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  MARINER LDC

  
	
   

  	
   

  
	
   

  	
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  MARINER OPPORTUNITIES FUND, L.P.

  
	
   

  	
   

  
	
   

  	
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  Name:

  	
   

  
	
   

  	
   

  	
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  MORGAN STANLEY SENIOR FUNDING

  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
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  PERRY PRINCIPALS LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  REDWOOD MASTER FUND, LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  RESTORATION FUNDING CLO, LTD.

  
	
   

  	
  By:  Highland Capital
  Management, L.P.

  As Collateral Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
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  SEMINOLE FUNDING LLC

  
	
   

  	
   

  
	
   

  	
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  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPIRET IV LOAN TRUST 2003-A

  
	
   

  	
  By:  Wilmington Trust Company,
  not in its

  individual capacity but solely as trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SRF 2000, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUNAMERICA LIFE INSURANCE

  COMPANY

  
	
   

  	
  By:  AIG Global Investment
  Corp., its

  Investment Adviser

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TACONIC CAPITAL PARTNERS L.P.

  
	
   

  	
   

  
	
   

  	
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  Name:

  	
   

  
	
   

  	
   

  	
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  TRS THEBE LLC

  
	
   

  	
   

  
	
   

  	
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  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TRS1 LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
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[SIGNATURE PAGE TO AMENDED AND RESTATED
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DISCLOSURE SCHEDULES

TO

AMENDED AND RESTATED CREDIT AGREEMENT

 

These
Disclosure Schedules have been prepared for the closing of the NorthWestern
Corporation Amended and Restated Credit Agreement.

 

 

Schedule P to Amended and Restated
Credit Agreement

Permitted Pre-Petition Payments

 

1.                                      Secured
Debt:

 

Regularly scheduled payments when due in respect of the secured debt of
the Borrower identified in the table below:

 

A. Montana Mortgage
Bonds

The Borrower owns
utility assets in the State of Montana which are subject to a (First) Mortgage
and Deed of Trust originally executed by Montana Power in 1945 and supplemented
from time to time to reflect the various bond issuances made pursuant thereto.
The following series remain outstanding listed in order of maturity:

 

	
  Description

  	
   

  	
  Amount
  Outstanding

  	
   

  
	
  7% Series Due 2005

  	
   

  	
  $

  	
  5.4 million

  	
   

  
	
  7.30% Series Due 2006

  	
   

  	
  $

  	
  150 million

  	
   

  
	
  Credit Agreement (2002) Series Due 2006
  (Security for CSFB Facility)

  	
   

  	
  $

  	
  277.9 million

  	
   

  
	
  8.25% Series Due 2007

  	
   

  	
  $

  	
  0.4 million

  	
   

  
	
  7.25% Secured Medium Term Notes Due 2008

  	
   

  	
  $

  	
  13 million

  	
   

  
	
  8.95% Series Due 2022

  	
   

  	
  $

  	
  1.5 million

  	
   

  
	
  TOTAL

  	
   

  	
  $

  	
  448.2 million

  	
   

  

 

B. South Dakota
Mortgage Bonds

The Borrower owns
utility assets in the State of South Dakota which are subject to a General
Mortgage Indenture and Deed of Trust originally executed by the Borrower in
1993 and supplemented from time to time to reflect the various bond issuances
made pursuant thereto. The following series remain outstanding listed in order
of maturity:

 

	
  Description

  	
   

  	
  Amount
  Outstanding

  	
   

  
	
  7.10% Series Due 2005

  	
   

  	
  $

  	
  60 million

  	
   

  
	
  Credit Agreement (2002) Series Due 2006
  (Security for CFSB Facility)

  	
   

  	
  $

  	
  109.2 million

  	
   

  
	
  7.00% Series Due 2023

  	
   

  	
  $

  	
  55 million

  	
   

  
	
  TOTAL

  	
   

  	
  $

  	
  224.2 million

  	
   

  

 

C. CSFB Facility

On December 17,
2002, the Borrower entered into a $390 million secured term loan credit
facility with a syndicate of banks led by Credit Suisse First Boston. $280
million of this facility is secured by mortgage bonds issued under the Montana
Mortgage Indenture described above and $110 million is secured by mortgage
bonds under the South Dakota Mortgage Indenture described above.

 

D. Pollution Control
Revenue Bonds

The Borrower assumed
certain obligations of Montana Power regarding pollution control revenue bonds.
The pollution control bonds are issued by various counties and municipalities,
although they are secured by isolated electric generating facilities owned by
the Borrower, subject to the rights of the outstanding bondholders under the
Montana Mortgage Indenture and the South Dakota Mortgage Indenture. The
following pollution control bonds remain outstanding:

 

	
  Description

  	
   

  	
  Amount
  Outstanding

  	
   

  
	
  Grant County, South Dakota Series 1993A
  Revenue Bonds Due 2023

  	
   

  	
  $

  	
  6.4 million

  	
   

  
	
  Grant County, South Dakota Series 1993B
  Revenue Bonds Due 2023

  	
   

  	
  $

  	
  3.4 million

  	
   

  
	
  City of Salix, Iowa Series 1993 Revenue
  Bonds Due 2023,

  	
   

  	
  $

  	
  4.0 million

  	
   

  
	
  Mercer County, Nebraska Series 1993 Revenue
  Bonds Due 2023

  	
   

  	
  $

  	
  7.6 million

  	
   

  
	
  City of Forsyth, Montana Series 1993A
  Revenue Bonds Due 2023

  	
   

  	
  $

  	
  90.2 million

  	
   

  
	
  City of Forsyth, Montana Series 1993B
  Revenue Bonds Due 2023

  	
   

  	
  $

  	
  80 million

  	
   

  
	
  TOTAL

  	
   

  	
  $

  	
  191.6 million

  	
   

  

 

 

 

E. Gas Transition
Bonds

The Borrower assumed
certain obligations of Montana Power, as grantor and servicer of the MPC
Natural Gas Funding Trust, issuer of the $46.5 million of the 6.2% Transition
Bonds Due 2012 which are secured by a pledge of certain utility related
revenues (the Gas Transition Bonds utilized a trust structure in connection
with a conveyance of certain revenue rights, but if not deemed a true sale
would be treated as a secured transaction).

 

TOTAL SECURED:                                  $910.5
million

 

2.                                      Payments
Approved by Bankruptcy Court:

 

Payments approved by the Bankruptcy Court as of September 15, 2003
in the following orders, except as otherwise limited by this Agreement:  (a) Order Authorizing Payment of Certain
Pre-Petition Payroll and Related Employee Obligations, dated September 15,
2003; (b) Order Authorizing Debtor to Continue Insurance and Insurance
Financing Program and Granting Related Relief, dated September 15, 2003;
(c) Final Order Authorizing the Debtor to (i) Comply with Terms of Pre-Petition
Trading Contracts, (ii) Enter into Post-Petition Trading Contracts in the
Ordinary Course of Business, and (iii) Setting a Final Hearing to Consider the
Entry of a Final Order Affirming Interim Order and Authorizing Assumption of
Pre-Petition Trading Contracts, dated September 15, 2003; (d) Final Order
Authorizing the Debtors to Obtain Post-Petition Credit Card Financing and
Scheduling a Final Hearing, dated September 15, 2003; and (e) Interim
Order Authorizing Debtor to Continue and Maintain Its (i) Consolidated Cash
Management System, (ii) Existing Bank Accounts, (iii) Existing Business Forms,
(iv) Public Purpose Programs, and (v) to Pay on an Interim Basis Certain
Limited Intercompany Obligations; and Granting Related Relief and Scheduling a
Final Hearing, dated September 15, 2003.

 

Additional payments approved by the Bankruptcy Court in orders entered
subsequent to September 15, 2003 following appropriate notice and hearing.

 

 

Schedule 3.4a to Amended and Restated
Credit Agreement

First Mortgage Approvals

 

1.                                       The
Borrower is subject to Section 204 of the Federal Power Act.  The Borrower applied to the Federal Energy
Regulatory Commission (“FERC”) for authority to issue securities of the
Borrower pursuant to its Application for Authorization of the Issuance of
Securities and Authorization for Exemption from Competitive Bidding and
Negotiated Offer Requirements and Expedited Treatment dated October 31,
2001, Docket No. ES02-6, as supplemented by the Borrower on November 15,
2001, and pursuant to its Application for Authorization of the Issuance of
Securities and Authorization for Exemption from Competitive Bidding and
Negotiated Offer Requirements dated April 3, 2001, Docket No.
ES01-28.  The Borrower obtained
authorization from the FERC pursuant to Section 204 with respect to the
First Mortgage Bonds consistent with the foregoing applications pursuant to the
FERC’s letter order dated November 30, 2001, Docket No. ES02-6 (NorthWestern
Corporation, 97 FERC ¶ 62,187 (2001)), authorizing the issuance of debt by
the Borrower in an amount not to exceed $1,100,000,000, and pursuant to the
FERC’s letter order dated May 7, 2001, Docket No. ES01-28 (NorthWestern
Corporation, 95 FERC ¶ 62,089 (2001)), authorizing the issuance of debt by
the Borrower in an amount not to exceed $300,000,000.

 

2.                                       The
Montana Public Service Commission (“MPSC”) takes the position that its approval
is required in connection with the issuance of debt by entities subject to the
regulation and oversight of the MPSC. 
The Borrower is subject to the regulation and oversight of the MPSC in
connection with its conduct of the utility business formerly owned by The Clark
Fork and Blackfoot, L.L.C. (f/k/a NorthWestern Energy, L.L.C.) (“CFB”),
including, without limitation, with respect to the issuance of debt securities
specifically relating to such business.

 

 

Schedule 3.4b to Amended and Restated
Credit Agreement

Required Consents of Governmental Authorities

 

See item 1 of
Schedule 3.4a

 

 

Schedule 3.8 to Amended and Restated
Credit Agreement

Exceptions to Title to Borrower’s Properties

 

None.

 

 

Schedule 3.12 to Amended and Restated
Credit Agreement

Taxes

 

None.

 

 

Schedule 3.14 to Amended and Restated
Credit Agreement

ERISA

 

1. Welfare
Plans providing benefits to former employees, including retirees (see item #2
below for Unfunded Liabilities):

 

(a)                                  Northwestern
Energy Active Employee Medical Plan

(b)                                 Northwestern
Energy Active Employee Life Insurance Plan

(c)                                  Northwestern
Energy Medicare Supplemental Benefit Plan

(d)                                 Northwestern
Corp. Basic Life Insurance Plan (frozen – no additional participants)

(e)                                  Northwestern
Corp. Family Protector Plan (frozen – no additional participants)

(f)                                    Northwestern
Corp. Retiree Medical Plan (benefit offered to retirees and retirees pay all
costs)

(g)                                 Northwestern
Energy Long-term Disability Plan

(h)                                 Northwestern
Corp. Long-term Disability Plan

 

2. The
Unfunded Liabilities of all Single Employer Plans do not in the aggregate
exceed $142,000,000 (based on financial statements as of January 1, 2003,
which have not to Borrower’s knowledge materially increased in 2003).

 

3.  The Unfunded Liabilities referenced in item
#2 above include the following Unfunded Liabilities associated with Single
Employer Plans subject to Title IV of ERISA or to Section 412 of the Code:

 

(a)
$97,000,000 under the Northwestern Energy Employee Retirement Plan

(b) $
5,000,000 under the Northwestern Corp. Pension Plan

 

 

Schedule 3.15 to Amended and Restated
Credit Agreement

Regulations Limiting Indebtedness

 

1.                                       The
Borrower is subject to Section 204 of the Federal Power Act.  The Borrower has obtained authorization from
the FERC pursuant to Section 204 with respect to the Credit Agreement to
which this Schedule relates, and the Borrower’s issuance of the Notes and
incurrence of debt thereunder as more fully described in Item 1 on
Schedule 3.4a.

 

2.                                       See
Item 2 of Schedule 3.4a.

 

3.                                       The
Borrower has filed with the SEC an application on Form U-1, seeking an
exemption under Section 3(a)(3) of PUHCA, which was effective upon a good
faith filing.

 

 

Schedule 3.17 to Amended and Restated
Credit Agreement

Environmental Matters

 

1.                                       During informal
conversations in the summer of 2003 on other matters, the Montana Attorney
General indicated that the State of Montana reserved any right that it might
have to file a natural resource damages claim based on the existence of
contaminated sediment located behind the Thompson Falls Dam, which area is
habitat for the Bull Trout, and that it was taking the matter under
consideration.

 

2.                                       In light of the
United States Environmental Protection Agency’s proposal to require dam and
sediment removal in its final remedy for the Milltown Reservoir, and in
consideration of other circumstances, the Borrower and Atlantic Richfield
Company (“ARCO”) have entered into a settlement that would assure ARCO access
for removal of sediments, and limit The Clark Fork and Blackfoot, L.L.C.’s
(“CFB”) and the Borrower’s liability for costs of dam removal, sediment
removal, natural resource damage claims, and upland disposal area remediation
efforts to no more than $10MM.  CFB
remains the licensee and operator of the dam, responsible for compliance with
the FERC requirements.

 

 

Schedule 3.25 to Amended and Restated Credit
Agreement

Subsidiaries

 

A. 
Organizational Chart

 

 

 

B. 
Capital Stock

 

	
  Company

  	
   

  	
  Class of
  Stock

  	
   

  	
  Total

  Authorized

  	
   

  	
  Total
  Issued

  and

  Outstanding

  	
   

  
	
  NorthWestern
  Corporation

  	
   

  	
  Common

  	
   

  	
  50,000,000

  	
   

  	
  37,680,095

  	
   

  
	
   

  	
   

  	
  Cum.
  Preferred Stock

  	
   

  	
  1,000,000

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
  Preference Stock

  	
   

  	
  1,000,000

  	
   

  	
  0

  	
   

  
	
  NorthWestern
  Capital Corporation

  	
   

  	
  NW Capital
  Group Stock

  	
   

  	
  1,000,000

  	
   

  	
  500,000

  	
   

  
	
   

  	
   

  	
  Blue Dot
  Group Stock

  	
   

  	
  500,000

  	
   

  	
  250,000

  	
   

  
	
   

  	
   

  	
  Expanets
  Group Stock

  	
   

  	
  500,000

  	
   

  	
  250,000

  	
   

  
	
   

  	
   

  	
  New Strategies
  Group Stock

  	
   

  	
  2,000,000

  	
   

  	
  20,000

  	
   

  
	
  NorCom
  Advanced Technologies, Inc.

  	
   

  	
  Common

  	
   

  	
  1,000

  	
   

  	
  1,000

  	
   

  
	
  NorthWestern
  Growth Corporation

  	
   

  	
  Common

  	
   

  	
  1,000

  	
   

  	
  1,000

  	
   

  
	
  NorthWestern
  Services Corporation

  	
   

  	
  Common

  	
   

  	
  1,000

  	
   

  	
  1,000

  	
   

  
	
  Nekota
  Resources, Inc.

  	
   

  	
  Common

  	
   

  	
  1,000

  	
   

  	
  1,000

  	
   

  
	
  NorthWestern
  Energy Development, LLC

  	
   

  	
  Membership
  Interests

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  
	
  NorthWestern
  Energy Marketing, LLC

  	
   

  	
  Membership
  Interests

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  
	
  NorthWestern
  Generation I, LLC

  	
   

  	
  Membership
  Interests

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  
	
  Montana
  Megawatts I, LLC

  	
   

  	
  Membership
  Interests

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  

 

 

Schedule 6.3 to Amended and Restated Credit
Agreement

Transactions with Affiliates

 

Intercompany Support Obligations

 

Montana
Megawatts I, LLC

The Borrower
currently provides suspended construction support for the Montana First
Megawatts power plant project (the “Project”), including security, caretaker,
warehousing and other costs in order to protect and preserve the equipment and
related warranties until the project can be sold.  The annual funding requirement is approximately $860,000, or
$72,000 per month, which is paid directly to the Project vendors by the
Borrower.

 

NorthWestern
Services Corporation

The Borrower
currently makes monthly support payments on an interim and emergency basis to
its wholly-owned, non-debtor subsidiary, NorthWestern Services Corporation
(“NSC”) pursuant to written agreements between the Borrower and the
predecessor-in- interest to NSC (the “NSC Support Agreements”).(1)  Pursuant to each of these agreements, the
Borrower advances funds to NSC for the bulk purchases of gas.  Upon NSC’s sale of the gas, the Borrower is
reimbursed for funds advanced under the NSC Support Agreements.  In the preceding twelve months, the Borrower
has been fully reimbursed for all funds advanced to NSC under the Support
Agreements and received revenues of approximately $50,000.

 

Canadian-Montana
Pipeline Corporation

The Borrower
funds an account with Royal Bank General held by the Canadian-Montana Pipeline
Corporation (“CMP”), a non-debtor affiliate of the Borrower, used for
disbursing Canadian dollar payments on behalf of CMP, primarily for property
and income tax payments. Over the past 12 months, the Borrower has not
transferred any funds into the CMP account.

 

Clark
Fork and Blackfoot, LLC

The Borrower is party to the Environmental Liabilities Support
Agreement (the “Environmental Agreement”) and the Maintenance and Operating
Costs Support Agreement (the “Maintenance Agreement”) with Clark Fork &
Blackfoot (“CFB”), which require the Borrower to pay any costs and expenses
that arise in connection with the operation and maintenance of the Milltown
Dam.  Under the terms of the
Environmental Agreement, the Borrower is obligated to make funds available to
CFB in the event that it runs short of cash and other liquid assets it needs in
order to meet any obligation to make payments in respect of environmental
liabilities.  To date, the Borrower has
not been required to pay any funds to CFB under the terms of the Environmental
Agreement.  Under the terms of the
Maintenance Agreement, the Borrower is required to make funds available to CFB
in the event that it is

 

(1)  The three agreements are the Management Services Agreement dated
November 29, 1999, the Gas Supply Sales and City-Gate Management Services
Agreement dated July 24, 1997, and the Aberdeen City-Gate Transportation
Services Agreement dated November 29, 1999.

 

 

 

unable to pay
its trade accounts arising out of its ordinary course of business, or to pay
any other costs and expenses (other than environmental liabilities covered by
the Environmental Agreement) that arise in connection with the operation or
maintenance of the Milltown Dam.  Since
January 1, 2003, the Borrower has paid approximately $270,000 per month to
fulfill its obligations under the terms of the Maintenance Agreement.  The Borrower reasonably anticipates that
under the terms of this agreement it will be required to pay the sum of
approximately $370,000 per month through December 31, 2003.

 

 

Schedule 6.4 to Amended and Restated Credit
Agreement

Liens Securing Indebtedness for Borrowed
Money

 

The following sets forth Liens
which are in existence on the date hereof and does not purport to reflect all
UCC financing statements that may be on file in any jurisdiction with respect
to the Borrower and its Subsidiaries.

 

	
  DEBTOR

  	
   

  	
  SECURED
  PARTY

  	
   

  	
  DESCRIPTION
  OF COLLATERAL

  
	
  NorthWestern Corporation

  	
   

  	
  Bankers
  Trust Company (now known as Deutsche Bank Trust Company)

  	
   

  	
  Debtor’s
  right, title and interest in and to (a) an undivided 32.14285% interest in
  (i) the Existing Contracts, (ii) all Accounts and General Intangibles, all
  moneys due under any Existing Contract, any damages arising out of any such
  Existing Contract or Account, the right of Debtor to terminate any Existing
  Contract; (b) an undivided 64.2857% interest in (i) the Power Sales
  Agreements and (ii) all Accounts and General Intangibles relating to the
  Power Sales Agreements and with respect to the Power Sales Agreements, all
  moneys due, any damages arising out of any contract or Account, the right of
  Debtor to terminate the contracts, as more specifically disclosed in Part 2
  of Schedule 1 attached to Delaware UCC file number 22923088, as filed on
  November 20, 2002 in connection with the transaction evidenced by the
  documents described in Item F.1. of Schedule 6.10.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Bankers
  Trust Company (now known as Deutsche Bank Trust Company

  	
   

  	
  Debtor’s
  right, title and interest in and to (a) and undivided 17.85715% interest in
  (i) the Existing Contracts, (ii) all Accounts and General Intangibles, all
  moneys due under any Existing Contract, any damages arising out of any such
  Existing Contract or Account, the right of Debtor to terminate any Existing
  Contract; (b) an undivided 35.7413% interest in (i) the Power Sales
  Agreements and (ii) all Accounts and General Intangibles relating to the
  Power Sales Agreements and with respect to the Power Sales Agreements, all
  moneys due, any damages arising out of any contract or Account, the right of
  Debtor to terminate the contracts, as more specifically disclosed in Part 2
  of Schedule 1 attached to Delaware UCC file number 22923237, as filed on
  November 20, 2002 in connection with the transaction evidenced by the
  documents described in Item F.1. of Schedule 6.10.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Bank of
  New York, as Trustee under the Mortgage

  	
   

  	
  All
  collateral described in the First Mortgage and Deed of Trust, dated as of
  October 1, 1945 as more specifically identified in Item A.2. of Schedule 6.10
  and as more specifically disclosed in Part 2 of Schedule 1 attached to
  Delaware UCC file number 22923286, as filed on November 20, 2002.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General
  Electric Capital Corporation

  	
   

  	
  One 1990
  Cessna Citation V aircraft Model 560 (Serial No. 560-0068), along with Pratt
  & Whitney Engines Model JT15D-5A (Serial Nos. PCE-108140 and PCE-108139),
  all present and future proceeds, profits, attachments, accessories, parts,
  and equipment thereto as further described on the schedule attached thereto
  and to be hangared at Huron Regional Airport, Hangar #3.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  JPMorgan
  Chase Bank, as Trustee

  	
   

  	
  All
  collateral described in the General Mortgage, Indenture and Deed of Trust,
  dated as of August 1, 1993 as more specifically identified in Item A.1. of
  Schedule 6.10 and as more specifically disclosed in Exhibit A attached to
  Delaware UCC file number 30353915, as filed on February 10, 2003.

  

 

 

	
  DEBTOR

  	
   

  	
  SECURED
  PARTY

  	
   

  	
  DESCRIPTION
  OF COLLATERAL

  
	
   

  	
   

  	
  Credit
  Suisse First Boston, Cayman Islands Branch, as Collateral Agent

  	
   

  	
  All of
  Borrower’s right, title and interest in, to and under the following: (i) the
  $278,600,000 aggregate principal amount of Borrower’s First Mortgage Bonds,
  Credit Agreement (2002) Series, due 2006, authenticated and delivered under
  the Mortgage and Deed of Trust dated as of October 1, 1945 (ii) the
  $109,500,000 aggregate principal amount of the Borrower’s New Mortgage Bonds,
  Credit Agreement (2002) Series, due 2006, authenticated and delivered under
  the General Mortgage Indenture and Deed of Trust, dated August 1, 1993, and
  (iii) all proceeds of the foregoing and as more specifically disclosed in
  Delaware UCC file number 30368301, as filed on February 11, 2003.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wells Fargo
  Bank Minnesota, N.A., as Trustee

  	
   

  	
  All of
  Borrower’s interest (amounting to an undivided 23.4% share) in the cooling
  pond, precipitator and monitoring, fly ash collection, bottom ash disposal,
  dust collection, active coal storage building, additional chimney height,
  weather station, sewage treatment plant, fuel storage dike in Grant County,
  SD as more specifically described in Schedule A to Delaware UCC file number
  31989261, as filed on July 11, 2003.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wells Fargo
  Bank Minnesota, N.A., as Trustee

  	
   

  	
  All of
  Borrower’s right, title and interest (amounting to an undivided 23.4% share)
  in the Waste Water Management System located in Grant County, South Dakota,
  together with all rights thereto as more specifically described in Schedule
  A, Exhibit A, and Exhibit 2 to Delaware UCC file number 31989279, as filed on
  July 11, 2003.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wells Fargo
  Bank Minnesota, N.A., as Trustee

  	
   

  	
  All of
  Borrower’s right, title and interest in and to electrostatic precipitator,
  wastewater management system, air quality monitoring system, coal dust
  collection system, bottom ash disposal system and additional stack height in
  connection with Unit No. 4 of the George Neal Generating Station as more
  specifically described in Schedule A, to Delaware UCC file number 31989287,
  as filed July 11, 2003.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wells Fargo
  Bank Minnesota, National Association, as Trustee

  	
   

  	
  All of
  Borrower’s right, title and interest (amounting to an undivided 10% share) to
  a Flue-Gas System, a Coal Dust Collection System, Sanitary Sewage Treatment
  Facilities and Waste Water Treatment Facilities in Mercer County, ND as more
  specifically described in Exhibit 1 and Exhibit 2, to Delaware UCC file
  number 31989600, as filed July 11, 2003.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Bank of Commerce
  and Trust Company

  	
   

  	
  Equipment
  (where permitted by the Areawide Contract Delivery Order No. 43-03R6-8-0071
  by USDA Forest Service, Lolo National Forest related to the Areawide Public
  Utility Contract No. GS-00P-96BSD-0012 between the US and Montana Power
  Company) and payments associated with Energy Management Services ordered by
  USDA Forest Service, Lolo National Forest along with all present and future
  attachments and accessories thereto and replacements and proceeds thereof,
  including, but not limited to, amounts payable in event of termination or
  under any insurance policies.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wells Fargo
  Bank

  	
   

  	
  Cash
  collateral held in stand-by Letter of Credit Collateral Accounts 2391749021
  and 4945060515 securing the Borrower’s obligations in respect of the Letters
  of Credit issued for its account and described in Item F of Schedule 6.10.

  

 

 

	
  DEBTOR

  	
   

  	
  SECURED
  PARTY

  	
   

  	
  DESCRIPTION
  OF COLLATERAL

  
	
  Nekota Resources, Inc.

  	
   

  	
  Northern
  Border Pipeline Company

  	
   

  	
  All
  collateral described in the Mortgage-Collateral Real Estate Mortgage, dated
  as of July 21, 2003 between the Borrower and Northern Border Pipeline Company
  as more specifically disclosed the document attached to South Dakota UCC file
  number 032131001168, as filed on August 1, 2003.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NorthWestern Growth Corporation

  	
   

  	
  UBS

  	
   

  	
  Cash
  collateral held in UBS Account CP-29119-16 securing NorthWestern Growth
  Corporation’s obligations in respect of the Letters of Credit issued for its
  account and described in Item F of Schedule 6.10.

  

 

 

Schedule 6.6 to Amended and Restated Credit
Agreement

Guarantee Obligations

 

 

See Section D of Schedule 6.10

 

 

Schedule 6.7 to Amended and Restated Credit
Agreement

Sale of Assets

 

1.                                       Expanets
and its Subsidiaries, Blue Dot and its Subsidiaries, and the stock or assets of
other Excluded Subsidiaries.

 

2.                                       The
real estate listed below

 

EXCESS PROPERTIES-TO BE RELEASED FROM LIEN OF
MORTGAGE INDENTURES

 

	
  Property
  Name

  	
   

  	
  County

  	
   

  	
  Purchaser

  
	
  MONTANA

  	
   

  	
   

  	
   

  	
   

  
	
  Townsend
  Shop/Office

  	
   

  	
  Broadwater

  	
   

  	
  Robert C
  & Gaylene Curtis

  
	
  Red Lodge
  Northside Substation

  	
   

  	
  Carbon

  	
   

  	
  City of Red
  Lodge

  
	
  Land in
  Cascade County

  	
   

  	
  Cascade

  	
   

  	
  King
  Properties

  
	
  McGregor
  Meadows

  	
   

  	
  Flathead

  	
   

  	
  Clark D.
  & Sharon M. Bronson

  
	
  Kalispell
  Service Center

  	
   

  	
  Flathead

  	
   

  	
  Montana
  Department of Transportation (MDOT)

  
	
  Bozeman
  Durston Substation Site

  	
   

  	
  Gailatin

  	
   

  	
  Douglas
  Lance Smith

  
	
  Jack Rabbit
  Substation MDOT Highway Proj

  	
   

  	
  Gailatin

  	
   

  	
  Montana
  Department of Transportation (MDOT)

  
	
  Bozeman
  Northside Substation land

  	
   

  	
  Gailatin

  	
   

  	
  Tengelsen
  Family Limited Partnership

  
	
  Marysville
  Substation

  	
   

  	
  Lewis and
  Clark

  	
   

  	
  Nick A.
  & Darcy A. Pipinich

  
	
  Helena
  Service Center Land

  	
   

  	
  Lewis and
  Clark

  	
   

  	
  Montana
  Department of Transportation (MDOT)

  
	
  Alberton
  Gorge

  	
   

  	
  Mineral

  	
   

  	
  Currently
  None

  
	
  Grant Creek
  Substation

  	
   

  	
  Missoula

  	
   

  	
  Dennis R.
  Washington

  
	
  Missoula
  Service Center excess parcel

  	
   

  	
  Missoula

  	
   

  	
  Currently
  None

  
	
  Livingston
  Indoor Substation excess parcel

  	
   

  	
  Park

  	
   

  	
  Fred J &
  F Thomas Shellenberg

  
	
  Thompson
  Falls House and Land

  	
   

  	
  Sanders

  	
   

  	
  Elvin
  Fitzhugh

  
	
  Buffalo
  Rapids lands

  	
   

  	
  Sanders

  	
   

  	
  Confederated,
  Salish & Kootenai Tribes(CSKT)

  
	
  Columbus
  substation site

  	
   

  	
  Stillwater

  	
   

  	
  Lance Hogan

  
	
  Glasgow pole
  yard

  	
   

  	
  Valley

  	
   

  	
  John
  Arneson, d/b/a Plains Construction

  
	
  Billings
  Service Center excess parcel

  	
   

  	
  Yellowstone

  	
   

  	
  Darrell
  Kreitzberg

  
	
  Montana Subtotal

  	
   

  	
   

  	
   

  	
   

  

 

	
  Property
  Name

  	
   

  	
  County

  	
   

  	
  Purchaser

  
	
  SOUTH DAKOTA

  	
   

  	
   

  	
   

  	
   

  
	
  Former
  Corporate Office, Hurce

  	
   

  	
  Beadle

  	
   

  	
  Currently
  None

  
	
  Excess
  Property Adjacent to Frank Avenue SubStation

  	
   

  	
  Beadle

  	
   

  	
  Matt and
  Lori Rathjen

  
	
  Former Pole
  Storage Yard

  	
   

  	
  Beadle

  	
   

  	
  State of
  South Dakota (South Dakota State Fair)

  
	
  Excess
  Property Adjacent to Kansas Avenue SubStation

  	
   

  	
  Beadle

  	
   

  	
  Currently
  None

  
	
  Former
  Propane Air Plant Property

  	
   

  	
  Brookings

  	
   

  	
  Currently
  None

  
	
  Former
  Armour Substation Property

  	
   

  	
  Charles Mix

  	
   

  	
  Currently
  None

  
	
  Former
  Webster Office

  	
   

  	
  Day

  	
   

  	
  City of
  Webster

  
	
  South Dakota Subtotal

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NEBRASKA

  	
   

  	
   

  	
   

  	
   

  
	
  Former Propane
  Air Plant Property

  	
   

  	
  Buffalo

  	
   

  	
  Currently
  None

  
	
  Nebraska Subtotal

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total of All Three States

  	
   

  	
   

  	
   

  	
   

  

 

 

Schedule 6.8 to Amended and Restated Credit
Agreement

Investments

 

	
  Investment

  	
   

  	
  Book Value as of

  August 31, 2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  NorthWestern Corporation

  	
   

  	
   

  	
   

  
	
  An Assignment and Assumption Agreement, dated as of August 20, 2002
  among Credit Suisse First Boston, CIBC, Inc. and Barclays Bank PLC as
  assignors (collectively, the “Assignors”) and Borrower as assignee, pursuant
  to which the Borrower purchased the Assignors’ interest in their Credit
  Agreement, dated as of November 30, 2001 among Cornerstone Propane, L.P. and
  the Assignors(1)

  	
   

  	
  $

  	
  20,072,518

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Note Receivable ($300,000 face amount) from Prairie Fire Internet
  Technologies, L.L.C. (originally issued to NorthWestern Services Group, Inc.
  which was consolidated into NorthWestern Corporation in September 2003)

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Promissory Note due December 1, 2005 from
  South Dakota Rural Enterprises, Inc.

  	
   

  	
  $

  	
  100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  North Western Growth Corporation

  	
   

  	
   

  	
   

  
	
  Sioux Empire Housing Equity Fund &
  Dakota Equities L.P. (low income housing investment)

  	
   

  	
  $

  	
  1,535,243

  	
   

  
	
  Blue Stream Series B Preferred Stock (1.79%
  of stock)

  	
   

  	
  $

  	
  0

  	
   

  

 

(1) Gross value of $26,197,508,
offset by $1,024,990 in cash proceeds received, and a $5,100,000 reserve taken
in the fourth quarter of 2002 based on estimated recoverable value.

 

 

 

	
  OTHER
  SECURITIES

  	
   

  	
  # OF SHARES

  	
   

  	
  COST

  	
   

  	
  VALUE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  As of 9/14/03:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  UBS Account No. CP 29119 16 (NorthWestern
  Growth Corporation)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Duke Power Co 6.75% Preferred Series X

  	
   

  	
  119

  	
   

  	
  12,452

  	
   

  	
  12,346

  	
   

  
	
  Duke Power 7.04 Preferred Series Y

  	
   

  	
  260

  	
   

  	
  27,303

  	
   

  	
  26,910

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other investment – Life Insurance

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CSV-Life Insurance-BenRest Plan

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  3,582,774

  	
   

  
	
  CSV-Life Insurance-FPP/SISP

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,769,725

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other investments (NorthWestern
  Corporation)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Restricted investments in Gas Funding Trust

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  3,847,939

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other Investments NPS Account No. 189000
  (NorthWestern Corporation)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Freeman Hospitality Inc.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  20,000

  	
   

  
	
  Kearney Industrial Park Bonds

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  4,000

  	
   

  
	
  Riverside Golf Club – Grand Island

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,000

  	
   

  

 

 

Schedule 6.10 to Amended and Restated Credit
Agreement 

Indebtedness, Mandatory Redeemable Stock and Preferred
Stock

 

Following is a
description of the Indebtedness owing by NorthWestern Corporation setting forth
the outstanding principal amount of such Indebtedness as of the date hereof
(other than in Section D (Guaranteed Indebtedness) and in Section F (Operating
and Capitalized Leases)):

 

A.                                    SECURED
SENIOR DEBT

 

1.                                       General
Mortgage Indenture and Deed of Trust dated August 1, 1993 between The Chase
Manhattan Bank (National Association), as Trustee and NorthWestern Public
Service Company (now known as the Borrower), as Issuer, as amended, pursuant to
which the following have been issued:

 

(a)                                  $60.0
Million of 7.10% New Mortgage Bonds of the Borrower due 2005;

 

(b)                                 $55.0
Million of 7.00% Mortgage Bonds of the Borrower due 2023; and

 

(c)                                  $109.2
Million of New Mortgage Bonds, Credit Agreement (2002) Series, due 2006.

 

2.                                       First
Mortgage and Deed of Trust, dated as of October 1, 1945, by and between The
Montana Power Company (predecessor to Clark Fork and Blackfoot, L.L.C.
(formerly known as NorthWestern Energy, L.L.C. and formerly known as The
Montana Power Company, L.L.C.)), as Issuer, and Guaranty Trust Company of NY
and Arthur E. Burke, as trustees, as amended, with respect to the following
First Mortgage Bonds originally issued by The Montana Power Company pursuant to
which the following have been issued:

 

(a)                                  $0.4
million of 8.25% First Mortgage Bonds of The Montana Power Company due 2007;

 

(b)                                 $1.5
million of 8.95% First Mortgage Bonds of The Montana Power Company due 2022;

 

(c)                                  $13.0
million of 7.25% Secured Medium Term Notes of The Montana Power Company due
2008;

 

(d)                                 $5.4
million of 7.00% First Mortgage Bonds of The Montana Power Company due 2005;

 

(e)                                  $90.2
million of 6.125% First Mortgage Bonds of The Montana Power Company due 2023
were issued to secure the obligations of The Montana Power Company under a Loan
Agreement, dated as of May 1, 1993, between The Montana Power Company and the
City of Forsyth, pursuant to which the City of Forsyth loaned

 

 

an aggregate
amount of $90,205,000 to The Montana Power Company, received from the proceeds
of the City of Forsyth Pollution Control Revenue Bonds Series 1993A, 6.125%
series, due 2023;

 

(f)                                    $80.0
million of 5.90% First Mortgage Bonds of The Montana Power Company due 2023
were issued to secure the obligations of The Montana Power Company under a Loan
Agreement, dated as of December 1, 1993, between The Montana Power Company and
the City of Forsyth, pursuant to which the City of Forsyth loaned an aggregate
amount of $80.0 million to The Montana Power Company, received from the
proceeds of the City of Forsyth Pollution Control Revenue Bonds Series 1993B,
5.90% series, due 2023;

 

(g)                                 $150.0
million of 7.30% First Mortgage Bonds of The Montana Power Company due 2006;
and

 

(h)                                 $277.9
million of New Mortgage Bonds, Credit Agreement (2002) Series, due 2006.

 

3.                                       Loan
Agreement, dated as of June 1, 1993, by and between Grant County and the
Borrower, pursuant to which Grant County loaned an aggregate amount of $6.4
million to the Borrower, received from the proceeds of the 5.90% Grant County
Series 1993A Pollution Control Revenue Bonds, due 2023.

 

4.                                       Loan
Agreement, dated as of June 1, 1993, by and between Grant County and the
Borrower, pursuant to which Grant County loaned an aggregate amount of $3.4
million to the Borrower, received from the proceeds of the 5.90% Grant County
Series 1993B Pollution Control Revenue Bonds, due 2023.

 

5.                                       Loan
Agreement, dated as of June 1, 1993, by and between the City of Salix and the
Borrower, pursuant to which the City of Salix loaned an aggregate amount of
$4.0 million to the Borrower, received from the proceeds of the 5.90% City of
Salix Series 1993 Pollution Control Revenue Bonds, due 2023.

 

6.                                       Sale
Agreement, dated as of June 1, 1993, by and between Mercer County and the
Borrower, pursuant to which Mercer County loaned an aggregate amount of
$7,600,000 to the Borrower, received from the proceeds of the 5.85% Mercer
County Series 1993 Pollution Control Revenue Bonds, due 2023.

 

7.                                       Assumption
of certain obligations of Montana Power, as grantor and servicer of MPC Natural
Gas Funding Trust, issuer of $46.5 million of 6.2% Transition Bonds Due 2012
which are secured by a pledge of certain utility related revenues.

 

8.                                       NorthWestern
Growth Corporation – Sioux Empire Housing Equity Fund Limited Partnership
and/or Dakota Equities Limited – housing loans of $1.1 million due 2007,
secured by a security interest in the limited partner interest.

 

 

9.                                       Assumption
of Federal Lease Finance Agreement between Montana Power Company and Municipal
Leasing Credit Corporation dated as of July 6, 1999 pursuant to which Montana
Power Company granted a first security interest in energy conservation measures
ordered by the USDA Forest Services, Lolo National Forest as permitted by the
Areawide Public Utility Contract No. GS-00P-96-BSD-0012, Delivery Order
No. 43-03R6-8-0071 (the “Equipment”), all Equipment proceeds, Lease
Payments, and/or Buy-out Amounts (currently $50,723.45).

 

 

B.                                    UNSECURED
SENIOR DEBT

 

1.                                       Indenture,
dated as of November 1, 1998, between the Borrower, as Issuer, and The Chase
Manhattan Bank, as Trustee, as amended, pursuant to which the following have
been issued:

 

(a)                                  $105.0
million of 6.95% unsecured Senior Debentures of the Borrower due 2028;

 

(b)                                 $250.0
million of 7.875% unsecured registered Senior Notes of the Borrower due 2007;
and

 

(c)                                  $470.0
million of 8.75% unsecured registered Senior Notes of the Borrower due 2012.

 

2.                                       Indenture,
dated December 1, 1989, between The Montana Power Company, as Issuer, and
Citibank, N.A., as Trustee, relating to the following issuances of The Montana
Power Company’s Unsecured Medium Term Notes:

 

(a)                                  7.875%
series, due 2026 ($20.0 million);

 

(b)                                 7.07%
series, due 2006 ($15.0 million); and

 

(c)                                  7.96%
series, due 2026 ($5.0 million).

 

 

C.                                    SUBORDINATED
DEBT

 

1.                                       $32,500,000
of 8.125% of Subordinated Debt Securities due 2025, issued pursuant to a First
Supplemental Indenture, dated as of August 1, 1995, to the Subordinated Debt
Securities Indenture, dated August 1, 1995, between NorthWestern Public Service
Company (now known as NorthWestern Corporation), as Issuer, and The Chase
Manhattan Bank (National Association), as Trustee.

 

2.                                       $55,000,000
of 7.20% of Junior Subordinated Debt Securities due 2038, issued pursuant to a
Second Supplemental Indenture, dated as of November 18, 1995, to the
Subordinated Debt Securities Indenture, dated August 1, 1995, between
NorthWestern Public Service Company (now known as NorthWestern Corporation), as
Issuer, and The Chase Manhattan Bank (National Association), as Trustee.

 

3.                                       $106,750,000
of 8.25% of Junior Subordinated Debt Securities due 2031, issued pursuant to a
Third Supplemental Indenture, dated as of December 21, 2001, to the
Subordinated Debt Securities Indenture, dated August 1, 1995, between
NorthWestern Public Service Company (now known as NorthWestern Corporation), as
Issuer, and The Chase Manhattan Bank (National Association), as Trustee.

 

4.                                       $111,000,000
of 8.10% of Junior Subordinated Debt Securities due 2032, issued pursuant to a
Fourth Supplemental Indenture, dated as of January 31, 2002, to the
Subordinated Debt Securities Indenture, dated August 1, 1995, between
NorthWestern Public Service Company (now known as NorthWestern Corporation), as
Issuer, and The Chase Manhattan Bank (National Association), as Trustee.

 

5.                                       $65,000,000
of 8.45% of Junior Subordinated Debt Securities of The Montana Power Company
due 2036, issued pursuant to a QUIP Indenture for Unsecured Subordinated Debt
Securities, dated as of November 1, 1996 (as amended), between The Montana
Power Company, as Obligor, and The Bank of New York, as Trustee.

 

 

D.                                    GUARANTEED INDEBTEDNESS

 

1.                                      Unsecured
Subordinated Guarantee Obligations in Respect of Trust Securities

 

(a)                                  Preferred
Securities Guarantee Agreement, dated as of August 1, 1995, between NorthWestern
Public Service Company (now known as NorthWestern Corporation), as Guarantor,
Wilmington Trust Company, as Trustee, and NWPS Capital Financing I, as Issuer,
with respect to the Preferred Capital Securities described in Item E.1 below.

 

(b)                                 Common
Securities Guarantee Agreement, dated as of August 1, 1995, executed by
NorthWestern Public Service Corporation (now known  as NorthWestern Corporation) for the benefit of the holders of
the Common Securities of NWPS Capital Financing I.

 

(c)                                  Preferred
Securities Guarantee Agreement, dated as of November 18, 1998, by and between
the Borrower, as Guarantor, Wilmington Trust Company, as Trustee, and
NorthWestern Capital Financing I, as Issuer, with respect to the Preferred
Capital Securities described in Item E.2 below.

 

(d)                                 Common
Securities Guarantee Agreement, dated as of November 18, 1998, executed by
NorthWestern Public Service Corporation (now known as NorthWestern Corporation)
for the benefit of the holders of the Common Securities of NorthWestern Capital
Financing I.

 

(e)                                  Preferred
Securities Guarantee Agreement, dated as of December 21, 2001, by and between
the Borrower, as Guarantor, Wilmington Trust Company, as Trustee, and
NorthWestern Capital Financing II, as Issuer, with respect to the Preferred
Capital Securities described in Item E.3 below.

 

(f)                                    Common
Securities Guarantee Agreement, dated as of December 21, 2001, executed by the
Borrower for the benefit of the holders of the Common Securities NorthWestern
Capital Financing II.

 

(g)                                 Preferred
Securities Guarantee Agreement, dated as of January 31, 2002, by and between
the Borrower, as Guarantor, Wilmington Trust Company, as Trustee, and
NorthWestern Capital Financing III, as Issuer, with respect to the Preferred
Capital Securities described in Item E.4 below.

 

(h)                                 Common
Securities Guarantee Agreement, dated as of January 31, 2002, executed by the
Borrower for the benefit of the holders of the Common Securities NorthWestern
Capital Financing III.

 

2.                                      Other
Guarantees

 

(a)                                  Contingent
Assignment obligations in respect of the Credit and Security Agreement, dated
as of March 31, 2001 (as amended), by and between Expanets,

 

 

Inc. and Avaya, Inc.  Upon the
occurrence of a default thereunder, Avaya, Inc. shall have the option to
require the Borrower to repay the outstanding balance (which is capped at $27.1
Million).

 

(b)                                 Guarantee
Agreement, dated as of November 1, 1996, between The Montana Power Company
(predecessor to CFB, formerly known as NorthWestern Energy, L.L.C. and formerly
known as The Montana Power, L.L.C.)), as guarantor, and The Bank of New York,
as guarantee trustee, as supplemented by the Side Letter, dated as of February
13, 2002, from CFB (formerly known as NorthWestern Energy, L.L.C.) to The Bank
of New York, and as amended by the Amendment to Guarantee Agreement, dated as
of August 13, 2002, among CFB (formerly known as NorthWestern Energy, L.L.C.),
the Borrower, as additional guarantor, and The Bank of New York, for the
benefit of the holders from time to time of the $65,000,000 aggregate
liquidation amount of the 8.45% Cumulative Quarterly Income Preferred
Securities, Series A, of Montana Power Capital I.

 

(c)                                  Purchase
obligations in respect of (i) the Purchase Agreement, dated as of April 24,
2002, by and between the Borrower and Automotive Rentals, Inc (“ARI”), (ii) the
Purchase Agreement, dated as of June 27, 2002, by and between the Borrower and
ARI and (iii) the Purchase Agreement, dated as of September 23, 2002, by and
between the Borrower and ARI.  Upon the
occurrence of a default, ARI shall have option to require the Borrower to
purchase all leased vehicles (currently $24,159,000).

 

(d)                                 (i)
Guaranty, dated as of May 2003 from NorthWestern Energy Corporation to Tetra
Financial Group U.S. in respect of certain Master Lease Agreement No. TFG/NR
052303 dated May 23, 2003 between Tetra Financial Group, L.L.C. and Nekota
Resources, Inc. and (ii) Guaranty, dated as of July 21, 2003 from Nekota
Resources, Inc. to Northern Border Pipeline Company in respect of  that certain Shippers Service Agreement and
that certain T-1B Service Agreement (as amended and supplemented from time to
time, collectively the “Agreements”) with NorthWestern Energy Corporation, a
South Dakota corporation.

 

 

E.                                    Subordinated
Debt Securities Held by Subsidiary Trusts and Preferred Capital Securities of
Such Trusts

 

1.                                       1,300,000
shares of 8.125% Trust Preferred Capital Securities of NWPS Capital Financing
I, issued pursuant to an Amended and Restated Declaration of Trust of NWPS
Capital Financing I, dated as of August 1, 1995, between NorthWestern Public
Service Company (now known as NorthWestern Corporation), as Trust Sponsor,
Merle D. Lewis, Richard R. Hylland, Wilmington Trust Company, as
Trustees, and the holders from time to time of beneficial interests in the
assets of the Trust.

 

2.                                       2,200,000
shares of 7.20% Trust Preferred Capital Securities of NorthWestern Capital
Financing I, issued pursuant to an Amended and Restated Declaration of Trust of
NorthWestern Capital Financing I, dated as of November 18, 1998, among the
Borrower, as Trust Sponsor, Merle D. Lewis, Richard R. Hylland,
Wilmington Trust Company, as Trustees, and the holders from time to time of
beneficial interests in the assets of the Trust.

 

3.                                       4,270,000
shares of 8.25% Trust Preferred Capital Securities of NorthWestern Capital
Financing II, issued pursuant to an Amended and Restated Declaration of Trust
of NorthWestern Capital Financing II, dated as of December 21, 2001, among the
Borrower, as Trust Sponsor, Merle D. Lewis, Richard R. Hylland, Wilmington
Trust Company, as Trustees, and the holders from time to time of beneficial
interests in the assets of the Trust.

 

4.                                       4,440,000
shares of 8.10% Trust Preferred Capital Securities of NorthWestern Capital
Financing III, issued pursuant to an Amended and Restated Declaration of Trust
of NorthWestern Capital Financing III, dated as of January 31, 2002, among the
Borrower, as Trust Sponsor, Merle D. Lewis, Richard R. Hylland, Wilmington
Trust Company, as Trustees, and the holders from time to time of beneficial
interests in the assets of the Trust.

 

5.                                       2,600,000
shares of 8.45% Trust Preferred Capital Securities of Montana Power Capital I,
issued pursuant to an Amended and Restated Trust Agreement of Montana Power
Capital I, dated as of November 1, 1996, among The Montana Power Company
(predecessor to CFB (formerly known as NorthWestern Energy, L.L.C. and formerly
known as The Montana Power, L.L.C.)), The Bank of New York (NY), as Property
Trustee, The Bank of New York (DE), as Delaware Trustee and Ellen M. Senechal,
Jerrold P. Pederson and Pamela K. Merrell, as Administrative Trustees.

 

 

F.                                      Operating
and Capitalized Leases

 

1.                                       Operating Lease

 

(a)                                  Indebtedness
outstanding in respect of the Sale and Leaseback Transaction evidenced by (i)
that certain Colstrip 4 Participation Agreement, dated December 16, 1985, by
and among United States Trust Company of New York and Louis P. Young, as Owner
Trustee, SGE (New York) Associates, as Owner Participant, Certain Institutions,
as Loan Participants, NorthWestern Corporation (successor to The Montana Power
Company), as Lessee, and Bankers Trust Company, as Indenture Trustee and Lease
Agreement, dated as of December 16, 1985, between United States Trust Company
of New York and Louis P. Young, as Lessor, and NorthWestern Corporation
(successor to The Montana Power Company), as Lessee and (ii) that certain
Participation Agreement, dated December 16, 1985 among United States Trust
Company of New York and Louis P. Young, as Owner Trustee, Burnham Leasing
Corporation, as Owner Participant, Certain Institutions, as Loan
Participations, NorthWestern Corporation (successor to The Montana Power
Company), as Lessee and Bankers Trust Company, as Indenture Trustee.  The annual lease payments are approximately
$32.0 million.

 

2.                                       Capitalized Lease Obligations (Amounts as of September
30, 2003)

 

	
  (a)

  	
  Cisco
  equipment lease

  	
   

  	
  $

  	
  179,326

  	
   

  
	
  (b)

  	
  Cisco
  software lease

  	
   

  	
  $

  	
  32,236

  	
   

  
	
  (c)

  	
  Dell
  Equipment lease

  	
   

  	
  $

  	
  47,991

  	
   

  
	
  (d)

  	
  IBM AS 400
  lease

  	
   

  	
  $

  	
  1,347,519

  	
   

  
	
  (e)

  	
  SAP servers
  lease

  	
   

  	
  $

  	
  144,469

  	
   

  
	
  (f)

  	
  Fleet lease
  referenced in Item D.2(c) above

  	
   

  	
  $

  	
  4,686,822

  	
   

  
	
  (g)

  	
  Airplane
  sale/leaseback

  	
   

  	
  $

  	
  3,245,170

  	
   

  
	
  (h)

  	
  Tetra
  financing lease referenced in Item D.2(d) above

  	
   

  	
  $

  	
  1,292,490

  	
   

  
	
  (i)

  	
  Tetra
  financing lease referenced in Item D.2(d) above

  	
   

  	
  $

  	
  2,178,121

  	
   

  
	
   

  	
   

  	
   

  	
  $

  	
  13,154,144

  	
   

  

 

 

G.
                                 Letters
of Credit

 

	
  Loan Party

  	
   

  	
  Applicant

  	
   

  	
  Name of Beneficiary

  	
   

  	
  Purpose of LOC

  	
   

  	
  Expiration

  Date

  	
   

  	
  LOC

  Amount

  	
   

  
	
  NorthWestern Growth Corporation

  	
   

  	
  Blue Dot

  	
   

  	
  Zurich

  	
   

  	
  Insurance
  Program Collateral for policy period February 2000/2001

  	
   

  	
  01/31/04

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  NorthWestern Growth Corporation

  	
   

  	
  NorthWestern
  Growth Corp

  	
   

  	
  United
  States Fidelity & Guaranty Co.

  	
   

  	
  Insurance
  Program Collateral for Workers Compensation policies prior to 2001

  	
   

  	
  05/21/04

  	
   

  	
  $

  	
  250,000

  	
   

  
	
  Borrower

  	
   

  	
  Borrower

  	
   

  	
  Insurance Company
  of North America, et al.

  	
   

  	
  Held as
  general surety program collateral for Expanets bid and performance bonds
  issued by Ace/Westchester

  	
   

  	
  03/06/04

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
  Borrower

  	
   

  	
  Borrower

  	
   

  	
  Westchester
  Fire Insurance Company

  	
   

  	
  Held as
  general surety program collateral for Blue Dot bid and performance bonds
  issued by Ace/Westchester

  	
   

  	
  03/21/04

  	
   

  	
  $

  	
  4,000,000

  	
   

  
	
  Borrower

  	
   

  	
  Borrower

  	
   

  	
  State of
  Montana

  	
   

  	
  Secures the
  Self-Insured Workers Compensation program in the State of Montana

  	
   

  	
  08/05/04

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
  Borrower

  	
   

  	
  Borrower

  	
   

  	
  Northern
  Border Pipeline Company

  	
   

  	
  Two month
  pipeline capacity payment

  	
   

  	
  08/30/04

  	
   

  	
  $

  	
  285,000

  	
   

  
	
  Borrower

  	
   

  	
  NorthWestern
  Services Corporation

  	
   

  	
  Northern
  Border Pipeline Company

  	
   

  	
  Prefunding
  of three month capacity for pipeline construction project

  	
   

  	
  09/04/04

  	
   

  	
  $

  	
  500,000

  	
   

  

 

 

EXHIBIT A-l

TO CREDIT AGREEMENT

 

FORM OF TERM NOTE

 

	
  $

  	
  New York, New York

  
	
   

  	
  [           ],
  200 

  

 

FOR VALUE RECEIVED, the undersigned,
NORTHWESTERN CORPORATION, a Delaware corporation, with its principal place of
business at 125 South Dakota Avenue, Suite 1100, Sioux Falls, South Dakota
57104-6403 (the “Borrower”), hereby unconditionally promises to pay to
the order of
                     ,
with a place of business at                                      (the
“Lender”), by wire transfer to the account of Credit Suisse First
Boston, as Administrative Agent (as defined in the Credit Agreement referred to
below), with [ACCOUNT BANK], ABA NO. [•], Account No. [•], Attn: Agency, Reference: [•], or at such other place or places and to
such account or accounts as the Administrative Agent, may direct from time to
time by notice to the Borrower in accordance with the Credit Agreement (as
hereinafter defined), in lawful money of the United States of America and in
immediately available funds, the principal amount of the lesser of (a)
                                    DOLLARS
($
                        )
and (b) the aggregate unpaid principal amount of all Loans (as defined in the
Credit Agreement) made by the Lender to the undersigned pursuant to the Credit
Agreement, payable, subject to the fourth paragraph hereof, on or before the
Maturity Date (as defined in the Credit Agreement).

 

The Borrower hereby unconditionally further agrees to pay interest in
like money on the unpaid principal amount hereof from time to time outstanding
from the date hereof, and, to the extent permitted by applicable law, on any
unpaid interest payable hereon, from the date such interest is due hereunder,
at the applicable rates per annum and on the dates specified in Section 2.9 of
the Credit Agreement until such principal amount and interest, as applicable,
is paid in full (both before and after judgment). The Borrower agrees to pay
costs and expenses, including reasonable attorneys’ fees, incurred in
connection with the interpretation or enforcement of this Term Note in
accordance with the Credit Agreement.

 

This Term Note is one of the Term Notes referred to in the Credit
Agreement, dated as of December 17, 2002 (as amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”; terms
defined therein being used herein as defined therein), among the Borrower, the
several banks and other financial institutions parties thereto (including the
Lender), and the Administrative Agent, and is entitled to the benefits thereof
and of the other Loan Documents referred to therein, and is subject to optional
and mandatory prepayment in whole or in part as provided therein. This Term
Note is secured as provided in the Loan Documents. Reference is hereby made to
the Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security, the
terms and conditions upon which the security interests were granted and the
rights of the holder of this Term Note in respect thereof.

 

A-1-1

 

Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts remaining unpaid on this Term
Note shall become, or may be declared to be, immediately due and payable all as
provided therein.

 

The Lender may proceed against the Borrower in such manner as it deems
desirable in accordance with the Credit Agreement. None of the rights or
remedies of the Lender hereunder are to be deemed waived or affected by failure
or delay on the part of the Lender to exercise the same. All remedies conferred
upon the Lender by this Term Note or any other instrument or agreement or by
applicable law, shall be cumulative and none is exclusive, and such remedies
may be exercised concurrently or consecutively at the Lender’s option.

 

All parties now and hereafter liable with respect to this Term Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand of payment, notice of protest, notice of dishonor and
all other notices of any kind.

 

THIS TERM NOTE SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS
THEREOF (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE
OF NEW YORK).

 

 

	
   

  	
  NORTHWESTERN CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  
	
   

  	
   

  	
  Title:

  

 

A-1-2

 

EXHIBIT A-2

TO CREDIT AGREEMENT

 

FORM OF OFL NOTE

 

	
  $

  	
  New York, New York

  
	
   

  	
  [           ],
  200 

  

 

FOR VALUE RECEIVED, the undersigned,
NORTHWESTERN CORPORATION, a Delaware corporation, with its principal place of
business at 125 South Dakota Avenue, Suite 1100, Sioux Falls, South Dakota
57104-6403 (the “Borrower”), hereby unconditionally promises to pay to
the order of
                          , with
a place of business at                                (the
“Lender”), by wire transfer to the account of Credit Suisse First
Boston, as Administrative Agent (as defined in the Credit Agreement referred to
below), with [ACCOUNT BANK], ABA NO. [•], Account No. [•], Attn: Agency, Reference: [•], or at such other place or places and to
such account or accounts as the Administrative Agent, may direct from time to
time by notice to the Borrower in accordance with the Credit Agreement (as
hereinafter defined), in lawful money of the United States of America and in
immediately available funds, the principal amount of the lesser of (a)
                                  DOLLARS
($                            )
and (b) the aggregate unpaid principal amount of all Loans (as defined in the
Credit Agreement) made by the Lender to the undersigned pursuant to the Credit
Agreement, payable, subject to the fourth paragraph hereof, on or before the
Maturity Date (as defined in the Credit Agreement).

 

The Borrower hereby unconditionally further agrees to pay interest in
like money on the unpaid principal amount hereof from time to time outstanding
from the date hereof, and, to the extent permitted by applicable law, on any
unpaid interest payable hereon, from the date such interest is due hereunder,
at the applicable rates per annum and on the dates specified in Section 2.9 of
the Credit Agreement until such principal amount and interest, as applicable,
is paid in full (both before and after judgment). The Borrower agrees to pay
costs and expenses, including reasonable attorneys’ fees, incurred in
connection with the interpretation or enforcement of this Term Note in
accordance with the Credit Agreement.

 

This Term Note is one of the Term Notes referred to in the Credit
Agreement, dated as of December 17, 2002 (as amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”; terms
defined therein being used herein as defined therein), among the Borrower, the
several banks and other financial institutions parties thereto (including the
Lender), and the Administrative Agent, and is entitled to the benefits thereof
and of the other Loan Documents referred to therein, and is subject to optional
and mandatory prepayment in whole or in part as provided therein. This Term
Note is secured as provided in the Loan Documents. Reference is hereby made to
the Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the

 

A-2-1

 

security, the terms and conditions upon which the security interests
were granted and the rights of the holder of this Term Note in respect thereof.

 

Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts remaining unpaid on this Term
Note shall become, or may be declared to be, immediately due and payable all as
provided therein.

 

The Lender may proceed against the Borrower in such manner as it deems
desirable in accordance with the Credit Agreement. None of the rights or
remedies of the Lender hereunder are to be deemed waived or affected by failure
or delay on the part of the Lender to exercise the same. All remedies conferred
upon the Lender by this Term Note or any other instrument or agreement or by
applicable law, shall be cumulative and none is exclusive, and such remedies
may be exercised concurrently or consecutively at the Lender’s option.

 

All parties now and hereafter liable with respect to this Term Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand of payment, notice of protest, notice of dishonor and
all other notices of any kind.

 

This Term Note is a QFL Note under the Credit Agreement, and as such,
ownership of the obligation represented by this Term Note may be transferred
only in accordance with Section 2.15 of the Credit Agreement.

 

THIS TERM NOTE SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS
THEREOF (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK).

 

	
   

  	
  NORTHWESTERN CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  
	
   

  	
   

  	
  Title:

  

 

A-2-2

 

EXHIBIT B-2

TO CREDIT AGREEMENT

 

FORM OF NOTICE OF INTEREST RATE CONVERSION

 

Date:

 

Credit Suisse First Boston,

    as Administrative Agent

Eleven Madison Street

New York, New York 10010-3629

Attention: Agency Department Manager

 

 

Re:                             Credit Agreement dated as of December 17, 2002 among Northwestern
Corporation, a Delaware corporation (the “Borrower”), the Lenders from
time to time party thereto, and the Administrative Agent (as amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”).

 

Ladies and Gentlemen:

 

The Borrower hereby gives notice pursuant to Section 2.7 of the Credit
Agreement that it requests a continuation or conversion of Loans outstanding
under the Credit Agreement, and in connection therewith sets forth below the
terms on which such continuation or conversion is requested to be made;
capitalized terms used and not defined herein shall have the meanings provided
in the Credit Agreement:

 

The Borrower hereby requests that
on                                 ,
            :(1)

 

(1)                                    $
                            of the currently outstanding principal
amount of the Loans currently being maintained as [Alternate Base Rate Loans]
[[one] [two] [three] [six] month Eurodollar Loans](2),

 

(2)                                be [converted into] [continued as],

 

(3)                                    [Eurodollar Loans having an Interest Period
of [one] [two] [three] [six] months, which Interest Period will expire on
                   ,         ](3)
[Alternate Base Rate Loans].

 

(1) Conversion of Eurodollar Loans may be made only on the last day of
the applicable Interest Period. A Notice of Conversion must be received by the
Administrative Agent prior to 10:00 a.m. (New York City time), (x) with respect
to Alternate Base Rate Loans, at least three Business Days, and (y) with
respect to Eurodollar Loans, at least two Business Days, prior to the date of
Borrower’s election.

(2) Select appropriate option.

(3) Insert appropriate interest rate option
and, if applicable, number of months (for Eurodollar Loans).

 

B-2-1

 

[In the event that such Loans are to be converted into, or continued
as, Eurodollar Loans, the Borrower hereby certifies in accordance with Section
2.7 of the Credit Agreement that no Default or Event of Default has occurred
and is continuing as of the date of this Notice of Interest Rate Conversion.]

 

IN WITNESS WHEREOF, the Borrower has caused this Notice of Interest
Rate Conversion to be executed and delivered, and the certification contained
herein to be made, by an authorized officer this
          day
of                   ,
             .

 

 

	
   

  	
  NORTHWESTERN CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  
	
   

  	
   

  	
  Title:

  

 

B-2-2

 

EXHIBIT C

TO CREDIT AGREEMENT

 

FORM OF CLOSING CERTIFICATE

 

NORTHWESTERN
CORPORATION

 

Pursuant to Section 4.1(e) of the Credit
Agreement dated as of December 17, 2002 among Northwestern Corporation, a
Delaware corporation (the “Borrower”), the several banks and other
financial institutions from time to time parties thereto (the “Lenders”),
and Credit Suisse First Boston, as administrative agent for the Lenders (the “Credit
Agreement”; terms defined therein shall have their defined meanings when
used herein), the undersigned hereby certifies that [he or she] is the
                   
of the Borrower and in such capacity further certifies as follows:

 

1.                                   The representations and warranties of the
Borrower set forth in the Credit Agreement and each of the other Loan Documents
to which the Borrower is a party, are true and correct in all material respects
on and as of the date hereof.

 

2                                        The Borrower has received all documents and
instruments, including all consents, authorizations and filings, required or
advisable under any Requirement of Law or Contractual Obligation of the
Borrower in connection with the execution, delivery, performance, validity and
enforceability of the Credit Agreement, the Notes and the other Loan Documents
except as expressly set forth in each document. I have examined Schedule
3.4b to the Credit Agreement and attached hereto are copies of all consents,
authorizations and filings referred to in Schedule 3.4b of the Credit
Agreement, which consents, authorizations and filings are in full force and
effect as of the date hereof.

 

3.                                     No Default or Event of Default has occurred
and is continuing as of the date hereof or after giving effect to the making of
the Loans on the date hereof.

 

4.                                     There are no liquidation or dissolution
proceedings pending or to my knowledge threatened against the Borrower, nor has
any other event occurred affecting or threatening the existence of the
Borrower.

 

C-1

 

IN
WITNESS WHEREOF, the undersigned has hereunto set his name.

 

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: [•], 2002

  	
   

  	
   

  

 

C-2

 

EXHIBIT D

TO CREDIT AGREEMENT

 

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

 

This Assignment and Assumption Agreement (the “Assignment”) is
dated as of the Effective Date set forth below and is entered into by and
between [Insert name of Assignor]
(the “Assignor”) and [Insert name of
Assignee] (the “Assignee”). Capitalized terms used but not
defined herein shall have the meanings given to them in the Credit Agreement
identified below (as amended, the “Credit Agreement”), receipt of a copy
of which is hereby acknowledged by the Assignee. The Standard Terms and
Conditions set forth in Annex 1 attached hereto are hereby agreed to and
incorporated herein by reference and made a part of this Assignment as if set
forth herein in full.

 

For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard Terms
and Conditions and the Credit Agreement, as of the Effective Date inserted by
the Administrative Agent as contemplated below, the interest in and to all of
the Assignor’s rights and obligations under the Credit Agreement and any other
documents or instruments delivered pursuant thereto that represents the amount
and percentage interest identified below of all of the Assignor’s outstanding
rights and obligations under the respective facilities identified below
(including, to the extent included in any such
facilities,[                ])
(the “Assigned Interest”).  Such
sale and assignment is without recourse to the Assignor and, except as
expressly provided in this Assignment, without representation or warranty by
the Assignor.

 

	
  1.

  	
  Assignor:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Assignee:

  	
   

  	
   

  	
  [and is an Affiliate/Approved
  Fund(1)]

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Borrower:

  	
   

  	
  NorthWestern Corporation, a
  Delaware corporation.

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Administrative Agent:

  	
   

  	
  Credit Suisse First Boston, as
  the administrative agent under the Credit Agreement

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Credit Agreement:

  	
   

  	
  Credit Agreement, dated as of
  December 17, 2002 (as amended, restated, supplemented or otherwise modified
  from time to time, the “Credit Agreement”; terms defined therein being
  used herein as defined therein), among the Borrower, the several banks and
  other financial institutions parties thereto (including the Lender), and the
  Administrative Agent

  

 

(1)  Select
as applicable.

 

D-1

 

6.                              Assigned Interest: 

 

	
  Aggregate

  Amount of

  Commitment/Loans

  for all Lenders

  	
   

  	
  Amount of

  Commitment/Loans

  Assigned

  	
   

  	
  Percentage

  Assigned of

  Commitment/Loans(2)

  	
   

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  

 

[Name of Assignor]

 

	
  Revised Commitment amount:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Revised Commitment Percentage:

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Revised Loan amount:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fees Assigned (if any):

  	
   

  	
  $

  	
   

  	
   

  

 

[Name of Assignee]

 

	
  New Commitment amount:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  New Commitment Percentage:

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  New Loan amount:

  	
   

  	
  $

  	
   

  	
   

  

 

Address for Notices for Assignee:

 

	
  [Address]

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  
	
  Telephone:

  	
   

  	
   

  
	
  Telecopy:

  	
   

  	
   

  
	
  Telephone

  	
   

  	
   

  
	
  Confirmation:

  	
   

  	
   

  
							

 

 

Eurodollar Lending Office:

 

 

 

(2)  Set forth, to at least 9 decimals, as a percentage of
the Commitment/Loans of all Lenders thereunder.

 

D-2

 

Domestic
Lending Office:

 

 

 

Effective
Date: 
                                ,
20       [TO BE INSERTED BY ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]

 

The terms set forth in this Assignment are hereby agreed to:

 

	
   

  	
  ASSIGNOR

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  

 

D-3

 

	
  Consented to and Accepted:

  
	
   

  
	
  CREDIT SUISSE FIRST BOSTON, as

  Administrative Agent

  
	
   

  
	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  
	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

D-4

 

ANNEX 1

 

NORTHWESTERN CORPORATION CREDIT AGREEMENT

DATED AS OF DECEMBER 17, 2002

 

STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT

AND ASSUMPTION AGREEMENT

 

1. Representations and Warranties.

 

1.1. Assignor. The Assignor (a) represents and warrants that (i)
it is the legal and beneficial owner of the Assigned Interest, (ii) the
Assigned Interest is free and clear of any lien, encumbrance or other adverse
claim and (iii) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with
respect to (i) any statements, warranties or representations made in or in
connection with any Credit Document, (ii) the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement or
any other instrument or document delivered pursuant thereto, other than this
Assignment (herein collectively the “Credit Documents”), or any
collateral thereunder, (iii) the financial condition of the Borrower, any of
its Subsidiaries or Affiliates or any other Person obligated in respect of any
Credit Document or (iv) the performance or observance by the Borrower, any of
its Subsidiaries or Affiliates or any other Person of any of their respective
obligations under any Credit Document.

 

1.2. Assignee. The Assignee (a) represents and warrants that (i)
it has full power and authority, and has taken all action necessary, to execute
and deliver this Assignment and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it meets all
requirements of an Eligible Assignee under the Credit Agreement, (iii) from and
after the Effective Date, it shall be bound by the provisions of the Credit
Agreement and, to the extent of the Assigned Interest, shall have the
obligations of a Lender thereunder, (iv) it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 3.1 thereof, as applicable, and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and to purchase the Assigned
Interest on the basis of which it has made such analysis and decision, and (v)
if it is a Foreign Lender, attached to the Assignment is any documentation
required to be delivered by it pursuant to the terms of the Credit Agreement,
duly completed and executed by the Assignee; and (b) agrees that (i) it will,
independently and without reliance on the Administrative Agent, the Assignor or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Documents, and (ii) it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Documents are required to be performed by it as a Lender.

 

2. Payments. From and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignor for amounts which have accrued to but excluding the

 

D-5

 

Effective
Date and to the Assignee for amounts which have accrued from and after the
Effective Date.

 

3. General Provisions. This Assignment shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and assigns. This Assignment may be executed in any number of counterparts,
which together shall constitute one instrument. Delivery of an executed
counterpart of a signature page of this Assignment by telecopy shall be
effective as delivery of a manually executed counterpart of this Assignment.
This Assignment shall be governed by, and construed in accordance with, the law
of the State of New York.

 

D-6Exhibit
10.3(e)

 

ASSET PURCHASE AND SALE
AGREEMENT

 

 

dated as of

 

October 29, 2003,

 

 

among

 

 

EXPANETS, INC.,

 

 

NORTHWESTERN CORPORATION,

 

 

NORTHWESTERN GROWTH
CORPORATION,

 

 

NORTHWESTERN CAPITAL
CORPORATION,

 

 

and

 

 

AVAYA,
INC.

 

 

Table of Contents

 

	
  ARTICLE I

  	
   

  
	
   

  	
   

  
	
  Defined Terms

  	
   

  
	
   

  	
   

  
	
  Section 1.01.  Definitions

  	
   

  
	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  
	
  The Transaction

  	
   

  
	
   

  	
   

  
	
  Section 2.01.  Purchase and Sale of the Purchased Assets

  	
   

  
	
  Section 2.02.  Excluded Assets

  	
   

  
	
  Section 2.03.  Assumption of Assumed Liabilities

  	
   

  
	
  Section 2.04.  Excluded Liabilities

  	
   

  
	
  Section 2.05.  Employees

  	
   

  
	
  Section 2.06.  Benefit Plans

  	
   

  
	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
   

  	
   

  
	
  Consideration; Adjustments

  	
   

  
	
   

  	
   

  
	
  Section 3.01.  Consideration.

  	
   

  
	
  Section 3.02.  Calculation of the Initial Cash Payment Amount

  	
   

  
	
  Section 3.03.  Post-Closing Adjustment to Purchase Price

  	
   

  
	
  Section 3.04.  Allocation of Purchase Price for Tax Purposes

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
   

  	
   

  
	
  The Closing;
  Conditions of Closing

  	
   

  
	
   

  	
   

  
	
  Section 4.01.  The Closing

  	
   

  
	
  Section 4.02.  Conditions Precedent to the Obligations of the Shareholders and
  the Company

  	
   

  
	
  Section 4.03.  Conditions Precedent to the Obligations of the Purchaser

  	
   

  
	
  Section 4.04.  Efforts to Close

  	
   

  
	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
   

  	
   

  
	
  Representations
  and Warranties of the Company

  	
   

  
	
   

  	
   

  
	
  Section 5.01.  Existence and Power

  	
   

  
	
  Section 5.02.  Authorization; Binding Effect

  	
   

  
	
  Section 5.03.  Contravention

  	
   

  
	
  Section 5.04.  Consents

  	
   

  

 

i

 

	
  Section 5.05.  Capitalization

  	
   

  
	
  Section 5.06.  Subsidiaries and Other Securities

  	
   

  
	
  Section 5.07.  Financial Information

  	
   

  
	
  Section 5.08.  Taxes

  	
   

  
	
  Section 5.09.  Litigation

  	
   

  
	
  Section 5.10.  Permits; Compliance with Laws

  	
   

  
	
  Section 5.11.  Absence of Certain Changes or Events

  	
   

  
	
  Section 5.12.  Assets

  	
   

  
	
  Section 5.13.  Real Property and Leaseholds

  	
   

  
	
  Section 5.14.  Equipment, Fixtures and Inventory

  	
   

  
	
  Section 5.15.  Material Contracts

  	
   

  
	
  Section 5.16.  Intellectual Property

  	
   

  
	
  Section 5.17.  Insurance

  	
   

  
	
  Section 5.18.  Books and Records; Company Names; Bank Accounts; Officers and
  Directors

  	
   

  
	
  Section 5.19.  Customers and Suppliers

  	
   

  
	
  Section 5.20.  Environmental Matters

  	
   

  
	
  Section 5.21.  Employees;  ERISA

  	
   

  
	
  Section 5.22.  Certain Business Relationships with the Company or its
  Subsidiaries

  	
   

  
	
  Section 5.23.  Warranties

  	
   

  
	
  Section 5.24.  Brokers, Finders

  	
   

  
	
  Section 5.25.  Solvency of the Company

  	
   

  
	
  Section 5.26.  Misstatements

  	
   

  
	
  Section 5.27.  Full Disclosure

  	
   

  
	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
   

  	
   

  
	
  Representations
  and Warranties of the Shareholders

  	
   

  
	
   

  	
   

  
	
  Section 6.01.  Existence and Power

  	
   

  
	
  Section 6.02.  Authorization; Binding Effect

  	
   

  
	
  Section 6.03.  Contravention

  	
   

  
	
  Section 6.04.  Consents

  	
   

  
	
  Section
  6.05.  Litigation

  	
   

  
	
  Section 6.06.  Title to Securities

  	
   

  
	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
   

  	
   

  
	
  Representations
  and Warranties of the Purchaser

  	
   

  
	
   

  	
   

  
	
  Section 7.01.  Existence and Power

  	
   

  
	
  Section 7.02.  Authorization; Binding Effect

  	
   

  
	
  Section 7.03.  Contravention

  	
   

  
	
  Section 7.04.  Consents

  	
   

  
	
  Section 7.05.  Litigation

  	
   

  
	
  Section 7.06.  Financing

  	
   

  
	
  Section 7.07.  No Other Representations or Warranties

  	
   

  

 

ii

 

	
  ARTICLE VIII

  	
   

  
	
   

  	
   

  
	
  Pre-Closing
  Covenants of the Shareholders, the Company and the Purchaser

  	
   

  
	
   

  	
   

  
	
  Section 8.01.  Conduct of Business Pending Closing

  	
   

  
	
  Section 8.02.  Access to Information; Cooperation

  	
   

  
	
  Section 8.03.  Disclosure Schedules

  	
   

  
	
  Section 8.04.  Reporting Requirements

  	
   

  
	
  Section 8.05.  Resignations

  	
   

  
	
  Section 8.06.  Certain Agreements

  	
   

  
	
   

  	
   

  
	
  ARTICLE IX

  	
   

  
	
   

  	
   

  
	
  Covenants
  of the Shareholders, the Company and the Purchaser

  	
   

  
	
   

  	
   

  
	
  Section 9.01.  Public Announcements; Confidentiality

  	
   

  
	
  Section 9.02.  Certain Tax Disclosures

  	
   

  
	
  Section 9.03.  Non-Competition

  	
   

  
	
  Section 9.04.  Reserved

  	
   

  
	
  Section 9.05.  Release

  	
   

  
	
  Section 9.06.  Use of Proceeds

  	
   

  
	
  Section 9.07.  Certain Leases

  	
   

  
	
  Section 9.08.  Bankruptcy Proceedings

  	
   

  
	
  Section 9.09.  Financial Statements

  	
   

  
	
   

  	
   

  
	
  ARTICLE X

  	
   

  
	
   

  	
   

  
	
  Termination

  	
   

  
	
   

  	
   

  
	
  Section 10.01.  Termination

  	
   

  
	
  Section 10.02.  Effect of Termination

  	
   

  
	
  Section 10.03.  Fees and Expenses

  	
   

  
	
   

  	
   

  
	
  ARTICLE XI

  	
   

  
	
   

  	
   

  
	
  Indemnification

  	
   

  
	
   

  	
   

  
	
  Section 11.01.  Indemnification

  	
   

  
	
  Section 11.02.  Notice and Opportunity to Defend

  	
   

  
	
  Section 11.03.  Survival of Indemnification

  	
   

  
	
  Section 11.04.  Threshold; Limitation on Liability

  	
   

  
	
  Section 11.05.  Fraud Exception

  	
   

  
	
  Section 11.06.  Set-Off

  	
   

  
	
  Section 11.07.  Escrow

  	
   

  
	
   

  	
   

  
	
  ARTICLE XII

  	
   

  

 

iii

 

	
  Miscellaneous

  	
   

  
	
   

  	
   

  
	
  Section 12.01.  Notices

  	
   

  
	
  Section 12.02.  Counterparts

  	
   

  
	
  Section 12.03.  Amendment of Agreement

  	
   

  
	
  Section 12.04.  Successors and Assigns; Assignability

  	
   

  
	
  Section 12.05.  Governing Law

  	
   

  
	
  Section 12.06.  Integration

  	
   

  
	
  Section 12.07.  Severability

  	
   

  
	
  Section 12.08.  Further Assurances

  	
   

  
	
  Section 12.09.  No Third-Party Rights

  	
   

  
	
  Section 12.10.  Enforcement

  	
   

  
	
  Section 12.11.  Submission to Jurisdiction;

  	
   

  
	
  Section 12.12.  Waiver of Jury Trial

  	
   

  
	
  Section 12.13.  No Waiver; Remedies

  	
   

  
	
  Section 12.14.  Ambiguities

  	
   

  
	
  Section 12.15.  Incorporation of Schedules and Exhibits

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedules

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 2.01(a)(i)

  	
  Company Real Property

  	
   

  
	
  Schedule 2.01(a)(ii)

  	
  Company Leaseholds

  	
   

  
	
  Schedule 2.01(b)(i)

  	
  Equipment

  	
   

  
	
  Schedule 2.01(b)(ii)

  	
  Fixtures

  	
   

  
	
  Schedule 2.01(b)(iii)

  	
  Inventory

  	
   

  
	
  Schedule 2.01(c)

  	
  Assigned Agreements

  	
   

  
	
  Schedule 2.01(f)

  	
  Securities

  	
   

  
	
  Schedule 2.01(g)

  	
  Intellectual Property

  	
   

  
	
  Schedule 2.01(h)

  	
  Benefit Plans

  	
   

  
	
  Schedule 2.03(a)(iv)

  	
  Capitalized Leases

  	
   

  
	
  Schedule 2.05(a)

  	
  Employment Offer Persons

  	
   

  
	
  Schedule 2.05(c)

  	
  Certain Other Employees

  	
   

  
	
  Schedule 3.04

  	
  Allocation of Purchase Price

  	
   

  
	
  Schedule 4.02(i)

  	
  Certain Collateral

  	
   

  
	
  Schedule 4.03(i)(i)

  	
  Employment Agreement Persons

  	
   

  
	
  Schedule 4.03(i)(ii)

  	
  Non-Competition Agreement
  Persons

  	
   

  
	
  Schedule 5.04

  	
  Company Consents

  	
   

  
	
  Schedule 5.05(a)

  	
  Capitalization

  	
   

  
	
  Schedule 5.05(b)

  	
  Rights, Options and Warrants

  	
   

  
	
  Schedule 5.05(c)

  	
  Shareholder Agreements

  	
   

  
	
  Schedule 5.06(a)

  	
  Subsidiaries

  	
   

  
	
  Schedule 5.07(a)

  	
  Balance Sheets

  	
   

  
	
  Schedule 5.07(b)

  	
  Other Financial Statements

  	
   

  
	
  Schedule 5.07(e)

  	
  Guarantees

  	
   

  
	
  Schedule 5.07(f)

  	
  Certain Accounts Payable and
  Accounts Receivable

  	
   

  
	
  Schedule 5.07(g)

  	
  Certain Accounting Changes

  	
   

  
	
  Schedule 5.07(h)

  	
  Non-Recurring Items

  	
   

  

 

iv

 

	
  Schedule 5.08(c)

  	
  Audits

  	
   

  
	
  Schedule 5.08(f)

  	
  Tax Liens

  	
   

  
	
  Schedule 5.09

  	
  Litigation

  	
   

  
	
  Schedule 5.10(a)

  	
  Required Permits

  	
   

  
	
  Schedule 5.10(c)

  	
  Certain Permit Notices

  	
   

  
	
  Schedule 5.11

  	
  Absence of Certain Changes or
  Events

  	
   

  
	
  Schedule 5.13(b)

  	
  Certain Real Property Liens

  	
   

  
	
  Schedule 5.13(d)

  	
  Condemnation or Eminent Domain

  	
   

  
	
  Schedule 5.13(e)

  	
  Company Leases

  	
   

  
	
  Schedule 5.15(a)

  	
  Material Contracts

  	
   

  
	
  Schedule 5.15(d)

  	
  Liens

  	
   

  
	
  Schedule 5.15(e)

  	
  Debt

  	
   

  
	
  Schedule 5.15(f)

  	
  Certain Maintenance Contracts

  	
   

  
	
  Schedule 5.16(d)

  	
  Certain Intellectual Property
  Matters

  	
   

  
	
  Schedule 5.17

  	
  Insurance

  	
   

  
	
  Schedule 5.18(a)

  	
  Certain Books and Records

  	
   

  
	
  Schedule 5.18(b)

  	
  Chief Executive Office

  	
   

  
	
  Schedule 5.18(c)

  	
  Bank Accounts

  	
   

  
	
  Schedule 5.18(d)

  	
  Officers and Directors

  	
   

  
	
  Schedule 5.19(a)

  	
  Customers

  	
   

  
	
  Schedule 5.19(b)

  	
  Suppliers

  	
   

  
	
  Schedule 5.20

  	
  Environmental Matters

  	
   

  
	
  Schedule 5.21(a)

  	
  Employees

  	
   

  
	
  Schedule 5.21(b)

  	
  Employment Agreements

  	
   

  
	
  Schedule 5.21(c)

  	
  Employee Benefit Plans

  	
   

  
	
  Schedule 5.21(e)

  	
  Certain Labor Matters

  	
   

  
	
  Schedule 5.21(g)

  	
  Transaction Entitlements

  	
   

  
	
  Schedule 5.22(a)

  	
  Certain Transactions

  	
   

  
	
  Schedule 5.22(b)

  	
  Related Party Transactions

  	
   

  
	
  Schedule 5.22(c)

  	
  Transactions with the
  Shareholders

  	
   

  
	
  Schedule 5.23

  	
  Warranties

  	
   

  
	
  Schedule 6.04

  	
  Seller Consents

  	
   

  
	
  Schedule 8.06(c)

  	
  Vendor Deposits

  	
   

  
	
  Schedule 9.07

  	
  Certain Leases

  	
   

  
	
  Schedule 11.07(c)

  	
  Specified Liabilities

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibits

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit 3.01

  	
  Form of Purchaser Note

  	
   

  

 

v

 

ASSET PURCHASE AND SALE
AGREEMENT (this “Agreement”), dated as of October 29, 2003 among (a)
EXPANETS, INC., a Delaware corporation (the “Company”), (b) NORTHWESTERN
CORPORATION (the “Parent”), (c) NORTHWESTERN GROWTH CORPORATION (“NGC”),
(d) NORTHWESTERN CAPITAL CORPORATION (“NCC”, and collectively with the
Parent and NGC, each a “Shareholder”, and collectively, the “Shareholders”),
and (e) AVAYA INC., a Delaware corporation (the “Purchaser”).

 

RECITALS

 

A.  The Parent owns all of the outstanding
capital stock of NGC.

 

B.  NGC owns all of the outstanding (i) shares
of Series B, Series C, Series F and Series G preferred stock of the Company,
and (ii) capital stock of NCC.

 

C.  NCC owns all of the outstanding shares of
Class B common stock of the Company.

 

D.  Collectively, NGC and NCC control
approximately 99% of the voting rights allocated to all classes of equity of
the Company.

 

E.  The Company owns the Purchased Assets (as
defined below).

 

F.  On the terms and subject to the conditions
set forth in this Agreement, the Purchaser desires to acquire from the Company,
and the Company wishes to sell to the Purchaser, the Purchased Assets, as set
forth herein.

 

AGREEMENT

 

In consideration of the
premises and the mutual covenants and the agreements herein set forth, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:

 

ARTICLE I

 

Defined Terms

 

Section 1.01.  Definitions.  As used in this Agreement, the following
terms have the meanings stated:

 

“2001 Audited Financial Statements” means the audited consolidated
balance sheet, statement of operations, statements of changes in shareholders’
equity and statements of cash flows of the Company and its Subsidiaries as of,
and for the 12-month period ending, December 31, 2001, in the forms attached
hereto as Schedule 5.07(a) and 5.07(b) hereof.

 

“Accounts Receivable” has the meaning stated in Section 2.01(d).

 

“Action” means an action, suit, litigation, arbitration,
investigation, complaint, contest, hearing or other proceeding, whether civil,
criminal, administrative, investigative

 

 

or appellate, in law or
equity before any arbitrator or Governmental Body, and any settlement or
compromise of any of the foregoing.

 

“Additional Assumed Liabilities” has the meaning stated in Section
2.04(c).

 

“Affiliate” of a Person means any other Person that directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with, the Person or any of its Subsidiaries.  The term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by Contract or otherwise.

 

“Alternative Transaction” means any transaction involving the sale
of all or substantially all of the Purchased Assets by the Company and the
assumption of all or substantially all of the Assumed Liabilities by the
purchaser, in substantially the same manner as the Transactions, but does not
include the Transactions.

 

“Assets” has the meaning stated in Section 5.12(c).

 

“Assigned Agreements” has the meaning stated in Section 2.01(c).

 

“Assignment and Assumption Agreement” has the meaning stated in
Section 4.03(d)(ii).

 

“Assumed Liabilities” has the meaning stated in Section 2.03.

 

“Assumption Agreement” has the meaning stated in Section 4.02(e).

 

“Avaya” means Avaya Inc.

 

“Avaya Credit Agreement” means the Credit and Security Agreement,
dated as of March 31, 2001, between the Company and Avaya, as amended up
through the date of this Agreement.

 

“Avaya Debt” means all Debt, including without limitation, letters
of credit, and other amounts, including, without limitation, principal,
interest, fees, costs, indemnification payments and any other amounts,
outstanding (whether or not then due or owing) under the Avaya Credit Agreement
as of the Closing Date.

 

“Benefit Plan” means any employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code, and any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, stock
purchase, restricted stock, stock appreciation rights, phantom stock,
retirement, supplemental retirement, vacation, severance, termination,
disability, death benefit, hospitalization, retiree medical or other plan,
program, insurance, arrangement, agreement, commitment or understanding

 

2

 

(whether or not legally
binding) providing benefits to any current or former employee, officer,
director or shareholder of the Company or any of its Subsidiaries, including
any such plan or program maintained outside the United States.

 

“Bill of Sale” has the meaning stated in Section 4.03(d)(i).

 

“Board” means the Board of Directors of the Company.

 

“Business” means the business and operations of the Company and its
Subsidiaries as conducted by the Company and its Subsidiaries on the date of
this Agreement and as proposed to be conducted by the Company and its
Subsidiaries as of the date of this Agreement.

 

“Business Day” means any day that is not a Saturday, Sunday or a day
on which banks are required or authorized by Law to be closed in New York.

 

“Capitalized Lease” means any lease that in accordance with GAAP is
capitalized and appears on the balance sheet of the lessee.

 

“Capitalized Lease Amount” means the aggregate dollar amount of all
Capitalized Leases of the Company and its Subsidiaries as of the Closing Date.

 

“Cash Amount” means an amount equal to $112,500,000, minus the
aggregate dollar amount of the Additional Assumed Liabilities, if any.

 

“Cash Proceeds” means an aggregate amount equal to the sum of (a)
the Cash Purchase Price, plus (b) the aggregate amount of cash payments made by
the Purchaser to the Company under the Purchaser Note (including for this
purpose any amounts that would have been paid by the Purchaser to the Company
under the Purchaser Note but are set-off against by the Purchaser pursuant to
Section 11.06 of this Agreement), plus (c) the aggregate amount of Non-Compete
Payments made by the Purchaser to the Company pursuant to Section 9.03(e) of
this Agreement (including for this purpose any Non-Compete Payments that would
have been paid by the Purchaser to the Company under Section 9.03 (e) of this
Agreement but are set-off against by the Purchaser pursuant to Section 11.06 of
this Agreement).

 

“Cash Purchase Price” means an amount equal to (a) the Cash Amount,
minus (b) the Final Company Debt Amount (as finally determined pursuant to
Section 3.03), minus (c) the excess, if any, of Required Net Current Assets,
over Final Net Current Assets (as finally determined pursuant to Section 3.03).

 

“Claims” has the meaning stated in Section 9.05.

 

“Closing” has the meaning stated in Section 4.01.

 

“Closing Balance Sheet” has the meaning stated in Section 3.03(a).

 

3

 

“Closing Date” has the meaning stated in Section 4.01.

 

“Code” means the Internal Revenue Code of 1986, as amended, and the
related regulations and published interpretations thereunder.

 

“Common Stock” means the Class A, Class B and Class C common stock
of the Company.

 

“Company” means Expanets, Inc., a Delaware corporation.

 

“Company Debt Amount” means the sum of (a) the Capitalized Lease
Amount, plus (b) the Avaya Debt, plus (c) the Congress Debt.

 

“Company Indemnified Person” means the Company, the Shareholders and
each of their respective shareholders, partners, members, managers, directors,
officers, employees, agents and Affiliates.

 

“Company Lease” has the meaning stated in Section 5.13(e).

 

“Company Leaseholds” has the meaning stated in Section 5.13(a).

 

“Company Outside Date” means December 15, 2003.

 

“Company Parties” means the Company’s Subsidiaries, Affiliates,
directors, officers, employees or agents or any investment banker, financial
advisor, attorney, accountant, representative, or any other Person acting on
behalf of the Company or any of its Subsidiaries.

 

“Company Real Property” has the meaning stated in Section 5.13(a).

 

“Company Required Consents” means the Consents set forth on Schedule
5.04 and Schedule 6.04, in each case, that are marked with an
asterisk.

 

“Company’s Accountants” means Deloitte & Touche LLP.

 

“Competing Business” means any business one or more of whose
products or services, including, without limitation, products or services in
the planning or development stage during the Non-Compete Period, compete,
directly or indirectly, in whole or in part, with one or more of the products
or services, including, without limitation, products or services in the
planning or development stage during the Non-Compete Period, produced, provided
or engaged in by the Company or any of its Subsidiaries at any time during the
Non-Compete Period.

 

“Competing Transaction” means any transaction or series of
transactions including, without limitation, an Alternative Transaction
involving a sale or other

 

4

 

Transfer of securities or
assets, or merger or other combination, whereby at the conclusion of such
transaction or transactions the Parent either directly or indirectly does not
own (a) at least 75% of the outstanding economic and voting interests of the
Company (on a fully-diluted basis) and (b) at least 75% of the assets of the
Company and its Subsidiaries, taken as a whole, as constituted on the date of
this Agreement, other than the Transactions.

 

“Confidential Information” means all information, data, “know-how”,
documents, reports, agreements, interpretations, plans, studies, forecasts and
records (whether in oral or written form, electronically stored or otherwise)
containing or otherwise reflecting information concerning the Purchaser, the
Company, any of their respective Subsidiaries or Affiliates, the Business, the
Assets or the Transactions, including, without limitation, “know-how”, trade
secrets and information not available to the public generally, but does not
include (a) information that is not related to the Purchaser, the Business, the
Purchased Assets or the Assumed Liabilities, (b) information which is or
becomes generally available to the public other than as a result of a
disclosure by the Shareholders or the Company in violation of this Agreement,
and (c) information that was or becomes available to the Shareholders or the
Company on a non-confidential basis from a Person other than the Purchaser or any
other Person who is not otherwise bound by any obligation not to transmit or
disclose the information to the Shareholders or the Company.

 

“Confidentiality Agreement” means the existing confidentiality
agreement, if any, among the Parent, the Company and the Purchaser.

 

“Congress” means Congress Financial Corporation (Western).

 

“Congress Credit Agreement” means the Credit Agreement, dated as of
June 13, 2003, between the Company and Congress, as amended as of the date of
this Agreement.

 

“Congress Debt” means all Debt, including without limitation,
letters of credit, and other amounts, including, without limitation, principal,
interest, fees, costs, indemnification payments and any other amounts,
outstanding (whether or not then due or owing) under the Congress Credit
Agreement as of the Closing Date; provided, however, that for purposes of
calculating Cash Purchase Price and Estimated Cash Purchase Price, letters of
credit up to $7,325,000 shall not be included in the definition of Company Debt
Amount.

 

“Consents” means any approval, consent, authorization or order of,
notice to or registration or filing with, or any other action by, any
Governmental Body or other Person.

 

“Contract” means any agreement, contract, license, lease,
instrument, document, note, bond, mortgage, indenture, guarantee, purchase
order, letter of credit, undertaking, obligation, commitment, or other legally
binding commitment or obligation, whether or not written, each as amended or
modified from time to time.

 

5

 

“Controlled Group” for any Person at any date means all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Person, are treated
as a single employer under Sections 414(b), 414(c), 414(m) or 414(o) of the
Code.

 

“Credit Agreements” means the Avaya Credit Agreement and the
Congress Credit Agreement.

 

“Current Assets” of the Company and its Subsidiaries at any date
means all assets of the Company and its Subsidiaries that would properly be
classified in accordance with GAAP as current assets as of such date, which for
purposes of the Sale Documents (a) shall not include any payment received after
June 30, 2003 on or in respect of any employee or shareholder notes owed to the
Company or any of its Subsidiaries, but (b) shall include the Company’s or its
Subsidiaries’ cash deposits (but not letters of credit) with vendors to secure
future performance to the extent that such cash deposits are not otherwise
included in Current Assets as of such date, after deducting adequate reserves
in each case where a reserve is proper, determined as of such date.

 

“Current Property” means all sites, facilities, locations, Real
Property and Leaseholds presently owned, leased, used or operated by the
Company or any of its Subsidiaries.

 

“Debt” of a Person at any date means, without duplication (a) all
obligations of the Person (i) for borrowed money, (ii) evidenced by bonds,
debentures, notes or other similar instruments, (iii) under conditional sale,
title retention, installment payment or other similar agreements or
arrangements creating an obligation with respect to the payment of the deferred
purchase price of property or services, (iv) as lessee under Capitalized
Leases, (v) under letters of credit or Guarantees issued for the account of the
Person and (vi) arising under acceptance facilities, (b) all obligations of the
type referred to in clause (a) above of others Guaranteed by the Person, (c)
all obligations of the type referred to in clause (a) above of others secured
by a Lien on any asset of the Person whether or not such obligation is assumed
or Guaranteed by the Person, (d) interest rate, currency and total return
swaps, hedges and similar arrangements, and (e) the aggregate Unfunded Vested
Liabilities under each Benefit Plan of the Person.

 

“Deed” has the meaning stated in Section 4.03(d)(iv).

 

“Dollars” and “$” refer to United States dollars and other
lawful currency of the United States of America from time to time in effect.

 

“Effective Time” means the time when the Company actually receives
the Initial Cash Payment Amount.

 

“Environmental Claims” means any complaint, summons, citation,
notice, directive, order, Action, notice of violation, judicial or
administrative proceeding,

 

6

 

judgment, letter or other
communication from any Governmental Body, or any third party involving
violations of Environmental Laws or Releases of Hazardous Materials from (a)
any assets, properties or businesses of the Company, any of its Subsidiaries or
any predecessors in interest, (b) from adjoining properties or businesses, or
(c) from or onto any facilities which received Hazardous Materials generated by
the Company, any of its Subsidiaries or any predecessors in interest.

 

“Environmental Laws” means all federal, state, local and foreign
Laws relating to pollution, human health, safety or protection of the
environment and all similar Laws.

 

“Environmental Liabilities” means any monetary obligations, losses,
liabilities (including strict liability), damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable out-of-pocket fees, disbursements and expenses of counsel, out-of-pocket
expert and consulting fees and out-of-pocket costs for environmental site
assessments, remedial investigation and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of any Environmental Claim filed by
any Governmental Body or any third party which relate to any violations of
Environmental Laws, Remedial Actions, Releases or threatened Releases of
Hazardous Materials from or onto (a) any property presently or formerly owned
by the Company or any of its Subsidiaries or a predecessor in interest, or (b)
any facility which received Hazardous Materials generated by the Company or any
of its Subsidiaries or a predecessor in interest.

 

“Environmental Reports” means all written reports, studies,
analyses, tests or monitoring in the possession of or initiated by the Company
or any of its Subsidiaries pertaining to Hazardous Materials in, on, beneath or
adjacent to any Relevant Property, or regarding the Company’s or any of its
Subsidiaries’ compliance with applicable Environmental Laws.

 

“Equipment” means all tangible personal property of a Person,
including, without limitation, all equipment and machinery in all of its forms,
wherever located, now or hereafter existing.

 

“Equity Securities” of a Person means (a) shares of capital stock,
limited liability company membership interests, joint venture interests,
partnership interests or other equity securities, stock or shares of any kind
of such Person, (b) securities directly or indirectly convertible into or
exercisable or exchangeable for any of the securities referred to in (a) above,
(c) rights, warrants, options, calls, subscriptions or commitments of any kind
or character relating to, or entitling any Person directly or indirectly to
purchase or otherwise acquire, any of the securities or rights referred to in
(a) or (b) above, and (d) equity equivalents, interests in the ownership or
earnings of, or equity appreciation, phantom stock or other similar rights of,
or with respect to, such Person.

 

“ERISA” means the Employee Retirement Income Security Act of 1974,
as amended, and the related regulations and published interpretations.

 

7

 

“Escrow Agent” means  JPMorgan Chase Bank, a New York
corporation, or such other Person as may be mutually acceptable to the
Shareholders, the Company and the Purchaser.

 

“Escrow Agreement” has the meaning stated in Section 4.03(d)(v).

 

“Escrow Amount” has the meaning stated in Section 11.07(c).

 

“Estimated Balance Sheet” has the meaning stated in Section 3.02(a).

 

“Estimated Cash Purchase Price” means an amount equal to (a) the
Cash Amount, minus (b) the Estimated Company Debt Amount, minus (c) the excess,
if any, of Required Net Current Assets, over Estimated Net Current Assets.

 

“Estimated Company Debt Amount” has the meaning stated in Section
3.02(a).

 

“Estimated Net Current Assets” has the meaning stated in Section
3.02(a).

 

“Excluded Assets” has the meaning stated in Section 2.02.

 

“Excluded Liabilities” has the meaning stated in Section 2.04(a).

 

“Expense Amount” has the meaning stated in Section 10.03(c).

 

“Extended Term” has the meaning stated in Section 9.03(e).

 

“Extinguished Liability” has the meaning stated in Section 11.07(c).

 

“Fees and Expenses” has the meaning stated in Section 10.03(a).

 

“Final Closing Balance Sheet” has the meaning stated in Section
3.03(c).

 

“Final Company Debt Amount” has the meaning stated in Section
3.03(c).

 

“Final Net Current Assets” has the meaning stated in Section
3.03(c).

 

“Fixtures” means, to the extent not covered by the definition of
Equipment, all fixtures appurtenant to Real Property or Leaseholds in all of
their forms, wherever located.

 

“Fundamental Representations” means the representations and
warranties set forth in Sections 5.01, 5.02, 5.03, 5.04, 5.05(a), 5.07, 5.12,
5.15(d) and (e), 6.01, 6.02, 6.03 and 6.04.

 

“Fundamental Representation Indemnification” means the
indemnification under Section 11.01(a)(i) with respect to the Fundamental
Representations.

 

8

 

“GAAP” means (a) with respect to the 2001 Audited Financial
Statements, generally accepted accounting principles in the United States and
(b) other than with respect to the 2001 Audited Financial Statements, generally
accepted accounting principles in the United States as applied by the Company
in the preparation of the 2001 Audited Financial Statements, except as
otherwise specifically set forth on Schedule 5.07(g); provided, however,
to the extent the 2001 Audited Financial Statements were not prepared in
accordance with generally accepted accounting principles in the United States,
“GAAP” means generally accepted accounting principles in the United States.

 

“General Escrow Amount” has the meaning stated in Section 11.07(c).

 

“Governmental Body” means any government or any agency, bureau,
commission, court, whether supranational, national, federal, state, regional,
provincial, local, domestic or foreign.

 

“Guarantee” means any guarantee, assurance of performance, standby
letter of credit, or other obligation by which any Person agrees to pay,
perform or be responsible for, in whole or in part, the obligations or
Liabilities of any other Person, whether or not contingent upon any other event
or circumstance.

 

“Hazardous Materials” means, without regard to amount and/or
concentration (a) any element, compound, or chemical that is defined, listed or
otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or
hazardous substances, extremely hazardous substance or chemical, hazardous waste,
medical waste, biohazardous or infectious waste, special waste, or solid waste
under Environmental Laws, (b) petroleum, petroleum-based or petroleum-derived
products, (c) polychlorinated biphenyls, (d) any substance exhibiting a
hazardous waste characteristic including but not limited to corrosivity,
ignitibility, toxicity or reactivity as well as any radioactive or explosive
materials, and (e) any raw materials, building components, including but not
limited to asbestos-containing materials and manufactured products containing
Hazardous Materials.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the related regulations and published interpretations.

 

“Indemnification Notice” has the meaning stated in Section 11.02(a).

 

“Indemnitee” has the meaning stated in Section 11.02(a).

 

“Indemnitor” has the meaning stated in Section 11.02(a).

 

“Indemnity Payment” has the meaning stated in Section 11.07.

 

“Independent Accounting Firm” means PriceWaterhouseCoopers, LLP.

 

9

 

“Initial Cash Payment Amount” means an amount equal to (a) the
Estimated Cash Purchase Price, minus (b) the Escrow Amount.

 

“Intellectual Property” means all copyrights, uncopyrighted works,
trademarks, trademark rights, trademark registrations, patents, including,
without limitation, all reissues, divisions, continuations and extensions
thereof, patent rights, unpatented inventions, service marks, logos, trade
names, trade name rights, corporate names, computer software licenses, data,
software, permits, trade secrets, know-how, protected models, designs, methods,
concepts, plans, specifications, schematics, formulas, inventions, technology,
processes and intellectual property rights and other proprietary rights,
whether or not subject to statutory registration, together with applications
and licenses for, and the goodwill of the Business relating to, any of the
foregoing.

 

“Intellectual Property Assignment Agreement” has the meaning stated
in Section 4.03(d)(iii).

 

“Inventory” means all finished products, work in process, raw
materials, goods in transit, goods at customer sites and other inventory or
goods held for sale of a Person in all of its forms, wherever located, now or
hereafter existing.

 

“Knowledge of the Company” means the knowledge, after reasonable
inquiry and review of such person’s own files and inquiry of those other
officers and employees of the Company who would reasonably be expected to have
knowledge of the specific matter at issue, of any of Marty Snella, Christopher
Younger, Lonnie Clark, Regina Vegliante, Tim Atkinson, and the Company’s and
its Subsidiaries’ directors and executive officers, Regional Presidents and the
Company’s Director of Human Resources.

 

“Law” means each applicable treaty, statute, law, rule, regulation
or order by any Governmental Body and each judgment, injunction, order, writ,
decree or award of any Governmental Body.

 

“Leaseholds” means all real property interests as lessee, together
with all tenements, hereditaments, easements, rights of way, privileges and
appurtenances to those interests and improvements and Fixtures on or to those
interests.

 

“Liability” of any Person means any Debt, liability, commitment, or
obligation of any kind or character, whether or not arising under any Guarantee
or other Contract, whether or not secured by any Lien, and whether or not
accrued, fixed, absolute, contingent, matured, unmatured, liquidated,
unliquidated, due or to become due.

 

“Lien” means any security interest, lien (statutory or otherwise),
claim, pledge, mortgage, deed of trust, hypothecation, charge, easement,
deposit arrangement, preference, priority, license, lease, conveyance of any
right, option, right of first refusal or offer, conditional sales or other
title retention agreement, restriction, covenant, condition or encumbrance of
any kind, including, without limitation, any restriction on

 

10

 

use, voting, transfer,
receipt of income or exercise of any other attribute of ownership, and the
filing of or agreement to give any financing statement under the uniform
commercial code or comparable law of any jurisdiction to evidence any of the
foregoing.

 

“Losses” means any and all liabilities, obligations, losses,
damages, costs, expenses, claims, penalties, Actions, judgments, diminution in
value, disbursements of any kind or nature whatsoever, interest, fines, cleanup
costs, settlements, costs of preparation and investigation, costs incurred in
enforcing any of the Sale Documents and reasonable attorneys’ fees and
expenses, including without limitation, any Taxes arising out of or resulting
from any payment under Article XI hereof.

 

“Maintenance Fee Agreement” means the Maintenance Fee Agreement,
dated as of March 31, 2000, between the Company and Avaya (as successor to
Lucent Technologies Inc.), as amended by Amendment No. 1 effective as of March
31, 2001.

 

“Material Adverse Effect” means (a) a material adverse effect upon
any of (i) the Business, management, employees, results, operations, the
Assets, the liabilities, condition (financial or otherwise), or prospects of
the Company and its Subsidiaries taken as a whole, or (ii) the legality,
validity or enforceability of the Sale Documents, or (b) the impairment,
hindrance or adverse effect in any material respect upon the ability of the
Company, any of its Subsidiaries or the Shareholders to perform any of their
obligations under the Sale Documents.

 

“Material Contract” has the meaning stated in Section 5.15(a).

 

“Net Current Assets” means an amount equal to the aggregate dollar
amount of (a) the Current Assets of the Company and its Subsidiaries included
in the Purchased Assets as of the Closing Date, minus (b) the Total
Liabilities of the Company and its Subsidiaries as of the Closing Date.

 

“Newly-Hired Employees” means any employee of the Company as of the
Closing Date who becomes an employee of the Purchaser as of the Closing Date.

 

“Newly-Hired Employees’ Liabilities” has the meaning stated in
Section 2.05(b).

 

“Non-Compete Payments” has the meaning stated in Section 9.03(e).

 

“Non-Compete Period” means the three-year period beginning on the
Closing Date.

 

“Other Employees” has the meaning stated in Section 2.05(c).

 

“Other Employees’ Liabilities” has the meaning stated in Section
2.05(c).

 

“Other Leases” has the meaning stated in Section 9.07.

 

11

 

“PBGC” means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

 

“Permit” means any permit, license, approval, consent, permission,
notice, franchise, confirmation, endorsement, waiver, certification,
registration, qualification, clearance, variance or other authorization issued,
granted or given by or under the authority of any Governmental Body or pursuant
to any federal, state, local or foreign Law.

 

“Permitted Liens” means (a) Liens for Taxes incurred in the ordinary
course of business consistent with past practice, if a specific reserve shall
have been made therefor on the Closing Balance Sheet (as finally agreed upon
pursuant to Section 3.03), (b) statutory Liens of landlords, Liens of carriers,
warehouse persons, mechanics and material persons and other Liens imposed by
Law incurred in the ordinary course of business consistent with past practice,
if a specific reserve shall have been made therefor on the Final Closing
Balance Sheet, (c) purchase money Liens incurred in the ordinary course of
business, consistent with past practice, provided that such Liens (i) do not exceed
the value of the Equipment or Inventory so acquired and (ii) were not incurred
in violation of any representation, warranty, covenant or agreement contained
in the Sale Documents, (d) easements, rights-of-way, restrictions and other
similar covenants or encumbrances which, in the aggregate, do not materially
interfere with the normal and ordinary operation of the Business, and (e) Liens
securing the Company Debt Amount.

 

“Person” means any individual, corporation, partnership, limited
liability company, association, joint venture, trust or any other entity or
organization, including, without limitation, any Governmental Body.

 

“Personnel” means all former and current employees, agents,
consultants and independent contractors of the Company and its Subsidiaries who
have contributed to or participated in the conception or development of any of
the Required Intellectual Property.

 

“Post-Closing Extinguished Liability Amount” has the meaning stated
in Section 11.07(e).

 

“Pre-Closing Extinguished Liability Amount” has the meaning stated
in Section 11.07(c).

 

“Preferred Stock” means the Series A, Series B, Series C, Series D,
Series E, Series F and Series G preferred stock of the Company.

 

“Prohibited Transaction” means any transaction described in Section
406 of ERISA or Section 4975 of the Code, for which an exemption does not
apply.

 

12

 

“Purchase Price” means the sum of (a) the Cash Purchase Price, plus
(b) the aggregate principal amount of the Purchaser Note, plus (c) the sum of
all of the Non-Compete Payments.

 

“Purchased Assets” has the meaning stated in Section 2.01.

 

“Purchaser” has the meaning stated in the heading of this Agreement,
and its successors and permitted assigns.

 

“Purchaser Indemnified Person” means the Purchaser and its
Affiliates and each of their respective shareholders, partners, members,
managers, directors, officers, employees, agents and Affiliates.

 

“Purchaser Note” has the meaning stated in Section 3.01.

 

“Purchaser Outside Date” means December 15, 2003.

 

“Purchaser Required Consents” means the Consents set forth on Schedule
7.04.

 

“Purchaser’s Accountants” means PricewaterhouseCoopers LLC.

 

“Real Property” means all real property interests, other than as
lessee, together with all tenements, hereditaments, easements, rights of way,
privileges and appurtenances to those interests and improvements and fixtures
on or to those interests.

 

“Release” means any spilling, leaking, pumping, emitting, emptying,
discharging, injecting, escaping, leaching, migrating, dumping, or disposing of
Hazardous Materials (including the abandonment or discarding of barrels,
containers or other closed receptacles containing Hazardous Materials) into the
environment.

 

“Relevant Property” means all sites, facilities, locations, Real
Property and Leaseholds (a) presently or formerly owned, leased, used or
operated by the Company or any of its Subsidiaries (whether or not such
properties are currently owned, leased, used or operated by the Company or any
of its Subsidiaries), (b) at which any Hazardous Material has been transported,
disposed, treated, stored or released by or on behalf of the Company or any of
its Subsidiaries, or (c) that are directly adjacent to any sites, facilities,
locations, Real Property or Leaseholds presently or formerly owned, leased,
used or operated by the Company or any of its Subsidiaries.

 

“Remedial Action” means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate or in any other way
address Hazardous Materials in the indoor or outdoor environment, (b) prevent
or minimize a Release or threatened Release of Hazardous Materials so they do
not migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform pre-remedial studies and
investigations and post-remedial operation and maintenance activities, or (d)
any other actions authorized by Environmental Laws.

 

13

 

“Reportable Event” means any event stated in Section 4043 of ERISA
for which reporting has not been waived by the Department of Labor.

 

“Required Intellectual Property” has the meaning stated in Section
5.16(a).

 

“Required Leases” has the meaning stated in Section 9.07.

 

“Required Net Current Assets” means (a) $51,000,000.00, minus (b)
the Vendor Deposit Reduction Amount as of the Closing Date.

 

“Required Permits “ has the meaning stated in Section 5.10(a).

 

“Restricted Payment” means (a) any dividend or other distribution of
any kind on or in respect of any Equity Securities, and (b) any payments in
cash or otherwise, on account of the purchase, redemption, retirement or
acquisition of (i) any Equity Securities, or (ii) any option, warrant or other
right to acquire any Equity Securities.

 

“Sale Documents” means this Agreement, the Purchaser Note, the
Transitional Services Agreement, each other document, agreement and instrument
to be executed and delivered by any of the Shareholders, the Company, any of
the Company’s Subsidiaries or the Purchaser pursuant to Article IV of this
Agreement, and all other documents and instruments by which the Purchased
Assets are transferred by the Company to the Purchaser and the Confidentiality
Agreement and the Escrow Agreement.

 

“Schedule Updates” has the meaning stated in Section 8.03(a).

 

“Securities” means (a) Equity Securities, (b) notes, bonds,
debentures, certificates of deposit and all other evidences of indebtedness or
Debt, (c) securities directly or indirectly convertible into or exercisable or
exchangeable for any of the securities referred to in (b) above, (d) rights,
warrants, options, calls, subscriptions or commitments of any kind or character
relating to, or entitling any Person to purchase or otherwise acquire, any of
the securities or rights referred to in (b) or (c) above, and (d) all other
securities of any type.

 

“Securities Act” means the Securities Act of 1933, as amended, and
the related regulations and published interpretations.

 

“Solvent” means, with respect to the Company, that as of the date of
determination (a) the sum of the Company’s Debt (including contingent
liabilities, but excluding Liabilities to the Shareholders and their
Affiliates) does not exceed all of the Company’s property, at a fair valuation,
(b) the present fair saleable value of the property of the Company is not less
than the amount that will be required to pay the probable Liabilities of the
Company’s then existing Debts (excluding Liabilities to the Shareholders and
their Affiliates) as they become absolute, and matured, and (c) the Company
does not intend to incur, or believe (nor should it reasonably believe) that it

 

14

 

will incur, Debt beyond
its ability to pay such Debt as it becomes due.  For purposes of this definition, the amount of any contingent
liability at any time shall be computed as the amount that, in light of all of
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability
(irrespective of whether such contingent liabilities meet the criteria for
accrual under Statement of Financial Accounting Standard No. 5).

 

“Specified Liability Amount” has the meaning stated in Section
11.07(c).

 

“Specified Liability Escrow Amount” has the meaning stated in
Section 11.07(c).

 

“Subsidiary” of any Person means any Person (a) of which such first
Person (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, more than 50% of the Equity Securities of such other
Person, the holders of which are generally entitled to vote for the election of
the board of directors, general partner, the manager or other governing body
of, or otherwise control the business and affairs of, such other Person, or (b)
the operations of which are consolidated with such first Person, pursuant to
GAAP, for financial reporting purposes. 
Unless the context otherwise requires, references to one or more
Subsidiaries are references to Subsidiaries of the Company.

 

“Subsidiary Assets” has the meaning stated in Section 5.12(b).

 

“Target Date” means the date which is five Business Days after
October 29, 2003, and if such date is not a Business Day, the next succeeding
Business Day after such date.

 

“Tax” or “Taxes” means all taxes, charges, fees, levies,
duties, imposts, deposits, withholdings, restrictions, fines, interests,
penalties, additions to tax or other tax, assessment or charge of any kind,
including, without limitation, income, excise, personal property, real
property, withholding, sales, use, gross receipts, value added, franchise,
profits, capital, premium, occupational, production, severance, ad valorem,
occupancy, stamp, transfer, employment, payroll, unemployment insurance, social
security, disability, workers compensation, custom duties, license recording,
documentation and registration fees imposed by any Governmental Body, and all
interest and penalties thereon and additions thereto.

 

“Tax Indemnification” means the indemnification under Section
11.01(a)(iv).

 

“Tax Return” means any federal, state, local or foreign return,
report, claim for refund, declaration, statement or other form relating to
Taxes, including, without limitation, any schedule thereto or amendment
thereof.

 

“Termination Fee” has the meaning stated in Section 10.03(d).

 

“Third Party Claim” has the meaning stated in Section 11.02(b).

 

15

 

“Threshold Amount” means an amount equal to $1,000,000.

 

“Total Liabilities” means an amount equal to the aggregate dollar
amount of all Liabilities of the Company and its Subsidiaries as of the Closing
Date included in Assumed Liabilities, but not including the Company Debt
Amount.

 

“Transactions” means the transactions contemplated by, or described
in, the Sale Documents, including, without limitation, the sale, transfer,
assignment, conveyance and delivery of the Purchased Assets by the Company to
the Purchaser.

 

“Transfer” means a direct or indirect offer, transfer, sale,
assignment, pledge, conveyance, hypothecation, license, sublicense or other
disposition of all or any interest.

 

“Transitional Services Agreement” has the meaning stated in Section
4.03(d).

 

“Unfunded Vested Liabilities” of a Person means, with respect to any
Benefit Plan at any time, the excess, if any, of (a) the present value of all
vested nonforfeitable benefits under the Benefit Plan, over (b) the fair market
value of all Benefit Plan assets allocable to those benefits, all determined as
of the then most recent valuation date for the Benefit Plan, but only to the
extent that the excess represents a potential liability of the Person or any
member of its Controlled Group to the PBGC or the Benefit Plan under Title IV
of ERISA.

 

“Vendor Deposit Reduction Amount” has the meaning stated in Section
8.06(c).

 

“Vendor Deposits” has the meaning stated in Section 8.06(c).

 

“WARN Act” means the Workers Adjustment and Retraining Notification
Act, 29 U.S.C. §2101, et. seq.

 

ARTICLE II

 

The Transaction

 

Section 2.01.  Purchase
and Sale of the Purchased Assets.  Upon
the terms and subject to the conditions of this Agreement, at the Closing, for
the consideration payable by the Purchaser to the Company in accordance with
Article III, the Company will, and the Shareholders, jointly and severally,
will cause the Company and its Subsidiaries to, sell, transfer, assign, convey
and deliver to the Purchaser, and the Purchaser will purchase, accept and
acquire from the Company and all of its Subsidiaries, all of the Company’s and
its Subsidiaries’ right, title and interest in, to and under all of the
Purchased Assets, free and clear of Liens, except for Permitted Liens.

 

The term “Purchased
Assets” means all the business, goodwill, operations as a going concern,
assets, properties, interests and rights owned, leased, licensed or used by, or
relating to or arising out of the business or operations of, the Company and
all of its Subsidiaries, of every kind and character, real, personal and mixed,
tangible and intangible, and wherever situated as of

 

16

 

the Effective Time, including, without limitation, the following, but
excluding only the Excluded Assets:

 

(a)  all (i) Real Property and (ii)
Leaseholds in which the Company or one of its Subsidiaries has an interest,
including, without limitation, those set forth on Schedule 2.01(a)(i)
and Schedule 2.01(a)(ii), respectively;

 

(b)  all (i) Equipment, (ii)
Fixtures and (iii) Inventory in which the Company or one of its Subsidiaries
has an interest or which relates to, is used in the business or operations of,
or arises out of the business or operations of, the Company or its
Subsidiaries, whether owned, rented or leased by, or on loan to the Company or
one of its Subsidiaries, including, without limitation, those set forth on Schedule
2.01(b)(i), Schedule 2.01(b)(ii) and Schedule 2.01(b)(iii),
respectively;

 

(c)  all right, title and interest
of the Company and its Subsidiaries now or hereafter existing, in, to and under
any Contracts, including, without limitation, all Material Contracts and those
Contracts set forth on Schedule 2.01(c) (collectively, the “Assigned
Agreements”), as each of the Assigned Agreements may have been amended or
otherwise modified prior to the date of this Agreement;

 

(d)  the accounts receivable of the
Company and its Subsidiaries, including, without limitation, (i) invoiced
accounts receivable, (ii) accrued but uninvoiced accounts receivable, and (iii)
all other rights to payment for goods or services sold, delivered or performed,
in each case other than any accounts receivable from the Shareholders or any
Affiliate of the Shareholders (collectively, the “Accounts Receivable”);

 

(e)  all security deposits, refunds,
deposits and prepaid expenses of the Company and its Subsidiaries and all
vendor rebate accounts and prospective rebates, whether soft dollar or hard
dollar;

 

(f)  all Securities in which the
Company or one of its Subsidiaries has an interest, including, without
limitation, the Securities set forth on Schedule 2.01(f), but not
including any Equity Securities which represent an interest in any of the
Company’s Subsidiaries;

 

(g)  all Intellectual Property in
which the Company or one of its Subsidiaries has an interest, including,
without limitation, the Intellectual Property set forth on Schedule 2.01(g)
 and the Company’s and its
Subsidiaries’ names and all trade names (and associated marks, logos and
styles) used at any time by the Company or any of its Subsidiaries;

 

(h)  all right, title and interest
of the Company and its Subsidiaries in, to and under, and all assets of, the
Benefit Plans set forth on Schedule 2.01(h);

 

(i)  all other rights, assets and
goodwill of the Company and its Subsidiaries, including, without limitation,
all (i) buildings, (ii) tangible and intangible personal

 

17

 

property, (iii) Permits,
(iv) the right to carry on the Business, (v) books of account, general,
financial and accounting records, files, invoices and customer’s and supplier’s
lists, and (vi) causes of action, claims and demands of whatever nature arising
from or in connection with the business and operation of the Company and its
Subsidiaries; and

 

(j)  all proceeds and products of
any and all of the foregoing Purchased Assets.

 

Section 2.02.  Excluded
Assets.  The Company and its
Subsidiaries will retain (and the Purchased Assets will not include) the
following (collectively, the “Excluded Assets”):

 

(a)  all of the Company’s rights
under the Sale Documents;

 

(b)  the Purchase Price payable to
the Company pursuant to Article III;

 

(c)  the articles of incorporation,
minute books, and stock books of the Company and its Subsidiaries;

 

(d)  all Tax-related assets of the
Shareholders, the Company and their respective Subsidiaries ; and

 

(e)  all Equity Securities which represent
an interest in any Subsidiary of the Company.

 

Section 2.03.  Assumption
of the Assumed Liabilities.  Upon
the terms and subject to the conditions of this Agreement, at the Closing, the
Purchaser will execute and deliver to the Company the Assumption Agreement,
pursuant to which the Purchaser will, effective as of the Effective Time,
assume only the Assumed Liabilities.

 

The term “Assumed
Liabilities” means:

 

(a)  the (i) accounts payable of the
Company and its Subsidiaries arising out of the purchase of goods and services
by the Company in the ordinary course of business, but only to the extent such
Liabilities are specifically and expressly set forth on the Closing Balance
Sheet (subject to adjustment pursuant to Section 3.03), (ii) accrued Liabilities
of the Company and its Subsidiaries for employee compensation, including
Liabilities for accrued and unpaid employee bonuses for 2003, but excluding
unpaid employee bonuses (whether or not accrued) arising out of or relating to
any period prior to January 1, 2003, lease payments and other Liabilities of
the Company and its Subsidiaries arising in the ordinary course of business,
but only to the extent such Liabilities are specifically and expressly set
forth on the Closing Balance Sheet (subject to adjustment pursuant to Section
3.03), (iii) payments relating to the agreement by the Company to reimburse
employees of Lucent that became employees of the Company in connection with the
GEM acquisition for pension benefits that such employees forfeited in connection
with such transaction, but only with respect to Newly-Hired Employees, and only
to the extent such Liabilities are specifically and expressly set forth on the
Closing Balance Sheet (subject to adjustment pursuant to Section 3.03), (iv)
the Liabilities assumed by the

 

18

 

Purchaser under Section
2.05(c), and (v) obligations of the Company and its Subsidiaries under the
Assigned Agreements arising after the Effective Time, in each case, excluding
Liabilities not paid in the ordinary course of business consistent with past
practice;

 

(b)  the Company’s obligations (i)
for the Avaya Debt and the Congress Debt, and (ii) under the Capitalized Leases
set forth on Schedule 2.03(b), in an amount not to exceed the
Capitalized Lease Amount used for purposes of calculating the Final Company
Debt Amount in Section 3.03 hereof; and

 

(c)  the Additional Assumed
Liabilities, if any, elected to be assumed by the Purchaser pursuant to Section
2.04(c) below,

 

in each case, only if and to the
extent the same have not been paid or discharged prior to the Closing Date.

 

Section 2.04.  Excluded
Liabilities.

 

(a)  Purchaser Not Assuming Excluded
Liabilities.  Notwithstanding any
provision of the Sale Documents to the contrary, the Purchaser will not accept,
acquire, assume or become liable to pay, perform or discharge, the Excluded
Liabilities.

 

The term “Excluded
Liabilities” means any of the following Liabilities:

 

(i)  any Liability owed to either of
the Shareholders or any of their Affiliates or any other inter-company Debt,
Liabilities or other obligations, including, without limitation, any accrued or
declared dividends, distributions or other obligations;

 

(ii)  any Liability with respect to
any Debt of the Company or any of its Subsidiaries, except as expressly
provided in Section 2.03(b) above;

 

(iii)  any Liability of the Company
or any of its Subsidiaries arising out of, based upon, relating to or otherwise
attributable to any Action (A) that is pending, threatened or completed on or
prior to the Effective Time, or (B) that arises out of or is based upon any
act, omission, event, condition or circumstance (actual or alleged) taking
place or existing prior to the Effective Time, including, without limitation,
(aa) the Settlement Agreement and General Release dated as of March 1, 2003,
between the Company and Joel A. Schleicher, (bb) the settlement with respect to
the termination of Jim Walker’s employment with the Company, (cc) any
securities law Actions or class action lawsuits, (dd) litigation involving the
Company’s and its Subsidiaries’ trade creditors, and (ee) discrimination and
sexual harassment claims;

 

(iv)  any Liability related to or
arising out of any obligation to repurchase, redeem or otherwise acquire any Common
Stock or other Securities of the Company, any of its Subsidiaries or any other
Person, whether arising out of a “put” option, right of rescission or
otherwise, or to pay any dividends or make any distributions in respect of the
Common Stock or other Equity Securities of the Company;

 

19

 

(v)  any Tax Liability of the
Shareholders, the Company, their Subsidiaries or any of their Affiliates, or
Liabilities due to the failure (or alleged failure) of any Shareholder, the
Company, their Subsidiaries or any of their Affiliates to timely and fully pay
such Taxes;

 

(vi)  any Liability (A) which arises
out of, relates to or results from any income, sales, use or other Tax or any
expense arising from or associated with the conveyance and transfer to the
Purchaser of the Purchased Assets, or (B) with respect to Taxes related to the
operation of the Business by the Company and its Subsidiaries or ownership by
the Company or its Subsidiaries of their assets, or otherwise relates to any
period of time prior to the Closing Date, including without limitation, any
Liability relating to or resulting from, any state sales Tax audit of the
Company and its Subsidiaries;

 

(vii)  any Liability of the Company,
any of its Subsidiaries, the Shareholders or any of their Affiliates arising
out of or in connection with any generation, use, storage, transportation,
disposal, cleanup or release of any Hazardous Materials or violation of
Environmental Laws which occurred or exists on or prior to the Effective Time,
regardless of whether it was discovered or was capable of discovery on or prior
to the Effective Time;

 

(viii)  any Liability which arises
out of, relates to, or is otherwise attributable to any of the Excluded Assets,
or arises out of or results from any income, sales, use or other Tax or any
expense arising from the distribution to, or ownership by, the Company, any of
its Subsidiaries or the Shareholders of any of the Excluded Assets or
associated with the realization of the benefits of any of the Excluded Assets;

 

(ix)  any Liability (A) of the
Company or any of its Subsidiaries which is inconsistent with any
representation or warranty of the Company, any of its Subsidiaries or either of
the Shareholders contained in the Sale Documents or which was incurred in
violation of any covenant, agreement or condition contained in the Sale
Documents, or (B) for breach or violation of any Law on or prior to the
Effective Time;

 

(x)  any Liability of the Company
incurred on or after the Effective Time;

 

(xi)  any Liability (A) for breach
or non performance of any Contract on or prior to the Effective Time,
including, without limitation, the Assigned Agreements, (B) under any Contract
which is not set forth on Schedule 2.01(c), (C) under any Contract which
the Purchaser shall not have received a correct and complete copy of prior to
the date of this Agreement, except for the Company’s maintenance Contracts that
are substantially similar to the standard form of agreement provided to the Purchaser
prior to the date of this Agreement, (D) except as may expressly be agreed to
by the Purchaser in writing, under any Contract (I) with any Shareholder or any
Affiliate of the Company or any Shareholder, or (II) relating to any foreign
exchange or similar transactions, (E) relating to the disgorgement, refund or
reimbursement of any payments under the Maintenance Fee Agreement, including,
without limitation, any such Liabilities arising out of the audit

 

20

 

of the payments due under
the Maintenance Fee Agreement, or (F) with respect to leases for unoccupied
facilities;

 

(xii)  any Liability (A) under or in
connection with any Benefit Plan, (B) arising out of or by reason of a complete
or partial withdrawal from a multi-employer pension plan within the meaning of
ERISA or termination or withdrawal from any other Benefit Plan, as of a date
prior to or as of the Effective Time by any Shareholder, the Company or any
other Person who is part of a Controlled Group with the Company, (C) that
constitutes an Unfunded Vested Liability, (D) that constitutes the Other
Employees’ Liabilities, (E) for stay bonuses, change of control payments or
other similar items, including, without limitation, any retention payments to
Chris Younger or Marty Snella, or (F) for unpaid employee bonuses (whether or
not accrued) arising out of or relating to any period prior to January 1, 2003;

 

(xiii)  any Liability relating to
the employees of the Company or any of its Subsidiaries or the employment or
termination of any employee, including, without limitation, any Liability
relating to compensation, salary, bonus, vacation, benefits, severance,
pensions, unemployment insurance and related Taxes accruing, arising, or based
on or relating to facts, issues or circumstances occurring, prior to the
Effective Time, other than for Newly-Hired Employees’ Liabilities and the
Liabilities assumed by the Purchaser under Section 2.05(c);

 

(xiv)  any Liability in respect of
any claim, regardless of when made or asserted, which arises from, out of or is
based upon the negligence, strict liability of, or any express or implied
representation, warranty, agreement or guarantee made by, the Company or any of
its Subsidiaries, or alleged to have been made, or which is imposed or asserted
to be imposed by operation of law, in connection with any product sold, shipped
or manufactured by or on behalf of the Company or any of its Subsidiaries, or
any service provided or sold by or on behalf of the Company or any of its
Subsidiaries, including, without limitation, any claim relating to the repair
or replacement of any such product and any claim seeking recovery for property
damage, consequential damage, lost revenue or income or personal injury, except
to the extent included in accounts payable or accrued liabilities as set forth
on the Closing Balance Sheet (subject to adjustment pursuant to Section 3.03);

 

(xv)  any Liability arising out of,
relating to, or for any rebate, refund, return of product sold, or Inventory
consignment, except to the extent included in accounts payable or accrued
liabilities as set forth on the Closing Balance Sheet (subject to adjustment
pursuant to Section 3.03); and

 

(xvi)  any other Liability not
expressly included in the Assumed Liabilities.

 

(b)  Company and Shareholders to Perform
Excluded Liabilities.  The Purchaser
will acquire the Purchased Assets free and clear of all Liabilities except for
the Assumed Liabilities.  The
Shareholders and the Company, jointly and severally, will remain responsible
for and will, subject to any defenses, claims, set-offs or other rights or
mutual agreements the Company or the

 

21

 

Shareholders may have, duly and timely pay, perform and discharge in full
all Excluded Liabilities; provided, however, that neither (i) the
exercise by the Shareholders and/or the Company of any or all such defenses,
claims, set-offs or other rights or agreements, nor (ii) the failure of the
Shareholders and the Company to fully satisfy any or all of the Excluded
Liabilities, shall in any way impose any Liability on the Purchaser, its
Subsidiaries or Affiliates.

 

(c)  Additional Assumed Liabilities.  Notwithstanding the provisions of Sections
2.04(a) and (b) above, on the date which is at least one Business Day prior to
the Closing Date, the Purchaser may, but shall not be obligated to, without the
consent of the Company or the Shareholders, elect in writing to (i) assume any
Excluded Liabilities relating to, owed to, or in respect of, current or former
employees of the Company and its Subsidiaries (such assumed liabilities being
the “Additional Assumed Liabilities”), and (ii) reduce the Cash Amount,
and consequently the Purchase Price, dollar-for-dollar by the aggregate dollar
amount of the Additional Assumed Liabilities assumed by the Purchaser.  In such an event, the Additional Assumed
Liabilities shall (x) be considered to be “Assumed Liabilities”, and (y) not be
considered to be “Excluded Liabilities”. 
Nothing in this Section 2.04(c) shall confer any rights or remedies
under or by reason of this Agreement or any other Sale Document on any Person,
and no third party shall have any right to enforce any provision of this
Section 2.04(c).

 

Section 2.05.  Employees.

 

(a)  Employment Offers.  The Purchaser will make employment offers to
substantially all of the employees of the Company listed on Schedule 2.05(a)
hereto.  Except as listed on Schedule
2.05(a), such employment offers will be offers of at will employment at
substantially the same compensation for each employee as such employee receives
as of the date of this Agreement.  The
Purchaser may, in its sole discretion, modify or amend any employment offer or
any employment terms or benefits at any time after the Closing Date for any
reason.

 

(b)  Newly-Hired Employees.  With respect to all Newly-Hired Employees,
the Purchaser will be responsible for, and shall pay, all liabilities and
obligations to the Newly-Hired Employees, but only to the extent that such
liabilities and obligations either (i) relate to the period after the Effective
Time, or (ii) represent accrued salaries and wages from the date of the last
regular payroll date of the Company prior to the Closing Date through the
Closing Date and, as such, are specifically, accurately and fully reserved for
and included in Current Liabilities on the Closing Balance Sheet (as deemed
final under Article III) (such liabilities and obligations being the “Newly-Hired
Employees’ Liabilities”).  Except
(A) for the Newly-Hired Employees’ Liabilities, (B) for the Purchaser’s
liabilities and obligations expressly set forth in Section 2.06 below with
respect to the Benefit Plans referred to therein, or (C) for accrued salaries
and wages referred to in clause (ii) above that are specifically, accurately
and fully reserved for and included in Current Liabilities on the Closing
Balance Sheet (as deemed final under Article III), the Company will be
responsible for, and shall duly and timely pay, perform and discharge, all
liabilities and obligations to the Newly-Hired Employees, including, without
limitation, all bonus or similar payments accrued (or that should be accrued)
with respect to the portion of the Company’s fiscal year completed prior to the
Closing Date under the Company’s bonus plans and employment policies in effect
as of the date hereof, which accrued bonuses shall be set aside and paid to the
Newly-Hired Employees entitled thereto on the Closing Date.

 

22

 

(c)  Other Employees.  The Purchaser will not assume or become
responsible for any Liability (the “Other Employees’ Liabilities”) to
any current or former employees of the Company and its Subsidiaries other than
the Newly-Hired Employees (all such employees being the “Other Employees”),
except that the Purchaser shall assume and be responsible for severance payable
to the Other Employees (except for the Other Employees set forth on Schedule
2.05(c) to this Agreement) due to such Other Employees’ termination of
employment with the Company on the Closing Date in connection with the
consummation of the Transactions.  The
Company will be responsible for, and shall duly and timely pay, perform and
discharge, all liabilities and obligations to the Other Employees.

 

(d)  No Rights of Officers or Employees.  The parties hereto expressly acknowledge and
agree that the matters and agreements set forth in Section 2.05 and Section
2.06  of
this Agreement are strictly agreements among the Shareholders, the Company and
the Purchaser and no present or former officer or employee of the Company or
any of its Subsidiaries has any rights (directly, as a third party beneficiary
or otherwise) under Section 2.05 and Section 2.06  and shall not have any right
to enforce any of the agreements set forth in such Sections.

 

(e)  COBRA.  The Parent or a member of its Controlled Group shall provide
continuation coverage mandated by Part 6 of Title I of ERISA or Section 49080B
of the Code or state Laws for Other Employees who are not Newly-Hired Employees,
including for all “M&A Qualified Beneficiaries”  and neither the Purchaser nor any member of its Controlled Group
shall have any responsibility or obligation to provide such coverage, unless
required pursuant to applicable Law.

 

(f)  WARN.  In the event that the termination of Other Employees who are not
Newly-Hired Employees results in an event that is subject to the WARN Act, the
Purchaser shall provide payment to the Parent or a member of the Controlled
Group, as applicable, for any resulting wage and/or benefits liabilities under
the WARN Act relating to such termination(s). 
Purchaser shall bear no responsibility for any other liabilities or
responsibilities under the WARN Act with respect to such termination(s) other
than that stated above.

 

Section 2.06.  Benefit
Plans.  As of the Effective Time,
the Purchaser will have in effect Benefit Plans providing benefits to the
Newly-Hired Employees which are consistent (taken as a whole) with the benefits
provided to employees of similarly situated companies operating in the same
business and in the same geographic location as the Company.  Each Newly-Hired Employee participating in
the Company’s Benefit Plans as of the Effective Time will become a participant
in the Purchaser’s Benefit Plans as of the Effective Time with credit for
service with the Company for participation, eligibility purposes and vesting,
but not for accrual of benefits. The Purchaser may, in its sole discretion,
modify or amend any such Benefit Plan or the terms or benefits provided
thereunder at any time after the Closing.

 

23

 

ARTICLE III

 

Consideration;
Adjustments

 

Section 3.01.  Consideration.  Upon the terms and subject to the conditions
set forth in this Agreement, at the Closing, as payment in full of the Purchase
Price for the purchase of the Purchased Assets,  which Purchase Price shall
be subject to adjustment after the Closing Date as provided in this Article
III, the Purchaser will:

 

(a)  pay, or cause to be paid, to
the Company, by wire transfer of immediately available funds, an amount in cash
equal to the Initial Cash Payment Amount;

 

(b)  issue to the Company a
promissory note, in the aggregate principal amount of $27,500,000, in
substantially the form of, and having the terms set forth on, Exhibit 3.01
attached hereto (the “Purchaser Note”);

 

(c)  pay, or cause to be paid, to
the Escrow Agent, by wire transfer of immediately available funds, an amount in
cash equal to the Escrow Amount; and

 

(d)  assume the Assumed Liabilities.

 

Section 3.02.  Calculation
of the Initial Cash Payment Amount.

 

(a)  Preparation of Estimated Balance Sheet.  On or prior to the date which is two
Business Days prior to the Closing Date, the Purchaser, after consulting with
the Company, shall prepare and deliver to the Company a detailed balance sheet
(the “Estimated Balance Sheet”) which reasonably estimates the financial
position of the Company and its Subsidiaries as of the Closing Date in
conformity with GAAP and sets forth a detailed calculation of the Purchaser’s
estimate of (i) the Company Debt Amount as of the Closing Date (the “Estimated
Company Debt Amount”), and (ii) the Net Current Assets as of the Closing
Date (the “Estimated Net Current Assets”).

 

(b)  Calculation of Initial Cash Payment
Amount.   Simultaneously with the
delivery of the Estimated Balance Sheet to the Company, the Purchaser shall
prepare and deliver to the Company a statement setting forth the calculation of
the Estimated Cash Purchase Price and the Initial Cash Payment Amount using the
Estimated Company Debt Amount and the Estimated Net Current Assets shown on the
Estimated Balance Sheet and the Escrow Amount.

 

Section 3.03.  Post-Closing
Adjustment to Cash Purchase Price.

 

(a)  Preparation of Closing Balance Sheet.  As promptly as practicable, but in any event
within 90 calendar days following the Closing Date, the Purchaser will deliver
to the Company a balance sheet (the “Closing Balance Sheet”), certified
by the Purchaser as fairly presenting the financial position of the Company and
its Subsidiaries on the Closing Date in conformity with GAAP and setting forth
a calculation of the Company Debt Amount and the Net Current Assets as of the
Closing Date.  Subject to Section
3.03(c), the Closing Balance Sheet and the calculation of Company Debt Amount
and Net Current Assets delivered by the Purchaser to the Company will be deemed
to be and will be final, binding and conclusive on the parties hereto.

 

24

 

(b)  Calculation of Cash Purchase Price.  Simultaneously with the delivery of the
Closing Balance Sheet to the Company, the Purchaser shall prepare and deliver
to the Company a written statement (the “Purchase Price Statement”)
setting forth the calculation of the Cash Purchase Price using the Company Debt
Amount and the Net Current Assets shown on the Closing Balance Sheet.

 

(c)  Right to Review and Dispute.

 

(i)  During the 30 calendar day period following
the Company’s receipt of the Closing Balance Sheet and the Purchase Price
Statement, the Company will be permitted to review the working papers of the
Purchaser relating to the preparation of the Closing Balance Sheet and the
Purchase Price Statement and the calculation of Company Debt Amount and Net
Current Assets and the Cash Purchase Price shown on the Purchase Price
Statement.

 

(ii)  The Company may dispute the preparation of
the Closing Balance Sheet, the Purchase Price Statement and/or the
determination of Company Debt Amount and Net Current Assets and the Cash
Purchase Price set forth thereon; provided, however, that the
Company must notify the Purchaser in writing of each disputed item, specifying
the amount thereof in dispute and setting forth, in reasonable detail, the
basis for such dispute, within 30 calendar days of the Purchaser’s delivery of
the Closing Balance Sheet and the Purchase Price Statement to the Company.  In the event written notice of such a
dispute is received by the Purchaser in a timely manner, such a dispute will be
resolved in accordance with the provisions of Section 3.03(d) below.

 

(iii)  The Closing Balance Sheet, the Purchase
Price Statement and the calculation of Company Debt Amount, Net Current Assets
and the Cash Purchase Price will be deemed final for the purposes of this
Article III upon the earliest to occur of (A) the failure of the Company to
notify the Purchaser of a dispute in accordance with this Agreement within 30
calendar days of the Purchaser’s delivery of the Closing Balance Sheet and the
Purchase Price Statement to the Company, (B) the resolution of all disputes in
writing by the Company and the Purchaser, (C) the resolution of all disputes
pursuant to Section 3.03(d) by the Purchaser’s Accountants and the Company’s
Accountants, and (D) the resolution of all disputes pursuant to Section 3.03(d)
by the Independent Accounting Firm.  The
Closing Balance Sheet, the Company Debt Amount and Net Current Assets, as
deemed final pursuant to this Section 3.03(c)(iii), are referred to herein as
the “Final Closing Balance Sheet”, the “Final Company Debt Amount”
and the “Final Net Current Assets”, respectively.

 

(d)  Resolution of Disputes Under This Section
3.03.  In the event that written
notice of a dispute is received by the Purchaser under Section 3.03(c) in a
timely manner, the Purchaser and the Company shall attempt in good faith to
resolve their dispute for a period of 15 calendar days.  In the event that the Purchaser and the
Company are unable to resolve such dispute within such period, the Purchaser’s
Accountants and the Company’s Accountants will attempt to reconcile their
differences, and any resolution by them as to any disputed amounts will be
final, binding and conclusive on the parties hereto.  If the Purchaser’s Accountants and the Company’s Accountants are
unable to reach a resolution with such effect within 30 calendar days after
receipt of such written notice of dispute under Section 3.03(c), the
Purchaser’s Accountants and

 

25

 

the Company’s Accountants will submit the items (together with their
respective positions thereon and reasons therefor) remaining in dispute for
resolution to the Independent Accounting Firm. 
The Independent Accounting Firm will be instructed to determine the
appropriate amount of each disputed item in accordance with GAAP and render a
report to the Purchaser and the Company within 20 calendar days after such
submission; provided, however, that in no case may such
determination of any such disputed item be outside the range established by the
respective positions of the Purchaser’s Accountants and the Company’s
Accountants.  The report of the
Independent Accounting Firm as to the disputed items will be conclusive as to
each disputed item and will be final and binding on the parties hereto.  The fees and expenses of the Independent
Accounting Firm for such determination shall be paid by the parties based upon
the degree to which the Independent Accounting Firm accept the respective
positions of the parties.  For example,
if it is Purchaser’s position that the adjustment owed is $300, the Company’s
position that the adjustment owed is $100 and the Independent Accounting Firm’s
finding that the adjustment owed is $150, then Purchaser shall pay 75% (300-150
/ 300-100) of the Independent Accounting Firm’s fees and expenses and the
Company shall pay 25% (150-100 / 300-100) of the Independent Accounting Firm’s
fees and expenses.  Other than the
expense of retaining the Independent Accounting Firm, the expense of preparing
the Closing Balance Sheet and the Purchase Price Statement shall be borne by
the Purchaser and the expense of the Company’s review shall be borne by the
Company and the Shareholders.

 

(e)  Adjustment of Cash Purchase Price and
Payment of Adjustment Amount.  In
the event that the Cash Purchase Price set forth in the Purchase Price
Statement (as finally determined in accordance with this Article III) is (i)
less than the Estimated Cash Purchase Price, the Purchaser shall have the right
to withdraw an amount in cash equal to the shortfall from the Escrow Amount
pursuant to the provisions of Section 11.07 hereof, and if the amount of such
shortfall exceeds the Escrow Amount, then the Company and the Shareholders,
jointly and severally agree promptly to pay to the Purchaser the amount of such
excess, in cash in immediately available funds, and (ii) greater than the
Estimated Cash Purchase Price, the Company shall have the right to withdraw an
amount in cash equal to the amount of such excess from the Escrow Amount, and
if the amount of such excess exceeds the Escrow Amount, then the Purchaser
agrees promptly to pay to the Company the amount of such excess, in cash in
immediately available funds; provided, however, that in no event
shall the Cash Purchase Price exceed the Cash Amount, and in no event shall the
sum of (aa) the amount of such withdrawal by the Company from the Escrow
Amount, plus (bb) Purchaser’s payment of any such excess set forth in clause
(ii) above, plus (cc) the Initial Cash Payment Amount, exceed an amount equal
to the Cash Amount minus the Company Debt Amount.

 

Section 3.04.  Allocation
of Purchase Price for Tax Purposes. 
On or before the Closing Date, the Company and the Purchaser will agree
upon an allocation of the Purchase Price covering the Purchased Assets for
federal, state and local Tax purposes. 
Upon reaching such agreement, such allocation will be set forth on Schedule
3.04 hereto.  The Company and its
Subsidiaries and the Purchaser will implement, report and accept the allocation
set forth on Schedule 3.04 for federal, state and local Tax purposes.  The parties agree that such allocations will
not in any way limit their respective rights and obligations under the Sale
Documents in respect of representations, warranties, covenants and agreements
and the breach thereof or damages therefor.

 

26

 

ARTICLE IV

 

The Closing; Conditions
to Closing

 

Section 4.01.  The
Closing.

 

(a)  Time and Place of Closing.  The consummation of the
Transactions (the “Closing”), will take place at the offices of Sidley
Austin Brown & Wood LLP, 787 Seventh Avenue, New York, New York 10019, at
10:00 a.m. (New York City time), on the Target Date, or at such other location
or time as the parties may agree in writing; provided, however,
that if any of the conditions to Closing contained in the Sale Documents
(except for conditions which can only be satisfied at Closing) are not
satisfied or effectively waived as of the Target Date or such other agreed-upon
date, the Closing shall take place on the second Business Day after the date on
which all of the conditions to Closing contained in the Sale Documents (except
for conditions which can only be satisfied at Closing) are satisfied or
effectively waived (the date of the Closing being hereinafter referred to as
the “Closing Date”).

 

(b)  Effective Time and Risk of Loss.  The sale, transfer, assignment, conveyance
and delivery of the Purchased Assets and the assumption of the Assumed
Liabilities described in the Sale Documents will be effective as of the
Effective Time.  Until the Effective
Time, any loss of or damage to any of the Purchased Assets from fire, casualty
or any other occurrence will be the sole responsibility of the Company.

 

Section 4.02.  Conditions
Precedent to the Obligations of the Shareholders and the Company. The obligations
of the Shareholders and the Company to consummate the Transactions  under
the Sale Documents are expressly subject to the fulfillment of each of the
following conditions, unless waived by the Company and the Parent in writing,
at or before the Closing:

 

(a)  Representations and
Warranties; Performance of Agreements. 
(i)  All of the representations
and warranties of the Purchaser set forth in the Sale Documents that are
qualified as to materiality shall be true and correct in all respects and all of
the representations and warranties of the Purchaser set forth in the Sale
Documents that are not qualified as to materiality shall be true and correct in
all material respects, in each case, on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date.  (ii) 
The Purchaser shall have performed and complied in all material respects
with all of its covenants and other obligations set forth in the Sale Documents
required to be performed or complied with by the Purchaser at or before the
Closing.  (iii)  The Company shall have received a
certificate of the president or a vice president  of the Purchaser as to the
fulfillment of the conditions set forth in clauses (i) and (ii) above, which
certificate shall have the effect of a representation and warranty of the
Purchaser as to the matters set forth therein.

 

(b)  Purchaser Required Consents.  The Company shall have received copies of
all of the Purchaser Required Consents, and all such Purchaser Required
Consents shall be in

 

27

 

form and substance
reasonably satisfactory to the Company and shall be in full force and effect as
of the Closing Date.  In addition, the
applicable waiting period required under the HSR Act and all similar Laws with
respect to the Transactions shall have expired or have been terminated early.

 

(c)  No Actions.  There shall be no (i) Action by any
Governmental Body or by any other Person (A) challenging or seeking to restrain
or prohibit the Transactions or (B) seeking to obtain from any Shareholder, the
Company or any of their Affiliates in connection with the Transactions any
damages that are material in relation to any Shareholder, the Company, their
Affiliates or the Purchase Price, or (ii) Law in effect that has had or could
reasonably be expected to have any of the consequences referred to in clause
(i) above.

 

(d)  Consideration.  The Company shall have received (i) the
Initial Cash Payment Amount by wire transfer of immediately available funds,
and (ii) the Purchaser Note, in each case,  in accordance with the provisions of
Section 3.01 hereof.  The Purchaser
shall have delivered the Escrow Amount to the Escrow Agent by wire transfer of
immediately available funds in accordance with the provisions of Section 3.01
hereof.

 

(e)  Ancillary Agreements.  The Company shall have received the
following, each dated the Closing Date and in full force and effect as of the
Closing Date, in form and substance satisfactory to the Company and its
counsel:

 

(i)  the Assumption Agreement, duly
executed by the Purchaser, in the form previously agreed to by the
Shareholders, the Company and the Purchaser (the “Assumption Agreement”);
and

 

(ii)  the Escrow Agreement, duly
executed by the Purchaser; and

 

(iii)  the Transitional Services
Agreement, duly executed by the Purchaser.

 

(f)  Secretary’s Certificate.  The Company shall have received a
certificate of the secretary of the Purchaser with respect to (i) the
certificate of incorporation of the Purchaser, (ii) the bylaws  of
the Purchaser, (iii) the resolutions of the board of directors of the Purchaser
approving each Sale Document to which the Purchaser is a party and the other
documents to be delivered by the Purchaser under the Sale Documents and the
performance of the obligations of the Purchaser thereunder and (iv) the names
and true signatures of the officers of the Purchaser authorized to sign each
Sale Document to which it is a party and the other documents to be delivered by
it under the Sale Documents.

 

(g)  Good Standing Certificate.  The Company shall have received a
certificate of the Secretary of State of the jurisdiction in which the
Purchaser is organized, dated as of a recent date, as to the good standing of
the Purchaser.

 

28

 

(h)  Opinion of Counsel.  If reasonably requested by the Company, the
Company shall have received an opinion of Sidley Austin Brown & Wood LLP,
counsel for the Purchaser, in the form agreed to by the Shareholders, the
Company and the Purchaser.

 

(i)  Certain Collateral.  The Company shall have received evidence
reasonably satisfactory to the Company that the Purchaser has replaced any
performance bonds, letters of credit or deposits, or provided substitute
collateral in connection therewith, for any performance bonds, letters of
credit or deposits reflected on Schedule 4.02(i).

 

Section 4.03.  Conditions
Precedent to the Obligations of the Purchaser.  The obligations of the Purchaser to consummate the Transactions
under the Sale Documents are expressly subject to the fulfillment of each of
the following conditions, unless waived by the Purchaser in writing, at or
before the Closing:

 

(a)  Representations and
Warranties; Performance of Agreements. 
(i)  All of the representations
and warranties of the Company and the Shareholders set forth in the Sale
Documents that are qualified as to materiality shall be true and correct in all
respects and all of the representations and warranties of the Company and the
Shareholders set forth in the Sale Documents that are not qualified as to
materiality shall be true and correct in all material respects, in each case,
on and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date.  (ii)  The Shareholders and the Company shall have
performed and complied in all material respects with all of their covenants and
other obligations contained in the Sale Documents required to be performed or
complied with by them at or before the Closing.  (iii)  The Purchaser shall
have received a certificate of the president or a vice president of each
Shareholder and the Company as to the fulfillment of the conditions set forth
in clauses (i) and (ii) above, which certificate shall have the effect of a
representation and warranty of the Company and the Shareholders as to the
matters set forth therein.

 

(b)  Company Required Consents.  The Purchaser shall have received copies of
all of the (i) Company Required Consents and (ii) the Required Permits and all
such Company Required Consents and Required Permits shall be in form and
substance reasonably satisfactory to the Purchaser and shall be in full force
and effect as of the Closing Date.  All
of the Required Leases shall have been assigned to the Purchaser.  In addition, the applicable waiting period
required under the HSR Act and all similar Laws with respect to the
Transactions shall have expired or have been terminated early; provided,
however, that if the applicable waiting period necessary to comply with
the HSA Act and all similar Laws with respect to the Transactions exceeds 30
days from the date of this Agreement, the Company shall have the right to
terminate this Agreement.

 

(c)  No Actions.  There shall be no (i) Action by any
Governmental Body or by any other Person (A) challenging or seeking to restrain
or prohibit the Transactions, or (B) seeking to obtain from the Purchaser or
any of its Affiliates in connection with the Transactions any damages that are
material in relation to the Purchaser or any of its Affiliates, or (ii) Law in
effect that has had or could reasonably be expected to have any of the
consequences referred to in clause (i) above.

 

29

 

(d)  Ancillary Agreements.  The Purchaser shall have received the following,
each dated the Closing Date and in full force and effect as of the Closing
Date, in each case, in the form agreed to by the Shareholders, the Company and
the Purchaser:

 

(i)  one or more Bills of Sale, duly
executed by the Company and its Subsidiaries, as applicable (each, a “Bill
of Sale”);

 

(ii)  one or more Assignment and
Assumption Agreements, duly executed by the Company and its Subsidiaries, as
applicable (each, an “Assignment and Assumption Agreement”);

 

(iii)  one or more Intellectual
Property Assignment Agreements, duly executed by the Company and its
Subsidiaries, as applicable (each, an “Intellectual Property Assignment
Agreement”);

 

(iv)  one or more Special Warranty
or Bargain and Sale Deeds, duly executed by the Company and its Subsidiaries,
as applicable (each, a “Deed”);

 

(v)  an Escrow Agreement, duly
executed by each of the Shareholders, the Company and the Escrow Agent (the “Escrow
Agreement”);

 

(vi)  a Transitional Services
Agreement, duly executed by the Parent (the “Transitional Services Agreement”);

 

(vii)  all other instruments of
transfer, duly executed by the Company and its Subsidiaries, as applicable, as
shall be necessary or appropriate to vest in the Purchaser good title to the
Purchased Assets and to permit the Purchaser to conduct the Business without
interruption;

 

(viii)  checks or drafts payable to
the order of the Purchaser, or some other method of delivering to the Purchaser
the benefit of, or credit for, all funds of the Company on deposit with banks,
financial institutions or other Persons, subject to the rights of Congress
pursuant to the Congress Credit Agreement; and

 

(ix)  such affidavits as reasonably
required by the Purchaser’s title insurance company in connection with the
Company Real Property.

 

(e)  Shareholder Approval.  The holders of the requisite number of each
class of the Company’s Securities shall have approved the Sale Documents and
the Transactions.

 

(f)  Secretary’s Certificate.  The Purchaser shall have received a
certificate of the secretary, manager or general partner, as the case may be,
of the Company, each of its Subsidiaries and each of the Shareholders with
respect to (i) the articles of incorporation, certificate of formation or
certificate of limited partnership, as the case may be, of the Company, its
Subsidiaries and each of the Shareholders, (ii) the bylaws, operating

 

30

 

agreement or limited
partnership agreement, as the case may be, of the Company, each of its
Subsidiaries and each of the Shareholders, (iii) the resolutions of the board
of directors and shareholders, managers, members and partners, as the case may
be, of the Company and each of the Shareholders approving each Sale Document to
which the Company or any Shareholder is a party and the other documents to be
delivered by them under the Sale Documents and the performance of the
obligations of the Company or the Shareholders thereunder, and (iv) the names
and true signatures of the officers, managers, members or partners, as the case
may be, of the Company and each Shareholder authorized to sign each Sale
Document to which they are parties and the other documents to be delivered by
them under the Sale Documents.

 

(g)  Good Standing Certificate.  The Purchaser shall have received a certificate
of the Secretary of State of the jurisdiction in which the Company, each of its
Subsidiaries and each Shareholder is organized, dated as of a recent date, as
to the good standing of the Company, each of its Subsidiaries and each
Shareholder, and as to the charter documents of the Company, each of its
Subsidiaries and each Shareholder on file in the office of the Secretary of
State.

 

(h)  Opinion of Counsel.  If reasonably requested by the Purchaser,
the Purchaser shall have received an opinion of (i) Paul, Hastings, Janofsky
& Walker LLP, counsel for the Shareholders, and (ii) Leonard, Street and
Deinard Professional Association, counsel for the Company, in each case, in the
form agreed to by the Shareholders, the Company and the Purchaser.

 

(i)  Employment and
Non-Competition Agreements. 
(i)  Substantially all of the
Persons set forth on Schedule 4.03(i)(i) shall have entered into written
employment agreements with the Purchaser in form and substance reasonably
satisfactory to the Purchaser and such agreements shall be in full force and
effect on the Closing Date.  In
addition, substantially all of the Persons set forth on Schedule 4.03(i)(ii)
shall have entered into non-competition, non-raiding and confidentiality
agreements with the Purchaser in form and substance reasonably satisfactory to
the Purchaser and such agreements shall be in full force and effect as of the
Closing Date, unless the Parent and Purchaser agree, with or without the
consent of the Person who entered into such employment or non-competition,
non-raiding and confidentiality agreement with the Purchaser, to terminate such
agreement prior to the Closing Date.

 

(j)  Resignations.  The officers (and the members of the board
of directors) of each of the Company’s Subsidiaries designated by the Purchaser
pursuant to Section 8.05 hereof shall have resigned from the Company’s
Subsidiaries and the board of directors of each of the Company’s Subsidiaries.

 

(k)  [Intentionally Omitted]

 

(l)  FIRPTA.  The Purchaser shall have received from the
Company a certificate executed by the Company that, as of the Closing Date, the
Company is not a “foreign

 

31

 

person” within the
meaning of Section 1445 of the Code, in form and substance acceptable to counsel
for the Purchaser.

 

(m)  Material Adverse Effect.  Since June 30, 2003, no fact, circumstance,
event or change shall have occurred, or be reasonably likely to occur, which
has had, or could reasonably be expected to have, a Material Adverse Effect.

 

(n)  Order.  The Delaware Bankruptcy Court shall have
entered the Parent Order in the Parent’s bankruptcy proceedings, and with
respect to each Filing Entity, the bankruptcy court in which such Filing
Entity’s bankruptcy or similar proceedings are filed shall have entered the
Filing Entity Order, and each of the Parent Order, the Filing Entity Order or
Filing Entity Orders (if more than one Filing Entity exists); provided, however,
that if the Parent Order and the Filing Entity Orders shall not have been entered
within 30 days of the date of this Agreement, the Company shall have the right
to terminate this Agreement.

 

Section 4.04.  Efforts
to Close.

 

(a)  Purchaser’s Efforts.  The Purchaser will use its commercially
reasonable best efforts to cause (i) the conditions to Closing set forth in
Section 4.02 which are within the Purchaser’s control to be satisfied on or
prior to the Target Date, and (ii) the Transactions to be consummated on the
Target Date.  The Purchaser will obtain
the Purchaser Required Consents at its expense.

 

(b)  Shareholders’ and the Company’s Efforts.  Each of the Shareholders, jointly and
severally, will, and will cause each of the Company and its Subsidiaries to,
the Company will, and the Company will cause each of its Subsidiaries to, use
its respective commercially reasonable best efforts to cause (i) the conditions
to Closing set forth in Section 4.03 which are within such parties’ control to
be satisfied on or prior to the Target Date, and (ii) the Transactions to be
consummated on the Target Date.  In
addition, each of the Shareholders and the Company, jointly and severally, will
obtain all Company Required Consents at the sole cost and expense of the
Shareholders.

 

ARTICLE V

 

Representations and Warranties of the Company

 

The Company hereby represents and warrants to the Purchaser as of the date
hereof and as of the Closing Date as follows:

 

Section 5.01.  Existence
and Power.  Each of the Company and
its Subsidiaries (a) is a corporation, limited liability company or limited partnership,
as the case may be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (b) is duly qualified under
the laws of, or is licensed to do business as a foreign company in good
standing in, each jurisdiction in which such qualification or license is
required to own, lease or license the Assets or to operate or carry on the
Business, except where the failure to be so qualified or licensed, individually
or in the aggregate, would not reasonably be expected to have

 

32

 

a Material Adverse Effect, and (c) has all necessary corporate, limited
liability company or partnership, as the case may be, power and authority
required to own, lease or license the Assets, to operate and carry on the
Business and to execute and deliver each of the Sale Documents, to consummate
the Transactions and to perform their obligations under the Sale
Documents.  The Company has previously
delivered to the Purchaser correct and complete copies of the certificates of
incorporation, certificates of formation, certificates of limited partnership,
by-laws, operating agreements, partnership agreements and other organizational
documents, as the case may be, of each of the Company and its Subsidiaries.

 

Section 5.02.  Authorization;
Binding Effect.  The execution and
delivery by each of the Company and its Subsidiaries of each of the Sale
Documents to which they are parties, the performance by each of the Company and
its Subsidiaries of their respective obligations under such Sale Documents and
the consummation of the Transactions by each of the Company and its
Subsidiaries has been duly authorized by all necessary corporate, limited
liability company or partnership, as the case may be, action on the part of
each of the Company and its Subsidiaries. 
Each of the Sale Documents to which each of the Company and its
Subsidiaries is or may become a party is, or, when executed and delivered in
accordance with this Agreement will be, legal, valid and binding obligations of
each of the Company and its Subsidiaries, enforceable against each of the
Company and its Subsidiaries in accordance with its terms, except that such
enforcement (a) may be limited by bankruptcy, insolvency, moratorium or similar
laws affecting creditors’ rights generally and (b) is subject to the
availability of equitable remedies, as determined in the discretion of the
court before which such a proceeding may be brought.

 

Section 5.03.  Contravention.  Neither the execution, delivery and
performance of the Sale Documents by each of the Company and it Subsidiaries
nor the consummation of the Transactions by each of the Company and its
Subsidiaries will (with or without notice or lapse of time or both) (a) violate
or breach any provision of the Company’s or any of their Subsidiaries’
certificate of incorporation, by-laws, certificate of formation, operating
agreement, certificate of limited partnership, partnership agreement or other
similar organizational documents, (b) assuming the receipt of all of the
Company Required Consents prior to the Closing, violate or breach any material
Law by which the Company, any of their Subsidiaries, the Business or any of the
Assets may be bound or affected, (c) assuming the receipt of all of the Company
Required Consents prior to the Closing, breach or result in a default under,
result in the acceleration of, or give rise to a change in the terms of or a
right of termination, cancellation, modification or acceleration or require any
notice under, any Material Contract, (d) result in or require the creation or
imposition of any Lien on any of the Assets, or (e) otherwise result in a
Material Adverse Effect.

 

Section 5.04.  Consents.  Except for the Consents set forth on Schedule
5.04 and any Consents required under the HSR Act, no material Consents are
required or advisable on behalf of the Company or any of its Subsidiaries in
connection with (a) the due execution and delivery by each of the Company and
its Subsidiaries of the Sale Documents and the performance of each of the
Company’s and its Subsidiaries’ obligations thereunder, (b) the consummation of
the Transactions by each of the Company and its Subsidiaries, (c) the exercise
by the Purchaser of its rights and remedies under the Sale Documents, and (d)
the (i) conduct of the Business and (ii) ownership or use of the Assets, by the
Purchaser and its Subsidiaries immediately following the

 

33

 

Closing Date.  As of the Closing
Date, all of the Company Required Consents will have been obtained and will be
in full force and effect.

 

Section 5.05.  Capitalization.

 

(a)  Authorized, Issued and Outstanding Shares.  Schedule 5.05(a) sets forth a correct
and complete list and description of the authorized, issued and outstanding
capital stock of the Company as of the date of this Agreement and as of the
Closing Date.  All of the issued and
outstanding shares of Common Stock and Preferred Stock have been duly authorized,
validly issued and are fully paid and non-assessable.  Schedule 5.05(a) sets forth a correct and complete list of
(i) the number of issued and outstanding shares of each class of the Company’s
Equity Securities, and (ii) the number of each class of Equity Securities of
the Company owned or held by each such owner. 
Except as set forth on Schedule 5.05(a), there are no Equity
Securities of the Company (i) authorized, issued or outstanding, (ii) held in
the Company’s treasury or held by any of the Company’s Subsidiaries, or (iii)
reserved for issuance.

 

(b)  Rights, Options, Warrants, Etc.  Except as set forth on Schedule 5.05(b),
there are no (i) Securities of the Company or any of its Subsidiaries, (ii)
statutory or contractual preemptive rights, subscriptions, conversion rights,
rights of first refusal or other similar rights, or (C) Contracts, commitments
or understandings of any character, in each case, that obligate the Company or
any of its Subsidiaries contingently or otherwise, to (A) issue, sell or
Transfer, any Securities of the Company or any of its Subsidiaries, (B)
purchase, redeem, retire, defease or otherwise acquire any Securities of the
Company or any of its Subsidiaries, or (C) that give any Person the right to
receive any benefits or rights substantially similar to any enjoyed by or
accruing to holders of any Securities of the Company or any of its
Subsidiaries, and no authorization for any of the foregoing has been given.

 

(c)  No Other Agreements.  Except as set forth on Schedule 5.05(c),
there are no voting trusts, stockholder agreements, investor rights agreements,
proxies or any other Contracts or understandings in effect with respect to the
voting or Transfer of any Securities of the Company or any of its Subsidiaries
or with respect to the management or governance of the Company or any of its
Subsidiaries.

 

Section 5.06.  Subsidiaries
and Other Securities.

 

(a)  Subsidiaries.  Schedule 5.06(a) sets forth a correct
and complete list of each Subsidiary of the Company, showing for each
Subsidiary (i) such Subsidiary’s name and the address of its principal place of
business, (ii) the jurisdiction of its organization and all jurisdictions in
which it is qualified to do business, (iii) the number of Equity Securities of
each class (A) authorized and (B) issued and outstanding, (iv) the percentage
of the outstanding Equity Securities owned directly or indirectly by the
Company, and (v) the names of the record and beneficial holders of each class
of outstanding Equity Securities and the number of such Equity Securities held
by each such holder.

 

(b)  Subsidiary Securities.  All outstanding Equity Securities of each
Subsidiary of the Company have been duly authorized, validly issued and are
fully paid and non-assessable and

 

34

 

are free of any preemptive rights and, except as set forth on Schedule
5.06(a), are owned, directly or indirectly, beneficially and of record by
the Company free and clear of all Liens, except for Permitted Liens, and any
options, warrants and other rights.  None of the Company’s Subsidiaries’ has violated the
Securities Act or any applicable Law in connection with the offer, sale or
issuance of any of their Securities. 
Except as set forth on Schedule 5.06(a), there are no Equity
Securities of any of the Company’s Subsidiaries (i) authorized, issued or
outstanding, (ii) held in any such Subsidiary’s treasury, or (iii) reserved for
issuance.

 

(c)  Other Securities.  Except for the Securities set forth on Schedule
5.06(a), neither the Company nor any of its Subsidiaries owns (beneficially
or of record), holds or has any interest in, any Securities.

 

Section 5.07.  Financial
Information.

 

(a)  Balance Sheets.  The audited consolidated balance sheets of
the Company and its Subsidiaries dated as of December 31, 2001 and December 31,
2000 (including the footnotes thereto) and the unaudited consolidated balance
sheet of the Company and its Subsidiaries dated  as of December 31, 2002 and
June 30, 2003, copies of which are attached hereto as Schedule 5.07(a),
were prepared in accordance with GAAP and fairly present the financial position
of the Company and its Subsidiaries as of their respective dates.  Except as and to the extent set forth on the
face of such balance sheets (as opposed to the notes thereto), as of the
respective dates thereof, neither the Company nor any Subsidiary had any
Liability.  Since June 30, 2003, neither
the Company nor any Subsidiary has incurred, assumed, or otherwise become
liable for any Liability, except for accounts payable and accrued liabilities
incurred in the ordinary course of business, all of which will be fully set
forth as Liabilities on the Final Closing Balance Sheet.

 

(b)  Other Financial Statements.  The audited consolidated statements of
operations, statements of changes in shareholder’s equity and statements of
cash flows of the Company and its Subsidiaries for the 12-month periods ended
on December 31, 2001 and December 31, 2000 (including the footnotes thereto)
and the unaudited consolidated statement of operations, statement of changes in
shareholder’s equity and statement of cash flows of the Company and its
Subsidiaries for the twelve-month period ended December 31, 2002 and the
six-month period ended  June 30, 2003, copies of which are
attached hereto as Schedule 5.07(b), were prepared in accordance with
GAAP (except with respect to the unaudited statements, for the absence of
footnotes and subject to normal recurring year end adjustments in accordance
with GAAP which were not and will not be material in amount) and fairly present
the results of operations, changes in shareholder’s equity and cash flows of
the Company and its Subsidiaries for such periods.

 

(c)  Interim Financial Statements.  The monthly and quarterly unaudited
consolidated and consolidating balance sheets, statements of operations,
statements of changes in shareholder’s equity and statements of cash flows
(both summary and detailed) of the Company and its Subsidiaries heretofore
provided to the Purchaser or its representatives were, and those to be provided
to the Purchaser pursuant to Section 8.04 will be, prepared in accordance with
GAAP (except for (i) the monthly statements, and (ii) the absence of footnotes
and subject to normal recurring year end adjustments in accordance with GAAP
which were not and will not be material in amount) and fairly present the
information purported to be set forth therein on a basis

 

35

 

consistent with the preparation of the other financial statements referred
to in clauses (a) and (b) above.

 

(d)  [Reserved]

 

(e)  No Guarantees.  Except as set forth on Schedule 5.07(e),
none of the Liabilities shown on any of the balance sheets referred to in this
Section 5.07 were Guaranteed by any Person other than the Company or a
Subsidiary, and none of the Liabilities incurred or assumed by the Company or a
Subsidiary after June 30, 2003 and before the Closing Date will have been
Guaranteed by any Person other than the Company or a Subsidiary.

 

(f)  Accounts Payable and Accounts Receivable.  (i) 
Except as set forth on Schedule 5.07(f), all of the accounts
payable of the Company and its Subsidiaries, whether reflected in the balance
sheets referred to in Section 5.07(a), on the Closing Balance Sheet or
otherwise on the books of the Company and its Subsidiaries on the Closing Date,
(A) were (or will have been as of the Closing Date) incurred in the ordinary
course of the Company’s business consistent with past practice, (B) arose or
will arise from the purchase of goods or services on customary trade terms in
the ordinary course of business, (C) accurately reflect all amounts owed by the
Company and its Subsidiaries with respect to trade accounts due and other
payables as of the respective dates thereof or the Closing Date, as the case
may be, and (D) are not secured by any Lien, except for Permitted Liens.  The charges, accruals and reserves on the
books of the Company and its Subsidiaries in respect of the accounts payable
were calculated in a manner consistent with GAAP and are adequate.  Since June 30, 2003, neither the Company nor
any of its Subsidiaries has paid any of its accounts payable after the date on
which the Company or such Subsidiary would have paid such account payable in
the ordinary course of the Company’s business consistent with past practice.

 

(ii)  Except as set forth on Schedule 5.07(f),
all Accounts Receivable of the Company and its Subsidiaries, whether reflected
in the balance sheets referred to in Section 5.07(a) or otherwise on the books
of the Company and its Subsidiaries on the Closing Date, (A) have arisen (or
will have arisen as of the Closing Date) from bona fide transactions in the
ordinary course of business of the Company and its Subsidiaries consistent with
past practice, (B) arose or will arise from the sale of goods or services on
customary trade terms in the ordinary course of business, and (C) are and will
be, as of the Closing Date, current and collectible and will be collected in
full within 90 calendar days after the Closing Date net of any reserves
specifically set forth on the Closing Balance Sheet (which reserves will be
adequate and calculated consistent with past practice).  Since December 31, 2002, neither the Company
nor any of its Subsidiaries has collected any of its accounts receivable prior
to the earlier of (i) the date on which such Account Receivable is due in
accordance with its terms, and (ii) the date on which the Company or such
Subsidiary would have collected such Account Receivable in the ordinary course
of the Company’s business consistent with past practice.  The entries for discounts, allowances and
returns on the statements of operations included in the financial statements
referred to in Section 5.07(b) are adequate to reflect in full the respective
amounts of the discounts, allowances, credits, rebates, provisions for returns,
and incentive programs relating to sales or deliveries of Inventory or services
recognized during the respective periods covered by such statements (whether
such amounts arose out of Inventory or services sold, delivery or performed
prior or

 

36

 

subsequent to such periods), and all such discounts, allowances, credits,
rebates, and provisions for returns as of the date of any balance sheet
included in the financial statements referred to in Section 5.07(b) and as of
the Closing Date will be classified on such balance sheets, on the Estimated
Closing Balance Sheet and the Final Closing Balance Sheet Working Capital
Schedule as an offset to gross Accounts Receivable as shown thereon.

 

(g)  Accounting Changes.  Except as set forth on Schedule 5.07(g),
since the date of the 2001 Audited Financial Statements, neither the Company
nor any of its Subsidiaries has (i) in the preparation of any internal
financial statements or any of the audited or unaudited financial statements
referred to in this Section 5.07, applied any accounting principles or
methodologies other than GAAP, (ii) changed any accounting methods or
principles used in recording transactions on their books or in preparing their
financial statements, or (iii) modified its general ledger or internal
financial records by changing, adding or deleting any classifications in which
transactions are recorded or by allocating similar transactions to different
classifications therein.

 

(h)  Non-Recurring Items.  Schedule 5.07(h) sets forth a
complete and correct list of (i) all releases from any or reversals of any
reserve account made for accounting or financial reporting purposes and
recognized in or otherwise affecting the statement of operations for the six
months ended June 30, 2003 included in the financial statements referred to in
Section 5.07(a) and (b), and (ii) all other extraordinary, non-recurring, or
non-operating items (including any write-up or revaluation of, or gain
recognized upon the sale of, any asset other than sale of Inventory in the
ordinary course of business, and any reversal of or credit corresponding to any
charge or expense recognized in a previous accounting period) recognized in or
otherwise affecting such statement of operations.

 

Section 5.08.  Taxes.

 

(a)  Filing of Tax Returns and Payment of
Taxes.  Each of the Company and its
Subsidiaries have timely filed all Tax Returns that are required to be filed by
them and have timely paid all Taxes due and owing by them (whether or not such
Taxes are required to be shown on a Tax Return) or has made adequate provision
for the payment of all Taxes which are due and payable.  All such Tax Returns were correct and complete
in all respects when filed.  The Company
has delivered to the Purchaser correct and complete copies of the Company’s and
its Subsidiaries’ United States federal income Tax Returns for the last three
complete fiscal years prior to the date of this Agreement.  The charges, accruals and reserves on the
books of the Company and each of its Subsidiaries in respect of Taxes were
calculated in the ordinary course of the Company’s and its Subsidiaries’
businesses consistent with past practice in accordance with GAAP and F.A.S.B.
and are accurate and adequate.  The
Company has established a Tax reserve or account payable in an amount
sufficient for all accrued and unpaid federal, state, local and foreign Taxes
of the Company and its Subsidiaries, whether or not disputed, including any
penalties, interest and related charges and fees in connection therewith, for
all complete fiscal periods of the Company.

 

(b)  Withholding Taxes.  All Taxes that the Company or any of its
Subsidiaries are required to withhold or collect have been withheld or
collected and, to the extent required, have been paid over to the proper
Governmental Body on a timely basis. 
Proper amounts have been

 

37

 

withheld by each of the Company and its Subsidiaries from their employees
for all periods in compliance with Tax withholding provisions of applicable
federal, state, local, domestic and foreign Laws.

 

(c)  Audits.  Schedule 5.08(c) sets forth a correct and complete list of
all audits of the Company and its Subsidiaries by any Taxing authority in the
past three years.  Except as set forth
on Schedule 5.08(c), no such audit is in progress.  Except for adjustments disclosed to the
Purchaser related to the 1998 and 1999 taxable years, there were no material
adjustments to the Company’s Tax Returns as a result of any such audit.  All deficiencies proposed as a result of
such examinations or audits have been paid, settled or fully reserved for on
the Final Closing Balance Sheet. 
Neither the Company nor any of its Subsidiaries has received any notice
of any pending or threatened audit by the Internal Revenue Service or any
state, local or foreign Taxing authority related to the Company’s Tax Returns
or Tax liability for any period and no claim for special assessment or
collection of Taxes has been asserted against the Company or any of its
Subsidiaries.

 

(d)  Waivers.  Except for waivers for the 1998 and 1999 taxable years previously
disclosed to the Purchaser, the Company has not entered into any agreements for
any waiver or for the extension of any statute of limitations governing the
time of assessment or collection of any federal, state or local Taxes or the
filing of any Tax Return.

 

(e)  Claims by Certain Jurisdictions.  No claim has been made by any Taxing
authority in a jurisdiction where neither the Company nor any of its
Subsidiaries files any Tax Returns that the Company or one of its Subsidiaries
is or may be subject to taxation in that jurisdiction.

 

(f)  Tax Liens.  Except as set forth on Schedule 5.08(f), no Tax Liens,
other than Permitted Liens, have been filed with respect to any Taxes of the
Company, any of its Subsidiaries or any of their Affiliates.

 

Section 5.09.  Litigation.  Except as set forth on Schedule 5.09,
there is no Action pending, or to the Knowledge of the Company, threatened (a)
against the Company or any of its Subsidiaries, or (b) that questions the
validity of any of the Sale Documents or that involves or relates to any of the
Transactions, or (c) affecting any of the Assets or the Business, or (d) that
could reasonably be expected to materially adversely affect the Purchaser’s and
its Subsidiaries’ ability to conduct the Business after the Closing or the
ownership or use by the Purchaser and its Subsidiaries of the Assets after the
Closing.  Except for the matters listed
on Schedule 5.09 that are marked with an asterisk, none of the matters
disclosed on Schedule 5.09 has had or could reasonably be expected to
have a Material Adverse Effect.

 

Section 5.10.  Permits;
Compliance with Laws.

 

(a)  Permits.  Schedule 5.10(a) sets forth a correct and complete list
and description of all material Permits necessary to entitle or permit the
Company and each of its Subsidiaries to use its corporate name, to own, lease,
operate and use the Assets, and to carry on and conduct the Business  at
full capacity  (such Permits being the “Required Permits”).  The Company and each of its Subsidiaries, as
the case may be, owns, holds or possesses all Required Permits and all

 

38

 

such Required Permits are validly held and are in full force and effect and
to the Knowledge of the Company, all Required Permits were validly issued.  To the Knowledge of the Company, no Required
Permit will be subject to suspension, modification, limitation, revocation,
cancellation or non-renewal as a result of the consummation of the
Transactions.  To the Knowledge of the
Company, no fact, issue or circumstance exists which could reasonably be
expected to cause any of the Required Permits not to be renewed in the ordinary
course of the Company’s business.

 

(b)  Compliance with Laws.  The Company, its Subsidiaries, their
operations, the Business and the Assets are and at all times have been in
compliance with each Required Permit and each Law applicable to the Company,
its Subsidiaries, their operations, the Business or the Assets.  Neither the Company nor any of its
Subsidiaries, nor any director, officer or employee of the Company or any of
its Subsidiaries acting on behalf of the Company or one of its Subsidiaries,
has at any time made any bribes, kickback payments or other illegal payments.

 

(c)  Certain Notices.  Except as set forth on Schedule 5.10(c),
neither the Company nor any of its Subsidiaries has received any written notice
(a) concerning the revocation, suspension, modification, limitation,
cancellation or non-renewal of any Required Permit, or (b) of a violation of or
default with respect to, any Required Permit or Law applicable to the Company,
its Subsidiaries, their operations, the Business or the Assets.

 

Section 5.11.  Absence
of Certain Changes or Events.  Since
June 30, 2003, except as specifically set forth on Schedule 5.11 hereto,
(a) there has not occurred any event, fact, circumstance or change that has had
or which could reasonably be expected to have, a Material Adverse Effect, (b)
the Company and each of its Subsidiaries has conducted its business only in the
ordinary course consistent with past practice, and (c) neither the Company nor
any of its Subsidiaries:

 

(i)  has (A) Transferred any of the
Assets, except for Inventory in the ordinary course of business consistent with
past practice or obsolete Inventory, (B) caused or permitted any of the Assets
to become subject to any Liens, other than Permitted Liens, (C) purchased or
acquired any Securities or otherwise made or acquired any investment in any
Person, or (D) incorporated or formed any Subsidiary, or merged or consolidated
with or into, or entered into any business combination with any Person;

 

(ii)  has (A) issued any notes,
bonds or other Debt Securities, incurred any Debt or Guaranteed any obligation
of any Person, (B) waived, released, canceled, settled, written off or
compromised any material Debt, obligation, claim or other right owed to the
Company or any of its Subsidiaries, or (C) made any loan or advance to any
Person;

 

(iii)  has (A) entered into any
Contract or transaction with any of its Affiliates, or (B) made or declared any
Restricted Payment;

 

(iv)  has  (A) paid or agreed to pay
any bonus, extra compensation, pension or severance pay, (B) increased the
benefits payable under the Company’s or its Subsidiaries’ Benefit Plans, or (C)
otherwise increased the wage, salary or compensation (of any nature) or
benefits to any of its directors, officers or employees;

 

39

 

(v)  has made (A) any single capital
expenditure in excess of $250,000, or (B) aggregate capital expenditures in
excess of $500,000;

 

(vi)  has (A) disclosed any
confidential Required Intellectual Property or other confidential proprietary
information of the Company or its Subsidiaries to any Person (other than to the
Purchaser), or (B) Transferred or permitted to lapse any Required Intellectual
Property;

 

(vii)  has (A) written down or
written up (or failed to write down or write up in accordance with GAAP) the
value of any Inventory or accounts receivable, (B) revalued any of the Assets,
or (C) increased or changed any assumptions underlying, or methods of
calculating, any bad debt, contingency or other reserves;

 

(viii)  has (A) made any material
change in its customary methods of operation, including, without limitation,
practices and policies relating to purchasing, inventories, marketing, selling
and pricing, or (B) entered into any other material transaction other than in
the ordinary course of business consistent with past practice;

 

(ix)  has suffered any material
damage, destruction or casualty loss (whether or not covered by insurance) or
any material operating or other loss or any taking of any of the Assets, by
condemnation or eminent domain;

 

(x)  has allowed any Required Permit
to lapse or terminate or failed to renew any Required Permit that is scheduled
to terminate or expire within 60 calendar days after the Closing Date; or

 

(xi)  has entered into, or authorized,
any Contract to do any of the foregoing.

 

Section 5.12.  Assets.

 

(a)  Purchased Assets; Transfer of Title to
Purchased Assets.  The Company has
good title to or leasehold interest in all of the Purchased Assets, free and
clear of all Liens, except for Permitted Liens.  Assuming the receipt of all of the Company Required Consents
prior to the Closing, the Company has good right, full power and lawful
authority to sell, bargain, convey, transfer, deliver and assign to Purchaser
all its right, title and interest in, to and under each of the Purchased
Assets.  Assuming the receipt of all of
the Company Required Consents prior to the Closing, upon delivery to the
Purchaser at the Closing by the Company of the agreements, documents and
instruments set forth in Section 4.03(d) and upon the Company’s receipt of the
Initial Cash Payment Amount in accordance with Article III of this Agreement,
good title to the Purchased Assets will pass to the Purchaser, free and clear
of any Liens, except for Permitted Liens.

 

(b)  Subsidiary Assets; No Adverse Impact on
Subsidiary Assets.  The Company’s
Subsidiaries have good title to or leasehold interest in and have the legal and
valid right to use all of the properties and assets, tangible or intangible,
including, without limitation, all Real

 

40

 

Property, Leaseholds, Equipment, Fixtures, Inventory, Contract rights,
Intellectual Property and personal property (such properties and assets being
the “Subsidiary Assets”), which, when taken together with the Purchased Assets,
constitute all of the properties and assets used in or necessary for the
conduct of the Business free and clear of all Liens, except for Permitted
Liens.  Assuming the receipt of all of
the Company Required Consents prior to the Closing, each of the Company’s
Subsidiaries has good right, full power and lawful authority to sell, bargain,
convey, transfer, deliver and assign to Purchaser all its right, title and
interest in, to and under each of the Subsidiary Assets.  Assuming the receipt of all of the Company
Required Consents prior to the Closing, upon delivery to the Purchaser at the
Closing by the Company’s Subsidiaries of the agreements, documents and
instruments set forth in Section 4.03(d) and upon the Company’s receipt of the
Initial Cash Payment Amount in accordance with Article III of this Agreement,
good title to the Subsidiary Assets will pass to the Purchaser, free and clear
of any Liens, except for Permitted Liens.

 

(c)  Sufficiency and Condition of the Assets.  The Purchased Assets and the Subsidiary
Assets (together, the “Assets”) comprise all of the properties and
assets reflected in the financial statements referred to in Section 5.07,
except for (i) the Excluded Assets, and (ii) Inventory sold or otherwise
disposed of since the respective dates thereof in the ordinary course of
business consistent with past practice. 
The Assets include all of the assets, properties, rights and interests
used or useful in the conduct of the business and operations of the Company and
its Subsidiaries, and no assets, properties, rights or interests, other than
the Assets, are required for the Company and its Subsidiaries to conduct their
business and operations as currently conducted or as proposed to be conducted.  The Assets (i) are in good condition and
repair, except for ordinary wear and tear, and (ii) are suitable and adequate
for the uses for which they are used and to carry on the Business.

 

Section 5.13.  Real
Property and Leaseholds.

 

(a)  Schedules.  Schedule 2.01(a)(i) sets forth a correct and complete list,
legal description and location, including, without limitation, street addresses
and tax map designations of all Real Property (all such Real Property being the
“Company Real Property”) and Schedule 2.01(a)(ii) sets forth a
correct and complete list, including location, street address, name and contact
information of the lessor, rents (and paid through dates), security deposits
and additional rent, of all Leaseholds (all such Leaseholds being the “Company
Leaseholds”), respectively, in which the Company or any of its Subsidiaries
has an interest.

 

(b)  Title to Real Property; Leasehold
Interests.  The Company or one of
its Subsidiaries, as the case may be, has good title in fee simple to all of
the Company Real Property, free and clear of all Liens, except for Permitted
Liens.  Except as set forth on Schedule
2.01(a)(i), none of the Company Real Property is subject to any lease,
sublease or other similar Contract or arrangement.  The Company or one of its Subsidiaries, as the case may be, has
good leasehold interest to all of the Company Leaseholds.  Except as set forth on Schedule
2.01(a)(ii), each of the Company Leaseholds is the subject of a written
lease agreement, and there are no oral terms inconsistent with the written
terms thereof.  Except as set forth on Schedule
5.13(b), no work has been performed on, or materials supplied to, any of
the Company Real Property or Company

 

41

 

Leaseholds within the applicable statutory period which would give rise to
any mechanic’s or materialmen’s Liens.

 

(c)  No Restrictions.  The Company or one of its Subsidiaries, as
the case may be, enjoys peaceful and undisturbed possession of the Company Real
Property and the Company Leaseholds.  No
instrument of record, easement, license, use restriction, grant or applicable
zoning, building or urban redevelopment Law or other impediment of any kind
prohibits or materially limits, impairs or interferes with, the use, operation,
maintenance of, or access to, or affects the value of, the Company Real
Property or Company Leaseholds or any item of personal property related to the
Company Real Property or the Company Leaseholds.   Except as set forth on Schedule 2.01(a)(i) or Schedule
2.01(a)(ii), there are no recorded easements or encroachments by
improvements on adjoining premises with respect to any of the Company Real
Property or Company Leaseholds that could reasonably be expected to materially
affect the ability of the Company and its Subsidiaries to conduct the Business.

 

(d)  Condemnation and Eminent Domain.  Except as set forth on Schedule 5.13(d),
there is no pending or, to the Knowledge of the Company, threatened
condemnation or eminent domain proceeding with respect to any of the Company
Real Property or Company Leaseholds.

 

(e)  Company Leaseholds.  Except as set forth on Schedule 5.13(e):

 

(i)  the Company has delivered
correct, and complete copies of each lease evidencing a Company Leasehold
described on Schedule 2.01(a)(ii), together with all amendments,
modifications, assignments, assumptions and subleases thereof (each a “Company
Lease”);

 

(ii)  all Company Required Consents
shall be delivered with respect to all Required Leases;

 

(iii)  each Company Lease is valid
and in full force and effect on the date hereof; except as set forth on Schedule
5.13(e), the Company or one of its Subsidiaries is currently in occupancy
of the premises demised under each Company Lease and all obligations required
to have been performed by the tenant under each Company Lease have been
performed by the Company or one of its Subsidiaries, including payment of any
rent due and payable on or prior to the date hereof;

 

(iv)  no event or condition exists
that constitutes or, with the giving of notice or passage of time or both,
would constitute a default or breach of any Company Lease by the Company or one
of its Subsidiaries, or, to the Knowledge of the Company, any other party
thereto, and no notice of default has been received or issued by any Company or
Subsidiary with respect to any such the Company Lease that has not been waived
or cured;

 

(v)  there are no mortgages, deeds
of trusts, security deeds or other encumbrances or any other Liens on any
Company Leasehold that have been granted by the Company or

 

42

 

one of its Subsidiaries,
as a result of a breach by any of the Company or one of its Subsidiaries of any
contractual obligation, or otherwise; and

 

(vi)  to the Knowledge of the
Company, except as set forth on Schedule 5.13(e), the current use of the
Company Leasehold or its Subsidiaries is in compliance with the uses permitted
under the applicable Company Lease.

 

(f)  Company Real Property.  Other than this Agreement, neither the
Company nor any of its Subsidiaries is a party to any Contract for the sale or
other disposition of any portion of the Company Real Property.  The Company has not received written
notification of any violation of any applicable Law relating to any Company
Real Property, including, without limitation, any Law regarding the generation,
storage, migration, disposal or existence of any hazardous waste on any Company
Real Property.

 

(g)  Casualty.  (i)  If all or any part of
the Company Real Property or the Company Leaseholds (excluding Inventory) is
damaged or destroyed by fire or other casualty occurring following the date
hereof and prior to the Closing Date and such fire or other casualty is fully
insured by the Company’s casualty insurance policies, neither party shall have
the right to terminate this Agreement and the parties shall nonetheless
consummate the Transactions in accordance with the Sale Documents, without any
abatement of the Purchase Price or any liability or obligation on the part of
the Company by reason of said destruction or damage other than an assignment to
Purchaser of all the Company’s rights to make a claim for and to retain any
casualty insurance proceeds received under such casualty insurance policies in
effect with respect to such damaged Company Real Property or Company Leasehold
(excluding Inventory) and Purchaser shall receive a credit from the Cash
Purchase Price due at Closing for the amount of the deductible on such casualty
insurance policy.

 

(ii)  If all or any part of the Company Real
Property or the Company Leaseholds (excluding Inventory) is damaged or
destroyed by fire or other casualty occurring following the date hereof and
prior to the Closing Date and such fire or other casualty is not fully insured
by the Company’s casualty insurance policies, neither party shall have the
right to terminate this Agreement and the parties shall nonetheless consummate
the Transactions in accordance with the Sale Documents, without any abatement
of the Purchase Price or any liability or obligation on the part of the Company
by reason of said destruction or damage other than either (i) restoring and/or
rebuilding or replacing such damaged property to substantially the same
condition as it existed prior to the occurrence of such fire or other casualty
or (ii) providing Purchaser with a credit from the Cash Purchase Price due at
Closing in an amount equal to the estimated cost of such repair or restoration.

 

Section 5.14.  Equipment,
Fixtures and Inventory.

 

(a)  Schedules and Possession.  Schedule 2.01(b)(i), Schedule
2.01(b)(ii) and Schedule 2.01(b)(iii) set forth a correct and
complete list and description of all Equipment, Fixtures and Inventory,
respectively, in which the Company or one of its Subsidiaries has an interest,
and the Company or one of its Subsidiaries has exclusive possession and control
of all such Equipment, Fixtures and Inventory.

 

43

 

(b)  Inventory.  All Inventory classified as such in the consolidated balance
sheet of the Company and its Subsidiaries dated as of June 30, 2003, and all
additions to Inventory since June 30, 2003, consist of items of a quantity and
quality which are usable or saleable in the ordinary course of the business of
the Company or one of its Subsidiaries consistent with GAAP and are carried on
the financial records of the Company at the lower of cost or market value,
except for obsolete or slow moving Inventory, which has been written off or
written down to net realizable value. 
The charges, accruals and reserves on the consolidated balance sheet of
the Company and its Subsidiaries dated as of June 30, 2003 and on the books of
the Company in respect of obsolete and slow moving Inventory are, and such
charges, accruals and reserves on the Closing Balance Sheet will be, adequate
and calculated consistent with GAAP. 
Neither the Company nor any of its Subsidiaries is under any obligation
nor do they have any liability with respect to accepting returns of items of
Inventory in the possession of their customers.

 

Section 5.15.  Material
Contracts.

 

(a)  Schedule of Material Contracts.  Schedule 5.15(a) sets forth a correct
and complete list and description of all of the Material Contracts.

 

The term “Material
Contracts” means all of the following Contracts to which the Company or any
of its Subsidiaries is a party or by which they or any of their properties,
assets or rights, including, without limitation, the Business and the Assets,
are or may be bound or subject:

 

(i)  deposit agreements, indentures,
mortgages, pledge agreements, security agreements, deeds of trust, conditional
sale agreements or other Contracts granting a Lien on any of the Assets  to
any Person;

 

(ii)  credit agreements, guarantees,
indentures, loan agreements, purchase agreements, bonds, Capitalized Leases,
bonds, debentures, notes, foreign exchange or other hedging arrangements,
interest rate swaps, investments and other evidences of Debt providing for or
relating to Debt in respect of which the Company or any of its Subsidiaries is
in any manner directly or contingently obligated or liable;

 

(iii)  Contracts under which the
Company or any of its Subsidiaries has, directly or indirectly, purchased or
acquired any Securities or otherwise made any advance, loan, extension of
credit or capital contribution to, or other investment in, any Person, and all
joint venture, partnership and limited liability company Contracts;

 

(iv)  Contracts under which the
Company or any of its Subsidiaries (A) is lessee of, or holds or operates, any
Equipment, vehicle or other tangible personal property, or (B) has a Leasehold
interest or (C) is the lessor or sublessor of Real Property;

 

(v)  Contracts (A) for the sale or
for the purchase or other acquisition by the Company or any Subsidiary of, or
the sale or other Transfer by the Company or any Subsidiary of, any tangible or
intangible property or assets, or any services, (I) under

 

44

 

which the Company and its
Subsidiaries are obligated to pay or entitled to receive, in the aggregate,
more than $250,000 in cash or the fair market value of other consideration,
assuming the exercise of all options or extensions under any such Contract, or
(II) except for maintenance Contracts entered into in the ordinary course of
the Company’s and its Subsidiaries’ business consistent with past practice,
which by their terms, assuming the exercise of all options and extensions
thereunder, have a term of greater than one year from the date they were
entered into, (B) granting any Person any right of first refusal, right of
first offer, buy-sell or economically preferential right or other similar
rights, to purchase any of the Assets, and (C) with respect to any warranty
program of the Company or its Subsidiaries;

 

(vi)  Contracts relating in whole or
in part to the Required Intellectual Property or providing for any license,
sublicense, assignment, or other Transfer of any of the Required Intellectual
Property (whether as licensor, licensee, sublicensor, sublicensee, assignor,
assignee, Transferor, Transferee, or otherwise);

 

(vii)  Contracts which (A) require
the Company or any of its Subsidiaries to deal on an exclusive basis with any
Person, (B) restrict or purport to restrict the Company or any of its
Subsidiaries from doing any kind of business or from doing business with any
Person or in any geographic area or from competing with any Person, (C) require
the Company or any of its Subsidiaries to maintain the confidentiality of any
matter, except for maintenance and/or sales Contracts entered into in the
ordinary course of the Company’s and its Subsidiaries’ business consistent with
past practice, and (D) require the Company or any of its Subsidiaries to
indemnify any Person, except for maintenance Contracts entered into in the
ordinary course of the Company’s and its Subsidiaries’ business consistent with
past practice;

 

(viii)  (A) employment, retainer,
severance, separation, non-competition, non-solicitation and consulting
Contracts with current and former employees officers, directors, consultants
and independent contractors, and Contracts with any labor union or other
collective bargaining group, (B) Contracts setting forth the terms of or
otherwise relating to Benefit Plans, (C) sales agency, dealer, distribution,
brokerage or franchise Contracts, (D) Contracts with any shareholder, member,
manager, director, officer or other Affiliate of the Company or any of its
Subsidiaries, (E) shareholders’ agreements, investor rights agreements,
registration rights agreements, voting agreements and other similar agreements
relating to the Company’s or any of its Subsidiary’s Equity Securities, and (F)
proxies, voting trusts, or powers of attorney to act on behalf of the Company
or any of its Subsidiaries;

 

(ix)  to the extent not covered
above, Contracts with suppliers of goods and services to distribute or resell
products, or receive commissions for acting as a sales agent for such supplier,
under which the Company or any of its Subsidiaries has, in the prior 24 months,
made purchases in excess of $250,000 or received commissions in excess of
$250,000, including, without limitation, Contracts with Cisco, Siemens and NEC
America;

 

45

 

(x)  maintenance Contracts; provided,
however, that Schedule 5.15 will only include a standard form of
such maintenance Contracts and a list of substantially all of the parties who
have executed such maintenance Contracts in substantially the form of such
standard form agreement;

 

(xi)  Contracts not made in the
ordinary course of business consistent with past practice.

 

(b)  Copies of Material Contracts.  The Company has provided to the Purchaser
correct and complete copies of all written Material Contracts, except for the
maintenance Contracts referred to in clause (a)(x) above, for which the Company
has provided a standard form of Contract.

 

(c)  Enforceability.  (i) 
Each of the Material Contracts (A) has been duly authorized, executed
and delivered by the Company or one of its Subsidiaries, and to the Knowledge
of the Company, the other parties thereto, and is in full force and effect and
(B) constitutes the legal, valid and binding obligation of the Company or one
of its Subsidiaries, and to the Knowledge of the Company, the other parties
thereto, enforceable against the Company or one of its Subsidiaries, and to the
Knowledge of the Company, the other parties thereto in accordance with the
terms of each such Material Contract, except that such enforcement (x) may be
limited by bankruptcy, insolvency, moratorium or similar laws affecting
creditors’ rights generally and (y) is subject to the availability of equitable
remedies, as determined in the discretion of the court before which such a
proceeding may be brought; provided, however, that with respect
to the maintenance Contracts referred to in clause (a)(x) above, this
representation and warranty shall be true and correct with respect to all
maintenance Contracts which individually, or in the aggregate involve payments
of $100,000 during any 12-month period.

 

(ii)  There exists no breach or default (or event
which with or without the lapse of time or the giving of notice, or both would
constitute a breach or default) under the Material Contracts by the Company or
one of its Subsidiaries, or to the Knowledge of the Company, the other parties
thereto, and neither the Company nor any of its Subsidiaries nor any other
party to any Material Contract has given or received any written notice of
breach or default thereunder; provided, however, that with
respect to the maintenance Contracts referred to in clause (a)(x) above, this
representation and warranty shall be true and correct with respect to all
maintenance Contracts which individually or in the aggregate involve payments
of $100,000 during any 12-month period. 
Neither the Company nor any of its Subsidiaries has given or received
any notice that any party to any Material Contract intends to terminate or
materially amend or modify any Material Contract; provided, however,
that with respect to the maintenance Contracts referred to in clause (a)(x)
above, this representation and warranty shall be true and correct with respect
to all maintenance Contracts which individually or in the aggregate involve
payments of $100,000 during any 12-month period.

 

(iii)  The consummation of the Transactions will
not cause (A) any of the Material Contracts to cease to be in full force and
effect, (B) the material breach of any terms or conditions of any Material
Contract, (C) the forfeiture or impairment of any material rights under any
Material Contract or (D) any material penalty or other material adverse
consequence under

 

46

 

any Material Contract; provided, however, that with respect
to the maintenance Contracts referred to in clause (a)(x) above, this
representation and warranty shall be true and correct with respect to all
maintenance Contracts which individually or in the aggregate involve payments
of $100,000 during any 12-month period.

 

(d)  Liens.  Schedule 5.15(d) 
sets forth a correct and complete list and description of all of the
Liens affecting or attaching to the Assets.

 

(e)  Debt.  Schedule 5.15(e) sets forth a correct and complete list
and description of the Debt outstanding or which may be outstanding under each
of the Material Contracts described in Section 5.15(a)(ii).

 

(f)  Certain Contracts.  (i) The maintenance Contracts entered into
since August 1, 2003 have a weighted average life of not less than 33 months,
(ii) since August 1, 2003, all maintenance Contracts were entered into in the
ordinary course of business consistent with past practice, (iii) except as set
forth on Schedule 5.15(f), since August 1, 2003, neither the Company nor
any of its Subsidiaries has entered into any maintenance Contracts, providing
for special incentives, rebates or excessive up-front payments or other
non-ordinary course incentives, and (iv) except as set forth on Schedule
5.15(f), neither the Company nor any of its Subsidiaries offered any member
of their sales force any special incentives, commissions or other similar items
to sell maintenance Contracts.

 

Section 5.16.  Intellectual
Property.

 

(a)  Ownership or Right to Use.  Schedule 2.01(f) sets forth a correct
and complete list and description of (i) all Intellectual Property (whether or
not owned by the Company or any of its Subsidiaries) used by the Company or any
of its Subsidiaries or which is necessary to conduct the Business, (ii) all
Intellectual Property which has been developed by or arisen out of the conduct
of the Business, and (iii) all other Intellectual Property (whether or not
currently used in the Business) in which the Company or any of its Subsidiaries
has an interest, whether as owner, licensee, licensor, sublicnesee, sublicensor
or otherwise (the Intellectual Property referred to in clauses (i) and (ii)
being the “Required Intellectual Property”), in each case (except where
the Company or a Subsidiary is a licensee or sublicensee), including, without
limitation, a correct and complete list of all jurisdictions in which all
trademarks, copyrights and patents (whether owned or licensed) are registered,
issued or applied for and all registration, grant and application numbers.  The Company or one of its Subsidiaries owns
or has the legal and valid right to use, all Required Intellectual Property,
free and clear of all Liens, except for Permitted Liens.  All Required Intellectual Property is valid,
enforceable and in good standing.

 

(b)  No Infringement.  Neither the ownership or use of the Required
Intellectual Property nor the operation of the Business has infringed,
misappropriated or conflicted with in any material respect and does not
infringe, misappropriate or conflict with in any material respect any
Intellectual Property of any other Person. 
To the Knowledge of the Company, no unauthorized Person is using or
engaging in any unauthorized use of any of the Required Intellectual Property.

 

47

 

(c)  Loss of Rights.  There have been no claims made within the
five years immediately preceding the Closing Date (whether currently pending or
resolved) against the Company or any of its Subsidiaries asserting the
invalidity, misuse or unenforceability of any Required Intellectual Property
and, to the Knowledge of the Company, there are no grounds for any of the
foregoing.  To the Knowledge of the
Company, at no time during the conception or reduction of any of the Required
Intellectual Property to practice was any developer, inventor or other
contributor to such Required Intellectual Property subject to any employment
agreement or invention assignment or non-disclosure agreement or other
obligation with any third party that could reasonably be expected to materially
and adversely affect the Company’s or its Subsidiary’s rights in the Required Intellectual
Property.

 

(d)  Confidentiality of Intellectual Property.  (i) 
The Required Intellectual Property has been maintained in
confidence in accordance with protection procedures customarily used in the
industry of the Company and its Subsidiaries to protect rights of like
importance and, to the extent that any portion of the Required Intellectual
Property would otherwise qualify as a “trade secret”, which would be necessary
to preserve its status as trade secrets under applicable Laws. The Company and
its Subsidiaries have taken all reasonably necessary actions to maintain and
protect the Required Intellectual Property.

 

(ii)  Except as set forth on Schedule 5.16(d),
all Personnel have executed and delivered to the Company or one of its
Subsidiaries (A) a proprietary information agreement restricting such Person’s
right to disclose proprietary information of the Company and its Subsidiaries,
and (B) appropriate instruments of assignment in favor of the Company or one of
its Subsidiaries as assignee that have conveyed to the Company or one of its
Subsidiaries exclusive ownership of all Intellectual Property conceived or
developed by such Personnel while they were employed or otherwise working for
the Company or one of its Subsidiaries.

 

Section 5.17.  Insurance.

 

(a)  Insurance.  The Company, its Subsidiaries, all of the Assets and the Business
are covered by valid and currently effective insurance policies or binders of
insurance, including, without limitation, general liability insurance, property
insurance, workers’ compensation insurance and business interruption insurance,
issued in favor of the Company or one of its Subsidiaries, in each case, in
such types and amounts and covering such risks as are consistent with customary
practices and standards of companies engaged in business and operations
substantially similar to those of the Company and its Subsidiaries.  Neither the Company nor any of its
Subsidiaries is in material default or breach with respect to its obligations
under any insurance policy maintained by any of them, and all premiums
thereunder will be timely paid in full for all periods up to and through the
Effective Time.   Neither the Company
nor any of its Subsidiaries has received any notice of cancellation or
non-renewal of any such policy or arrangement. 
There is no claim pending against the Company or any of its Subsidiaries
under any of such policies or arrangements as to which coverage has been denied
or disputed by the underwriters of such policies or arrangements.  Schedule 5.17 sets forth a correct
and complete list and description of all such policies of insurance, including
(i) the name of the insurer and the names of the principal insured and each
named insured, (ii) the period of coverage, (iii) the type and amount of coverage,
and (iv) a list of the material claims paid out under such policies during

 

48

 

the past three years and claims that are pending.  Schedule 5.17 sets forth a correct and complete list of
all risks against which the Company or any of its Subsidiaries is insured under
a program of self insurance.

 

(b)  Bonding.  The Company and its Subsidiaries have as of the date of this
Agreement, and will have, as of the Closing Date, posted all necessary employee
malfeasance, performance or liability bonds in connection with the operation of
the Business, and neither the Company nor any of its Subsidiaries has, nor will
they have as of the Closing Date, any Liability under any such bonds.

 

Section 5.18.  Books
and Records; Company Names; Bank Accounts; Officers and Directors.

 

(a)  Books and Records.  Except as set forth on Schedule 5.18(a),
the books and records and other financial records of the Company and each of
its Subsidiaries are in all material respects accurate, correct and complete,
have been maintained in accordance with good business practices, including the
maintenance of an adequate system of financial controls, accurately reflect the
transactions and other information purported to be contained therein, and are
reflected accurately in all material respects in the financial statements
referred to in Section 5.07.  Correct
and complete copies of all such books and records of the Company and each of
its Subsidiaries will have been provided to, or made available to, the
Purchaser or its representatives prior to the Due Diligence Termination
Date.  The minute books of the Company
and each of its Subsidiaries, copies of which will have been delivered to the
Purchaser or its representatives prior to the Due Diligence Termination Date,
contain materially accurate records of all meetings and accurately reflect all
corporate action of the shareholders and the board of directors (including
committees) of the Company and each of its Subsidiaries, as the case may be.  The stock books and ledgers of the Company
and its Subsidiaries, copies of which will have been delivered to the Purchaser
or the Purchaser’s representatives, correctly record all transfers and
issuances of all Securities of the Company and each of its Subsidiaries.

 

(b)  Company Names; Chief Executive Office.  Neither the Company nor any of its
Subsidiaries has operated or conducted any business under any name other than
the name ascribed to the Company in this Agreement and for each Subsidiary on Schedule
5.05(a).  The location of the chief
executive office and chief place of business of the Company and its
Subsidiaries is set forth on Schedule 5.18(b).

 

(c)  Bank Accounts.  Schedule 5.18(c) sets forth a correct
and complete list and description of (i) all bank and savings accounts,
certificates of deposit and safe deposit boxes of the Company’s Subsidiaries
and (ii) all corporate borrowing, depository and transfer resolutions and those
Persons entitled to act thereunder.

 

(d)  Officers and Directors.  Schedule 5.18(d) sets forth a correct
and complete list of all officers and directors of the Company’s Subsidiaries.

 

49

 

Section 5.19.  Customers
and Suppliers.

 

(a)  Customers.  (i)  Schedule 5.19(a)
sets forth a correct and complete list and description, including, without
limitation, the names and addresses, of the twenty  most significant customers
(by revenue to the Company and its Subsidiaries) of the Company and its
Subsidiaries for the twelve-month period ended December 31, 2002 and for the
six-month period ended on June 30, 2003, and the amount for which each such
customer was invoiced during such period. 
To the Knowledge of the Company, each such customer intends to use the
products, equipment, goods and services sold to it as an end user, and none of
such customers intends to act as a distributor or reseller thereof.

 

(ii)  Except as set forth on Schedule 5.19(a),
since June 30, 2003, there has not been (A) any material adverse change in the
business relationship of the Company or any of its Subsidiaries with any
customer set forth on Schedule 5.19(a), including, without limitation,
any such customer ceasing to purchase or use the products, equipment, goods or
services of the Company or its Subsidiaries or  reducing the purchase
or use of such products, equipment, goods or services, or (B) any material
change in any term (including credit terms) of the purchase Contracts, purchase
orders or related arrangements with any such customer.  Since December 31, 2002, neither the Company
nor any of its Subsidiaries has received any notice from any customer set forth
on Schedule 5.19(a) that such customer intends to take any of the
actions set forth in clauses (A) or (B) above.

 

(iii)  Since June 30, 2003, neither the Company nor
its Subsidiaries has shipped or sold to any customer any products, equipment,
goods or services (A) to the Knowledge of the Company, in excess of the amount
thereof that such customer is reasonably expected to use during its ordinary
course of business, (B) on terms that include any volume discount, right of
return, rights to rebate, or consignment, or (C) to the Knowledge of the
Company, on terms that provided such customer with an incentive to take
delivery of or pay for such products, equipment, goods or services prior to the
date that such customer would otherwise have taken delivery of or paid for the
same.

 

(b)  Suppliers.  Schedule 5.19(b) (i) sets forth a correct and complete
list and description, including, without limitation, the names and addresses,
of the twenty most significant vendors and suppliers (by amounts billed to the
Company and its Subsidiaries) of the Company and its Subsidiaries for the
twelve-month period ended December 31, 2002 and for the six-month period ended
June 30, 2003.

 

(ii)  Since June 30, 2003, there has not been (A)
any material adverse change in the business relationship of the Company or any
of its Subsidiaries with any supplier of goods, supplies, Inventory or
merchandise or (B) any material change in any term (including credit terms) of
the supply Contracts or related arrangements with any such supplier.  Since June 30, 2003, neither the Company nor
any of its Subsidiaries has received any notice from any vendor or supplier set
forth on Schedule 5.19(b) that such supplier intends to take any of the
actions set forth in clauses (A) or (B) above.

 

50

 

Section 5.20.  Environmental
Matters.  Except as set forth in Schedule
5.20 or with respect to any Recognized Environmental Condition contained in
a report obtained by Purchaser prior to the Closing Date:

 

(a)  The operations of the Company
and its Subsidiaries are in full compliance with Environmental Laws;

 

(b)  The Company and/or its
Subsidiaries have obtained and are in compliance with all necessary Permits
that are required under Environmental Laws to operate the facilities, Assets
and Business of the Company and it Subsidiaries;

 

(c)  There has been no Release at
any of the Relevant Properties owned or operated by the Company, its
Subsidiaries or a predecessor in interest, or to the Knowledge of the Company,
at any Relevant Property which received Hazardous Materials generated by the
Company or its Subsidiaries or any predecessor in interest which is reasonably
likely to result in Environmental Liabilities;

 

(d)  No Environmental Claims have
been asserted against the Company, its Subsidiaries or, to the Knowledge of the
Company, any predecessor in interest, nor to the Knowledge of the Company are
any Environmental Claims threatened or pending against the Company, any of its
Subsidiaries or any predecessor in interest which is reasonably likely to
result in Environmental Liabilities;

 

(e)  To the Knowledge of the
Company, no Environmental Claims have been asserted against any Relevant
Properties that may have received Hazardous Materials generated by the Company,
any of its Subsidiaries or any predecessor in interest which is reasonably
likely to result in Environmental Liabilities that have an Material Adverse
Effect;

 

(f)   The Company has delivered to
Purchaser correct and complete copies of (A) all Environmental Reports, or
correspondence regarding any Environmental Liabilities of the Seller at any of
the Relevant Properties which are in possession of the Shareholders, Company,
its Subsidiaries or their agents or (B) any Recognized Environmental Conditions
(as defined by the American Society of Testing and Materials (“ASTM”) E
1527-00(Standard Practice for ESA Phase I Environmental Site Assessment
Process)) at any of the Current Properties which are in possession of the
Shareholders, Company, its Subsidiaries or their agents;

 

(g)  To the Knowledge of the
Company, no environmental Liens have been filed against any Real Property owned
by the Company or any of its Subsidiaries; and

 

(h)  To the Knowledge of the
Company, Schedule 5.20 sets forth a correct and complete list and
description of all instances where any Relevant Property of the Company, any of
its Subsidiaries or any predecessor in interest are not in compliance with
Environmental Laws or give rise to Environmental Liabilities.

 

51

 

Section 5.21.  Employees;
ERISA.

 

(a)  Schedule of Employees.  Schedule 5.21(a) sets forth a correct
and complete list and description of all of the employees of, and consultants
and independent contractors to, the Company and its Subsidiaries and each
employee’s place of employment, compensation, bonuses, deferred or contingent
compensation, pension, accrued vacation, accrued sick pay, severance, “golden
parachute” and other like benefits and term of employment, in effect as of the
date of this Agreement.  Since December
31, 2002, none of the employees listed on Schedule 5.21(a) has spent
less than 75% of his active business hours on matters involving the Business;
and since December 31, 2002 there has been no officer or employee of, or
consultant or independent contractor to, the Company, any of its Subsidiaries,
any Shareholder, or any of their Affiliates, other than those listed on Schedule
5.21(a), who has spent more than 25% of his active business hours on
matters involving the Business.

 

(b)  Employment Agreements.  Except as set forth on Schedule 5.21(b),
neither the Company nor any of its Subsidiaries has entered into and is not bound
by any (i) employment, consulting or severance Contract with any of its
directors, officers or employees, or (ii) collective bargaining agreements with
its employees.  None of the Company’s or
its Subsidiaries’ employees is subject to any non-compete, non-disclosure,
confidentiality, employment, consulting or similar agreements relating to,
affecting or in conflict with the Company’s and its Subsidiaries’ conduct of
the Business.  Except as set forth on Schedule
5.21(b), the Company and its Subsidiaries have entered into normal and
customary non-competition and non-solicitation agreements with all former
officers and other members of management of the Company and its
Subsidiaries.  Correct and complete
copies of all agreements set forth on Schedule 5.21(b) and a copy of each
normal and customary non-competition and non-solicitation agreement have been
delivered to Purchaser or its representatives prior to the date of this
Agreement.

 

(c)  Plans.  Schedule 5.21(c) sets forth a correct and complete list of
all Benefit Plans of the Company and its Subsidiaries correct and complete
copies of which and all summary plan descriptions, summaries of material
modifications, most recent Form 5500 (and schedules) and actuarial reports of
which have been delivered to the Purchaser or its representatives prior to the
date of this Agreement.

 

(d)  Plan Qualifications.  Each of the Company’s Benefit Plans which is
an “employee pension benefit plan” (as defined in Section 3(2) of ERISA) and
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service that the Plan is
qualified and that its related trust has been determined to be exempt from
taxation under Section 501(a) of the Code. 
To the Knowledge of the Company, no events or circumstances have
occurred (other than changes for which the remedial amendment period under
Section 401(b) of the Code has not expired) since the date of such letters that
will materially adversely affect the qualification or exemption of such
Plan.  Except as set forth on Schedule
5.21(d), no Benefit Plan sponsored by the Company is under audit, nor, to
the Knowledge of the Company, is any such audit pending.  Schedule 5.21(d) lists each employee pension
benefit plan covered under Title IV of ERISA that is maintained, contributed to
or required to be contributed to by a member of the Company’s Controlled Group
and each

 

52

 

“multiemployer plan” as defined under Section 3(37) of ERISA that covers
employees of the Company.

 

(e)  Labor Relations. 
(i)  Except as
specifically set forth on Schedule 5.21(e), none of the Company’s or its
Subsidiaries’ employees currently are covered by a unit which has been
certified by the National Labor Relations Board as a unit for purposes of
collective bargaining, nor are they represented by any labor union or
organization.  To the Knowledge of the
Company, no labor union or organization currently is engaged in any efforts to
organize or represent any of the Company’s or its Subsidiaries’ employees.  The Company and each Subsidiary are in
substantial compliance with all Laws respecting employment, employment
practices, labor, terms and conditions of employment and wages and hours, in
each case, with respect to employees.

 

(ii)  There is no unfair labor practice complaint
against the Company or any of its Subsidiaries pending before any Governmental
Body or other Person.  There is no labor
strike, dispute, slowdown or stoppage at any Company or Subsidiary location and
no such strike, dispute, slowdown or stoppage has ever occurred.  The Company and its Subsidiaries have timely
prepared and filed all appropriate forms (including Immigration and
Naturalization Service Form I-9) required by any relevant Governmental Body.

 

(iii)  To the Knowledge of the Company, no
executive or key employee of the Company or any of its Subsidiaries nor any
group of employees of the Company or its Subsidiaries has any plans to
terminate their employment with the Company or its Subsidiary, as the case may
be.

 

(f)  Compliance with Benefit Laws.  Neither a Reportable Event nor a Prohibited
Transaction has occurred or is continuing with respect to any Plan of the
Company or any of its Subsidiaries.  No
notice of intent to terminate a Benefit Plan subject to Title IV of ERISA has
been filed nor except as listed on Schedule 5.21 has any Benefit Plan been
terminated.  To the Knowledge of the
Company, no circumstances exist which constitute grounds under Section 4042 of
ERISA entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administrate, a Benefit Plan, nor has the PBGC instituted any such
proceedings.  None of the Shareholders,
the Company, any of the Company’s Subsidiaries or other members of a Controlled
Group with the Company or any Shareholder has completely or partially withdrawn
under Section 4201 or 4204 of ERISA from a multi-employer pension plan (or is
liable for any complete or partial withdrawal which occurred prior to or as of
the Closing Date).  Each of the Company,
its Subsidiaries and the other members of a Controlled Group has met its
minimum funding requirements under ERISA with respect to all of their Plans and
none of them has an Unfunded Vested Liability. 
None of the Company, its Subsidiaries or other members of a Controlled
Group has incurred any liability to the PBGC under ERISA, other than liability
for premiums which have been paid.  None
of the Company, its Subsidiaries or any of member of their Controlled Group has
used the services of workers provided by contract labor suppliers, temporary
employees, “leased employees” (as that term is defined in Section 414(n) of the
Code), or persons who have provided services as independent contractors, to an
extent that could reasonably be expected to result in the disqualification of
any Benefit Plan under applicable Law, or the imposition of penalties or excise
Taxes with respect to any Benefit Plan by the Internal Revenue Service, the
U.S. Department of Labor, the PBGC or any other Governmental Body.

 

53

 

Other than claims for benefits under the claims procedures of any Benefit
Plans, there are no pending or, to the Knowledge of the Company, threatened in
writing, actions, claims or proceedings against the Company, a Subsidiary or
any member of their Controlled Group or any Benefit Plan or its assets with
respect to such plan.  Correct and
complete copies of any agreement entered into with the PBGC, U.S. Department of
Labor or Internal Revenue Service have been delivered to the Purchaser or its
representatives prior to the date of this Agreement.  All contributions required to be made, and claims to be paid,
under the terms of any Benefit Plan maintained or contributed by the Company or
any Subsidiary have been timely made or reserves therefor on the balance sheet
of the Company have been established, which reserves are adequate in all
material respects.  None of the Parent’s
or Company’s purpose for engaging in the transactions contemplated by this
Agreement is for the evasion of liability under Section 4069 of ERISA.

 

(g)  Absence of Transaction Entitlements.  Except as set forth on Schedule 5.21(g),
the consummation of the Transactions will not (i) entitle any current or former
director, officer or employee of the Company or any of its Subsidiaries or any
group of such Persons to any payment from the Company or any of its
Subsidiaries, (ii) increase the amount of compensation due to any such
director, officer or employee, (iii) accelerate the time of vesting of any
compensation, stock incentive or other benefit of any such directors, officer
or employee or (iv) result in any “parachute payment” under Section 280G of the
Code, whether or not such payment is considered to be reasonable compensation
for services rendered.

 

(h)  No Post-Retirement Benefits.  Except with respect to the Benefit Plans set
forth on Schedule 5.21(c), neither the Company nor any of its
Subsidiaries has any liability with respect to an obligation to provide
benefits, including death or medical benefits (whether or not insured) with
respect to any Person beyond their retirement or other termination of service
with the Company or one of its Subsidiaries other than (i) coverage mandated by
Part 6 of Title I of ERISA or Section 4980B of the Code or state Laws, (ii)
retirement or death benefits under any employee pension plan, (iii) disability
benefits under any employee welfare plan that have been fully provided for by
insurance or otherwise, (iv) deferred compensation benefits accrued as
liabilities on the books of the Company, or (v) benefits in the nature of
severance pay.  The obligations set
forth on Schedule 5.21(c) have been accrued for in the financial
statements attached hereto as Schedule 5.07(a) and Schedule 5.07(b)
in accordance with past practice.

 

(i)  Workers’ Compensation.  There are no liabilities to any of the
Company’s employees relating to workers’ compensation benefits that are not
fully insured against by third-party insurance carriers.

 

(j)  WARN Act.  Except as set forth on Schedule 5.21(j), neither the
Company nor any of its Subsidiaries has laid off or involuntarily dismissed
(other than for cause) any employees within the six months immediately prior to
the Closing Date.  Neither the Company
nor any of its Subsidiaries, has, within the 90 days immediately prior to the
Closing Date, taken any action or actions which would, independently of the
Transactions, result in a plant closing or mass layoff within the meaning of
the WARN Act.

 

54

 

Section 5.22.  Certain
Business Relationships with the Company or its Subsidiaries.

 

(a)  Certain Transactions or Arrangements.  Except as set forth on Schedule 5.22(a),
no partner, shareholder, member, manager, officer, director, employee or other
Affiliate of any Shareholder, the Company or any of its Subsidiaries, nor any
spouse, former spouse, parent, sibling or child of any such Person or Affiliate
thereof, (i) is, or has been during the 12-month period immediately preceding
the date of this Agreement, involved in any business arrangement, relationship
or transaction with the Company or any of its Subsidiaries, other than an
employment relationship, (ii) is, or has been during the 12-month period
immediately preceding the date of this Agreement, a party to Contract with the
Company or any of its Subsidiaries, or (iii) will after the Closing have any
interest in any of the Assets.

 

(b)  No Other Related Party Transactions.  Except as set forth on Schedule 5.22(b),
no partner, shareholder, member, manager, officer, director, employee or other
Affiliate of any Shareholder, the Company or any of its Subsidiaries, nor any
spouse, former spouse, parent, sibling or child of any such Person or Affiliate
thereof, owns, holds or possesses, directly or indirectly, any material
financial or other interest in, or is a partner, shareholder, member, manager,
officer, director, employee or other Affiliate of (i) any Person that is a
supplier, vendor, customer, lessor, lessee, or competitor of the Company, any
of its Subsidiaries or the Business, or (ii) any other business which engages
in any transactions or other business relationships with the Company or any of
its Subsidiaries.

 

(c)  Transactions with the Shareholders and
Their Affiliates.  Schedule
5.22(c) sets forth a correct and complete list and description of all
transactions between, among, involving or relating to any Shareholder or any of
their Affiliates (other than the Company) on the one hand, and the Company or
any of its Subsidiaries, on the other hand, including, without limitation, any
Guarantees, credit support or other similar transactions, and all transactions
entered into by the Company or any of its Subsidiaries that provided a benefit
to either of the Shareholders or any of their Affiliates (other than the
Company).

 

Section 5.23.  Warranties.  Schedule 5.23 sets forth a correct
and complete list and description of all oral and written warranty programs
offered by the Company or any of is Subsidiaries.  The Company has delivered to the Purchaser correct and complete
copies or descriptions of each such warranty program.  No material claim for breach of any express or implied warranty
with respect to any of the Company’s or its Subsidiaries’ products or services
has been made or, or to the Knowledge of the Company, is threatened.  Neither the Company nor any of its
Subsidiaries is contemplating the recall of any products sold by them and there
are no material defects in any such products. 
The charges, accruals and reserves on the books of the Company and its
Subsidiaries in respect of any and all warranties given by the Company and its
Subsidiaries were calculated in a manner consistent with GAAP and are adequate.

 

Section 5.24.  Brokers,
Finders.  Except for Bear, Stearns
& Co. Incorporated, the fees and expenses of which will be paid entirely by
the Shareholders, neither the Shareholders, the Company nor any of their
Subsidiaries has retained any broker or finder in connection with the
Transactions, and is not obligated and has not agreed to pay any brokerage or
finder’s commission, fee or similar compensation.

 

55

 

Section 5.25.  Solvency
of the Company.  As of the date of
this Agreement, and as of the Effective Time, before and after giving effect to
the Transactions, the Company is, and will be, Solvent.

 

Section 5.26.  Misstatements.

 

(a)  No Material Misstatements or Omissions.  No information, certificate, schedule or
report furnished or to be furnished (as of the date furnished) by any
Shareholder, the Company or any of its Subsidiaries (or by their employees,
representatives, counsel, accountants or other professionals) to the Purchaser
or to its representatives in connection with (i) the Transactions, (ii) the
preparation or negotiation of any Sale Document or (iii) the satisfaction of
any conditions set forth in any Sale Document and no representation or warranty
contained in the Sale Documents, contains or will contain, as the case may be,
any material misstatement of fact or omitted or will omit, as the case may be,
to state a material fact or any fact necessary to make the statement contained
therein not materially misleading; provided, however, that this
Section 5.26(a) shall not apply to any projections or forward-looking financial
data covered by Section 5.26(b) hereof.

 

(b)  Projections.  All projections and forward-looking
financial data provided to the Purchaser or its representatives by or on behalf
of the Company or any of its Subsidiaries (or by their employees, representatives,
counsel, accountants or other professionals) were prepared in good faith and
are based on underlying assumptions which the Shareholders and the Company
reasonably believe provide a reasonable basis for the projections contained
therein.  Such projections have been
prepared on the basis of the assumptions set forth therein, which the
Shareholders and the Company reasonably believe are fair and reasonable.

 

Section 5.27.  Full
Disclosure.  There are no facts
pertaining to the Company, its Subsidiaries, the Assets or the Business which
could reasonably be expected to have a Material Adverse Effect and which have
not been disclosed in this Agreement. 
There is no information which would materially contradict or is
inconsistent in any material respect with any representation or warranty of the
Shareholders or the Company contained in the Sale Documents.

 

ARTICLE VI

 

Representations and Warranties of the Shareholders

 

The Shareholders, jointly
and severally, hereby represent and warrant to the Purchaser as of the date
hereof and as of the Closing Date as follows:

 

Section 6.01.  Existence
and Power.  Each Shareholder (a) is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and (b) has all necessary
corporate power and authority to execute and deliver each of the Sale Documents
and to consummate the Transactions and to perform its obligations under the
Sale Documents.

 

56

 

Section 6.02.  Authorization;
Binding Effect.  The execution and
delivery by each Shareholder of each of the Sale Documents to which any
Shareholder is a party, the performance by the Shareholders of their
obligations under such Sale Documents and the consummation of the Transactions
by the Shareholders has been duly authorized by all necessary corporate action
on the part of the Shareholders.  Each
of the Sale Documents to which any Shareholder is or may become a party is, or,
when executed and delivered in accordance with this Agreement will be, legal,
valid and binding obligations of the Shareholders enforceable against the
Shareholders in accordance with its terms, except that such enforcement (a) may
be limited by bankruptcy, insolvency, moratorium or similar laws affecting
creditors’ rights generally and (b) is subject to the availability of equitable
remedies, as determined in the discretion of the court before which such a
proceeding may be brought.

 

Section 6.03.  Contravention.  Neither the execution, delivery and
performance of the Sale Documents by each Shareholder nor the consummation of
the Transactions by the Shareholders will (with or without notice or lapse of
time or both) (a) violate or breach any provision of any Shareholder’s
organizational or governing documents, (b) assuming the receipt of all of the
Company Required Consents prior to the Closing, violate or breach any material
Law by which any Shareholder or any of their material assets or properties may
be bound or affected, or (c) assuming the receipt of all of the Company
Required Consents prior to the Closing, breach or result in a default under,
result in the acceleration of, or give rise to a change in the terms of or a
right of termination, cancellation, modification or acceleration or require any
notice under, any material Contract to which any Shareholder is a party or by
which any Shareholder or any of their material assets or properties, may be
bound or affected.

 

Section 6.04.  Consents.  Except for the Consents set forth on Schedule
6.04 and any Consents required under the HSR Act, no material Consents are
required or advisable on behalf of the Shareholders in connection with (a) the
due execution and delivery by the Shareholders of the Sale Documents and the
performance of the Shareholders’ obligations thereunder, (b) the consummation
of the Transactions by the Shareholders, (c) the exercise by the Purchaser of
its rights and remedies under the Sale Documents, and (d) the (i) conduct of
the Business and (ii) ownership or use of the Assets, by the Purchaser and its
Subsidiaries immediately following the Closing Date.  As of the Closing Date, all of the Company Required Consents will
have been obtained and will be in full force and effect.

 

Section 6.05.  Litigation.  There is no Action against any Shareholder
or, to the Knowledge of the Company, any other Person (not including the
Purchaser), that involves any of the Transactions that, individually or in the
aggregate, if determined adversely to any Shareholder, could reasonably be expected
to have a Material Adverse Effect.

 

Section 6.06.  Title
to Securities.  The Parent is the
sole record, legal and beneficial owner of 100% of the outstanding shares of
capital stock of NGC.  The Parent’s
right, title and interest in such capital stock of NGC is free and clear of all
Liens, voting trusts, voting Contracts and restrictions of any nature
whatsoever.  Except as set forth on
Schedule 6.06, NGC is the sole record, legal and beneficial owner of (i) 100% of
the outstanding shares of Series B, Series C, Series F and Series G preferred
stock of the Company, and (ii) 100% of the outstanding capital

 

57

 

stock of NCC.  NCC is the sole
record, legal and beneficial owner of all of the outstanding shares of Class B
common stock of the Company, of which 3% of such Class B common stock is
subject to a warrant in favor of a third party.  NGC’s and NCC’s respective rights, title and interest in such
capital stock of the Company, and NGC’s right, title and interest in the
capital stock of NCC, are each free and clear of all Liens, voting trusts,
voting Contracts and restrictions of any nature whatsoever other than as set
forth above.  Such shares of Preferred
Stock and Common Stock are all the Securities of any kind, debt or equity, of
the Company owned by NGC and NCC other than intercompany loans payable by the
Company to any of the Shareholders.

 

ARTICLE VII

 

Representations and Warranties of the Purchaser

 

The Purchaser represents
and warrants to the Shareholders and the Company as of the date hereof and as
of the Closing Date as follows:

 

Section 7.01.  Existence
and Power.  The Purchaser (a) is a
corporation, validly existing and in good standing under the laws of the
jurisdiction of its organization, and (b) has all necessary corporate power to
execute and deliver each of the Sale Documents and to consummate the
Transactions and to perform its obligations under the Sale Documents.

 

Section 7.02.  Authorization;
Binding Effect.  The execution and
delivery by the Purchaser of each of the Sale Documents to which the Purchaser
is a party, the performance by the Purchaser of its obligations under such Sale
Documents and the consummation of the Transactions by the Purchaser has been
duly authorized by all necessary corporate action on the part of the
Purchaser.  Each of the Sale Documents
to which the Purchaser is or may become a party is, or, when executed and
delivered in accordance with this Agreement will be, legal, valid and binding
obligations of the Purchaser enforceable against the Purchaser in accordance
with its terms, except that such enforcement (a) may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting creditors’ rights generally
and (b) is subject to the availability of equitable remedies, as determined in
the discretion of the court before which such a proceeding may be brought.

 

Section 7.03.  Contravention.  Neither the execution, delivery and
performance of the Sale Documents by the Purchaser nor the consummation of the
Transactions by the Purchaser will (with or without notice or lapse of time or
both) (a) violate or breach any provision of the Purchaser’s organizational or
governing documents, (b) assuming the receipt of all of the Purchaser Required
Consents prior to the Closing, violate or breach any material Law by which the
Purchaser or any of its material assets or properties, may be bound or
affected, or (c) assuming the receipt of all of the Purchaser Required Consents
prior to the Closing, conflict with, breach or result in a default under, any
material Contract to which the Purchaser is a party or by which the Purchaser
or any of its material assets or properties, may be bound or affected.

 

Section 7.04.  Consents.  No material Consents are required on behalf
of the Purchaser in connection with (a) the due execution and delivery by the
Purchaser of the Sale Documents and the performance of the Purchaser’s
obligations thereunder, and (b) the consummation of the

 

58

 

Transactions by the Purchaser.  As
of the Closing Date, all of the Purchaser Required Consents will have been
obtained and will be in full force and effect.

 

Section 7.05.  Litigation.  There is no Action against the Purchaser or,
to the Purchaser’s knowledge, any other Person (not including the Company or
the Shareholders), that involves any of the Transactions that, individually or
in the aggregate, if determined adversely to the Purchaser, could reasonably be
expected to materially and adversely affect the ability of the Purchaser to
perform its obligations under the Sale Documents or to consummate the
Transactions.

 

Section 7.06.  Financing.  As of the date of this Agreement, and as of
the Closing Date, the Purchaser has, or has readily available pursuant to binding
commitments, funds in an amount sufficient to enable the Purchaser to pay the
Cash Purchase Price.

 

Section 7.07.  No
Other Representations or Warranties. 
The Purchaser acknowledges that neither the Company, any of the
Shareholders nor any of their Affiliates is making any representation or
warranty,  express or implied, about or
with respect to the Company, its Subsidiaries, the Assets, the Business or the
Shareholders, except for the representations and warranties set forth in the
Sale Documents and in the exhibits, annexes and schedules thereto, and in any
certificates delivered thereunder.

 

ARTICLE VIII

 

Pre-Closing Covenants of the Shareholders, the Company and the Purchaser

 

Section 8.01.  Conduct
of Business Pending Closing.  Each
of the Shareholders and the Company, jointly and severally, agree that, from
the date of this Agreement through the earlier to occur of (x) the Closing
Date, and (y) the date on which this Agreement is terminated in accordance with
the provisions of Section 10.01 hereof, the Company will, the Shareholders will
cause the Company and its Subsidiaries to, and the Company will cause its
Subsidiaries to:

 

(a)  Conduct of Business.  Conduct the business of the Company and its
Subsidiaries in a manner consistent with the past practices of the Company and
its Subsidiaries and neither the Company nor any of its Subsidiaries will
engage in any transactions out of the ordinary course of business consistent
with past practice.

 

(b)  Payment of Obligations.  Subject to Section 8.01(g) hereof, cause the
Company and its Subsidiaries to promptly and timely pay and discharge in the
ordinary course of the Company’s business consistent with past practice, all
Taxes and other material obligations assessed, levied or imposed upon, or
required to be withheld by, or otherwise owing by, the Company, its
Subsidiaries or with respect to the Assets or the Business and shall not incur,
assume, guarantee or otherwise become liable for any additional Debt, except
for Capitalized Leases and Debt under the Congress Credit Agreement.

 

59

 

(c)  Material Contracts.  Perform and observe all of the material
terms and provisions of each Material Contract to be performed or observed by
it, enforce each Material Contract in accordance with its terms and not enter
into or terminate any Material Contracts or make any material amendments or
modifications to any Material Contracts. 
Notwithstanding the foregoing, (i) from the date of this Agreement
through the Closing Date, the maintenance Contracts entered into by the Company
and its Subsidiaries shall have a weighted average life of not less than 33
months, (ii) all maintenance Contracts shall be entered into in the ordinary
course of business consistent with past practice, (iii) neither the Company nor
any of its Subsidiaries shall enter into any maintenance Contracts, providing
for special incentives, rebates or excessive up-front payments or other
non-ordinary course incentives, and (iv) without the prior written consent of
the Purchaser (which consent shall not be unreasonably withheld or delayed)
neither the Company nor any of its Subsidiaries shall offer any member of their
sales force any special incentives, commissions or other similar items to sell
maintenance Contracts.  In addition,
neither the Company nor any of its Subsidiaries shall amend or modify any terms
or provisions of their organizational or governing documents.

 

(d)  Representations and
Warranties; Conditions.  Not engage
in any practice, take any action, fail to take any action or enter into any
transaction that could reasonably be expected to (i) cause any of the
representations and warranties of the Shareholders or the Company contained in
the Sale Documents, including, without limitation, those contained in Section
5.11 hereof, to be untrue, inaccurate or incorrect in any material respect at
any time, or (ii) result in any of the conditions set forth in Section 4.03 not
being satisfied on or prior to the Purchaser Outside Date.

 

(e)  Sale of Assets; Liens.  Not (i) Transfer any of the Assets, except
Inventory sold or disposed of in the ordinary course of business consistent
with past practice, (ii) dispose of, or trade in, any of the Equipment or
Fixtures, or (iii) create, incur, assume, or suffer to exist any Lien upon or
with respect to any of the Assets, except for Permitted Liens.

 

(f)  Compensation.  Not increase the aggregate amount of
compensation or benefits of the directors, officers or employees of the Company
or any of its Subsidiaries, including, without limitation, base salaries and
bonuses of all types, whether paid or accrued.

 

(g)  Restricted Payments;
Affiliate Transactions; Securities. 
Not (i) declare or make any Restricted Payment, (ii) issue, sell or
grant any Securities of the Company or any of its Subsidiaries; provided,
however, that during the period from the date of this Agreement up to
the Closing Date, the Company may issue additional Equity Securities
representing not more than 25% of the outstanding Equity Securities of the
Company in the aggregate, (iii) sell, acquire, redeem, repurchase or amend the
terms of any Securities of the Company or any of its Subsidiaries, except in
each case, in connection with the termination of the Company’s stock option
plan, (iv) loan or advance any funds, or any goods or property to, any
Shareholder or any of their Affiliates, (v) make any payments or otherwise
Transfer any consideration to any Shareholder or any of their Affiliates,

 

60

 

whether on account of any
Liability or otherwise, or permit any Shareholder or any of their Affiliates
to, (vi) engage in any transaction with any Shareholder or any of their
Affiliates, (vii) engage in any transaction for the benefit of either of the
Shareholders or any of their Affiliates (other than the Company), or (viii)
purchase or acquire any Securities of any Person; provided, however,
that notwithstanding the foregoing, from the date of this Agreement through the
Closing Date, the Company may make an aggregate of $2,000,000 of payments to
the Shareholders.

 

Section 8.02.  Access
to Information; Cooperation.

 

(a)  Access to Information.  (i) 
Each Shareholder and the Company, jointly and severally, understand and
acknowledge that the Purchaser has not completed its examination of the
Company, its Subsidiaries, the Assets and the Business and therefore requires
continuous reasonable access to the Company, its Subsidiaries, the Assets and
the Business, from the date of this Agreement through the earlier to occur of
(x) the Closing Date and (y) the date on which this Agreement is terminated in
accordance with the provisions of Section 10.01 hereof.

 

(ii)  Each Shareholder and the Company, jointly
and severally, agree that during the period from the date of this Agreement
through the earlier to occur of (x) the Closing Date and (y) the date on which
this Agreement is terminated in accordance with the provisions of Section 10.01
hereof, the Company will, the Shareholders will (only with respect to
information relating to the Company and its Subsidiaries), the Parent will
cause NGC and NCC (only with respect to information relating to the Company and
its Subsidiaries) to, NGC and NCC will cause the Company and its Subsidiaries
to, the Company will cause its Subsidiaries to, and the Company and each of the
Shareholders will cause their respective Affiliates, directors, officers,
employees, accountants, counsel, consultants, investment bankers and other
representatives to:

 

(A)  upon reasonable notice to the Company, give the Purchaser and its
authorized representatives, including, without limitation, investors, lenders,
environmental consultants and advisors, and respective authorized employees,
accountants, counsel and other representatives of any of the foregoing (I)
during normal business hours, reasonable access to all plants, offices,
personnel (including the Persons responsible for the preparation of Tax
Returns), warehouses, facilities, properties, books, Contracts, commitments and
records (including accountant’s work papers) of or relating to the Company and
its Subsidiaries, including, without limitation, the Assets and the Business,
and (II) such financial and operating data and other information with respect
to the Business and the Assets as any of them may from time to time reasonably
request; and

 

(B)  permit the Purchaser and its
authorized representatives, including, without limitation, investors, lenders,
environmental consultants and advisors, and respective authorized employees,
accountants, counsel and other representatives of any of the foregoing to make
such inspections thereof as any of them may reasonably request, including,
without limitation, the real estate and facility audit that is currently in
progress and an Environmental Site Assessment of the Current Properties and
environmental compliance audits.

 

61

 

(b)  Cooperation. Each Shareholder and the
Company, jointly and severally, agree that during the period from the date of
this Agreement through the earlier to occur of (x) the Closing Date and (y) the
date on which this Agreement is terminated in accordance with the provisions of
Section 10.01 hereof, the Company will, the Shareholders will, the Parent will
cause NGC to, NGC will cause the Company and its Subsidiaries to, the Company
will cause its Subsidiaries to, and the Company and each Shareholder will cause
their respective Affiliates, directors, officers, employees, accountants,
counsel, consultants, investment bankers and other representatives to cooperate
with the Purchaser and its representatives in carrying out the Transactions.

 

Section 8.03.  Disclosure
Schedules.

 

(a)  Updating of Disclosure Schedules.  Each Shareholder and the Company, jointly
and severally, agree that during the period from the date of this Agreement
through the earlier to occur of (x) the Closing Date and (y) the date on which
this Agreement is terminated in accordance with the provisions of Section 10.01
hereof, the Company will promptly notify the Purchaser of (i) any and all
information, facts, events, circumstances, issues or other matters that existed
as of the date of this Agreement that should have been set forth or described
in the schedules to this Agreement required or provided for under Articles V or
VI of this Agreement as of the date of this Agreement by delivery of
appropriate updates to the Schedules attached to this Agreement setting forth
such information, facts, events, circumstances, issues or other matters, and
(ii) any and all information, facts, events, circumstances, issues or other
matters arising after the date of this Agreement which, if existing on the date
of this Agreement, would have been required to be set forth or described in the
schedules to this Agreement required or provided for under Articles V and VI
hereof, in each case, by delivery of appropriate updates to the Schedules
attached to this Agreement setting forth such information, facts, events,
circumstances, issues or other matters, in each case, no later than two
Business Days prior to the scheduled Closing Date (any such updates to the
Schedules being referred to herein as “Schedule Updates”).

 

(b)  Effect of Schedule Updates.  Notwithstanding anything to the contrary set
forth herein, no delivery of the Schedule Updates by the Company shall limit,
restrict, or otherwise affect the schedules previously delivered under this
Agreement, nor shall such delivery of the Schedule Updates affect the rights of
the Purchaser or the obligations or liability of the Company or the Shareholders
hereunder with respect to the schedules previously delivered under this
Agreement.

 

Section 8.04.  Reporting
Requirements.  Each Shareholder and
the Company, jointly and severally, agree that during the period from the date
of this Agreement through the earlier to occur of (x) the Closing Date and (y)
the date on which this Agreement is terminated in accordance with the
provisions of Section 10.01 hereof, the Company will prepare and promptly (and
in any event not later than 15  Business Days following the end of the
month to which a statement relates) deliver to the Purchaser monthly financial
statements for the Company and its Subsidiaries, on a consolidated basis, as
well as detailed back-up schedule therefor. 
These monthly financial statements will be prepared in accordance with
GAAP and in a manner consistent with the basis of presentation used in the
financial statements referred to in Section 5.07.

 

62

 

Section 8.05.  Resignations.  On the Closing Date, the Company and the
Shareholders shall cause to be delivered to the Purchaser duly signed
resignations, effective as of the Effective Time, of all of the directors and
officers of each of the Company’s Subsidiaries set forth on a list delivered to
the Company prior to the Closing Date, and shall take such other actions as are
necessary to accomplish the foregoing.

 

Section 8.06.  Certain
Agreements.

 

(a)  Agreement.  The Shareholders, the Company and the Purchaser agree to accept
the form, terms and provisions of the Assumption Agreement, the Escrow
Agreement, the Transitional Services Agreement, the Bills of Sale, the
Assignment and Assumption Agreement, the Intellectual Property Assignment
Agreement, the legal opinions and the Deeds as provided to them with such
changes as they shall mutually agree upon.

 

(b)  Transitional Services Agreement.  The Parent agrees that it will enter into
the Transitional Services Agreement with the Purchaser, pursuant to which the
Parent will agree to provide the Purchaser with certain insurance and tax
services and such other services as may mutually be agreed by the Purchaser and
the Parent.

 

(c)  Vendor Deposits.  The Purchaser agrees, during the period from
the date of this Agreement, through the Closing Date, to use its reasonable
best efforts to reduce or eliminate the Vendor Deposits, and for every dollar
of Vendor Deposits for which the Purchaser receives reasonably satisfactory
evidence that such Vendor Deposits will be reduced or eliminated by the
Purchaser during such period, the Required Net Current Asset Amount shall be
reduced by an amount (such amount being the “Vendor Deposit Reduction Amount”)
equal to the product of (i) 80%, multiplied by (ii) the aggregate dollar amount
of Vendor Deposits reduced or eliminated by the Purchaser during such
period.  For purposes of this Agreement
the term “Vendor Deposit” means the letters of credit set forth on Schedule
8.06(c).

 

ARTICLE IX

 

Covenants of the Shareholders, the Company and the
Purchaser

 

Section 9.01.  Public
Announcements; Confidentiality.

 

(a)  Public Announcements.  The Shareholders, the Company and the
Purchaser agree that except as required by applicable Laws or a listing
agreement with a national securities exchange, without the prior written
consent of the other parties hereto, the Parent will not, NGC will not, the
Company will not, the Parent will cause NGC not to, NGC will cause the Company
and the Company Parties not to, the Company will cause its Subsidiaries not to,
nor will the Purchaser or any manager, member, partner, shareholder, director,
officer, employee or other agent or representative of the Purchaser, make (i)
any press release or any similar public announcement concerning the
Transactions, or (ii) any general communication to any of the Shareholders’,
the Company’s or any of its Subsidiaries’ employees, customers, suppliers,
lenders, creditors, distributors or others having business or financial
relationships with the

 

63

 

Shareholders, the Company or any of its Subsidiaries, or any other public
statement, pertaining to the Sale Documents or the Transactions.

 

(b)  Confidentiality.  The Shareholders, the Company and the
Purchaser agree that the Confidentiality Agreement shall survive the execution
and delivery of this Agreement and remain in full force and effect; provided,
however, that such Confidentiality Agreement shall terminate and be of
no further force or effect as of the Effective Time; and provided, further,
however, that notwithstanding any provision of the Confidentiality
Agreement to the contrary, until the termination of this Agreement pursuant to
the provisions of Section 10.01:

 

(i)  the Purchaser shall have the
right to meet with and interview the customers, clients, suppliers and vendors
of the Company and its Subsidiaries so long as (A) the Purchaser provides the
Company with prior notice of any such meeting relating to the Transactions or
the Company and offers a representative of the Company the opportunity to
participate in such meeting, and (B) in the event of an unsolicited call from a
customer, client, supplier or vendor, the Purchaser may discuss the Transaction
and the Company with such Person so long as promptly after such calls the
Purchaser promptly informs the Company of the substance of such calls; and

 

(ii)  the Purchaser shall be
entitled to meet with, and make any necessary disclosures to, any Governmental
Body in order to obtain any Consents or Permits necessary to (A) consummate the
Transactions or (B) allow the Company and its Subsidiaries to operate the
Business immediately following the Closing without interruption.

 

Section 9.02.  Certain
Tax Disclosures.  Notwithstanding
anything to the contrary set forth in the Sale Documents the obligations of
confidentiality contained herein or in any other agreement to which the parties
hereto are parties, as they relate to the Transactions, shall not apply to the
tax structure or tax treatment of the Transactions, and each party hereto (and
any employee, representative, or agent of any party hereto) may disclose to any
and all Persons, without limitation of any kind, the tax structure and tax
treatment of the Transactions and all materials of any kind (including, without
limitation, opinions or other tax analyses) that are provided to such Persons
relating to such tax treatment or tax structure; provided, that such disclosure
may not be made until the earliest of (x) the date of the public announcement
of discussions relating to the Transactions, (y) the date of the public announcement
of the Transactions, and (z) the date of the execution of this Agreement.  The preceding sentence is intended to cause
the Transactions to be treated as not having been offered under conditions of
confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor
provision)  of the Treasury Regulations
promulgated under Section 6011 of the Code, and shall be construed in a manner
consistent with such purpose.

 

Section 9.03.  Non-Competition.

 

(a)  Acknowledgment.  In order to induce the Purchaser to purchase
the Purchased Assets and assume the Assumed Liabilities as provided in the Sale
Documents and to consummate the Transactions and in consideration of the
payments made or to be made by the Purchaser to the

 

64

 

Company under the Sale Documents and to protect the goodwill of the
Business, each of the Company and the Shareholders (i) agrees to be bound by
the terms and provisions of this Section, (ii) agrees, represents and warrants
that the Company and the Shareholders have read and given careful consideration
to all of the terms and provisions of this Section, and agrees that the terms
and provisions of this Section are reasonable with respect to the subject
matter thereof and necessary for the reasonable and proper protection of the
Confidential Information, legitimate business interests and goodwill of the
Purchaser, its Subsidiaries, the Business and the Assets, and (iii)
acknowledges that the Purchaser agreed to enter into the Sale Documents in
reliance on the representations, agreements and covenants of the Company and
the Shareholders to abide by and be bound by the terms and provisions of this
Section.

 

(b)  Confidential Information.  Except as may be required by applicable Law
or required by any legal proceeding, each of the Company and the Shareholders,
jointly and severally, agrees during the Non-Compete Period, not to, and agrees
to cause its Affiliates, directors, officers, employees or agents or any
investment banker, financial advisor, attorney, accountant, representative, and
any other Person acting on behalf of the Company or the Shareholders not to,
directly or indirectly, disclose, reveal, divulge, publish or otherwise make
known any of the Confidential Information to any Person for any reason or
purpose whatsoever, or use any of the Confidential Information for any reason
or purpose whatsoever at any time from and after the Effective Time.  In addition, and subject to the foregoing,
each of the Company and the Shareholders, jointly and severally, agrees during
the Non-Compete Period, to treat the Confidential Information as confidential
at all times.  Each of the Company and
the Shareholders, jointly and severally, agrees to be fully responsible for any
breach of this Section by any of its Affiliates, directors, officers, employees
or agents or any investment banker, financial advisor, attorney, accountant,
representative, or any other Person acting on behalf of such the Company or the
Shareholders.

 

(c)  Restrictive Covenant.  Each of the Company and the Shareholders,
jointly and severally, agrees that during the Non-Compete Period, neither the
Company nor any Shareholder, nor any Affiliate thereof will, except in
connection with the discharge of any Excluded Liabilities, engage, or hold any
direct or indirect financial interest in any Person that engages, or assist any
Person in engaging, either directly or indirectly, individually, or as a
director, officer, employee, shareholder, manager, member, partner, owner,
trustee, agent, consultant, independent contractor, investor, lender or
principal, or in any other capacity, in any Competing Business in any city,
county, state, country or other territory or jurisdiction anywhere in North
America; provided, however, that the passive ownership by the
Company or any Shareholder of not more than 3.0% of any class of equity
securities of any corporation that engages in a Competing Business, if such
equity securities are listed on a national securities exchange or have been
registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended, will not be deemed to be a breach of this Section.

 

(d)  Non-Solicitation.  Each of the Company and the Shareholders,
jointly and severally, agrees that during the Non-Compete Period, neither the
Company nor any Shareholder, nor any Affiliate thereof will, in any manner,
directly or indirectly:

 

65

 

(i)  solicit, induce or attempt to
induce, or assist others to solicit, hire, induce or attempt to induce, any
employee, contractor, consultant or agent of the Purchaser or any of its
Subsidiaries to either (A) leave his or her employment, consulting or other
position or business relationship with the Purchaser or any of its
Subsidiaries, or (B) breach his or her employment, consulting or other
agreement with the Purchaser or any of its Subsidiaries; provided, however,
that the foregoing provision shall not prohibit the Company or the Shareholders
from hiring any such employee, contractor, consultant or agent (x) through
general advertising that is not targeted directly at the Purchaser or any of
its Subsidiaries, or (y) whose employment or business relationship with the
Purchaser or any of its Subsidiaries is terminated by the Purchaser or any of
its Subsidiaries, as the case may be; or

 

(ii)  solicit, induce or attempt to
induce or assist others to solicit, induce or attempt to induce, any customer,
supplier, vendor, contractor or client associated with the Purchaser’s or its
Subsidiaries’ businesses to terminate its, his or her business relationship or
association with the Purchaser or any of its Subsidiaries, or make any
disparaging, derogatory or detrimental comments about the Purchaser, any of its
Subsidiaries, any of their employees, directors, officers or Affiliates, any
customer or client or other Person having a business relationship with the
Purchaser or any of the Purchaser’s Subsidiaries.

 

(e)  Non-Compete Payments.  (i) 
As partial consideration for the agreements and covenants of the
Shareholders and the Company set forth in this Section 9.03, upon the terms and
subject to the conditions of this Agreement, if the term of the Maintenance Fee
Agreement is extended beyond March 31, 2005 (the portion of the extended term
beginning on April 1, 2005 through the newly-extended termination date of the
Maintenance Fee Agreement being the “Extended Term”), then the Purchaser
shall make payments to the Company as follows. 
During the Extended Term, within 30 days after a payment received by the
Purchaser from Avaya under the Maintenance Fee Agreement with respect to
services provided by the Purchaser during the Extended Term becomes
non-refundable and non-disgorgeable by the Purchaser, the Purchaser shall pay
to the Company (each such payment being a “Non-Compete Payment”), by
wire transfer of immediately available funds, an amount equal to 20% of each
such payment that is actually received by the Purchaser.  For the avoidance of doubt, no Non-Compete
Payments shall be made in respect of any payments received by the Purchaser for
services or maintenance provided outside of the Extended Term, even if such
payments are actually received by the Purchaser during the Extended Term.

 

(ii)  If for any reason, the Purchaser is required
to set-off, refund, reimburse or disgorge to Avaya any payment for which the
Purchaser has made a Non-Compete Payment, the Shareholders and the Company
shall immediately refund to the Purchaser the Non-Compete Payment made in
respect of such set-off, refunded, reimbursed or disgorged payment.  Alternatively, the Purchaser shall have the
right to set off such Non-Compete Payment against any other Non-Compete Payment
that may be due hereunder, or against any other payment that may be due under
any of the Sale Documents, including, without limitation, the Purchaser Note.

 

66

 

(iii)   During the Extended Term and for a period
of six months thereafter, upon reasonable notice to the Purchaser, the
Purchaser shall permit the Company and its representatives reasonable access to
the Purchaser’s books and records relating to the Non-Compete Payments and the
Maintenance Fee Agreement, for the purpose of confirming the Purchaser’s
calculations of the Non-Compete Payments hereunder.

 

(f)  Enforcement.  Notwithstanding any other provision of the
Sale Documents, if, at the time of enforcement of any provision of this
Section, a court should hold that the duration or scope restrictions stated
herein are unreasonable or unenforceable under circumstances then existing, the
parties agree that the maximum duration or scope permitted by applicable Law
under such circumstances will be substituted for the stated duration or
scope.  Whenever possible, each
provision of this Section will be interpreted in such manner as to be effective
and valid under applicable law.  If the
provisions of this Section are held unenforceable to any extent in any
jurisdiction, such holding shall not impair the enforceability of this Section
in any other jurisdiction.

 

(g)  Name Change.  Immediately following the Closing, and at all
times thereafter, the Company, its Subsidiaries and the Shareholders will cease
using any corporate names or tradenames that include “Expanets” (or any
substantially similar names). 
Immediately following the Closing, the Shareholders will change the
corporate name of the Company and each of its Subsidiaries to names that do not
include “Expanets” (or any substantially similar names).

 

Section 9.04. [Reserved]

 

Section 9.05.  Release.  Each Shareholder, on behalf of itself and
its Subsidiaries and Affiliates, hereby agrees, effective upon the Closing and
without the need of any further notice or action, that (a) the Purchaser and
its Subsidiaries and Affiliates are hereby released and forever discharged from
any and all Liabilities, obligations, claims, demands, proceedings, Actions,
Contracts, agreements, Debt and Guarantees whatsoever, whether known or
unknown, suspected or unsuspected, both in law and in equity, that any
Shareholder, or any of their Subsidiaries or Affiliates now have, have ever had
or may hereafter have arising contemporaneously with or prior to the Closing
Date or on account of or arising out of any Debt or Liability owed by the
Company or any of its Subsidiaries to any of the Shareholders or any of their
Subsidiaries or any of their Affiliates (collectively, “Claims”), and
(b) any and all Liens, if any, which any Shareholder or any of its Subsidiaries
or Affiliates may have on the assets of the Purchaser or any of its
Subsidiaries and Affiliates in respect of the Claims are hereby automatically
and irrevocably released; provided, however, that,
notwithstanding the foregoing, this release does not cover, and the
Shareholders shall not be deemed to release the Purchaser from, any and all
Claims the Shareholders may have or be entitled to, under any of the Sale
Documents.  Each Shareholder, on behalf
of itself and its Subsidiaries and Affiliates, hereby represents and warrants
to the Purchaser that neither the Shareholders nor any of their Subsidiaries or
Affiliates has Transferred or purported to Transfer to any Person all or any
portion of any Claim released by the Shareholders and their Subsidiaries and
Affiliates herein.  This Section 9.05
shall not prohibit or in any way restrict the Shareholders’ rights and ability
to make a Claim or demand for payment directly against the Company or its
Subsidiaries of the amounts or claims owed by the Company or its Subsidiaries
to the Shareholders.

 

67

 

Section 9.06.  Use
of Proceeds.  The Company and the
Shareholders, jointly and severally, hereby agree that the Parent will cause
NGC to, NGC will cause the Company to, and the Company will use the proceeds
from the Transactions to, subject to any defenses, claims, set-offs or other
rights or mutual agreements the Company and the Shareholders may have, repay
the Company’s creditors in accordance with applicable Laws and the terms of any
agreements the Company may have with such creditors.

 

Section 9.07.  Certain
Leases.  The Shareholders and the
Company will cause the leases set forth on Schedule 9.07 that are marked
with an asterisk (each such lease being a “Required Lease”) to be
assigned (including all security deposits in connection with such leases) to
the Purchaser at the Closing.  With
respect to all other leases (such other lease being the “Other Leases”)
set forth on Schedule 9.07 (other than the Required Leases), the
Shareholders and the Company will use their respective reasonable best efforts
to cause such Other Leases to be assigned (including all security deposits in
connection with such leases) to the Purchaser at the Closing; provided, however,
that the failure of the Shareholders and the Company to cause all of the Other
Leases to be assigned to the Purchaser shall not be considered to be a breach
of this Agreement.  In any event, the
Company will cause all of the Other Leases to be assigned to the Purchaser
within 60 days following the Closing.

 

Section 9.08.  Bankruptcy
Proceedings.

 

(a)  [Intentionally Omitted]

 

(b)  Additional Orders.  In the event of a bankruptcy or similar
proceeding with respect to NCC or NGC (either such entity being the “Filing
Entity”), the Shareholders and the Company, jointly and severally, agree (i) to
file as promptly as practicable a motion in form and substance reasonably
satisfactory to the Purchaser with the bankruptcy court in which such
bankruptcy or similar proceeding is filed, seeking an order in form and
substance reasonably satisfactory to the Purchaser, providing for the approval
of all of such Filing Entity’s obligations under this Agreement and the
authorization of such Filing Entity to perform all of its obligations under
this Agreement as promptly as practicable, (ii) to use their commercially
reasonable best efforts to cause as promptly as practicable a hearing on such
motion to be held as promptly as practicable and (iii) to use their
commercially reasonable best efforts to cause as promptly as practicable such
bankruptcy court to approve such Filing Entity’s obligations under this
Agreement as promptly as practicable, but in no event later than the earlier to
occur of (x) the date which is twenty days after the date of such bankruptcy
filing, and (y) the date which is three Business Days prior to the Closing Date
(such earlier date being the “Filing Entity Order Date”).

 

(c)  Parent Order.  The Shareholders and the Company, jointly
and severally, agree that they shall (i) file with the Delaware Bankruptcy
Court in connection with the Parent’s bankruptcy proceedings a motion (the
“Parent Motion”), in form and substance reasonably satisfactory to the
Purchaser, seeking an order (the “Parent Order”) in form and substance
reasonably satisfactory to the Purchaser, providing for the approval of all of
the Parent’s obligations under the Sale Documents and the authorization of the
Parent to perform all of its obligations under the Sale Documents, (ii) use
their commercially reasonable best efforts to

 

68

 

cause a hearing on the Parent Motion to be held as promptly as practicable
on or prior to the Closing Date and (iii) use their commercially reasonable
best efforts to cause the Delaware Bankruptcy Court to approve the Parent
Motion and enter the Parent Order as promptly as practicable on or prior to the
Closing Date.

 

(d)  Subsequent Filing Entity Order.  The Shareholders and the Company, jointly
and severally, agree that they shall with respect to each Filing Entity (i)
file with the bankruptcy court in which each such Filing Entity’s bankruptcy or
similar proceedings are filed a motion (the “Filing Entity Motion”), in form
and substance reasonably satisfactory to the Purchaser, seeking an order (the
“Filing Entity Order”) in form and substance reasonably satisfactory to the
Purchaser, providing for the approval of all of such Filing Entity’s
obligations under the Sale Documents and the authorization of such Filing
Entity to perform all of its obligations under the Sale Documents, (ii) use
their commercially reasonable best efforts to cause a hearing on the Filing
Entity Motion to be held as promptly as practicable on or prior to the Closing
Date and (iii) use their commercially reasonable best efforts to cause such
bankruptcy court to approve the Filing Entity Motion and enter the Filing
Entity Order as promptly as practicable on or prior to the Closing Date.

 

Section 9.09. Financial Statements.   After the date hereof, the Company and the
Parent will (a) request Deloitte & Touche LLP to prepare and deliver for
the benefit of Purchaser all material financial statements required by
Purchaser to satisfy its obligations under Rule 3.05 of Regulations S-X with
respect to filings to be made by it with the Securities and Exchange
Commission, including, without limitation, (i) audited consolidated balance
sheets of the Company and its Subsidiaries as of December 31, 2002, 2001 and
2000 and (ii) audited consolidated statements of operations, statements of
changes in shareholders’ equity and statements of cash flows of the Company and
its Subsidiaries for the twelve-month periods ended December 31, 2002, 2001 and
2000, and (b) deliver an unaudited consolidated balance sheet of the Company
and its Subsidiaries as at September 30, 2003 and an unaudited consolidated
statement of operations, statement of changes in shareholders’ equity and
statement of cash flows for the period ended September 30, 2003.  The Company, the Shareholders and the Parent
shall use commercially reasonable efforts to have delivered to Purchaser an
unqualified opinion of Deloitte & Touche LLP with respect to the foregoing
audited financial statements.  The
Company will engage Deloitte & Touche LLP to commence the foregoing audit
within five days of the execution of this Agreement and will request Deloitte
& Touche LLP to proceed diligently with such audit.  Each of the Company, the Shareholders and
the Parent will make its representatives and representatives of Deloitte &
Touche LLP available to Purchaser and its representatives to answer questions
with respect to such financial statements; provided, that all reasonable costs,
expenses and fees of Deloitte & Touche LLP in connection with such audit
shall be for Purchaser’s account.

 

ARTICLE X

 

Termination and Expenses

 

Section 10.01.  Termination.  The obligations of the parties under the
Sale Documents to consummate the Transactions may be terminated at any time
prior to the Closing:

 

69

 

(a)  by the mutual consent of the
Company and the Purchaser;

 

(b)  by the Company, if (i) the
Closing shall not have occurred on or prior to the Company Outside Date, unless
such failure to consummate the Transactions is the result of a material breach
of any Sale Document by the Company or the Shareholders, or (ii) the Purchaser
shall have breached in any material respect any of its representations,
warranties, covenants or other agreements contained in the Sale Documents,
which breach (A) would give rise to the failure of a condition set forth in
Section 4.02, and (B) cannot be or has not been cured by the earlier to occur
of (x) the date which is 30 days after the giving of written notice by the
Company to the Purchaser specifying such breach, and (y) the Company Outside
Date; provided, however, that if the Purchaser shall have breached
the representation and warranty in Section 7.06, or the covenants and
agreements set forth in Sections 3.01(a), (b) or (c), the Purchaser shall not
be entitled to any cure right;

 

(c)  by the Purchaser, if (i) the
Closing shall not have occurred on or prior to the Purchaser Outside Date,
unless such failure to consummate the Transactions is the result of a material
breach of any Sale Document by the Purchaser, or (ii) the Company or any
Shareholder shall have breached in any material respect any of its representations,
warranties, covenants or other agreements contained in the Sale Documents,
which breach (A) would give rise to the failure of a condition set forth in
Section 4.03, and (B) cannot be or has not been cured by the earlier to occur
of (x) the date which is 30 days after the giving of written notice by the
Purchaser to the Company specifying such breach, and (y) the Purchaser Outside
Date;

 

(d)  by the Purchaser if (i) any Law
shall have been enacted, adopted, issued or promulgated which, prohibits the
Transactions, or (ii) any Governmental Body shall have issued an order, decree
or ruling or taken any other action, which permanently restrains, enjoins or
otherwise prohibits the Transactions, and such order, decree, ruling or other
action shall have become final and non-appealable; or

 

(e) by the Purchaser, if the conditions set forth in Section 4.03(n) is not
satisfied prior to the Purchaser Outside Date ;

 

(f)  by the Purchaser, if with
respect to each Filing Entity, the bankruptcy court in which such Filing
Entity’s bankruptcy or similar proceedings are filed shall not have approved
such Filing Entity’s obligations under this Agreement and the other Sale
Documents on or prior to the Filing Entity Order Date, or (iii) by the
Purchaser, if any of the Shareholders or the Company shall (A) reject any of
the Sale Documents in connection with a bankruptcy or similar proceeding with
respect to any of the Shareholders, the Company or any of their Subsidiaries,
(B) convert such proceeding into a Chapter 7 proceeding or other liquidation
proceeding, or (C) file a Plan of Reorganization that excludes, prohibits or
does not provide for the consummation of the Transactions.

 

70

 

Any such termination
shall be in writing delivered to the other parties hereto in accordance with
the provisions of Section 12.01 hereof.

 

Section 10.02.  Effect
of Termination.  In the event of a
termination of this Agreement under Section 10.01, this Agreement will become
void and of no further force or effect, except for the provisions of (a)
Section 9.01 relating to public disclosures, (b) Section 10.03 relating to the
payment of fees and expenses, and (c) this Section 10.02.  Except as provided in Section 10.03(e),
notwithstanding any provision of the Sale Documents to the contrary, neither
the termination of this Agreement, nor anything contained in this Section
10.02, will be deemed to release any party from any liability due to, or
prevent the other party from exercising their rights and remedies under the
Sale Documents with respect to, (i) the breach or inaccuracy of any
representation or warranty of such party set forth in the Sale Documents, or
(ii) the breach by any such party of the covenants or agreements of such party
in the Sale Documents, in each case, prior to the date of such termination.

 

Section 10.03.  Fees
and Expenses.

 

(a)  Payment of Fees and Expenses.  Subject to clauses (b), (c) and (d) below,
each of the parties hereto will be responsible for and pay its own, and prior
to the Effective Time, the Shareholders, jointly and severally, will pay or
reimburse the Company and each of its Subsidiaries for, legal, accounting,
engineering, environmental, survey and title charges and other fees and
expenses, including, without limitation, reasonable attorneys’ and accountants’
fees and expenses and the fees and expenses of financial consultants,
investment bankers, lenders and environmental consultants, incurred in
connection with the Transactions, including, without limitation, the due
diligence review, and the negotiation, preparation and execution of the Sale
Documents (collectively, all such fees and expenses being the “Fees and
Expenses”).  Without limiting the
generality of the foregoing, prior to the Closing, the Company shall obtain
final invoices from its accountants, attorneys, investment bankers, financial
advisors and other similar professionals reflecting all Fees and Expenses
payable by the Company and its Subsidiaries in connection with the
Transactions.  Prior to the Closing, the
Company shall have paid in full all such Fees and Expenses and delivered to the
Purchaser invoices from each such accountant, attorney, investment banker,
financial advisor and other professional marked “paid in full”.  The Shareholders agree that any Fees and
Expenses not paid by the Company and its Subsidiaries prior to the Closing
shall be the sole responsibility of, and shall be timely paid by, the
Shareholders.

 

(b)  Transaction Fees and Taxes.  The Company will be responsible for and will
duly and timely pay  any and all (i) filing fees, including,
without limitation, HSR Act filing fees, recording charges, registration costs
and expenses, and (ii) Taxes, including, without limitation, stock transfer
Taxes, sales and use Taxes and real property gains and transfer Taxes, in each
case, directly or indirectly attributable to the Transactions.  Except as otherwise required by applicable
Law, the Company will be responsible for filing any Tax Returns and complying
with any procedures required in connection with all Taxes resulting from such
Transfer.

 

(c)  Expense Reimbursement.  On the date of the Shareholders’ execution
of this Agreement, the Parent shall cause NGC to, and NGC will cause the
Company to, and the

 

71

 

Company shall, pay to the Purchaser (to an account designated by the
Purchaser) by wire transfer of immediately available funds, an amount equal to
$250,000 (which amount, when added to the $250,000 previously paid by the
Company to the Purchaser pursuant to the Letter of Intent, shall be the “Expense
Amount”) as reimbursement for the Purchaser’s Fees and Expenses incurred
and to be incurred in connection with the Transactions.

 

(d)  Termination Fee.  In the event that either (i) this Agreement
is terminated pursuant to Section 10.01(e) or (f), or (ii) both (A) this
Agreement is terminated pursuant to Section 10.01(c) or the Transactions are
not consummated on or prior to the Purchaser Outside Date for any reason other
than as a result of a material breach of this Agreement by the Purchaser, and
(B) within twelve months after the date of termination of this Agreement, NGC,
NCC or the Company shall consummate any Competing Transaction (whether such
Competing Transaction was proposed, contemplated or announced before or after
the date of termination of this Agreement), then in the case of (i) or (ii)
above, in addition to the Expense Amount payable to the Purchaser pursuant to
Section 10.01(c) above, the Shareholders and the Company, jointly and
severally, shall pay to the Purchaser on the first business day after the
termination of this Agreement, an amount in cash equal to $4,000,000 by wire
transfer of immediately available funds (the payment made to the Purchaser
under (x) or (y) above being the “Termination Fee”).  Notwithstanding anything to the contrary
contained in this Agreement, Purchaser shall not be entitled to receive the
Termination Fee more than one time.

 

(e)  Acknowledgement.  The parties acknowledge and agree that the
payment of the Expense Amount and Termination Fee shall constitute the sole
remedy to which the Purchaser shall be entitled in the circumstance set forth
in Section 10.03(d).

 

ARTICLE XI

 

Indemnification

 

Section 11.01.  Indemnification.

 

(a)  Indemnification by the Shareholders and
the Company.  Each of the
Shareholders and the Company, jointly and severally, will indemnify and defend
the Purchaser Indemnified Persons against and hold each Purchaser Indemnified
Person harmless from any and all Losses that the Purchaser Indemnified Persons
may incur,suffer, sustain or become subject to arising out of, relating to,
based upon, in connection with or due to:

 

(i)  any inaccuracy or breach of any
of the representations and warranties (other than the representations and
warranties set forth in Section 5.08 and 5.20 which are covered separately in
clauses (iv) and (iii) below, respectively) of the Shareholders or the Company
contained in any Sale Document or in any certificate delivered thereunder;

 

(ii)  the nonfulfillment or breach
of any covenant, undertaking, agreement or other obligation (other than the
covenants and agreements set forth in Section 10.03(b) which

 

72

 

are covered separately in
clause (iv) below) of the Shareholders or the Company contained in any Sale
Document or in any certificate delivered thereunder;

 

(iii)  (A) any inaccuracy or breach
of any of the representations and warranties set forth in Section 5.20 of this
Agreement or in any certificate delivered thereunder, (B) any of the
information, facts, events, circumstances, issues or other matters set forth on
Schedule 5.20 of this Agreement, whether or not referred to as
presenting an actual, alleged or contingent liability or violation of Environmental
Law, or (C) any Recognized Environmental Condition identified in any
Environmental Site Assessment conducted by the Purchaser;

 

(iv)  (A) any inaccuracy or breach
of any of the representations and warranties set forth in Section 5.08 of this
Agreement or in any certificate delivered thereunder, (B) any nonfulfillment of
any covenant, undertaking, agreement or other obligation of the Shareholders or
the Company contained in Section 10.03(b), or (C) any Taxes related to (I) the
operation of the Business by the Company and its Subsidiaries prior to the
Closing, (II) the ownership by the Company and its Subsidiaries of the Assets
prior to the Closing, or (III) any distributions, dividends or other payments
from the Company or any of its Subsidiaries to any Shareholder, or (IV) the
transfer of the Purchased Assets to the Purchaser;

 

(v)  the Excluded Assets;

 

(vi)  the Excluded Liabilities,
except for the Liabilities referred to in Section 2.04(a)(ix) which are covered
by clause (i) and (ii) above, including, without limitation, the Company’s or
any Shareholder’s failure to pay or discharge the Excluded Liabilities as and
when they become due, and including any claim, Action, allegation or threat by
any third party that, if upheld or granted, would result in any Purchaser
Indemnified Person having any Liability in respect of any Excluded Liability;
and

 

(vii)  the Transfer or Transfers by
the Company or any of its Subsidiaries prior to the Effective Time, of any
businesses, operations, assets or properties, including, without limitation,
Liabilities related to representations, warranties, covenants, agreements and
indemnities given by the Shareholders, the Company or any of their Subsidiaries
in connection with any such Transfer, or any broker’s, finder’s or similar fees
payable in connection with any such Transfers.

 

(b)  Indemnification by the Purchaser.  The Purchaser will indemnify and defend the
Company Indemnified Persons against and hold each Company Indemnified Person
harmless from any and all Losses that the Company Indemnified Persons may
incur, suffer, sustain or become subject to arising out of, relating to, based
upon, in connection with or due to:

 

(i)  any inaccuracy or breach of any
of the representations and warranties of the Purchaser contained in any Sale
Document or in any certificate delivered thereunder; or

 

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(ii)  the nonfulfillment or breach
of any covenant, undertaking, agreement or other obligation of the Purchaser
contained in any Sale Document or in any certificate delivered thereunder.

 

(c)  Right to Assign and Delegate.  The parties hereto agree that the Purchaser
shall have the right to assign its rights to indemnification, and delegate its
obligations, under this Section 11.01 to any Person that acquires the Purchased
Assets or the Business from the Purchaser, or substantially all of the assets
of the Purchaser or the Equity Securities of the Purchaser, whether by sale,
merger, consolidation or otherwise, in each case, so long as either (i) such
Person has a net worth at least equal to the net worth of the Purchaser as of
the time of such assignment, or (ii) the Purchaser remains liable for its
obligations under this Agreement.

 

Section 11.02.  Notice
and Opportunity to Defend.

 

(a)  Delivery of Indemnification Notice.  (i) 
If there occurs an event which a party hereto asserts is an
indemnifiable event pursuant to Section 11.01 hereof, the party seeking
indemnification (the “Indemnitee”) will promptly notify the party
obligated to provide indemnification hereunder (the “Indemnitor”) in
writing (such written notice being an “Indemnification Notice”).  Such Indemnification Notice shall specify
(A) the nature of the claim or Loss, (B) the facts, circumstances, issues and
events with respect to such claim or Loss in reasonable detail, and (C) the
amount of such claim or Loss, if determined. 
Delay or failure to deliver an Indemnification Notice to the Indemnitor
will only relieve the Indemnitor of its indemnification obligations hereunder
to the extent, if at all, that the Indemnitor is actually prejudiced by reason
of such delay or failure.

 

(ii)  The Indemnitor will have a period of 10
calendar days following the Indemnitor’s receipt of the Indemnification Notice
(such period to be 20  calendar days if the event specified in
the Indemnification Notice involves a claim or a Loss by a Person other than a
Purchaser Indemnified Person or a Company Indemnified Person (a “Third Party
Claim”)), in which to either (A) accept responsibility for such claim, Loss
or Third Party Claim or (B) deny or dispute responsibility for such claim, Loss
or Third Party Claim (which dispute may be as to the validity of such claim or
Loss, the amount thereof or both).

 

(b)  Third Party Claims.  (i) 
Subject to the provisions of clause (iii)(B) below, if the Indemnitor
accepts responsibility for a Third Party Claim in writing within such 20
calendar day period, the Indemnitor will be obligated to defend, compromise or
settle such Third Party Claim and, subject to the terms, conditions and
limitations set forth in this Article, the Indemnitor will be liable for the
Losses in connection with such Third Party Claim, including, without
limitation, the fees and expenses of counsel incurred by the Indemnitor in
defending, compromising or settling such Third Party Claim; provided, however,
that in such an event, the Indemnitee will have the right to participate in the
defense of such Third Party Claim and employ counsel, at the Indemnitee’s
expense, separate from the counsel employed by the Indemnitor, it being
understood that the Indemnitor will control such defense.

 

(ii)  If (A) the Indemnitor fails to accept
responsibility for such Third Party Claim within such 20 calendar day period or
the Indemnitor does not respond within such 20 calendar day

 

74

 

period, or (B) either (x) the Indemnitee is advised by counsel that in
connection with such Third Party Claim there may be one or more legal defenses
available to the Indemnitee that are not available to the Indemnitor or
conflict with or are different from those available to the Indemnitor, (y) the
Third Party Claim seeks an order, injunction or other relief other than money
damages against the Indemnitee, or (z) the Indemnitor does not promptly provide
the Indemnitee with its financial statements or other information demonstrating
the Indemnitor’s ability to discharge its obligations under this Article XI in
full, then in any such case, the Indemnitor will not be entitled to assume the
defense of such Third Party Claim and the Indemnitee shall have the right to
undertake the defense, compromise or settlement of such Third Party Claim and,
subject to the terms, conditions and limitations set forth in this Article, the
Indemnitor will be liable for the Losses in connection with such Third Party
Claim, including, without limitation, the fees and expenses of counsel incurred
by the Indemnitee in defending, compromising or settling such Third Party
Claim; provided, however, that in such an event, the Indemnitor
will have the right to participate in the defense of such matter and employ
counsel, at the Indemnitor’s expense (provided, that such expenses shall not
count towards any limitations on the Indemnitor’s obligations hereunder), separate
from the counsel employed by the Indemnitee, it being understood that the
Indemnitee will control such defense.

 

(iii)  The Indemnitor will not be liable for any
settlement of any Action effected without the Indemnitor’s written consent
(which consent shall not be unreasonably withheld or delayed), but if settled
with the Indemnitor’s written consent or if there be a final judgment for the
plaintiff in any such Action, the Indemnitor agrees, subject to the terms,
conditions and limitations set forth in this Article, to indemnify and hold
harmless the Indemnitee from and against any Loss by reason of such settlement
or judgment.

 

(c)  Non-Third Party Claims.  (i) 
If the Indemnitor accepts responsibility for a claim or Loss which does
not involve a Third Party Claim in writing within such 10 calendar day period,
or the Indemnitor does not respond within such 10 calendar day period, such
claim or Loss specified by the Indemnitee in the Indemnification Notice will
conclusively be deemed a liability of the Indemnitor under Section 11.01 and
the Indemnitor will pay the amount of such liability to the Indemnitee on
demand.

 

(ii)  If the Indemnitor has timely disputed its
liability with respect to such claim or Loss within such 10 calendar day
period, the Indemnitor and the Indemnitee will proceed in good faith to
negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute will be resolved by litigation in an appropriate
court of competent jurisdiction.

 

(d)  Contribution.  If the indemnification provided for in this
Article XI is prohibited under applicable Laws to an Indemnitee (other than by
reason of the exceptions, limitations and conditions set forth in this Article)
then the Indemnitor, in lieu of indemnifying the Indemnitee, will contribute to
the amount paid or payable by the Indemnitee as a result of the Losses in such
proportion as is appropriate to reflect the relative fault of the Indemnitor,
on the one hand, and of the Indemnitee, on the other, in connection with the
events or circumstances which resulted in the Losses as well as any other
relevant equitable considerations.  The
relative fault of the Indemnitor, on the one hand, and of the Indemnitee, on
the other, will be determined by

 

75

 

reference to, among other things, such Persons’ relative intent, knowledge,
access to information and opportunity to correct or prevent the events or
circumstances resulting in the Losses.

 

Section 11.03.  Survival
of Indemnification.  The
representations, warranties, covenants and agreements of the parties contained
in the Sale Documents or in any document delivered pursuant thereto and the
rights to indemnification under this Agreement with respect thereto will
survive the Closing Date and any investigation at any time made by or on behalf
of the Purchaser or any other party; provided, however, that the
representations and warranties set forth in the Sale Documents and the
indemnification under Section 11.01(a) and (b) shall expire on the second
anniversary of the Closing Date, unless prior to such date, an Indemnification
Notice or other notice of the inaccuracy or breach thereof has been given; provided,
however, that:

 

(a)  Fundamental Indemnification.  The (i) Fundamental Representations and the
Fundamental Representation Indemnification and (ii) the rights to
indemnification under Section 11.01(a)(ii), (v), (vi) and (vii), will survive
the Closing for a period ending on the fifth anniversary of the Closing Date,
and will be effective with respect to any inaccuracy therein, breach thereof or
claims made thereunder, notice of which has been given within such period; and

 

(b)  Tax Indemnification.  The representations and warranties set forth
in Section 5.08, the covenants and agreements set forth in Section 10.03(b),
and the Tax Indemnification will survive the Closing for a period ending six
months after the termination of the statute of limitations (or any extension
thereof) on any Law applicable to the matters covered therein, and will be
effective with respect to any inaccuracy therein, breach thereof or claims made
thereunder, notice of which has been given within such period.

 

Section 11.04.  Threshold;
Limitation on Liability; Release of Company.

 

(a)  Threshold.  No Purchaser Indemnified Person or Company Indemnified Person
will be entitled to indemnification for any Losses under Section 11.01(a)(i) or
11.01(b)(i), unless and until the aggregate amount of Losses suffered,
sustained, or incurred by all of the Purchaser Indemnified Persons or the
Company Indemnified Persons, as the case may be, due to the inaccuracy or
breach of any representations or warranties or in any certificate delivered
thereunder, exceeds the Threshold Amount, calculated on a cumulative basis and
not per item basis , and then such party will be entitled to recover such
Losses from the first dollar of such Losses and not merely the excess of such
Losses above the Threshold Amount; provided, however, that with
respect to indemnification pursuant to the Fundamental Representation
Indemnification, the Tax Indemnification and indemnification under Section
11.01(a)(ii), (v), (vi) and (vii), the Purchaser Indemnified Persons shall be
entitled to recover any such Losses from the first dollar of such Losses
without any threshold, basket or deductible of any kind, and any such payments
shall count towards the Threshold Amount.

 

(b)  Limitations on Liability of the
Shareholders and the Company.  The
aggregate liability of the Shareholders and the Company for indemnification
under Section 11.01(a) of this Agreement shall not exceed an aggregate amount
equal to the Cash Proceeds.

 

76

 

(c)  Limitations on Liability of the Purchaser.  The aggregate liability of the Purchaser for
indemnification under Section 11.01(b) of this Agreement shall not exceed an
aggregate amount equal to 10% of the Cash Proceeds.

 

(d)  Release of the Company.  Notwithstanding any provision of this
Agreement to the contrary, except for the provisions of Section 11.05 below
which shall apply to this Section 11.04(d), effective from and after the first
anniversary of the Closing Date, the Company shall have no further obligation
to indemnify the Purchaser under this Article XI, except with respect to any Losses
or claims made for which the Purchaser or any Purchaser Indemnified Person
shall have given the Company notice on or prior to such first anniversary; provided,
however, that such release of the Company shall not in any way
eliminate, restrict, affect or impair the Purchaser’s and the Purchaser
Indemnified Person’s rights to (i) be indemnified by the Shareholders under
this Article XI for Losses related to inaccuracies or breaches of
representations, warranties, covenants and agreements of the Company set forth
in the Sale Documents to the extent and during the period that the Company or
the Shareholders were obligated to indemnify the Purchaser or the Purchaser
Indemnified Persons, (ii) be indemnified for each type of Claim by the
Shareholders under this Article XI during the relevant entire periods for each
type of Claim provided in Section 11.03 above, and (iii) claim against and
withdraw amounts from the Escrow Amount as provided in Section 11.07(d) below.

 

Section 11.05.  Fraud
Exception.

 

(a)  Purchaser Indemnified Persons.  Notwithstanding any provision contained in
Article XI to the contrary, in the event any Loss or failure to discover a fact
or condition by a Purchaser Indemnified Person, is due to, arises from, or is
in connection with, fraud, intentional misrepresentation, grossly negligent
misrepresentation or willful misconduct by any Shareholder, the Company, any of
their Subsidiaries or any Person acting or purporting to act on their behalf,
such Purchaser Indemnified Person will be entitled to recover any such Losses
from the Shareholders and the Company, jointly and severally, without regard to
any of the time limitations, dollar thresholds or dollar limitations set forth
above, and will be entitled to recover the full amount of such Losses from the
first dollar of any such Loss, together with any punitive, exemplary and other
damages that may be assessed by any court of competent jurisdiction.

 

(b)  Company Indemnified Persons.  Notwithstanding any provision contained in
Article XI to the contrary, in the event any Loss or failure to discover a fact
or condition by a Company Indemnified Person, is due to, arises from, or is in
connection with, fraud, intentional misrepresentation, grossly negligent
misrepresentation or willful misconduct by the Purchaser, any of its
Subsidiaries or any Person acting or purporting to act on their behalf, such
Company Indemnified Person will be entitled to recover any such Losses from the
Purchaser without regard to any of the time limitations, dollar thresholds or
dollar limitations set forth above, and will be entitled to recover the full
amount of such Losses from the first dollar of any such Loss, together with any
punitive, exemplary and other damages that may be assessed by any court of
competent jurisdiction.

 

77

 

Section 11.06.  Set-Off.  Each of the parties hereto expressly
acknowledges and agrees that in the event that a Purchaser Indemnified Person
is entitled to indemnification under Section 11.01(a), the Purchaser will be
entitled to set-off the amount of such Losses incurred by such Purchaser
Indemnified Person against and retain such amount from any obligations or
payments due to any Shareholder or the Company under any Sale Document,
including, without limitation, under the Purchaser Note.

 

Section 11.07.  Escrow.

 

(a)  Escrow Agreement.  On or prior to the Closing Date, the
Purchaser, the Shareholders and the Company will enter into the Escrow
Agreement with the Escrow Agent.

 

(b)  Escrow Deposit.  In order to secure the obligations of the
Shareholders and the Company to (i) pay to the Purchaser any amount under
Section 3.03(e) hereof, and (ii) indemnify the Purchaser Indemnified Persons
under Section 11.01(a) hereof, on the Closing Date, the Purchaser will deposit
the Escrow Amount with the Escrow Agent, to be held by the Escrow Agent in
accordance with the Escrow Agreement. 
Such Escrow Amount will be deposited into an account to be managed and
paid out by the Escrow Agent in accordance with the terms of the Escrow
Agreement.

 

(c)  Escrow Amount.  (i) 
The term “Escrow Amount” means an amount in cash equal to the sum
of (A) $7,500,000.00 (the “General Escrow Amount”), plus (B) the
Specified Liability Escrow Amount (as defined below).

 

(ii)  The “Specified Liability Escrow Amount”
means (i) as of the date of this Agreement, an amount equal to the sum of all
of the Liabilities set forth on Schedule 11.07(c) hereof, which the
parties agree is $19,024,000.00 (such amount being the “Specified Liability
Amount”), and (ii) as of the Closing Date, an amount equal to (A) the
Specified Liability Amount, minus (B) the Pre-Closing Extinguished Liability
Amount (as defined below).

 

(iii)  The “Pre-Closing Extinguished Liability
Amount” means, with respect to all of the Liabilities set forth on Schedule
11.07(c) for which the Company shall have received (and delivered to the
Purchaser) a full, unconditional and irrevocable release of the Company, its
Subsidiaries, the Purchaser and their respective successors and assigns in form
and substance reasonably satisfactory to the Purchaser prior to the Closing
Date (each such Liability being an “Extinguished Liability”), the
aggregate amount of such Extinguished Liabilities as set forth on Schedule
11.07(c); provided, however, that in no event shall the
Pre-Closing Extinguished Liability Amount exceed the Specified Liability Escrow
Amount.

 

(d)  Right to Withdraw.  In the event that either (i) (A) the
Purchaser is entitled to any amount under Section 3.03(e) hereof, or (ii) a
Purchaser Indemnified Person is entitled to indemnification pursuant to Section
11.01(a), then the Purchaser, or such Purchaser Indemnified Person, as the case
may be, will have the right to withdraw such amounts from the balance of the
Escrow Amount pursuant to the Escrow Agreement, or (ii) the Company is entitled
to any amount under Section 3.03(e) hereof, then the Company will have the
right to withdraw such amount from the balance of the Escrow Amount pursuant to
the Escrow Agreement.  In such an

 

78

 

event, the Purchaser or the Company, as the case may be, will instruct the
Escrow Agent in writing pursuant to the terms of the Escrow Agreement to pay
the Purchaser, such Purchaser Indemnified Person or the Company, as the case
may be, from the Escrow Amount the amount that is due the Purchaser, such
Purchaser Indemnified Person or the Company, as the case may be.

 

(e)  Release of Escrow.

 

(i)  Post-Closing Extinguished Liabilities.  After the Closing Date, in the event that
the Company shall receive (and deliver to the Purchaser) a full, unconditional
and irrevocable release of the Company, its Subsidiaries, the Purchaser and
their respective successors and assigns in form and substance reasonably
satisfactory to the Purchaser in respect of an Extinguished Liability (except
for Liabilities that are included within the definition of Pre-Closing
Extinguished Liability Amount), then (A) the Escrow Amount shall be reduced by
the amount of such Extinguished Liability as set forth on Schedule 11.07(c),
and (B) the Escrow Agent will pay to the Company from the Escrow Amount, an
aggregate amount equal to the amount of such Extinguished Liability as set
forth on Schedule 11.07(c) (the sum of all such amounts being the “Post-Closing
Extinguished Liability Amount”); provided, however, that in
no event shall the sum of the Pre-Closing Extinguished Liability Amount, plus
the Post-Closing Extinguished Liability Amount exceed the Specified Liability
Escrow Amount, and provided, further, however, that in no
event shall the Escrow Amount held by the Escrow Agent be reduced below the
General Escrow Amount, except to the extent funds in the Escrow Account have
theretofore been used to satisfy Losses or claims under Section 11.01(a).

 

(ii)  Second Anniversary.  On the second anniversary of the Closing
Date, the Escrow Agent will pay to the Company an aggregate amount equal to the
excess, if any, of (i) the amount held by the Escrow Agent in the escrow
account on the second anniversary of the Closing Date, over (ii) the aggregate
dollar amount of all claims made (but not paid as of the second anniversary of
the Closing Date) by the Purchaser or the Purchaser Indemnified Persons under
Section 3.03(c) or Section 11.01(a); provided, however, that such
payment or release shall not limit or affect the rights of the Purchaser or any
other Purchaser Indemnified Persons under this Article XI or otherwise.

 

ARTICLE XII

 

Miscellaneous

 

Section 12.01.  Notices.  All notices, requests, demands and other
communications to any party or given under any Sale Document will be in writing
and delivered personally, by overnight delivery or courier, by registered mail
or by telecopier (with confirmation received) to the parties at the address or
telecopy number specified for such parties on the signature pages hereto (or at
such other address or telecopy number as may be specified by a party in writing
given at least five Business Days prior thereto).  All notices, requests, demands and other communications will be
deemed delivered when actually received.

 

79

 

Section 12.02.  Counterparts.  This Agreement may be executed
simultaneously in one or more counterparts, and by different parties hereto in
separate counterparts, each of which when executed will be deemed an original,
but all of which taken together will constitute one and the same instrument.

 

Section 12.03.  Amendment
of Agreement.  This Agreement may
not be amended, modified or waived except by an instrument in writing signed on
behalf of each of the parties hereto.

 

Section 12.04.  Successors
and Assigns; Assignability.  This
Agreement will be binding upon and inures to the benefit of and is enforceable
by the respective successors and permitted assigns of the parties hereto.  This Agreement may not be assigned by any
party hereto without the prior written consent of all other parties hereto,
except for the assignment of all or any part of the rights and obligations of
the Purchaser under this Agreement, which may be freely assigned by the
Purchaser to an Affiliate of the Purchaser either prior to or after the Closing
Date, in any case, so long as either (i) such Affiliate has a net worth at
least equal to the net worth of the Purchaser as of the time of such
assignment, or (ii) the Purchaser remains liable for its obligations under this
Agreement.  Any assignment or attempted
assignment in contravention of this Section will be void ab  initio
and will not relieve the assigning party of any obligation under this
Agreement.

 

Section 12.05.  Governing
Law.  This Agreement will be
governed by, and construed in accordance with, the laws of the state of New
York applicable to contracts executed in and to be performed entirely within
that state, without reference to conflicts of laws provisions.

 

Section 12.06.  Integration.  The Sale Documents contain and constitute
the entire agreement of the parties with respect to the subject matter hereof
and supersedes all prior negotiations, agreements and understandings, whether
written or oral, of the parties hereto.

 

Section 12.07.  Severability.  If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
Law, or public policy, all other conditions and provisions of this Agreement
will nevertheless remain in full force and effect.  Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.

 

Section 12.08.  Further
Assurances.  Promptly upon the
reasonable request by the Purchaser, the parties hereto (with the expenses paid
by the party responsible as provided in this Agreement) shall (a) correct any
defect or error that may be discovered in any Sale Document or in the
execution, delivery, acknowledgment or recordation of any Sale Document and (b)
execute, acknowledge, deliver, record, file and register, any and all such
further acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust,
trust deeds, assignments, estoppel certificates, financing statements and
continuations, notices of assignment, transfers, certificates, assurances and
other instruments, in each case, as such requesting party may require from time
to time.

 

80

 

Section 12.09.  No
Third-Party Rights.  This Agreement
is not intended, and will not be construed, to create any rights in any parties
other than the Shareholders, the Company, and the Purchaser, and no Person may
assert any rights as third-party beneficiary hereunder, including, without
limitation, the directors, officers and employees of the Company or any of its
Subsidiaries, except (a) that any rights, obligations or remedies of the
Purchaser hereunder may be exercised by an Affiliate of the Purchaser in
accordance with Section 12.04 and (b) as provided in Article XI, except that
the directors, officers and employees of the Company and its Subsidiaries are
not parties to this Agreement, are not third-party beneficiaries of this
Agreement or any other Sale Document and are not entitled to enforce any of the
provisions of this Agreement or the other Sale Documents.

 

Section 12.10.  Enforcement.

 

(a)  Shareholders and the Company.  Each of the Company and the Shareholders
hereby acknowledges and agrees that the provisions of this Agreement are of a
special and unique nature, the loss of which cannot be accurately compensated
for in damages by an action at law, and that the breach or threatened breach of
the provisions of this Agreement would cause the Purchaser irreparable harm and
that money damages would not be an adequate remedy for any breach or threatened
breach of the provisions of this Agreement by the Company or the
Shareholders.  Therefore, the parties
hereto agree that the Purchaser shall be entitled to equitable relief, including,
without limitation, an injunction or injunctions (without the requirement of
posting a bond or other security or any similar requirement or proving actual
damages) to prevent breaches or threatened breaches of this Agreement,
including, without limitation, the provisions of Section 9.03 hereof, by the
Company or the Shareholders and to specifically enforce the terms and
provisions of this Agreement, including, without limitation, Section 9.03
hereof, this being in addition to any other remedy to which the Purchaser is or
may be entitled at law or in equity.

 

(b)  Purchaser.  The parties hereto agree that the Company and the Shareholders
shall be entitled to equitable relief, including, without limitation, an
injunction or injunctions (without the requirement of posting a bond or other
security or any similar requirement or proving actual damages) to prevent
breaches or threatened breaches of this Agreement by the Purchaser and to
specifically enforce the terms and provisions of this Agreement, this being in
addition to any other remedy to which the Company and the Shareholders are or
may be entitled at law or in equity.

 

Section 12.11.  Submission
to Jurisdiction.  Each of the
Shareholders, the Company, and the Purchaser hereby (a) agrees that any Action
with respect to any Sale Document may be brought in the courts of the State of
New York or of the United States of America for the Southern District of New
York, (b) accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of such courts, (c) irrevocably
waives any objection, including, without limitation, any objection to the
laying of venue or based on the grounds of forum  non  conveniens,
which it may now or hereafter have to the bringing of any Action in those
jurisdictions, and (d) irrevocably consents to the service of process of any of
the courts referred to above in any Action by the mailing of copies of the
process to the parties

 

81

 

hereto as provided in Section 12.01. 
Service effected as provided in this manner will become effective ten
calendar days after the mailing of the process.

 

Section 12.12.  Waiver
of Jury Trial.  EACH OF THE PARENT,  THE
COMPANY, AND THE PURCHASER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION TO ENFORCE OR DEFEND ANY RIGHT UNDER ANY SALE DOCUMENT OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR TO BE DELIVERED IN CONNECTION
WITH ANY SALE DOCUMENT AND AGREES THAT ANY ACTION WILL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY.

 

Section 12.13.  No
Waiver; Remedies.  No failure or
delay by any party in exercising any right, power or privilege under this
Agreement will operate as a waiver of the right, power or privilege.  A single or partial exercise of any right,
power or privilege will not preclude any other or further exercise of the
right, power or privilege or the exercise of any other right, power or
privilege.  The rights and remedies
provided in the Sale Documents will be cumulative and not exclusive of any
rights or remedies provided by law.

 

Section 12.14.  Ambiguities.  This Agreement was negotiated between legal
counsel for the parties and any ambiguity in this Agreement shall not be
construed against the party who drafted this Agreement.

 

Section 12.15.  Incorporation
of Schedules and Exhibits.  The
Schedules and Exhibits hereto are incorporated into this Agreement and will be
deemed a part hereof as if set forth herein in full.  References to “this Agreement” and the words “herein”, “hereof”
and words of similar import refer to this Agreement (including the Schedules
and Exhibits) as an entirety.  In the
event of any conflict between the provisions of this Agreement and any Schedule
or Exhibit, the provisions of this Agreement will control.  Capitalized terms used in the Schedules have
the meanings assigned to them in this Agreement.  The Section references referred to in the Schedules are to
Sections of this Agreement, unless otherwise expressly indicated.  The term “including”, as used herein, shall
be deemed to be followed by the words “without limitation”.

 

82

 

In witness whereof, the
parties have executed and delivered this Agreement as of the date first written
above.

 

 

COMPANY:

 

	
  Address for Notices:

  	
  EXPANETS, INC.

  
	
  9780 Mt. Pyramid Court, Suite
  400

  	
   

  
	
  Englewood, Colorado 80112

  	
   

  
	
  Attention:  Christopher J. Younger

  	
   

  
	
  Telephone No.: 303-300-6111

  	
  By

  	
   

  
	
  Facsimile No.: 303-300-6125

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

With a copy to:

Leonard, Street and
Deinard Professional Association

150 South Fifth Street,
Suite 2300

Minneapolis, Minnesota
55402

Attention:  Michael G. Taylor, Esq.

Telephone No.:  612-335-1589

Facsimile No.:
612-335-1657

 

83

 

SHAREHOLDERS:

 

	
  Address for Notices:

  	
  NORTHWESTERN CORPORATION

  
	
  125 South Dakota Avenue, Suite
  1100

  	
   

  
	
  Sioux Falls, South Dakota 57104

  	
   

  
	
  Attention: Eric Jacobsen

  	
   

  
	
  Telephone No.:  605-978-2908

  	
  By:

  	
   

  
	
  Facsimile No.:  605-978-2963

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

With a copy to:

Paul, Hastings, Janofsky
& Walker LLP

75 East 55th Street

New York, New York 10022

Attention:  Marie Censoplano, Esq.

Telephone No.:  212-318-6000

Facsimile No.:
212-319-4090

 

	
  Address for Notices:

  	
  NORTHWESTERN GROWTH CORPORATION

  
	
  125 South Dakota Avenue, Suite
  1100

  	
   

  
	
  Sioux Falls, South Dakota 57104

  	
   

  
	
  Attention: Eric Jacobsen

  	
   

  
	
  Telephone No.:  605-978-2908

  	
  By:

  	
   

  
	
  Facsimile No.: 605-978-2963

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

With a copy to:

Paul, Hastings, Janofsky
& Walker LLP

75 East 55th Street

New York, New York 10022

Attention:  Marie Censoplano, Esq.

Telephone No.:  212-318-6000

Facsimile No.:
212-319-4090

 

84

 

	
  Address for Notices:

  	
  NORTHWESTERN CAPITAL
  CORPORATION

  
	
  125 South Dakota Avenue, Suite
  1100

  	
   

  
	
  Sioux Falls, South Dakota 57104

  	
   

  
	
  Attention: Eric Jacobsen

  	
   

  
	
  Telephone No.:  605-978-2908

  	
  By:

  	
   

  
	
  Facsimile No.: 605-978-2963

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

With a copy to:

Paul, Hastings, Janofsky
& Walker LLP

75 East 55th Street

New York, New York 10022

Attention:  Marie Censoplano, Esq.

Telephone No.:  212-318-6000

Facsimile No.:
212-319-4090

 

85

 

PURCHASER:

 

	
  Address for Notices:

  	
  AVAYA INC.

  
	
  c/o Avaya Inc.

  	
   

  
	
  211 Mount Airy Road

  	
   

  
	
  Basking Ridge, New Jersey 07920

  	
   

  
	
  Attention:  Justin Choi, Vice President

  	
  By:

  	
   

  
	
  Telephone:  908 953-6000

  	
  Name:

  	
  Garry McGuire

  
	
  Facsimile:    908 953-4912

  	
  Title:

  	
  Chief Financial Officer

  
				

 

With copies to:

 

Sidley Austin Brown & Wood llp

787 Seventh Avenue

New York, New York  10019

Attention:  Irving Rotter

Telephone:  212 839-5300

 

Facsimile :   212 839-5599

 

86

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