MINNESOTA GAS

 

 

Exhibit 10.3

 

 

Asset Purchase Agreement

by and between

Aquila, Inc.

and

WPS Minnesota Utilities, Inc.

Dated: September 21, 2005

 

 

MINNESOTA GAS

 

 

 

TABLE OF CONTENTS  

Article I DEFINITIONS

2

 

1.1

Definitions

2

 

1.2

Other Definitional and Interpretive Matters

12

 

1.3

Joint Negotiation and Preparation of Agreement

13

Article II PURCHASE AND SALE

14

 

2.1

The Sale

14

 

2.2

Excluded Assets

15

 

2.3

Assumed Obligations

16

 

2.4

Excluded Liabilities

17

 

2.5

Delivery of Guaranty

18

Article III PURCHASE PRICE

18

 

3.1

Purchase Price

18

 

3.2

Determination of Purchase Price.

19

 

3.3

Allocation of Purchase Price

20

 

3.4

Proration

20

Article IV THE CLOSING

21

 

4.1

Time and Place of Closing

21

 

4.2

Payment of Closing Payment Amount

22

 

4.3

Deliveries by Seller

22

 

4.4

Deliveries by Buyer

23

Article V REPRESENTATIONS AND WARRANTIES OF SELLER

24

 

5.1

Organization; Qualification

24

 

5.2

Authority Relative to this Agreement

24

 

5.3

Consents and Approvals; No Violation

24

 

5.4

Governmental Filings

25

 

5.5

Financial Information

25

 

5.6

No Material Adverse Effect

26

 

5.7

Operation in the Ordinary Course

26

 

5.8

Title and Related Matters

26

 

5.9

Leases

26

 

5.10

Environmental

26

 

5.11

Labor Matters

27

 

5.12

ERISA; Benefit Plans

28

 

5.13

Certain Contracts and Arrangements

30

 

5.14

Legal Proceedings and Orders

30

 

5.15

Permits

30

 

5.16

Compliance with Laws

31

 

5.17

Insurance

31

 

5.18

Taxes

31

 

5.19

Regulation as a Utility

32

 

5.20

Fees and Commissions

32

 

5.21

Shipper Services Sale to Cornerstone

32

 

5.22

Sufficiency of Assets

32

 

5.23

Financial Hedges

32

 

5.24

Related-Party Agreements

32

 

 

 

MINNESOTA GAS

 

 

 

Article VI REPRESENTATIONS AND WARRANTIES OF BUYER

32

 

6.1

Organization

32

 

6.2

Authority Relative to this Agreement

33

 

6.3

Consents and Approvals; No Violation

33

 

6.4

Regulation as a Utility

33

 

6.5

Buyer’s Knowledge

33

 

6.6

Fees and Commissions

34

 

6.7

Financial Capability

34

Article VII COVENANTS OF THE PARTIES

34

 

7.1

Conduct of Business

34

 

7.2

Access to Information

36

 

7.3

Expenses

39

 

7.4

Further Assurances; Procedures with Respect to Certain Agreements and

 

other Assets

39

 

7.5

Public Statements

42

 

7.6

Consents and Approvals

42

 

7.7

Tax Matters

44

 

7.8

Supplements to Schedules

45

 

7.9

Employees and Employee Benefits

45

 

7.10

Eminent Domain; Casualty Loss

50

 

7.11

Transitional Use of Signage and Other Materials Incorporating Seller’s Name

 

or other Logos

52

 

7.12

Litigation and Regulatory Support

52

 

7.13

Notification of Customers

52

 

7.14

Document Delivery

52

 

7.15

Title Insurance, Surveys, Estoppel Certificates, and Non-Disturbance Agreements

53

 

7.16

Central or Shared Functions for Transition Period

53

 

7.17

Post-Closing Insurance

54

Article VIII CONDITIONS TO CLOSING

55

 

8.1

Conditions to Each Party’s Obligations to Effect the Closing

55

 

8.2

Conditions to Obligations of Buyer

55

 

8.3

Conditions to Obligations of Seller

56

Article IX INDEMNIFICATION

57

 

9.1

Survival of Representations and Warranties

57

 

9.2

Indemnification

57

 

9.3

Indemnification Procedures

58

 

9.4

Limitations on Indemnification

60

 

9.5

Applicability of Article IX

61

 

9.6

Tax Treatment of Indemnity Payments

61

 

9.7

No Consequential Damages

61

 

9.8

Exclusive Remedy

62

Article X TERMINATION AND OTHER REMEDIES

62

 

10.1

Termination

62

 

10.2

Procedure and Effect of Termination

63

 

10.3

Remedies upon Termination

63

 

10.4

Specific Performance

63

 

 

 

MINNESOTA GAS

 

 

 

Article XI MISCELLANEOUS PROVISIONS

64

 

11.1

Amendment and Modification

64

 

11.2

Waiver of Compliance; Consents

64

 

11.3

Notices

64

 

11.4

Assignment

65

 

11.5

Governing Law

65

 

11.6

Severability

65

 

11.7

Entire Agreement

66

 

11.8

Bulk Sales or Transfer Laws

66

 

11.9

Delivery

66

 

11.10

Waiver Of Jury Trial.

66

 

 

 

MINNESOTA GAS

 

 

EXHIBITS AND SCHEDULES

Exhibit 1.1-A

Form of Assignment and Assumption Agreement

 

Exhibit 1.1-B

Form of Assignment of Easements

 

Exhibit 1.1-C

Form of Bill of Sale

 

Exhibit 1.1-D

Form of Guaranty

 

Exhibit 1.1-E

Form of Special Warranty Deed

 

Exhibit 1.1-F

Form of Transitional Services Agreement

 

Exhibit 3.1

Determination of Purchase Price

 

Exhibit 3.1.A

Example of Minnesota Gas Closing Payment Amount

 

Exhibit 3.1.B

Example of Minnesota Gas Post-Closing Adjustment Statement

Exhibit 3.1.C

Sample Calculation of Minnesota Gas Purchase Price

 

Exhibit 7.9(d)(ii)(C)

Pension Matters

 

 

Schedule ­­1.1-A

Business Activities

 

Schedule 1.1-B

Business Employees

 

Schedule 1.1-C

Buyer Required Regulatory Approvals

 

Schedule 1.1-D

Central or Shared Functions

 

Schedule 1.1-E

Permitted Encumbrances

 

Schedule 1.1-F

Service Guard Business Trademarks

 

Schedule 1.1-G

Seller Required Regulatory Approvals

 

Schedule 1.1-H

Seller’s Knowledge

 

Schedule 1.1-I

Territory

 

Schedule 2.1(a)

Real Property

 

Schedule 2.1(d)

Tangible Personal Property

 

Schedule 2.1(l)

Other Assets

 

Schedule 2.2(k)

Retained Agreements

 

Schedule 2.2(m)

Excluded Assets

 

Schedule 2.3(h)

Additional Assumed Obligations

 

Schedule 5.3

Seller’s Consents and Approvals

 

Schedule 5.5(a)

Selected Balance Sheet Information

 

Schedule 5.5(b)

Division Income Statement Information

 

Schedule 5.6

Material Adverse Effect

 

Schedule 5.7

Transactions Outside the Ordinary Course of Business

Schedule 5.8

Title and Related Matters

 

Schedule 5.9

Real Property Leases

 

Schedule 5.10(a)-1

Sufficiency of Environmental Permits

 

Schedule 5.10(a)-2

Environmental Permits

 

Schedule 5.10(b)

Environmental Notices

 

Schedule 5.10(c)

Environmental Claims or Releases

 

Schedule 5.10(e)

MGP Insurance Settlements

 

Schedule 5.11

Labor Matters

 

Schedule 5.12(a)

Employee Benefit Plans

 

Schedule 5.12(d)

Administrator or Fiduciary Non-Compliance

 

Schedule 5.12(g)

Retiree Health and Welfare Benefits

 

Schedule 5.13(a)

Certain Contracts and Arrangements

 

Schedule 5.13(b)

Franchises

 

 

 

 

MINNESOTA GAS

 

 

 

Schedule 5.14

Legal Proceedings and Orders

 

Schedule 5.15

Permits

 

Schedule 5.17

Insurance

 

Schedule 5.18

Taxes

 

Schedule 5.22

Sufficiency of Assets

 

Schedule 5.23

Financial Hedges

 

Schedule 5.24

Related-Party Agreements

 

Schedule 6.3

Buyer’s Consents and Approvals

 

Schedule 7.1

Conduct of Business

 

Schedule 7.4(e)

Shared Agreements

 

Schedule 7.9(a)

Unions

 

Schedule 7.9(b)

Severance Compensation Agreements

 

Schedule 7.9(d)(ii)-A

Other Plan Participants

 

Schedule 7.9(d)(ii)(D)

Grandfathered Individuals

 

Schedule 7.9(d)(ix)

Nonqualified Deferred Compensation Obligations

 

 

 

MINNESOTA GAS

 

 

 

ASSET PURCHASE AGREEMENT

Asset Purchase Agreement (“Agreement”), made as of September 21, 2005 by and
between Aquila, Inc., a Delaware corporation (“Seller”), and WPS Minnesota
Utilities, Inc., a Delaware corporation (“Buyer”).

WHEREAS, Buyer desires to purchase, and Seller desires to sell, the Purchased
Assets (as hereinafter defined) upon the terms and conditions set forth in this
Agreement; and

WHEREAS, Buyer is a direct subsidiary of Parent, and Parent will guarantee the
obligations of Buyer under this Agreement and the Ancillary Agreements pursuant
to the Guaranty;

NOW THEREFORE, in consideration of the Parties’ respective covenants,
representations, warranties, and agreements hereinafter set forth, and intending
to be legally bound hereby, the Parties agree as follows:

ARTICLE I

DEFINITIONS

 

1.1

Definitions.

(a)          As used in this Agreement, the following terms have the meanings
specified in this Section 1.1(a):

“Actionable Incident” means an incident or occurrence that (i) results in
damages or other harm to a Person other than Buyer or Seller, or any of their
respective Affiliates; and (ii) provides such Person with the legal basis to
recover damages or other relief without any further event or fact being required
for such recovery.

“Adjustment Amount” may be a positive or negative number, and will be determined
in accordance with Exhibit 3.1.

“Affiliate” has the meaning set forth in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934.

“Affiliated Group” means any affiliated group within the meaning of Code section
1504(a) or any similar group defined under a similar provision of Law.

“Ancillary Agreements” means the Assignment and Assumption Agreement, Assignment
of Easements, Bill of Sale, Guaranty, Special Warranty Deed, and Transitional
Services Agreement.

“Assignment and Assumption Agreement” means the Assignment and Assumption
Agreement to be executed and delivered by Seller and Buyer at Closing, in the
form of Exhibit 1.1-A.

“Assignment of Easements” means the form of Assignment of Easements set forth on
Exhibit 1.1-B.

 

2

 

 

MINNESOTA GAS

 

 

“Bill of Sale” means the bill of sale to be executed and delivered by Seller at
the Closing, in the form of Exhibit 1.1-C.

“Business” means, collectively, (i) the Natural Gas Distribution Business, (ii)
the Service Guard Business, and (iii) the activities described on Schedule
1.1-A.

“Business Agreements” means any contract, agreement, real or personal property
lease, commitment, understanding, or instrument (other than the Retained
Agreements and the Shared Agreements) to which Seller is a party or by which it
is bound that either (i) is listed or described on Schedule 5.9, Schedule
5.13(a), or Schedule 7.9(b), or (ii) relates principally to the Business or the
Purchased Assets and (A) has been entered into, renewed, extended, or otherwise
amended in the ordinary course of business and does not involve annual
obligations in excess of $100,000 (and is not otherwise material to the Business
or the Purchased Assets), or (B) is entered into, renewed, extended, or
otherwise amended after the date hereof consistent with the terms of this
Agreement.

“Business Day” means any day other than Saturday, Sunday, and any day which is a
legal holiday or a day on which banking institutions in Kansas City, Missouri
are authorized by Law to close.

“Business Employees” means the employees of Seller set forth on Schedule 1.1-B,
together with any persons who are hired by Seller for the Business after the
date hereof in accordance with Section 7.1, other than persons hired to perform
Central or Shared Functions.

“Buyer Pension Plan” means one or more defined benefit plans within the meaning
of section 3(35) of ERISA that are (i) maintained or to be established or
maintained by Buyer, and (ii) qualified plans under section 401(a) of the Code.

“Buyer Required Regulatory Approvals” means (i) the filings by Seller and Buyer
required by the HSR Act and the expiration or earlier termination of all waiting
periods under the HSR Act, and (ii) the approvals set forth on Schedule 1.1-C.

“Buyer’s Representatives” means Buyer’s accountants, employees, counsel,
environmental consultants, surveyors, financial advisors, and other
representatives.

“Central or Shared Functions” means any of the business functions set forth on
Schedule 1.1-D.

“Claims” means any and all administrative, regulatory, or judicial actions or
causes of action, suits, petitions, proceedings (including arbitration
proceedings), investigations, hearings, demands, demand letters, claims, or
notices of noncompliance or violation delivered by any Governmental Entity or
other Person.

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.

“COBRA Continuation Coverage” means the continuation of medical coverage
required under sections 601 through 608 of ERISA, and section 4980B of the Code.

“Code” means the Internal Revenue Code of 1986, as amended.

“Confidentiality Agreement” means the Confidentiality Agreement, dated April 29,
2005 between Seller and WPS Resources Corporation.

 

3

 

 

MINNESOTA GAS

 

 

“Documents” means all files, documents, instruments, papers, books, reports,
tapes, microfilms, photographs, letters, ledgers, journals, title commitments
and policies, title abstracts, surveys, customer lists and information,
regulatory filings, operating data and plans, technical documentation (such as
design specifications, functional requirements, and operating instructions),
user documentation (such as installation guides, user manuals, and training
materials), marketing documentation (such as sales brochures, flyers, and
pamphlets), Transferred Employee Records, and other similar materials related
principally to the Business, the Purchased Assets, or the Assumed Obligations,
in each case whether or not in electronic form; provided, that “Documents” does
not include: (i) information which, if provided to Buyer, would violate any
applicable Law or Order or the Governing Documents of Seller or any of its
Affiliates, (ii) bids, letters of intent, expressions of interest, or other
proposals received from others in connection with the transactions contemplated
by this Agreement or otherwise and information and analyses relating to such
communications, (iii) any information, the disclosure of which would jeopardize
any legal privilege available to Seller or any of its Affiliates relating to
such information or would cause Seller or any of its Affiliates to breach a
confidentiality obligation by which it is bound (provided, that in the case of
any items that would be Documents but for a confidentiality obligation, Seller
will use commercially reasonable efforts at Buyer’s request to obtain a waiver
of such obligation), (iv) any valuations or projections of or related to the
Business, the Purchased Assets, or the Assumed Obligations (other than any such
valuations and projections prepared in conjunction with any past, present, or
future regulatory filings, whether or not the same was actually filed with the
regulatory authority, and customary studies, reports, and similar items prepared
by or on behalf of Seller for the purposes of completing, performing, or
executing unperformed service obligations, Easement relocation obligations, and
engineering and construction required to complete scheduled construction,
construction work in progress, and other capital expenditure projects, in each
case related principally to the Business and the Purchased Assets), (v) any
information management systems of Seller which are Excluded Assets, or (vi) any
web pages or similar media tools for communication on the Internet.

“Encumbrances” means any mortgages, pledges, liens, claims, charges, security
interests, conditional and installment sale agreements, Preferential Purchase
Rights, activity and use limitations, easements, covenants, encumbrances,
obligations, limitations, title defects, deed restrictions, and any other
restrictions of any kind, including restrictions on use, transfer, receipt of
income, or exercise of any other attribute of ownership.

“Environment” means all or any of the following media: soil, land surface and
subsurface strata, surface waters (including navigable waters, streams, ponds,
drainage basins, and wetlands), groundwater, drinking water supply, stream
sediments, ambient air (including the air within buildings and the air within
other natural or man-made structures above or below ground), plant and animal
life, and any other natural resource.

“Environmental Claims” means any and all Claims (including any such Claims
involving toxic torts or similar liabilities in tort, whether based on
negligence or other fault, strict or absolute liability, or any other basis)
relating in any way to any Environmental Laws or Environmental Permits, or
arising from the presence, Release, or threatened Release (or alleged presence,
Release, or threatened Release) into the Environment of any Hazardous Materials,
including any and all Claims by any Governmental Entity or by any Person for
enforcement, cleanup, remediation, removal, response, remedial or other actions
or damages, contribution,

 

4

 

 

MINNESOTA GAS

 

 

indemnification, cost recovery, compensation, or injunctive relief pursuant to
any Environmental Law or for any property damage or personal or bodily injury
(including death) or threat of injury to health, safety, natural resources, or
the Environment.

“Environmental Laws” means all Laws relating to pollution or the protection of
human health, safety, the Environment, or damage to natural resources, including
Laws relating to Releases and threatened Releases or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Materials. Environmental Laws include the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
§ 9601 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
§ 136 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. § 6901, et
seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Clean Air
Act, 42 U.S.C. § 7401 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. § 1251 et seq.; the Oil Pollution Act, 33 U.S.C. § 2701 et seq.; the
Endangered Species Act, 16 U.S.C. § 1531 et seq.; the National Environmental
Policy Act, 42 U.S.C. § 4321, et seq.; the Occupational Safety and Health Act,
29 U.S.C. § 651 et seq. (to the extent relating in any way to Hazardous Material
or environmental matters); the Safe Drinking Water Act, 42 U.S.C. § 300f et
seq.; Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et
seq.; Atomic Energy Act, 42 U.S.C. § 2014 et seq.; Nuclear Waste Policy Act, 42
U.S.C. § 10101 et seq.; and their state and local counterparts or equivalents,
all as amended from time to time, and regulations issued pursuant to any of
those statutes.

“Environmental Permits” means all permits, certifications, licenses, franchises,
approvals, consents, waivers, or other authorizations of Governmental Entities
issued under or with respect to applicable Environmental Laws and used or held
by Seller for the operation of the Business.

“EPA” means the United States Environmental Protection Agency.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means any Person that, together with Seller, would be
considered a single employer under section 414(b), (c), or (m) of the Code.

“FERC” means the Federal Energy Regulatory Commission.

“Final Regulatory Order” means, with respect to a Required Regulatory Approval,
an Order granting such Required Regulatory Approval that has not been revised,
stayed, enjoined, set aside, annulled, or suspended, and with respect to which
(i) any required waiting period has expired, and (ii) all conditions to
effectiveness prescribed therein or otherwise by Law or Order have been
satisfied.

“Good Utility Practice” means any practices, methods, standards, guides, or
acts, as applicable, that (i) are generally accepted in the region during the
relevant time period in the natural gas utility industry, (ii) are commonly used
in prudent utility engineering, construction, project management, and
operations, or (iii) would be expected if the Natural Gas Distribution Business
is to be conducted at a reasonable cost in a manner consistent with Laws and
Orders applicable to the Natural Gas Distribution Business and the objectives of
reliability, safety, environmental protection, economy, and expediency. Good
Utility Practice includes acceptable practices, methods, or acts generally
accepted in the region, and is not limited to the optimum practices, methods, or
acts to the exclusion of all others.

 

5

 

 

MINNESOTA GAS

 

 

“Governing Documents” of a Party means the articles or certificate of
incorporation and bylaws, or comparable governing documents, of such Party.

“Governmental Entity” means the United States of America and any other federal,
state, local, or foreign governmental or regulatory authority, department,
agency, commission, body, court, or other governmental entity.

“Guaranty” means the Guaranty to be executed and delivered by Parent to Seller
on the date hereof, in the form of Exhibit 1.1-D.  

“Hazardous Material” means (i) any chemicals, materials, substances, or wastes
which are now or hereafter defined as or included in the definition of
“hazardous substance,” “hazardous material,” “hazardous waste,” “solid waste,”
“toxic substance,” “extremely hazardous substance,” “pollutant,” “contaminant,”
or words of similar import under any applicable Environmental Laws; (ii) any
petroleum, petroleum products (including crude oil or any fraction thereof),
natural gas, natural gas liquids, liquefied natural gas or synthetic gas useable
for fuel (or mixtures of natural gas and such synthetic gas), or oil and gas
exploration or production waste, polychlorinated biphenyls, asbestos-containing
materials, mercury, and lead-based paints; and (iii) any other chemical,
material, substances, waste, or mixture thereof which is prohibited, limited, or
regulated by Environmental Laws.

“Holding Company Act” means the Public Utility Holding Company Act of 1935, as
amended.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“Income Tax” means any Tax based upon, measured by, or calculated with respect
to (i) net income, profits, or receipts (including capital gains Taxes and
minimum Taxes) or (ii) multiple bases (including corporate franchise and
business license Taxes) if one or more of the bases on which such Tax may be
based, measured by, or calculated with respect to is described in clause (i), in
each case together with any interest, penalties, or additions to such Tax.

“Independent Accounting Firm” means Ernst & Young LLP.

“Law” means any statutes, regulations, rules, ordinances, codes, and similar
acts or promulgations of any Governmental Entity.

“Loss” or “Losses” means losses, liabilities, damages, obligations, payments,
costs, and expenses (including the costs and expenses of any and all actions,
suits, proceedings, assessments, judgments, settlements, and compromises
relating thereto and reasonable attorneys’ fees and reasonable disbursements in
connection therewith).

“Material Adverse Effect” means a material adverse effect on the business,
assets, properties, results of operations, or financial condition of the
Business and the Purchased Assets (taken as a whole) other than an effect
(i) resulting from an Excluded Matter, or (ii) cured (including by payment of
money or credit to the Purchase Price) before the Closing Date. “Excluded
Matter” means any one or more of the following: (A) any change in the
international, national, regional, or local markets or industries in which the
Business operates or of which the Business is a part, (B) any Law or Order
(other than a Law adopted or an Order issued specifically with respect to the
Business, the Purchased Assets, or the transactions contemplated

 

6

 

 

MINNESOTA GAS

 

 

by this Agreement), (C) any change of general application in GAAP, FERC
Accounting Rules, or the PUC accounting rules, (D) this Agreement or the
transactions contemplated hereby (including any announcement with respect to
this Agreement or the transactions contemplated hereby or the performance by the
Parties of their obligations hereunder), (E) any change in international,
national, regional, or local economic, regulatory, or political conditions,
including prevailing interest rates, (F) weather conditions or customer use
patterns, (G) any matter disclosed in this Agreement, any Schedule or Exhibit
hereto, or any Ancillary Agreement, (H) any change in the market price of
commodities or publicly traded securities, or (I) any action permitted under
this Agreement.

“MNOPS” means Minnesota Office of Pipeline Safety.

“Natural Gas Distribution Business” means the natural gas utility business
conducted by Seller serving customers in the Territory.

“Order” means any order, judgment, writ, injunction, decree, directive, or award
of a court, administrative judge, or other Governmental Entity acting in an
adjudicative or regulatory capacity, or of an arbitrator with applicable
jurisdiction over the subject matter.

“Parent” means WPS Resources Corporation, a Wisconsin corporation and the direct
parent of Buyer.

“Party” means either Buyer or Seller, as indicated by the context, and “Parties”
means Buyer and Seller.

“Permits” means all permits, certifications, licenses, franchises, approvals,
consents, waivers or other authorizations of Governmental Entities issued under
or with respect to applicable Laws or Orders and used or held by Seller for the
operation of the Business or the ownership, operation, or maintenance of the
Purchased Assets, other than Environmental Permits.

“Permitted Encumbrances” means (i) those Encumbrances set forth in Schedule
1.1-E; (ii) the Preferential Purchase Rights set forth on Schedule 5.8;
(iii) Encumbrances securing or created by or in respect of any of the Assumed
Obligations; (iv) statutory liens for current Taxes or assessments not yet due
or delinquent or the validity or amount of which is being contested in good
faith by appropriate proceedings, none of which contested matters is material,
and provided such contested matters have been disclosed in writing to Buyer;
(v) mechanics’, carriers’, workers’, repairers’, landlords’, and other similar
liens arising or incurred in the ordinary course of business relating to
obligations as to which there is no default on the part of Seller or the
validity or amount of which is being contested in good faith by appropriate
proceedings, none of which contested matters is material, and provided such
contested matters have been disclosed in writing to Buyer, or pledges, deposits,
or other liens securing the performance of bids, trade contracts, leases, or
statutory obligations (including workers’ compensation, unemployment insurance,
or other social security legislation) as to which there is no default on the
part of Seller; (vi)  zoning, entitlement, restriction, and other land use and
environmental regulations by Governmental Entities which do not materially
interfere with the present use of the Purchased Assets and as to which there is
no default on the part of Seller; (vii)  any Encumbrances set forth in any
state, local, or municipal franchise or governing ordinance under which any
portion of the Business is conducted and as to which there is no default on the
part of Seller; (viii) all rights of condemnation, eminent domain, or other
similar rights of any Person; and (ix) such other

 

7

 

 

MINNESOTA GAS

 

 

Encumbrances (including requirements for consent or notice in respect of
assignment of any rights) which do not materially interfere with Seller’s use of
the Purchased Assets for the Business, and do not secure indebtedness or the
payment of the deferred purchase price of property (except for Assumed
Obligations).

“Person” means any individual, partnership, limited liability company, joint
venture, corporation, trust, unincorporated organization, or Governmental
Entity.

“Preferential Purchase Rights” means rights of any Person (other than rights of
condemnation, eminent domain, or other similar rights of any Person) to purchase
or acquire any interest in any of the Purchased Assets, including any rights
that are conditional upon a sale of any Purchased Assets or any other event or
condition.

“Prime Rate” means, for any day, the per annum rate of interest quoted as the
“Bank Prime Rate” rate for the most recent weekday for which such rate is quoted
in the statistical release designated as H.15(519), or any successor
publication, published from time to time by the Board of Governors of the
Federal Reserve System.

“PUC” means the Minnesota Public Utilities Commission.

“Regulatory Order” means an Order issued by the PUC or FERC that affects or
governs the rates, services, or other utility operations of the Business.

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing of Hazardous
Materials into the Environment.

“Required Regulatory Approvals” means the Seller Required Regulatory Approvals
and the Buyer Required Regulatory Approvals.

“SEC” means the Securities and Exchange Commission.

“Seller Disclosure Schedule” means, collectively, all Schedules other than
Schedule 1.1-C and Schedule 6.3.

“Seller Marks” means the names “Aquila,” “Aquila Networks,” “Energy One,”
“Peoples Natural Gas,” “PNG,” “Service Guard,” “UtiliCorp,” and any derivative
of any of the foregoing, and any related, similar, and other trade names,
trademarks, service marks, and logos of Seller, including the trademarks
associated with the Service Guard Business set forth on Schedule 1.1-F, but
excepting those items specifically included as Purchased Assets in Schedule
2.1(l).

“Seller Pension Plan” means the Aquila, Inc. Retirement Income Plan, as amended
from time to time.

“Seller Required Regulatory Approvals” means (i) the filings by Seller and Buyer
required by the HSR Act and the expiration or earlier termination of all waiting
periods under the HSR Act, and (ii) the approvals set forth on Schedule 1.1-G.

“Seller’s Knowledge,” or words to similar effect, means the actual knowledge of
the persons set forth in Schedule 1.1-H, after due inquiry by them of those
employees of Seller whom they reasonably believe, in good faith, to be the
persons generally responsible for the subject matters to which the knowledge is
pertinent.

 

8

 

 

MINNESOTA GAS

 

 

“Seller’s Representatives” means Seller’s accountants, employees, counsel,
environmental consultants, financial advisors, and other representatives.

“Service Guard Business” means Seller’s appliance repair and HVAC installation
business conducted in Minnesota.

“Special Warranty Deed” means the special warranty deed or deeds to be executed
and delivered by Seller at the Closing, substantially in the form set forth on
Exhibit 1.1-E attached hereto.

“Subsidiary,” when used in reference to a Person, means any Person of which
outstanding securities or other equity interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions of such Person are owned directly or indirectly by such first Person.

“Tax” and “Taxes” means all taxes, charges, fees, levies, penalties, or other
assessments imposed by any foreign or United States federal, state, or local
Taxing Authority, including income, excise, property, sales, transfer,
franchise, license, payroll, withholding, social security, or other taxes
(including any escheat or unclaimed property obligations), including any
interest, penalties, or additions attributable thereto.

“Tax Affiliate” of a Person means a member of that Person’s Affiliated Group and
any other Subsidiary of that Person which is a partnership or is disregarded as
an entity separate from that Person for Tax purposes.

“Tax Return” means any return, report, information return, or other document
(including any related or supporting information) required to be supplied to any
Governmental Entity with respect to Taxes.

“Taxing Authority” means any Governmental Entity administering, regulating, or
having general oversight over, or that imposes, determines, or assesses, any
Tax.

“Territory” means the service territory described in Schedule 1.1-I.

“Transferred Employee Records” means the following records relating to
Transferred Employees: (i) skill and development training records and resumes,
(ii) seniority histories, (iii) salary and benefit information (including all
historical compensation and service information to the extent necessary to
calculate or verify a Transferred Employee’s accrued benefit under the Seller
Pension Plan), (iv) Occupational, Safety and Health Administration medical
reports, (v) active medical restriction forms, and (vi) job performance reviews
and applications; provided that such records will not be deemed to include any
record which Seller is restricted by Law, Order, or agreement from providing to
Buyer.

“Transitional Services Agreement” means the Transitional Services Agreement to
be executed and delivered by the Parties at the Closing, in the form of Exhibit
1.1-F.

“WARN Act” means the Worker Adjustment Retraining and Notification Act of 1988,
as amended.

(b)          In addition, each of the following terms has the meaning specified
in the Exhibit or Section set forth opposite such term:

 

 

9

 

 

MINNESOTA GAS

 

 

 

 

Term

Reference

 

 

Accounting Principles

Exhibit 3.1

 

 

Accounts Payable

Section 2.4(c)

 

 

Accrued Liability

Exhibit 7.9(d)(ii)(C)

 

 

Adjustment Dispute Notice

Section 3.2(c)

 

 

Allocated Rights and Obligations

Section 7.4(e)

 

 

Applicable Preferential Purchase Right

Section 7.10(c)

 

 

Assumed Environmental Liabilities

Section 2.3(f)

 

 

Assumed Obligations

Section 2.3

 

 

Base Net Plant Amount

Exhibit 3.1

 

 

Base Price

Section 3.1

 

 

Benefit Continuation Period

Section 7.9(d)(ii)(D)

 

Benefit Plan

Section 5.12(a)

 

 

Book Value

Exhibit 3.1

 

 

Buyer Pension Plan Trust

Exhibit 7.9(d)(ii)(C)

 

 

Closing

Section 4.1

 

 

Closing Date

Section 4.1

 

 

Closing Payment Amount

Section 3.2(a)

 

 

Collective Bargaining Agreement

Section 5.11

 

 

Confidential Information

Section 7.2(c)

 

 

Contingent Purchased Assets

Section 7.4(g)(ii)

 

 

Current Retirees

Section 7.9(d)(ii)(D)

 

Customer Notification

Section 7.13

 

 

Direct Loss

Section 9.3(d)

 

 

Division Income Statement Information

Section 5.5(b)

 

 

Easements

Section 7.4(b)

 

 

Effective Time

Section 4.1

 

 

Estimated Closing Payment Amount

Section 3.2(a)

 

 

Excluded Assets

Section 2.2

 

 

Excluded Liabilities

Section 2.4

 

 

Extraordinary Expenditures

Exhibit 3.1

 

 

Extraordinary Expenditures Adjustment

Exhibit 3.1

 

 

Extraordinary Expenditures Reference Amount

Exhibit 3.1

 

 

FERC Accounting Rules

Exhibit 3.1

 

 

FERC Accounts

Exhibit 3.1

 

 

Financial Hedge

Section 7.4(c)(ii)

 

 

Franchises

Section 5.13(b)

 

 

GAAP

Exhibit 3.1

 

 

Grandfathered Active Employees

Section 7.9(d)(ii)(D)

 

Grandfathered Individuals

Section 7.9(d)(ii)(D)

 

Historical Insurance Policies

Section 7.17(a)

 

 

Indemnifiable Loss

Section 9.2(a)

 

 

Indemnifying Party

Section 9.3(a)

 

 

Indemnitee

Section 9.2(c)

 

 

Initial Transfer Amount

Exhibit 7.9(d)(ii)(C)

 

 

Initial Transfer Date

Exhibit 7.9(d)(ii)(C)

 

 

 

10

 

 

MINNESOTA GAS

 

 

 

 

Interim Period

Section 7.4(g)(ii)

 

 

Lease Buy-Out Amount

Exhibit 3.1

 

 

Locals

Section 7.9(a)

 

 

Net Insurance Settlement Amount

Exhibit 3.1

 

 

Net Plant

Exhibit 3.1

 

 

Net Plant Adjustment

Exhibit 3.1

 

 

Net Plant at Closing

Exhibit 3.1

 

 

New CBA

Section 7.9(a)

 

 

New Pension Plan

Exhibit 7.9(d)(ii)(C)

 

 

New Plan Section 4044 Amount

Exhibit 7.9(d)(ii)(C)

 

 

NMU

Section 7.17(a)

 

 

Observers

Section 7.2(b)

 

 

Other Arrangements

Section 7.4(e)

 

 

Other Plan Participants

Exhibit 7.9(d)(ii)(C)

 

 

Post-Closing Adjustment Statement

Section 3.2(b)

 

 

Post-Retirement Welfare Benefits

Section 7.9(d)(ii)(D)

 

Purchase Price

Section 3.1

 

 

Purchased Assets

Section 2.1

 

 

Qualifying Offer

Section 7.9(b)

 

 

Real Property

Section 2.1(a)

 

 

Reduction Amount

Exhibit 7.9(d)(ii)(C)

 

 

Retained Agreements

Section 2.2(k)

 

 

Savings Plan

Section 7.9(d)(ii)(E)

 

 

Section 4044 Amount

Exhibit 7.9(d)(ii)(C)

 

 

Selected Balance Sheet Information

Section 5.5(a)

 

 

Seller Insurance Policies

Section 7.17(c)

 

 

Seller Pension Plan Trust

Exhibit 7.9(d)(ii)(C)

 

 

SFAS 132 Assumptions

Exhibit 7.9(d)(ii)(C)

 

 

Shared Agreements

Section 7.4(e)

 

 

Shared Easement Rights

Section 7.4(b)

 

 

Shared Easements

Section 7.4(b)

 

 

Spin-Off Date

Exhibit 7.9(d)(ii)(C)

 

 

Substitute Arrangements

Section 7.4(e)

 

 

Termination Date

Section 10.1(b)

 

 

Third Party Claim

Section 9.3(a)

 

 

Transferable Environmental Permits

Section 2.1(h)

 

 

Transferable Permits

Section 2.1(g)

 

 

Transferred Employee

Section 7.9(b)

 

 

Transition Committee

Section 7.1(b)

 

 

True-Up Amount

Exhibit 7.9(d)(ii)(C)

 

 

True-Up Date

Exhibit 7.9(d)(ii)(C)

 

 

1.2          Other Definitional and Interpretive Matters. Unless otherwise
expressly provided, for purposes of this Agreement, the following rules of
interpretation apply:

(a)          Calculation of Time Period. When calculating the period of time
before which, within which, or following which any act is to be done or step
taken pursuant to

 

11

 

 

MINNESOTA GAS

 

 

this Agreement, the date that is the reference date in calculating such period
will be excluded. If the last day of such period is a non-Business Day, the
period in question will end on the next succeeding Business Day.

(b)          Dollars. Any reference in this Agreement to “dollars” or “$” means
U.S. dollars.

(c)          Exhibits and Schedules. Unless otherwise expressly indicated, any
reference in this Agreement to an “Exhibit” or a “Schedule” refers to an Exhibit
or Schedule to this Agreement, including as any such Schedule may be
supplemented or amended in accordance with Section 7.8. The Exhibits and
Schedules to this Agreement are hereby incorporated and made a part hereof as if
set forth in full herein and are an integral part of this Agreement. Any
capitalized terms used in any Schedule or Exhibit but not otherwise defined
therein are defined as set forth in this Agreement.

(d)          Gender and Number. Any reference in this Agreement to gender
includes all genders, and the meaning of defined terms applies to both the
singular and the plural of those terms.

(e)          Headings. The provision of a Table of Contents, the division of
this Agreement into Articles, Sections, and other subdivisions, and the
insertion of headings are for convenience of reference only and do not affect,
and will not be utilized in construing or interpreting, this Agreement. All
references in this Agreement to any “Section” are to the corresponding Section
of this Agreement unless otherwise specified.

(f)           “Herein”. The words such as “herein,” “hereinafter,” “hereof,” and
“hereunder” refer to this Agreement (including the Schedules and Exhibits to
this Agreement) as a whole and not merely to a subdivision in which such words
appear unless the context otherwise requires.

(g)          “Including”. The word “including” or any variation thereof means
“including, without limitation” and does not limit any general statement that it
follows to the specific or similar items or matters immediately following it.

(h)          “To the extent”. The words “to the extent” when used in reference
to a liability or other matter, means that the liability or other matter
referred to is included in part or excluded in part, with the portion included
or excluded determined based on the portion of such liability or other matter
exclusively related to the subject. For example, if 40 percent of a liability is
attributable to the Business, then a statement that Buyer will assume the
liability “to the extent related to the operation of the Business” means that
Buyer will assume 40 percent of the liability. As an additional example, if a
performance obligation attributable to the Business is by its terms to be
performed prior to and following the Effective Time, a statement that Buyer will
assume the obligation “to the extent such obligation relates to the period from
and after the Effective Time” means that Buyer will assume all liability for the
performance from and after the Effective Time, and that Seller would remain
liable for any failure to perform such obligations prior to the Effective Time.

 

12

 

 

MINNESOTA GAS

 

 

(i)           “Principally in the Business”. With reference to assets owned by
Seller, and liabilities of Seller, which are used by, in, or for, or relate to,
the Business, the phrases “principally in the Business,” “principally for the
Business,” and other statements of similar import will be construed to refer to
assets or liabilities that are: (A) specifically listed in a Schedule setting
forth Purchased Assets or Assumed Obligations; or (B) otherwise are devoted
principally to (or in the case of liabilities, are related principally to) the
Business other than Excluded Assets and Excluded Liabilities.

1.3          Joint Negotiation and Preparation of Agreement. The Parties have
participated jointly in the negotiation and drafting of this Agreement and, in
the event an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as jointly drafted by the Parties hereto and no
presumption or burden of proof favoring or disfavoring any Party will exist or
arise by virtue of the authorship of any provision of this Agreement.

ARTICLE II

PURCHASE AND SALE

2.1          The Sale. Upon the terms and subject to the satisfaction of the
conditions contained in this Agreement, at the Closing, Seller will sell,
assign, convey, transfer, and deliver to Buyer, and Buyer will purchase and
acquire from Seller, free and clear of all Encumbrances (except for Permitted
Encumbrances), all of Seller’s right, title, and interest in, to, and under the
real and personal property, tangible or intangible, described below, as the same
exists at the Effective Time (and, as applicable and as permitted or
contemplated hereby, with such additions and deletions as will occur from the
date hereof through the Effective Time), except to the extent that such assets
are Excluded Assets (collectively, the “Purchased Assets”):

(a)          the real property and real property interests described on Schedule
2.1(a), including buildings, structures, other improvements, and fixtures
located thereon, the leasehold and subleasehold interests under the leases
described on Schedule 5.9 (to the extent such leasehold and subleasehold
interests are assignable), and the Easements and Shared Easement Rights to be
conveyed at the Closing pursuant to Section 7.4(b) (to the extent such Easements
and Shared Easement Rights are assignable) (collectively, the “Real Property”);

(b)          the accounts receivable and inventories owned by Seller and
principally related to the Business, and other similar or related items
principally related to the Business, all as reflected in the applicable FERC
Accounts set forth on Exhibit 3.1;

 

(c)

the Documents;

(d)          the machinery, equipment, vehicles, furniture, pipeline system, and
other tangible personal property owned by Seller and used principally in the
Business, including the vehicles and equipment listed on Schedule 2.1(d), and
all warranties against manufacturers or vendors relating thereto, to the extent
that such warranties are freely transferable;

(e)          the Business Agreements and the Franchises, in each case, to the
extent the same are assignable;

 

13

 

 

MINNESOTA GAS

 

 

(f)           the Allocated Rights and Obligations to the extent transferred to
Buyer pursuant to Section 7.4(e);

(g)          the Permits listed on Schedule 5.15, in each case to the extent the
same are assignable (the “Transferable Permits”);

(h)          the Environmental Permits listed on Schedule 5.10(a)-2, in each
case to the extent the same are assignable (the “Transferable Environmental
Permits”);

(i)           Claims and defenses of Seller to the extent such Claims or
defenses arise with respect to the Purchased Assets or the Assumed Obligations,
provided that any such Claims and defenses will be assigned to Buyer without
warranty or recourse;

(j)           any assets acquired by Seller pursuant to Section 7.4(d) for
inclusion in the Purchased Assets;

 

(k)

assets transferred pursuant to Section 7.9;

 

 

(l)

assets set forth on Schedule 2.1(l); and

 

 

(m)

any other assets owned by Seller and used principally in the Business.

2.2          Excluded Assets. The Purchased Assets do not include any property
or assets of Seller not described in Section 2.1 and, notwithstanding any
provision to the contrary in Section 2.1 or elsewhere in this Agreement, the
Purchased Assets do not include the following property or assets of Seller (all
assets excluded pursuant to this Section 2.2, the “Excluded Assets”):

 

(a)

cash, cash equivalents, and bank deposits;

(b)          certificates of deposit, shares of stock, securities, bonds,
debentures, evidences of indebtedness, and any other debt or equity interest in
any Person;

 

(c)

the Seller Marks;

(d)          subject to Section 3.4 hereof, any refund or credit (i) related to
Taxes paid by or on behalf of Seller, whether such refund is received as a
payment or as a credit against future Taxes payable, or (ii) relating to a
period before the Closing Date;

 

(e)

all books, records, or the like other than the Documents;

(f)           any assets that have been disposed of in the ordinary course of
business or otherwise in compliance with this Agreement prior to Closing;

(g)          except as expressly provided in Section 2.1(d) and Section 2.1(i),
all of the Claims or causes of action of Seller against any Person;

 

(h)

assets used for performance of the Central or Shared Functions;

 

 

14

 

 

MINNESOTA GAS

 

 

(i)           except as otherwise expressly provided herein, all insurance
policies, and rights thereunder, including any such policies and rights in
respect of the Purchased Assets or the Business;

(j)           the rights of Seller arising under or in connection with this
Agreement, any certificate or other document delivered in connection herewith,
and any of the transactions contemplated hereby and thereby;

(k)          all (i) agreements and contracts set forth on Schedule 2.2(k) (the
“Retained Agreements”), (ii) Shared Agreements (except to the extent provided by
Section 7.4(e)), and (iii) other agreements and contracts not specifically
included in the Business Agreements and Franchises;

(l)           all software, software licenses, information systems, management
systems, and any items set forth in or generally described in subparts (i)
through (vi) of the definition of “Documents” in Section 1.1(a); and

 

(m)

the assets and other rights set forth on Schedule 2.2(m).

2.3          Assumed Obligations. On the Closing Date, Buyer will deliver to
Seller the Assignment and Assumption Agreement pursuant to which Buyer will
assume and agree to discharge all of the debts, liabilities, obligations,
duties, and responsibilities of Seller of any kind and description, whether
absolute or contingent, monetary or non-monetary, direct or indirect, known or
unknown, or matured or unmatured, or of any other nature, to the extent related
to the Purchased Assets or the Business, other than Excluded Liabilities (the
“Assumed Obligations”), in accordance with the respective terms and subject to
the respective conditions thereof, including the following liabilities and
obligations:

(a)          all liabilities and obligations of Seller under the Business
Agreements, the Franchises, the Transferable Permits, the Transferable
Environmental Permits, the Preferential Purchase Rights assigned to Buyer
pursuant to Section 7.10(c), and the Allocated Rights and Obligations
transferred to Buyer pursuant to Section 7.4(e), and any other agreements or
contractual rights assigned to Buyer pursuant to the terms of this Agreement,
except as provided in Section 2.4(b);

(b)          all liabilities and obligations of Seller with respect to customer
deposits, customer advances for construction and other similar items reflected
in the applicable FERC Accounts set forth on Exhibit 3.1;

(c)          all liabilities and obligations relating to unperformed service
obligations, Easement relocation obligations, and engineering and construction
required to complete scheduled construction, construction work in progress, and
other capital expenditure projects, in each case related principally to the
Business and outstanding on or arising after the Effective Time;

(d)          all liabilities and obligations associated with the Purchased
Assets or the Business in respect of Taxes for which Buyer is liable pursuant to
Section 3.4 or Section 7.7;

 

15

 

 

MINNESOTA GAS

 

 

(e)          all liabilities and obligations for which Buyer is responsible
pursuant to Section 7.9;

(f)            all liabilities, obligations, Environmental Claims, and demands
arising under, in respect of, or relating to compliance or non-compliance by
Seller with past, present, and future Environmental Laws, existing, arising, or
asserted with respect to the Business or the Purchased Assets, whether before,
on, or after the Closing Date (the “Assumed Environmental Liabilities”). For
avoidance of doubt, the Assumed Environmental Liabilities include all
liabilities and obligations (including liabilities and obligations based upon
the presence, Release, or threatened Release of Hazardous Materials at any
location whatsoever) of Seller directly or indirectly relating to, caused by, or
arising in connection with the operation, ownership, use, or other control of or
activity at or relating to any installation, facility, plant (including any
manufactured gas plant), or site (including any manufactured gas plant site)
that at the Closing is, or at any time prior to the Closing was, (i) operated,
owned, leased, or otherwise under the control of or attributed to any of Seller,
the Business, or any predecessor in interest of Seller or the Business, and (ii)
located in the Territory or any areas previously served by the Business or any
predecessor of the Business;

(g)          all liabilities and obligations of Seller or Buyer arising on or
after the Effective Time under (i) any Regulatory Orders applicable to the
Business or the Purchased Assets, or (ii) imposed on Buyer or the Purchased
Assets or Business in connection with any Required Regulatory Approval; and

 

(h)

the liabilities and obligations set forth on Schedule 2.3(h).

2.4          Excluded Liabilities. Buyer does not assume and will not be
obligated to pay, perform, or otherwise discharge any of the following
liabilities or obligations (collectively, the “Excluded Liabilities”):

(a)          any liabilities or obligations of Seller to the extent related to
any Excluded Assets;

(b)          any liabilities or obligations of Seller for any breach or default
by Seller prior to the Effective Time, or any event prior to the Effective Time,
which after the giving of notice or passage of time or both would constitute a
default or breach by Seller, of or under the Business Agreements, Franchises,
the Transferable Permits, or the Transferable Environmental Permits, except to
the extent that such liability or obligation is taken into account in
determining the Adjustment Amount;

(c)          all trade accounts payable and other accrued and unpaid current
expenses in respect of goods and services incurred by or for the Business in the
ordinary course of business to the extent attributable to the period prior to
the Effective Time (the “Accounts Payable”);

(d)          any liabilities or obligations of Seller in respect of indebtedness
for borrowed money;

 

16

 

 

MINNESOTA GAS

 

 

(e)          any liabilities or obligations in respect of Taxes of Seller or any
Tax Affiliate of Seller, or any liability of Seller for unpaid Taxes of any
Person under Treasury Regulation section 1.1502-6 (or similar provision of
state, local, or foreign law) as a transferee or successor, by contract or
otherwise, except for Taxes for which Buyer is liable pursuant to Section 3.4 or
Section 7.7;

(f)           any obligations of Seller for wages, employment Taxes, or
severance pay to the extent attributable to the period prior to the Effective
Time (except, with respect to vacation days and severance pay, as otherwise
provided in Section 7.9);

(g)          except for the Assumed Environmental Liabilities, (i) any
liabilities or obligations arising from any lawsuit (including any workers
compensation claim) against Seller involving the Business filed prior to the
Effective Time, (ii) any liabilities or obligations arising from any lawsuit
(including any workers compensation claim) arising from an Actionable Incident
related to the Purchased Assets or the Business which occurred prior to the
Effective Time, or (iii) any criminal fines or penalties imposed by a
Governmental Entity resulting from (A) an investigation or proceeding before a
Governmental Entity regarding acts which occurred prior to the Effective Time,
or (B) intentional fraud by Seller or its Affiliates prior to the Effective
Time;

(h)          except as otherwise provided in Section 7.9, any liability or
obligation of Seller or an ERISA Affiliate of Seller under or in connection with
any of the Benefit Plans, including under any deferred compensation arrangement
or severance policy or any obligation to make any parachute or retention
payment;

(i)           any grievance arising out of or under any Collective Bargaining
Agreement, or other collective bargaining agreement applicable to any of the
Business Employees, prior to the Effective Time, and except as provided in
Section 7.9, any other liabilities or obligations of Seller relating to the
employment or termination of employment, including discrimination, wrongful
discharge, unfair labor practices, or constructive termination, by Seller of any
individual, to the extent the circumstances giving rise to the liability or
obligation occurred prior to the Effective Time;

(j)           any liabilities or obligations of Seller arising under or in
connection with this Agreement, any certificate or other document delivered in
connection in herewith, and any of the transactions contemplated hereby and
thereby; and

(k)          the amount of any disallowance (whether reflected in a required
rate adjustment or a denial of a requested rate adjustment or otherwise
affecting Buyer) in any purchased gas adjustment proceeding, to the extent the
disallowance results from a finding by the PUC of an imprudent gas decision made
by Seller prior to the Effective Time.

2.5          Delivery of Guaranty. Contemporaneously with the execution and
delivery of this Agreement, Parent will duly execute and deliver the Guaranty to
Seller.

ARTICLE III

PURCHASE PRICE

 

17

 

 

MINNESOTA GAS

 

 

3.1          Purchase Price. The purchase price for the Purchased Assets (the
“Purchase Price”) will be an amount equal to $288,000,000.00 (the “Base Price”),
adjusted as follows: (i) the Base Price will be increased by the Adjustment
Amount if the Adjustment Amount is a positive number; and (ii) the Base Price
will be reduced by the Adjustment Amount if the Adjustment Amount is a negative
number. The Adjustment Amount will be determined in accordance with the
requirements set forth on Exhibit 3.1.

 

3.2

Determination of Purchase Price.

(a)          No later than 15 days prior to the Closing Date, Seller will
prepare and deliver to Buyer a good faith estimate of the Purchase Price, based
on Seller’s good faith estimates of the Adjustment Amount (such estimated
Purchase Price being referred to herein as the “Estimated Closing Payment
Amount”), together with supporting assumptions and calculations, in reasonable
detail, for such estimates of the Purchase Price and the Adjustment Amount.
Within five Business Days following receipt by Buyer of the Estimated Closing
Payment Amount, Buyer may object in good faith and in writing to Seller’s
estimate of the Adjustment Amount included in the Estimated Closing Payment
Amount. If Buyer objects to Seller’s estimate of the Adjustment Amount, the
Parties shall attempt to reconcile their differences in good faith by
negotiation. If the Parties are unable to do so within five Business Days
following receipt by Seller of Buyer’s written objection (or if Buyer does not
object to Seller’s estimate of the Adjustment Amount), the Base Price shall be
adjusted for purposes of the Closing by the amount of the estimated Adjustment
Amount not in dispute (as adjusted, the “Closing Payment Amount”). The disputed
portion of Seller’s estimate of the Adjustment Amount shall be paid when and as
required under Section 3.2(e).

(b)          Within 90 days after the Closing Date, Seller will prepare and
deliver to Buyer a statement (the “Post-Closing Adjustment Statement”) that
reflects Seller’s determination of (i) the Adjustment Amount, and (ii) the
Purchase Price based on the Adjustment Amount. In addition, Seller will provide
Buyer with supporting assumptions and calculations, in reasonable detail, for
such determinations at the time it delivers the Post-Closing Adjustment
Statement. Buyer agrees to cooperate with Seller in connection with Seller’s
preparation of the Post-Closing Adjustment Statement and related information,
and will provide Seller with access to its books, records, information, and
employees as Seller may reasonably request.

(c)          The amounts determined by Seller as set forth in the Post-Closing
Adjustment Statement will be final, binding, and conclusive for all purposes
unless, and only to the extent, that within 30 days after Seller has delivered
the Post-Closing Adjustment Statement Buyer notifies Seller of any dispute with
matters set forth in the Post-Closing Adjustment Statement. Any such notice of
dispute delivered by Buyer (an “Adjustment Dispute Notice”) will identify with
specificity each item in the Post-Closing Adjustment Statement with respect to
which Buyer disagrees, the basis of such disagreement, and Buyer’s position with
respect to such disputed item.

(d)          If Buyer delivers an Adjustment Dispute Notice in compliance with
Section 3.2(c), then (i) the undisputed portion of the total proposed Adjustment
Amount

 

18

 

 

MINNESOTA GAS

 

 

set forth in the Post-Closing Adjustment Statement (together with interest
thereon for the period commencing on the Closing Date through the date of
payment calculated at the Prime Rate in effect on the Closing Date) will be paid
by the appropriate Party, in accordance with the payment procedures set forth in
Section 3.2(e); and (ii) Buyer and Seller will attempt to reconcile their
differences and any resolution by them as to any disputed amounts will be final,
binding, and conclusive for all purposes on the Parties. If Buyer and Seller are
unable to reach a resolution with respect to all disputed items within 45 days
of delivery of the Adjustment Dispute Notice, Buyer and Seller will submit any
items remaining in dispute for determination and resolution to the Independent
Accounting Firm, which will be instructed to determine and report to the
Parties, within 30 days after such submission, upon such remaining disputed
items. The report of the Independent Accounting Firm will be final, binding, and
conclusive on the Parties for all purposes. The fees and disbursements of the
Independent Accounting Firm will be allocated between Buyer and Seller so that
Buyer’s share of such fees and disbursements will be in the same proportion that
the aggregate amount of such remaining disputed items so submitted to the
Independent Accounting Firm that is unsuccessfully disputed by Buyer (as finally
determined by the Independent Accounting Firm) bears to the total amount of such
remaining disputed amounts so submitted to the Independent Accounting Firm.

(e)          Within five days following the final determination of the Purchase
Price pursuant to Sections 3.2(c) and 3.2(d), (i) if the Purchase Price is
greater than the Closing Payment Amount, Buyer will pay the difference (adjusted
to reflect any payment pursuant to Section 3.2(d)(i)) to Seller; or (ii) if the
Purchase Price is less than the Closing Payment Amount, Seller will pay the
difference (adjusted to reflect any payment pursuant to Section 3.2(d)(i)) to
Buyer. Any amount paid under this Section 3.2(e) will be paid with interest for
the period commencing on the Closing Date through the date of payment,
calculated at the Prime Rate in effect on the Closing Date, in cash by wire
transfer of immediately available funds to the account specified by the Party
receiving payment.

3.3          Allocation of Purchase Price. The sum of the Purchase Price and the
Assumed Obligations will be allocated among the Purchased Assets on a basis
consistent with section 1060 of the Code and the Treasury Regulations
thereunder. Within 60 days following the final determination of the Purchase
Price, the Parties will work together in good faith to agree upon such
allocation; provided that in the event that such agreement has not been reached
within such 60-day period, the allocation will be determined by the Independent
Accounting Firm based solely on presentations of Buyer and Seller (and not
independent review), and such determination will be binding on the Parties. Each
Party will pay one-half of the fees and expenses of the Independent Accounting
Firm in connection with such determination. Each Party will report the
transactions contemplated by the Agreement for federal Income Tax and all other
Tax purposes in a manner consistent with such allocation, and shall not
voluntarily take any action inconsistent therewith upon examination of any Tax
Return, in any refund claim, in any litigation or otherwise with respect to such
Tax Returns. Each Party will provide the other promptly with any other
information required to complete Form 8594 under the Code. Each Party will
notify the other, and will provide the other

 

19

 

 

MINNESOTA GAS

 

 

with reasonably requested cooperation, in the event of an examination, audit, or
other proceeding regarding the allocations provided for in this Section 3.3.

 

3.4

Proration.

(a)          All Taxes, utility charges, and similar items customarily prorated,
including those listed below, to the extent relating to the Business or the
Purchased Assets will be prorated as of the Effective Time, with Seller liable
to the extent such items relate to any period prior to the Effective Time, and
Buyer liable to the extent such items relate to any period from and after the
Effective Time. Such items to be prorated will include:

(i)           personal property and real property Taxes, assessments, franchise
Taxes, and other similar charges, including charges for water, telephone,
electricity, and other utilities;

(ii)          any permit, license, registration, and compliance assurance fees
or other fees with respect to any Transferable Permits and Transferable
Environmental Permits; and

 

(iii)

rents under any leases of real or personal property.

(b)          In connection with any real property Tax prorations, including
installments of special assessments, Buyer will be credited with an amount equal
to the amount of the current real property Tax or installment of special
assessments, as the case may be, multiplied by a fraction, (i) the numerator of
which is the number of days from the date of the immediately preceding
installment to the day before the Closing Date, and (ii) the denominator of
which is the total number of days in the assessment period in which the Closing
Date occurs. In connection with any other prorations, in the event that actual
amounts are not available at the Closing Date, the proration will be based upon
the Taxes, assessments, charges, fees, or rents for the most recent period
completed prior to the Closing Date for which actual Taxes, assessments,
charges, fees, or rents are available. All prorations will be based upon the
most recent available Tax rates, assessments, and valuations. Any prorations
will be made so as to avoid duplication of any items, and will not include items
which are otherwise taken into account in determining the Purchase Price,
including the Adjustment Amount.

(c)          The proration of all items under this Section 3.4 will be
recalculated by Buyer within 60 days following the date upon which the actual
amounts become available to Buyer. Buyer will notify Seller promptly of such
recalculated amounts, and will provide Seller with all documentation relating to
such recalculations, including tax statements and other notices from third
parties. The Parties will make such payments to each other as are necessary to
reconcile any estimated amounts prorated as of the Effective Time with the final
amounts to be prorated. Seller and Buyer agree to furnish each other with such
documents and other records as may be reasonably requested in order to confirm
all proration calculations made pursuant to this Section 3.4.

 

20

 

 

MINNESOTA GAS

 

 

ARTICLE IV

THE CLOSING

4.1          Time and Place of Closing. Upon the terms and subject to the
satisfaction of the conditions contained in Article VIII of this Agreement, the
closing of the purchase and sale of the Purchased Assets and assumption of the
Assumed Obligations (the “Closing”) will take place at the offices of Blackwell
Sanders Peper Martin LLP in Kansas City, Missouri, beginning at 10:00 A.M.
(Kansas City, Missouri time) on the first Business Day of the calendar month
following the calendar month during which the conditions set forth in Article
VIII (other than conditions to be satisfied by deliveries at the Closing) have
been satisfied or waived, or at such other place or time as the Parties may
agree; provided, however, that in no event shall such Closing occur prior to
February 8, 2006, and provided that in no event shall the Closing occur sooner
than seven Business Days after the receipt of the last Final Regulatory Order.
The date on which the Closing occurs is referred to herein as the “Closing
Date.” The purchase and sale of the Purchased Assets and assumption of the
Assumed Obligations will be effective as of 12:01 A.M., Rosemount, Minnesota
time on the Closing Date (the “Effective Time”).

4.2          Payment of Closing Payment Amount. At the Closing, Buyer will pay
or cause to be paid to Seller the Closing Payment Amount, by wire transfer of
immediately available funds or by such other means as may be agreed upon by
Seller and Buyer.

4.3          Deliveries by Seller. At or prior to the Closing, Seller will
deliver the following to Buyer:

 

(a)

the Bill of Sale, duly executed by Seller;

 

 

(b)

the Assignment and Assumption Agreement, duly executed by Seller;

 

(c)

the Transitional Services Agreement, duly executed by Seller;

 

(d)          all consents, waivers or approvals obtained by Seller from third
parties in connection with this Agreement;

 

(e)

the certificate contemplated by Section 8.2(d);

(f)           one or more deeds of conveyance of the parcels of Real Property
with respect to which Seller holds fee interests, substantially in the form of
the Special Warranty Deed, duly executed and acknowledged by Seller and in
recordable form;

(g)          one or more instruments of assignment or conveyance, substantially
in the form of the Assignment of Easements, as are necessary to transfer the
Easements and the Shared Easement Rights pursuant to Section 7.4(b);

(h)          all such other instruments of assignment or conveyance as are
reasonably requested by Buyer in connection with the transfer of the Purchased
Assets to Buyer in accordance with this Agreement;

 

21

 

 

MINNESOTA GAS

 

 

(i)           a receipt or certificate from the Minnesota Department of Treasury
confirming that all Minnesota Taxes have been paid in full as of the Closing
Date;

(j)           certificates of title for certificated motor vehicles or other
titled Purchased Assets, duly executed by Seller as may be required for transfer
of such titles to Buyer pursuant to this Agreement;

(k)          terminations or releases of Encumbrances on the Purchased Assets
other than the Permitted Encumbrances;

(l)           a long-form certificate of good standing with respect to Seller,
to the extent applicable (dated as of a recent date prior to the Closing Date
but in no event more than 15 Business Days before the Closing Date), issued by
the Secretary of State (or other duly authorized official) of the State of
Delaware;

(m)         a copy, certified by an authorized officer of Seller, of resolutions
authorizing the execution and delivery of this Agreement and the Ancillary
Agreements and instruments attached as exhibits hereto and thereto, and the
consummation of the transactions contemplated hereby and thereby, together with
a certificate by the Secretary of Seller as to the incumbency of those officers
authorized to execute and deliver this Agreement and the Ancillary Agreements;

(n)          an affidavit that Seller is not a foreign person under section
1445(b)(2) of the Code; and

(o)          such other agreements, documents, instruments, and writings as are
required to be delivered by Seller at or prior to the Closing Date pursuant to
this Agreement or any Ancillary Agreement.

4.4          Deliveries by Buyer. At or prior to the Closing, Buyer will deliver
the following to Seller:

 

(a)

the Assignment and Assumption Agreement, duly executed by Buyer;

 

(b)

the Transitional Services Agreement, duly executed by Buyer;

 

 

(c)

the certificate contemplated by Section 8.3(c);

 

(d)          all consents, waivers, or approvals obtained by Buyer from third
parties in connection with this Agreement;

(e)          a long-form certificate of good standing with respect to Buyer, to
the extent applicable (dated as of a recent date prior to the Closing Date but
in no event more than 15 Business Days before the Closing Date), issued by the
Secretary of State (or other duly authorized official) of the State of Delaware;

(f)           a copy, certified by an authorized officer of Buyer, of
resolutions authorizing the execution and delivery of this Agreement and the
Ancillary Agreements

 

22

 

 

MINNESOTA GAS

 

 

and instruments attached as exhibits hereto and thereto, and the consummation of
the transactions contemplated hereby and thereby, together with a certificate by
the Secretary of Buyer as to the incumbency of those officers authorized to
execute and deliver this Agreement and the Ancillary Agreements;

(g)          all such other documents, instruments, and undertakings as are
reasonably requested by Seller in connection with the assumption by Buyer of the
Assumed Obligations in accordance with this Agreement or any Ancillary
Agreement; and

(h)          such other agreements, documents, instruments and writings as are
required to be delivered by Buyer at or prior to the Closing Date pursuant to
this Agreement or any Ancillary Agreement.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER

As an inducement to Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, except as set forth in, or qualified by any
matter set forth in, the Seller Disclosure Schedule (as the same may be
supplemented or amended pursuant to Section 7.8), Seller represents and warrants
to Buyer as set forth in this Article V. For convenience of reference, selected
Sections of Article V refer to specific, numbered Schedules.

5.1          Organization; Qualification. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of Delaware and
has all requisite corporate power and authority to own, lease, and operate the
Purchased Assets and to carry on the Business as presently conducted. Seller is
duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the conduct of the Business, or the
ownership or operation of any Purchased Assets, by Seller makes such
qualification necessary. Seller has heretofore delivered to Buyer true,
complete, and correct copies of Seller’s Governing Documents, as currently in
effect.

5.2          Authority Relative to this Agreement. Seller has full corporate
power and authority necessary to execute and deliver this Agreement and the
Ancillary Agreements and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by the board of directors of
Seller and no other corporate proceedings on the part of Seller are necessary to
authorize this Agreement and the Ancillary Agreements or to consummate the
transactions contemplated hereby and thereby. This Agreement has been, and upon
Closing each of the Ancillary Agreements will be, duly and validly executed and
delivered by Seller, and constitutes (or, with respect to each Ancillary
Agreement, will constitute upon Closing) a valid and binding agreement of
Seller, enforceable against Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
or other similar laws affecting or relating to enforcement of creditors’ rights
generally or general principles of equity.

 

23

 

 

MINNESOTA GAS

 

 

5.3          Consents and Approvals; No Violation. Except as set forth in
Schedule 5.3, the execution and delivery of this Agreement and the Ancillary
Agreements by Seller, and the consummation by Seller of the transactions
contemplated hereby and thereby, do not:

 

(a)

conflict with or result in any breach of Seller’s Governing Documents;

(b)          result in a default (including with notice, lapse of time, or
both), or give rise to any right of termination, cancellation, or acceleration,
under any of the terms, conditions, or provisions of any note, bond, mortgage,
indenture, agreement, lease, or other instrument or obligation to which Seller
or any of its Affiliates is a party or by which Seller or any of its Affiliates
or any of the Purchased Assets may be bound, except for such defaults (or rights
of termination, cancellation, or acceleration) as to which requisite waivers or
consents have been, or will prior to the Effective Time be, obtained or which if
not obtained or made would not, individually or in the aggregate, prevent or
materially delay the consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements;

(c)          violate any Law or Order applicable to Seller, any of its
Affiliates, or any of the Purchased Assets;

(d)          require any declaration, filing, or registration with, or notice
to, or authorization, consent, or approval of any Governmental Entity, including
the FERC as to gas storage facilities, and including state utility commissions,
other than (i) the Seller Required Regulatory Approvals, (ii) such declarations,
filings, registrations, notices, authorizations, consents, or approvals which,
if not obtained or made, would not, individually or in the aggregate, prevent or
materially delay the consummation of the transactions contemplated by this
Agreement, or (iii) any requirements which become applicable to Seller as a
result of the specific regulatory status of Buyer (or any of its Affiliates) or
as a result of any other facts that specifically relate to any business or
activities in which Buyer (or any of its Affiliates) is or proposes to be
engaged.

5.4          Governmental Filings. Since January 1, 2004, Seller has filed or
caused to be filed with the PUC, MNOPS, and FERC all material forms, statements,
reports, and documents (including all exhibits, amendments, and supplements
thereto) required by Law or Order to be filed by Seller with the PUC, MNOPS, or
FERC with respect to the Natural Gas Distribution Business and the Purchased
Assets. As of the respective dates on which such forms, statements, reports, and
documents were filed, each (to the extent prepared by Seller and excluding
information prepared or provided by third parties) complied in all material
respects with all requirements of any Law or Order applicable to such form,
statement, report, or document in effect on such date.

 

5.5

Financial Information.

(a)          Schedule 5.5(a) sets forth the Book Values, as of December 31,
2004, and June 30, 2005, respectively, of selected balance sheet information
with respect to certain Purchased Assets and certain Assumed Obligations. The
information set forth in Schedule 5.5(a) is referred to herein as the “Selected
Balance Sheet Information.”

 

24

 

 

MINNESOTA GAS

 

 

(b)          Schedule 5.5(b) sets forth the division income statements for the
Business for the 12-month period ended December 31, 2004, and the six-month
period ended June 30, 2005. The information set forth in Schedule 5.5(b) is
referred to herein as the “Division Income Statement Information.”

(c)          The Selected Balance Sheet Information and the Division Income
Statement Information fairly present as of the dates thereof or for the periods
covered thereby, in all material respects, the items reflected therein, all in
accordance with FERC Accounting Rules and any applicable PUC accounting rules
applied on a consistent basis in accordance with the Seller’s normal accounting
practices. The individual accounts in the Selected Balance Sheet Information are
recorded in accordance with GAAP, with the exception of the following items that
reflect pro forma adjustments: (i) Cash Value of Leased Vehicles, (ii) Other
Post-Retirement Benefits (presented at the accumulated post-retirement benefit
obligation liability with an offsetting Other Post Employment Benefits
regulatory asset), and (iii) the items described in Note 1 on Exhibit 3.1.C,
which are currently reflected on Seller’s corporate books and records and that,
beginning January 1, 2006, will be reflected on the Business’s books and
records.

5.6          No Material Adverse Effect. Except as set forth in Schedule 5.6,
since June 30, 2005, no change or event has occurred which, either individually
or in the aggregate, has resulted in or is reasonably likely to have a Material
Adverse Effect.

5.7          Operation in the Ordinary Course. Except as otherwise disclosed
herein or set forth in Schedule 5.7, or otherwise specifically contemplated or
permitted pursuant to the terms hereof, since June 30, 2005, the Business has
been operated in the ordinary course of business consistent with past practice.

5.8          Title and Related Matters. Except as set forth on Schedule 5.8: (i)
Seller owns, and has good, valid, and marketable title to, the Purchased Assets,
free and clear of all Encumbrances other than Permitted Encumbrances; and (ii)
the Purchased Assets are not subject to Preferential Purchase Rights. The
Purchased Assets have been maintained consistent with Good Utility Practice,
except to the extent that the failure to so maintain the Purchased Assets does
not create a Material Adverse Effect.

5.9          Leases. Schedule 5.9 lists all real property leases under which
Seller is a lessee or lessor that (i) relate principally to the Business or the
Purchased Assets, and (ii) provide for annual payments of more than $100,000 or
are otherwise material to the Business or the Purchased Assets. To the extent
available to Seller, true and complete copies of all such leases have been made
available to Buyer.

5.10       Environmental. The only representations and warranties given in
respect to Environmental Laws, Environmental Permits, or Environmental Claims
are those contained in this Section 5.10, and none of the other representations
and warranties contained in this Agreement will be deemed to constitute,
directly or indirectly, a representation and warranty with respect to
Environmental Laws, Environmental Permits, or Environmental Claims, or matters
incident to or arising out of or in connection with any of the foregoing. All
such matters are governed exclusively by this Section 5.10 and by Article IX.

 

25

 

 

MINNESOTA GAS

 

 

(a)          Except as set forth on Schedule 5.10(a)-1, (i) to Seller’s
Knowledge, Seller presently possesses all Environmental Permits necessary to
own, maintain, and operate the Purchased Assets as they are currently being
owned, maintained and operated, and to conduct the Business as it is currently
being conducted, (ii) to Seller’s Knowledge, with respect to the Purchased
Assets and the Business, Seller is in compliance, in all material respects, with
the requirements of such Environmental Permits and Environmental Laws, and (iii)
Seller has received no written notice or information of an intent by an
applicable Governmental Entity to suspend, revoke, or withdraw any such
Environmental Permits. Schedule 5.10(a)-2 sets forth a list of all material
Environmental Permits held by Seller for the operation of the Business.

(b)          Except as set forth on Schedule 5.10(b), neither Seller nor any
Affiliate of Seller has received within the last three years any written notice,
report, or other information regarding any actual or alleged violation of
Environmental Laws, Environmental Permits, or any liabilities or potential
liabilities, including any investigatory, remedial, or corrective obligations,
relating to the operation of the Business or the Purchased Assets arising under
Environmental Laws.

(c)          Except as set forth on Schedule 5.10(c), (i) to Seller’s Knowledge,
there is and has been no Release from, in, on, or beneath the Real Property that
could form a basis for an Environmental Claim, and (ii) there are no
Environmental Claims related to the Purchased Assets or the Business, which are
pending or, to Seller’s Knowledge, threatened against Seller.

(d)          Seller has made available to Buyer, prior to the date hereof, all
material correspondence, studies, audits, reviews, investigations, analyses, and
reports on environmental matters relating to the Purchased Assets, the Assumed
Environmental Liabilities, or the Business (including estimates of costs
developed in accordance with the “Statement of Position 96-1: Environmental
Remediation Liabilities,” prepared by the Accounting Standards Executive
Committee of the American Institute of Certified Public Accountants (October 10,
1996)) that were conducted by, or on behalf of, or which are in the possession
or reasonable control of Seller.

(e)          Except as set forth on Schedule 5.10(e), Seller has not entered
into any settlements with any of its insurance carriers in connection with the
clean-up of any of the manufactured gas plant sites related to the Purchased
Assets or Assumed Obligations.

5.11       Labor Matters. Schedule 5.11 lists each collective bargaining
agreement covering any of the Business Employees to which Seller is a party or
is subject (each, a “Collective Bargaining Agreement”). Except to the extent set
forth in Schedule 5.11, (i) Seller is in compliance with all Laws applicable to
the Business Employees respecting employment and employment practices, terms and
conditions of employment, and wages and hours; (ii) Seller has not received
written notice of any unfair labor practice complaint against Seller pending
before the National Labor Relations Board with respect to any of the Business
Employees; (iii) Seller has not received notice that any representation petition
respecting the Business Employees has been filed with the National Labor
Relations Board; (iv) Seller is in compliance with the terms of and its
obligations under the Collective Bargaining Agreements, and has administered
each

 

26

 

 

MINNESOTA GAS

 

 

Collective Bargaining Agreement in a manner consistent in all material respects
with the terms and conditions of such Collective Bargaining Agreement; (v) no
grievance or arbitration proceeding arising out of or under the Collective
Bargaining Agreements is pending against Seller; and (vi) there is no labor
strike, slowdown, work stoppage, or lockout actually pending or, to Seller’s
Knowledge, threatened against Seller in respect of the Purchased Assets or the
Business. Except for obligations to be assumed or undertaken by Buyer pursuant
to Section 7.9, there are no employment, severance, or change in control
agreements or contracts between Seller and any Business Employee under which
Buyer would have any liability. Seller has made available to Buyer a true,
correct, and complete copy of each Collective Bargaining Agreement. Prior to the
Closing Date, Seller has not engaged in any act in violation of the WARN Act, or
in any act that requires notice or any other action on the part of Seller under
the WARN Act, with respect to the Business.

 

5.12

ERISA; Benefit Plans.

(a)          Schedule 5.12(a) lists each employee benefit plan (as such term is
defined in section 3(3) of ERISA) and each other plan, program, or arrangement
providing benefits to employees that is maintained by, contributed to, or
required to be contributed to by Seller (or any ERISA Affiliate of Seller) as of
the date hereof on account of current or former Business Employees, including
persons who have retired or may retire from the Business (each, a “Benefit
Plan”). Copies of such plans and all amendments thereto, together with the most
recent annual report and actuarial report with respect thereto, if any, have
been made available to Buyer.

(b)          Each Benefit Plan that is intended to be qualified under section
401(a) of the Code is qualified in all material respects and has received a
determination from the Internal Revenue Service that such Benefit Plan is so
qualified, and each trust that is intended to be exempt under section 501(a) of
the Code has received a determination letter that such trust is so exempt.
Seller has furnished to Buyer true and complete copies of all such determination
letters. Nothing has occurred since the date of such determination that would
materially adversely affect the qualified or exempt status of such Benefit Plan
or trust, nor will the consummation of the transactions provided for by this
Agreement have any such effect.

(c)          Each Benefit Plan has been maintained, funded, and administered in
material compliance with its terms, the terms of any applicable Collective
Bargaining Agreements, and all applicable Laws, including ERISA and the Code.
There is no “accumulated funding deficiency” within the meaning of section 412
of the Code with respect to any Benefit Plan which is an “employee pension
benefit plan” as defined in section 3(2) of ERISA. No reportable event (within
the meaning of section 4043 of ERISA) has occurred or exists in connection with
any Benefit Plan other than events which would not, individually or in the
aggregate, have an adverse effect on the Purchased Assets or Business. No event
or liability or lien on assets described in sections 4041, 4042, 4062, 4063,
4064, 4068, or 4069 of ERISA has occurred or exists in connection with any
Benefit Plan. Seller has accounted for the Seller Pension Plan in accordance
with GAAP, and the contributions to the Seller Pension Plan have been made in
accordance with applicable Law. No proceeding has been initiated to terminate
the

 

27

 

 

MINNESOTA GAS

 

 

Seller Pension Plan, nor, to Seller’s Knowledge, has the Pension Benefit
Guaranty Corporation threatened or otherwise expressed its intention to
terminate the Seller Pension Plan. Neither Seller nor any ERISA Affiliate has
any obligation to contribute to or any other liability under or with respect to
any multiemployer plan (as such term is defined in section 3(37) of ERISA). No
liability under Title IV or section 302 of ERISA has been incurred by Seller or
any ERISA Affiliate that has not been satisfied in full, and no condition exists
that presents a material risk to Seller or any ERISA Affiliate of incurring any
such liability, other than liability for premiums due to the Pension Benefit
Guaranty Corporation. No Person has provided or is required to provide security
to the Seller Pension Plan under section 401(a)(29) of the Code due to a plan
amendment that results in an increase in current liability.

(d)          Except as set forth on Schedule 5.12(d), the administrator and the
fiduciaries of each Benefit Plan have in all material respects complied with the
applicable requirements of ERISA, the Code, and any other requirements of
applicable Laws, including the fiduciary responsibilities imposed by Part 4 of
Title I, Subtitle B of ERISA. Except as set forth on Schedule 5.12(d), there
have been no non-exempt “prohibited transactions” as described in section 4975
of the Code or Title I, Part 4 of ERISA involving any Benefit Plan, and to
Seller’s Knowledge there are no facts or circumstances which could give rise to
any tax or penalty imposed by section 4975 of the Code or section 502 of ERISA
with respect to any Benefit Plan.

(e)          All contributions (including all employer matching and other
contributions and all employee salary reduction contributions) for all periods
ending prior to the Effective Time (including periods from the first day of the
current plan year to the Effective Time) have been paid to the Benefit Plans
within the time required by Law or will be paid to the Benefit Plans prior to or
as of the Closing, notwithstanding any provision of any Benefit Plan to the
contrary. All returns, reports, and disclosure statements required to be made
under ERISA and the Code with respect to the Benefit Plans have been timely
filed or delivered.

(f)           Each Benefit Plan that is a group health plan (within the meaning
of Code section 5000(b)(1)) in all material respects complies with and has been
maintained and operated in material compliance with each of the health care
continuation requirements of section 4980B of the Code and Part 6 of Title I,
Subtitle B of ERISA (or the applicable requirements of state insurance
continuation law) and the requirements of the Health Insurance Portability and
Accountability Act of 1996.

(g)          Schedule 5.12(g) sets forth the medical and life insurance benefits
currently provided by Seller to any currently retired or former employees of the
Business other than pursuant to Part 6 of Subtitle B of Title I of ERISA,
section 4980B of the Code, or similar provisions of state law. Except for (i)
any obligation to provide medical and/or life insurance benefits under and for
the duration of any applicable Collective Bargaining Agreement or any prior
collective bargaining agreement to which Seller or any of Seller’s predecessors
was a party with respect to the Business, or (ii) any obligation under the
Consolidated Omnibus Budget Reconciliation Act of 1985 or other applicable Law,
Seller may amend, modify, or terminate post-retirement and post-

 

28

 

 

MINNESOTA GAS

 

 

employment medical and life benefits or coverage, or adjust retirement premiums
or cost-sharing provisions, at any time without further liability.

(h)          Except as provided in Section 7.9, no provision of any Benefit Plan
would require the payment by Buyer of any money or other property, or the
provision by Buyer of any other rights or benefits, to any employee or former
employee of Seller as a result of the transactions contemplated by this
Agreement, whether or not such payment would constitute a parachute payment
within the meaning of section 280G of the Code.

 

5.13

Certain Contracts and Arrangements.

(a)          Except for contracts, agreements, leases, commitments,
understandings, or instruments which (i) are listed on Schedule 5.9, Schedule
5.11, or Schedule 5.13(a), or (ii) have been entered into in the ordinary course
of business and do not individually involve annual payment obligations in excess
of $100,000, Seller is not a party to any contract, agreement, lease,
commitment, understanding, or instrument which is principally related to the
Business or the Purchased Assets other than the Retained Agreements, the Shared
Agreements, and any other contracts, agreements, personal property leases,
commitments, understandings, or instruments which are Excluded Assets. Except as
disclosed in Schedule 5.13(a), each material Business Agreement constitutes a
valid and binding obligation of Seller and, to Seller’s Knowledge, constitutes a
valid and binding obligation of the other parties thereto and is in full force
and effect. Seller is not in breach or default (nor has any event occurred
which, with notice or the passage of time, or both, would constitute such a
breach or default) under, and has not received written notice that it is in
breach or default under, any material Business Agreement, except for such
breaches or defaults as to which requisite waivers or consents have been
obtained. Except as set forth in Schedule 5.13(a), to Seller’s Knowledge, no
other party to any material Business Agreement is in breach or default (nor has
any event occurred which, with notice or the passage of time, or both, would
constitute such a breach or default) under any material Business Agreement.
Except as set forth in Schedule 5.13(a), Seller has not received written notice
of cancellation or termination of any material Business Agreement. To the extent
available to Seller, true and complete copies of each Business Agreement listed
in Schedule 5.13(a), together with all amendments and supplements thereto, have
been made available to Seller.

(b)          Schedule 5.13(b) sets forth a list of each municipal or county
franchise agreement relating to the Business to which Seller is a party (the
“Franchises”). Except as disclosed on Schedule 5.13(b), Seller is not in default
under such agreements, and, to Seller’s Knowledge, each such agreement is in
full force and effect.

5.14       Legal Proceedings and Orders. Except as set forth in Schedule 5.14,
there are no material Claims relating to the Purchased Assets or the Business,
which are pending or, to Seller’s Knowledge, threatened against Seller. Except
for any Regulatory Orders, or as set forth in Schedule 5.14, Seller is not
subject to any outstanding Orders that would reasonably be expected to apply to
the Purchased Assets or the Business following Closing.

 

29

 

 

MINNESOTA GAS

 

 

5.15       Permits. Seller has all Permits required by Law for the operation of
the Business as presently conducted and for the ownership, operation, and
maintenance of the Purchased Assets as presently owned, operated, and
maintained. Schedule 5.15 sets forth a list of all material Permits held by
Seller and required for the operation of the Business as presently conducted and
for the ownership, operation, and maintenance of the Purchased Assets as
presently owned, operated, and maintained. Except as set forth in Schedule 5.15,
(i) Seller has not received any written notification that it is in violation of
any such Permits, and (ii) Seller is in compliance in all material respects with
all such Permits.

5.16       Compliance with Laws. Seller is in material compliance with all Laws,
Orders, and Regulatory Orders applicable to the Purchased Assets or the
Business.

5.17       Insurance. Schedule 5.17 contains a complete list of the current
insurance policies held by Seller in respect of the Business and the Purchased
Assets. Except as set forth on Schedule 5.17, since June 30, 2005, the Purchased
Assets have been continuously insured with financially sound insurers in such
amounts and against such risks and losses as are customary in the gas utility
industry, and Seller has not received any written notice of cancellation or
termination with respect to any material insurance policy of Seller providing
coverage in respect of the Purchased Assets. All insurance policies of Seller
covering the Purchased Assets are in full force and effect.

 

5.18

Taxes.

Except as set forth in Schedule 5.18:

(a)          All Tax Returns relating to the Business or the Purchased Assets,
including all property, activities, income, employees, sales, purchases, capital
or gross receipts of Seller relating thereto, required to be filed by or on
behalf of Seller have been or will be filed in a timely manner, and all Taxes
required to be shown on such Tax Returns have been or will be timely paid in
full, except to the extent being contested in good faith by appropriate
proceedings. All such Tax Returns were or will be correct and complete in all
material respects, and were or will be prepared in compliance with all
applicable Laws and regulations. None of the Purchased Assets is (i) an asset or
property that is or will be required to be treated as described in section
168(f)(8) of the Internal Revenue Code of 1954 as in effect immediately before
the enactment of the Tax Reform Act of 1986, or (ii) tax-exempt use property
within the meaning of section 168(h)(1) of the Code. No property Taxes paid by
Seller will be subject to refund to the customers of the Business.

(b)          Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee or
independent contractor, service provider, creditor, member, stockholder or other
third party in connection with the Business or the Purchased Assets, and all
forms W-2 and 1099 required with respect thereto have been properly completed
and timely filed.

(c)          To Seller’s Knowledge, there are no additional state or local Taxes
due and no state or local deficiencies for any period for which state or local
Tax Returns have

 

30

 

 

MINNESOTA GAS

 

 

been filed by or on behalf of Seller, and there are no pending, active or
threatened audits or proposed deficiencies or other claims for unpaid state or
local Taxes of Seller or of the Affiliated Group that are attributable to
Seller, in each case with respect to the Business or the Purchased Assets.

(d)          Seller is not a party (directly or indirectly) to any Tax
allocation or sharing agreement relating to the Business or the Purchased
Assets.

(e)          None of the Assumed Obligations is an obligation to make a payment
that is not or will not be deductible under section 280G of the Code.

(f)           The transactions contemplated by this Agreement will be a taxable
event as to Seller, and all of Seller’s accumulated deferred Taxes related to
Seller’s Natural Gas Distribution Business will be extinguished.

5.19       Regulation as a Utility. Neither Seller nor any of its Affiliates is
a “Holding Company,” a “Subsidiary Company,” or an “Affiliate” of a “Holding
Company” within the meaning of the Holding Company Act. The Natural Gas
Distribution Business is regulated as a public utility in the state of
Minnesota.

5.20       Fees and Commissions. No broker, finder, or other Person is entitled
to any brokerage fees, commissions, or finder’s fees for which Buyer could
become liable or obligated in connection with the transactions contemplated
hereby by reason of any action taken by Seller.

5.21       Shipper Services Sale to Cornerstone. The sale of Seller’s Shipper
Services business first to Energy One Ventures before merging that entity into
Cornerstone Energy has not been accorded accounting treatment which (i) is
contrary to prior PUC Orders or (ii) in any way could result in a refund
requirement or cost disallowance.

5.22       Sufficiency of Assets. Except as set forth on Schedule 5.22, the
Purchased Assets, together with the assets identified in Sections 2.2(h), (k),
(l), and (m), constitute all assets necessary for Buyer to conduct the Business
in substantially the same manner as Seller conducted the Business prior to the
Effective Time.

5.23       Financial Hedges. Each of the Financial Hedges identified on Schedule
5.23 (a) has been entered into solely in connection with, or allocated solely
to, the gas supply portfolio serving the Natural Gas Distribution Business, and
(b) has been applied to the gas supply portfolio serving the Natural Gas
Distribution Business in conformance with the PUC’s rules and regulations,
including the purchased gas adjustment rules. At Closing, Schedule 5.23 will
also identify each Financial Hedge to be included in the Purchased Assets or
that will be liquidated pursuant to Section 7.4(c)(ii).

5.24       Related-Party Agreements. Except as set forth in Schedule 5.24,
Seller is not a party to any agreement, contract, commitment, transaction, or
proposed transaction with any of its Affiliates related to the Business. Except
as set forth in Schedule 5.24, no contract, agreement, or commitment included in
the Purchased Assets has, as a counterparty thereto, an Affiliate of Seller.

 

31

 

 

MINNESOTA GAS

 

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF BUYER

As an inducement to Seller to enter this Agreement and to consummate the
transactions contemplated hereby, Buyer represents and warrants to Seller as
follows:

6.1          Organization. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware and has all requisite
corporate power and authority to own, lease, and operate its properties and to
carry on its business as is now being conducted.

6.2          Authority Relative to this Agreement. Buyer has all corporate power
and authority necessary to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the board of directors of Buyer and no other
corporate proceedings on the part of Buyer are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Buyer, and constitutes a
valid and binding agreement of Buyer, enforceable against Buyer in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, or other similar laws affecting or relating
to enforcement of creditors’ rights generally or general principles of equity.

6.3          Consents and Approvals; No Violation. Except as set forth in
Schedule 6.3, the execution and delivery of this Agreement and the Ancillary
Agreements by Buyer, and the consummation by Buyer of the transactions
contemplated hereby and thereby, do not:

 

(a)

conflict with or result in any breach of Buyer’s Governing Documents;

(b)          result in a default (including with notice, lapse of time, or
both), or give rise to any right of termination, cancellation, or acceleration,
under any of the terms, conditions, or provisions of any note, bond, mortgage,
indenture, agreement, lease, or other instrument or obligation to which Buyer or
any of its Affiliates is a party or by which Buyer or any of its Affiliates or
any of their respective assets may be bound, except for such defaults (or rights
of termination, cancellation, or acceleration) as to which requisite waivers or
consents have been, or will prior to the Effective Time be, obtained or which if
not obtained or made would not, individually or in the aggregate, prevent or
materially delay the consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements;

(c)          violate any Law or Order applicable to Buyer, any of its
Affiliates, or any of their respective assets;

(d)          require any declaration, filing, or registration with, or notice
to, or authorization, consent, or approval of any Governmental Entity, including
the FERC as to gas storage facilities, and including state utility commissions,
other than (i) the Buyer Required Regulatory Approvals, or (ii) such
declarations, filings, registrations, notices, authorizations, consents, or
approvals which, if not obtained or made, would not,

 

32

 

 

MINNESOTA GAS

 

 

individually or in the aggregate, prevent or materially delay the consummation
of the transactions contemplated by this Agreement.

6.4          Regulation as a Utility. Buyer is a subsidiary of a “Holding
Company” within the meaning of the Holding Company Act, which Holding Company is
exempt from the Holding Company Act’s registration requirements.

6.5          Buyer’s Knowledge. Buyer represents that it is a sophisticated
party, and has conducted a full due diligence investigation of the Business, the
Purchased Assets, and the Assumed Obligations. Buyer understands and agrees that
any financial forecasts or projections relating to the Business prepared by or
on behalf of Seller have been provided to Buyer with the understanding and
agreement that Seller is making no representation or warranty with respect to
such forecasts or projections.

6.6          Fees and Commissions. No broker, finder, or other Person is
entitled to any brokerage fees, commissions, or finder’s fees for which Seller
could become liable or obligated in connection with the transactions
contemplated hereby by reason of any action taken by Buyer.

6.7          Financial Capability. Buyer (i)  at the Closing will have
sufficient funds available to pay the Purchase Price and any expenses incurred
by Buyer in connection with the transactions contemplated by this Agreement,
(ii)  at the Closing will have the resources and capabilities (financial or
otherwise) to perform its obligations hereunder, and (iii) has not incurred any
obligation, commitment, restriction, or liability of any kind, which would
impair or adversely affect such resources and capabilities.

ARTICLE VII

COVENANTS OF THE PARTIES

 

7.1

Conduct of Business.

(a)          Except as specifically contemplated in this Agreement, specifically
required by any Business Agreement, Law, or Order, or otherwise specifically
described in Schedule 7.1, during the period from the date of this Agreement to
the Closing Date, Seller will operate the Purchased Assets and the Business in
the ordinary course consistent with Good Utility Practice and will use
commercially reasonable efforts to preserve intact the Business, and to preserve
the goodwill and relationships with customers, suppliers, Governmental Entities,
and others having business dealings with the Business. Without limiting the
generality of the foregoing, except as specifically contemplated in this
Agreement, specifically required by any Business Agreement, Law, or Order, or
otherwise specifically described in Schedule 7.1, prior to the Closing Date,
without the prior written consent of Buyer, which will not be unreasonably
withheld, delayed or conditioned, Seller will not:

(i)           create, incur, assume, or suffer to exist any Encumbrance (other
than Permitted Encumbrances) upon the Purchased Assets;

 

33

 

 

MINNESOTA GAS

 

 

(ii)          make any material change in the level of inventories customarily
maintained by Seller with respect to the Business, other than in the ordinary
course of business or consistent with Good Utility Practice;

(iii)         other than any such sales, leases, transfers, or dispositions
involving any Purchased Assets involving less than $25,000 on an individual
basis, or $100,000 in the aggregate, sell, lease (as lessor), transfer, or
otherwise dispose of any of the Purchased Assets, other than (A) in the ordinary
course of business, and (B) consistent with Good Utility Practice;

(iv)         other than in the ordinary course of business or consistent with
Good Utility Practice, (A) enter into, terminate, extend, renew, or otherwise
amend any material Business Agreement, or (B) waive any material default by, or
release, settle, or compromise any material claim against, any other Person who
is a party thereto;

(v)          grant severance or termination pay to any present or former
employee of the Business that would be the responsibility of Buyer;

(vi)         enter into any collective bargaining agreement in which the terms
and conditions to be applicable to Transferred Employees of a specific job
classification or seniority materially differ from those currently applicable to
Business Employees of such specific job classification or seniority;

(vii)       amend in any material respect or cancel (or suffer the cancellation
of) any property, liability, casualty, or other insurance policies related to
the Purchased Assets, or fail to maintain by self insurance, or with financially
responsible insurance companies, insurance in such amounts and against such
risks and losses as are consistent with Good Utility Practice and customary for
such Purchased Assets and the Business;

(viii)      enter into, amend, make any waivers under, or otherwise modify any
property Tax agreement, treaty, or settlement;

(ix)         with respect to the Business, change, in any material respect, its
accounting methods or practices, credit practices, collection policies, or
investment, financial reporting, or inventory practices or policies or the
manner in which the books and records of the Business are maintained;

(x)          grant any increase in the compensation of or grant or agree to any
bonus or increase the benefits or coverage under any Benefit Plan or adopt a new
Benefit Plan for Business Employees not covered by collective bargaining who
will become Transferred Employees, except for increases and bonuses, or changes
in benefits or coverage, in the ordinary course of business and consistent with
past practice;

(xi)         hire any employee for the Business other than (A) persons who are
hired by Seller to replace an employee identified on Schedule 1.1-B who has

 

34

 

 

MINNESOTA GAS

 

 

terminated employment, died, or become disabled, (B) persons who are hired by
Seller in order to meet a reasonable, demonstrable need, or (C) persons hired by
Seller to perform Central or Shared Functions; or

(xii)       agree or commit to take any action which would be a violation of the
restrictions set forth in Section 7.1(a)(i) through Section 7.1(a)(xi).

(b)          Within fifteen (15) Business Days after the date hereof, a
committee comprised of one Person designated by Seller and one Person designated
by Buyer, and such additional Persons as may be appointed by the Persons
originally appointed to such committee (the “Transition Committee”) will be
established promptly following the execution of this Agreement to examine
transition issues relating to or arising in connection with the transactions
contemplated hereby. From time to time, the Transition Committee will report its
findings to the senior management of each of Seller and Buyer. The Transition
Committee shall have no authority to bind or make agreements on behalf of the
Parties or to issue instructions to or direct or exercise authority over the
Parties. Seller shall provide to Buyer, at no cost, interim furnished office
space, utilities, and telecommunications at mutually agreed locations as
reasonably necessary to allow Buyer to conduct its transition efforts.

 

7.2

Access to Information.

(a)          Between the date of this Agreement and the Closing Date, Seller
will, during ordinary business hours and upon reasonable notice, (i) give Buyer
and Buyer’s Representatives reasonable access to the Purchased Assets to which
Buyer is not denied access by Law and to which Seller has the right to grant
access without the consent of any other Person (and in the case where consent of
another Person is required, only on such terms and conditions as may be imposed
by such other Person); (ii) permit Buyer to make such reasonable inspections
thereof (including but not limited to surveys thereof) as Buyer may reasonably
request; (iii) furnish Buyer with such financial and operating data and other
information with respect to the Business (including information concerning
software and configuration of business systems that are not included in the
Purchased Assets, to the extent that such information is not proprietary) as
Buyer may from time to time reasonably request; (iv) furnish Buyer with a copy
of each material report, schedule, or other document principally relating to the
Business filed by Seller with, or received by Seller from, any Governmental
Entity; and (v) furnish Buyer with access to such officers and employees of
Seller (including information technology support personnel) as Buyer may
reasonably request for purposes of coordinating the transfer and conversion of
data and business processes and systems from Seller to Buyer and for such other
purposes as are reasonably related to the process of transitioning ownership of
the Purchased Assets and operation of the Business from Seller to Buyer in
accordance with this Agreement; provided, however, that (A) any such
investigation will be conducted in such a manner as not to interfere
unreasonably with the operation of the Business or any other Person, (B) Buyer
will indemnify and hold harmless Seller from and against any Losses caused to
Seller by any action of Buyer or Buyer’s Representatives while present on any of
the Purchased Assets or other premises to which Buyer is granted access
hereunder (including restoring any such premises to the condition substantially
equivalent to the

 

 

MINNESOTA GAS

 

35

 

condition such premises were in prior to any such investigation), (C) Seller
will not be required to take any action which would constitute a waiver of the
attorney-client privilege, and (D) Seller need not supply Buyer with any
information which Seller is under a contractual or other legal obligation not to
supply; provided, however, if Seller relies upon clauses (C) or (D) as a basis
for withholding information from disclosure to Buyer, to the fullest extent
possible without causing a waiver of the attorney-client privilege, or a
violation of a contractual or legal obligation, as the case may be, Seller will
provide Buyer with a description of the information withheld and the basis for
withholding such information. Notwithstanding anything in this Section 7.2 to
the contrary, (x) Buyer will not have access to personnel and medical records if
such access could, in Seller’s good faith judgment, subject Seller to risk of
liability or otherwise violate the Health Insurance Portability and
Accountability Act of 1996, and (y) any investigation of environmental matters
by or on behalf of Buyer will be limited to visual inspections and site visits
commonly included in the scope of “Phase 1” level environmental inspections, and
Buyer will not have the right to perform or conduct any other sampling or
testing at, in, on, or underneath any of the Purchased Assets. Buyer shall
repair all damage caused by Buyer and parties acting on Buyer’s behalf and shall
indemnify and hold Seller harmless of and from all claims which may be asserted
against Seller by reason of Buyer’s activities under or contemplated by this
Section 7.2(a).

(b)          The Parties agree that between the date hereof and the Closing
Date, at the sole responsibility and expense of Buyer, Seller shall permit
designated representatives (“Observers”) of Buyer to regularly observe, in the
presence of personnel of Seller, all operations of Seller to the extent related
specifically to the Purchased Assets or the Assumed Obligations, and the
operation thereof, and to observe (without participating in) material
discussions with third parties to the extent related specifically to the
Purchased Assets or the Assumed Obligations; provided, however, that (A) any
such observations shall be conducted in such a manner as not to interfere
unreasonably with the operation of the Business or the Purchased Assets, (B)
Buyer shall not be entitled to observe any discussions between Seller and its
legal counsel, accountants, or financial advisors and shall not otherwise be
entitled to observe any activities or discussions which may constitute a waiver
of the attorney client or other privilege, which are related to the performance
of the Parties under the terms of this Agreement, or which otherwise are outside
of the normal conduct of the Business in the ordinary course, and (C) Seller
need not permit the Observers to observe or participate in discussions
concerning any information which Seller is under a legal or contractual
obligation not to disclose. The Observers may recommend or suggest that actions
be taken or not be taken by Seller; provided, however, that Seller will not be
under any obligation to follow any such recommendations or suggestions and that
Seller shall be entitled, subject to the terms of this Agreement, to conduct the
Business in accordance with its own judgment and discretion. The Observers shall
have no authority to bind or make agreements on behalf of Seller, to conduct
discussions with or make representations to third parties on behalf of Seller,
or to issue instructions to or direct or exercise authority over Seller, or any
of its officers, employees, advisors or agents.

(c)          Unless and until the transactions contemplated hereby have been
consummated, each Party will, and will cause its Affiliates and Buyer’s
Representatives

 

36

 

 

MINNESOTA GAS

 

 

or Seller’s Representatives, as applicable, to, hold in strict confidence and
not use or disclose to any other Person all Confidential Information.
“Confidential Information” means all information in any form heretofore or
hereafter obtained from either Party in connection with Buyer’s evaluation of
the Business, the negotiation of this Agreement, or the performance of the
covenants and agreements of this Agreement, whether pertaining to financial
condition, results of operations, methods of operation or otherwise, other than
information which is in the public domain through no violation of this Agreement
or the Confidentiality Agreement by either Party, its Affiliates, Buyer’s
Representatives, or Seller’s Representatives. Notwithstanding the foregoing,
each Party may disclose Confidential Information to the extent that such
information is required to be disclosed by such Party by Law or in connection
with any proceeding by or before a Governmental Entity, including any
disclosure, financial or otherwise, required to comply with any SEC rules. In
the event that a Party believes any such disclosure is required, such Party will
give the other Party notice thereof as promptly as possible and will cooperate
with the other Party in seeking any protective orders or other relief as such
Party may determine to be necessary or desirable. In no event will a Party make
or permit to be made any disclosure of Confidential Information other than to
the extent such Party’s legal counsel has advised in writing it is required by
Law, and such Party will use its best efforts to assure that any Confidential
Information so disclosed is protected from further disclosure to the maximum
extent permitted by Law. If the transactions contemplated hereby are not
consummated, each Party will promptly return to the other Party all copies of
any Confidential Information, including any materials prepared by such Party or
Buyer’s Representatives or Seller’s Representatives, as applicable,
incorporating or reflecting Confidential Information, and an officer of such
Party will certify in writing compliance by such Party with the foregoing.

(d)          Buyer agrees that, without Seller’s written consent, except as
otherwise provided for in this Agreement, neither Buyer nor any Affiliate of
Buyer will directly or indirectly solicit for employment or employ any person
who is now employed by Seller; provided, that Buyer and its Affiliates are not
prohibited from: (i) employing a person who contacts Buyer or its Affiliates on
his own initiative and without any direct or indirect solicitation by Buyer or
its Affiliates; or (ii) conducting generalized solicitations for employees that
are not specifically targeted at Seller’s employees, through the use of media
advertisements, professional search firms, or otherwise.

(e)          The provisions of Section 7.2(c) and 7.2(d) supersede the
Confidentiality Agreement, and will survive for a period of two years following
the Closing or the termination of this Agreement, except that if the Closing
occurs, the provisions of Section 7.2(c) will expire with respect to any
information principally related to the Purchased Assets and the Business.

(f)           For a period of seven years after the Closing Date, each Party and
its representatives will have reasonable access to all of the books and records
relating to the Business or the Purchased Assets, including all Transferred
Employee Records, in the possession of the other Party to the extent that such
access may reasonably be required by such Party in connection with the Assumed
Obligations or the Excluded Liabilities, or other matters relating to or
affected by the operation of the Business and the Purchased

 

37

 

 

MINNESOTA GAS

 

 

Assets. Such access will be afforded by the Party in possession of such books
and records upon receipt of reasonable advance notice and during normal business
hours; provided, however, that (i) any review of books and records will be
conducted in such a manner as not to interfere unreasonably with the operation
of the business of any Party or its Affiliates, (ii) no Party will be required
to take any action which would constitute a waiver of the attorney-client
privilege, and (iii) no Party need supply the other Party with any information
which such Party is under a contractual or other legal obligation not to supply.
The Party exercising the right of access hereunder will be solely responsible
for any costs or expenses incurred by it pursuant to this Section 7.2(f). If the
Party in possession of such books and records desires to dispose of any such
books and records prior to the expiration of such seven-year period, such Party
will, prior to such disposition, give the other Party a reasonable opportunity
at such other Party’s expense to segregate and take possession of such books and
records as such other Party may select.

7.3          Expenses. Except to the extent specifically provided herein, and
irrespective of whether the transactions contemplated hereby are consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be borne by the Party incurring such costs
and expenses. For the avoidance of doubt, Buyer will be solely responsible for
payment of (i) all filing fees in connection any Required Regulatory Approvals,
and (ii) all other filing, recording, transfer, or other fees or charges of any
nature payable pursuant to any provision of Law or any Order or Franchise in
connection with the sale, transfer, and assignment of the Purchased Assets and
the Assumed Obligations; provided, however, that neither Party shall be
responsible for any penalties or other conditions imposed on the other Party
pursuant to any Required Regulatory Approval.

7.4          Further Assurances; Procedures with Respect to Certain Agreements
and other Assets.

(a)          Subject to the terms and conditions of this Agreement, each of the
Parties will use commercially reasonable efforts to take, or cause to be taken,
all action, and to do, or cause to be done, all things necessary, proper, or
advisable to consummate and make effective the transactions contemplated hereby,
including using commercially reasonable efforts to obtain satisfaction of the
conditions precedent to each Party’s obligations hereunder within its reasonable
control and to effectuate a transfer of operation of the Business to Buyer with
minimal interruptions or disruptions in the conduct of the Business. Neither
Party will, without the prior written consent of the other Party, take any
action which would reasonably be expected to prevent or materially impede,
interfere with or delay the transactions contemplated by this Agreement. From
time to time on or after the Closing Date, Seller will, at its own expense,
execute and deliver such documents to Buyer as Buyer may reasonably request in
order to more effectively consummate the transactions contemplated hereby. From
time to time after the date hereof, Buyer will, at its own expense, (i) execute
and deliver such documents to Seller as Seller may reasonably request in order
to more effectively consummate the transactions contemplated hereby, and (ii)
cooperate with Seller in connection with obtaining any releases or discharges of
Seller from any of the Assumed Obligations.

 

38

 

 

MINNESOTA GAS

 

 

(b)          Seller has easements, license agreements (including railroad
crossing rights), rights-of-way, and leases for rights-of-way, some of which
relate solely to the Business and Purchased Assets (the “Easements”) and others
of which relate to both the Business and Purchased Assets and Seller’s other
businesses (the “Shared Easements”). At the Closing, Seller will convey and
assign to Buyer, subject to the obtaining of any necessary consents, (i) by the
Assignment of Easements, all Easements, and (ii) by separate sub-easement or
other document, sufficient rights under the Shared Easements to permit Buyer to
use the same, as presently used by Seller with respect to the Business, on a
nonexclusive basis (the “Shared Easement Rights”).

 

(c)

(i)           To the extent that Seller’s rights under any Business Agreement
may not be assigned without the consent of another Person which consent has not
been obtained, this Agreement will not constitute an agreement to assign the
same if an attempted assignment would constitute a breach thereof or be
unlawful. Seller will use its commercially reasonable efforts (without being
required to make any payment to any third party or to incur any economic burden)
to obtain any such required consent as promptly as possible. Buyer agrees to
cooperate with Seller in its efforts to obtain any such consent (including the
submission of such financial or other information concerning Buyer and the
execution of any assumption agreements or similar documents reasonably requested
by a third party) without being required to make any payment to any third party
(other than as provided under Section 7.3) or to incur any economic burden
(other than the assumption of Seller’s obligations under the applicable Business
Agreement). Seller and Buyer agree that if any consent to an assignment of any
Business Agreement is not obtained or if any attempted assignment would be
ineffective or would impair Buyer’s rights and obligations under the Business
Agreement in question so that Buyer would not acquire the benefit of all such
rights and obligations, then (i) Seller may elect to exercise its rights under
Section 7.4(d) with respect to any such Business Agreement that is a personal
property lease, or (ii) if Seller does not exercise such rights or if such
Business Agreement is not a personal property lease, then at the Closing the
Parties will, to the maximum extent permitted by Law and such Business
Agreement, enter into such arrangements with each other as are reasonably
necessary to provide Buyer with the benefits and obligations of such Business
Agreement from and after the Effective Time.

(ii)          To the extent that any Business Agreement consisting of a futures
contract, options contract, or other derivatives transaction (but not including
contracts for physical delivery) (each, a “Financial Hedge”) is not assignable
due to the rules and regulations of the Commodities Futures Trading Commission,
the New York Mercantile Exchange (or other futures or options exchange on which
the Financial Hedge was entered into), or the relevant clearinghouse, the
Parties agree that the Financial Hedges shall be liquidated at Closing.
Liquidation proceeds will be paid as follows: (A) in the event Seller’s
aggregate mark-to-market value of the Financial Hedges is positive, Seller will
pay Buyer the mark-

 

39

 

 

MINNESOTA GAS

 

 

to-market value of the Financial Hedges; or (B) in the event Seller’s aggregate
mark-to-market value of the Financial Hedges is negative, Buyer will pay Seller
the mark-to-market value of the Financial Hedges. On or before Closing, the
Parties shall mutually agree on a specific procedure to liquidate the Financial
Hedges, and any payment due as a result of such liquidation under this Section
7.4(c)(ii) shall be made at Closing.

(d)          With respect to equipment or other personal property that is used
principally for the Business and that is leased by Seller either (i) pursuant to
a personal property lease that is a Business Agreement that cannot be assigned
to Buyer, or (ii) pursuant to any agreement that is not included in the
Purchased Assets, Seller may elect prior to the Effective Time to purchase some
or all of the assets leased under such lease and used principally for the
Business, and such assets will be included in the Purchased Assets, if such
purchase can be accomplished on commercially reasonable terms and conditions.

(e)          The Parties have agreed that the agreements set forth on Schedule
7.4(e) (the “Shared Agreements”) will be governed by this Section 7.4(e) and are
not Business Agreements. Seller’s rights and obligations under the Shared
Agreements, to the extent such rights and obligations relate to the Business,
are described on Schedule 7.4(e), and are referred to herein as the “Allocated
Rights and Obligations.” Unless Seller elects to enter into Other Arrangements,
the Parties agree to cooperate with each other and use commercially reasonable
efforts to enter into agreements with the other party or parties to each Shared
Agreement providing for (i) assignment to and assumption by Buyer, effective
from and after the Effective Time, of the Allocated Rights and Obligations, and
(ii) retention by Seller of all rights and obligations of Seller under the
Shared Agreements other than the Allocated Rights and Obligations (such
agreements set forth in (i) and (ii) being referred to as “Substitute
Arrangements”); provided, that neither Seller nor Buyer will be obligated to
enter into or agree to any such Substitute Arrangements unless such Substitute
Arrangements have the effect of transferring to the Buyer the Allocated Rights
and Obligations (and reserving to Seller the rights and obligations which are
not Allocated Rights and Obligations) on a fair and equitable basis, as
determined in the reasonable discretion of Seller and Buyer. In connection with
the foregoing, the Parties agree, as reasonably requested, to submit such
financial or other information concerning themselves, and to execute such
assumption agreements or similar documents reasonably requested by a third
party; provided that neither Party will be required to make any payment to any
third party or to incur any economic burden (other than the assumption of the
Allocated Rights and Obligations by Buyer, and the retention of the other rights
and obligations under the Shared Agreements by Seller). In the event that (x)
the Parties are unable to enter into Substitute Arrangements with respect to a
Shared Agreement in accordance with the foregoing, or (y) Seller notifies Buyer
that it elects not to pursue Substitute Arrangements with respect to such Shared
Agreement, then in either case at the Closing the Parties will, to the maximum
extent permitted by Law and such Shared Agreement, enter into such arrangements
with each other as are necessary to provide Buyer with the benefits and
obligations of the Allocated Rights and Obligations under such Shared Agreement,
with Seller retaining the other benefits and obligations under such Shared
Agreement from and after the Effective Time (the “Other Arrangements”).

 

40

 

 

MINNESOTA GAS

 

 

(f)           Seller from time to time provides collateral or other security to
certain other Persons in connection with certain Business Agreements and Shared
Agreements. Seller and Buyer agree to use commercially reasonable efforts to
cause such collateral or other security to be returned to Seller (including in
the case of a letter of credit a return of the letter of credit to Seller), or
released (in the case of other credit support previously provided by Seller) at
the Closing. Subject to the next sentence of this clause, in the event that such
collateral or other security is not returned to Seller or otherwise released at
the Closing, Buyer will (i) pay to Seller an amount equal to any cash collateral
posted by Seller; and (ii) in the case of a letter of credit, provide to Seller
a back-up letter of credit in the same amount and for a period expiring no
earlier than 10 days following the expiration of the letter of credit previously
provided by Seller. The provisions of this Section 7.4(f) will apply only to
collateral or other security provided in connection with (i) Business Agreements
assigned to Buyer at Closing, and (ii) Shared Agreements to the extent such
collateral or other security is related to the Allocated Rights and Obligations
assigned to Buyer at Closing under such Shared Agreements.

(g)          In the event that any approval from the Federal Communications
Commission, the Michigan Public Service Commission, the South Dakota Public
Utility Commission, the Iowa Utilities Board, or any Franchise authority that is
not a Required Regulatory Approval but is nonetheless necessary to obtain in
order to avoid violation of any Law were all the Purchased Assets to be
transferred to Buyer at the Effective Time is not obtained within 30 days prior
to the Closing, the Parties agree that:

(i)           they will each continue to use commercially reasonable efforts to
obtain such approvals as quickly as possible;

(ii)          any of the Purchased Assets, the transfer of which to Buyer in the
absence of such an approval would cause or lead to a violation of any Law (the
“Contingent Purchased Assets”), shall not be transferred to Buyer at the
Effective Time, but will be transferred immediately upon receipt of the
requisite approvals, with the time between the Effective Time and the receipt of
such approval being referred to as the “Interim Period”

(iii)         during the Interim Period, Seller shall continue to have all
title, rights, and obligations in the Contingent Purchased Assets to the extent
necessary to avoid any violation of Law; and

(iv)         the Parties will enter into such arrangements with each other prior
to Closing as are permissible under Law and reasonably necessary to provide
Buyer with the benefits and obligations in respect of the Contingent Purchased
Assets from and after the Effective Time, and otherwise on terms and conditions
reasonably acceptable to each Party.

(h)          Following the Closing, each Party will promptly remit to the other
any payments such Party receives that are in satisfaction of any rights or
assets belonging to the other Party.

 

41

 

 

MINNESOTA GAS

 

 

7.5          Public Statements. Each Party will consult with the other prior to
issuing, and will consider in good faith any comments by the other to or in
respect of, any public announcement, statement, or other disclosure with respect
to this Agreement or the transactions contemplated hereby, except as may be
required by Law or stock exchange rules and provided that any such public
announcement, statement, or other disclosure issued by Buyer will be subject to
Section 7.2(c).

 

7.6

Consents and Approvals.

(a)          Seller and Buyer will each file or cause to be filed with the
Federal Trade Commission and the United States Department of Justice, Antitrust
Division any notifications required to be filed under the HSR Act and the rules
and regulations promulgated thereunder with respect to the transactions
contemplated hereby. The Parties will consult and cooperate with each other as
to the appropriate time of filing such notifications and will (i) make such
filings at the agreed upon time, (ii) respond promptly to any requests for
additional information made by either of such agencies, and (iii) use their
commercially reasonable efforts to cause the waiting periods under the HSR Act
to terminate or expire at the earliest possible date after the date of such
filings.

(b)          Seller and Buyer will cooperate with each other and use
commercially reasonable efforts to (i) promptly prepare and file all necessary
applications, notices, petitions, and filings, and execute all agreements and
documents to the extent required by Law or Order for consummation of the
transactions contemplated by this Agreement (including the Required Regulatory
Approvals), (ii) obtain the transfer to Buyer of all Transferable Permits and
Transferable Environmental Permits, and the reissuance to Buyer of all Permits
that are not Transferable Permits and all Environmental Permits that are not
Transferable Environmental Permits, (iii) obtain the consents, approvals, and
authorizations of all Governmental Entities to the extent required by Law or
Order for consummation of the transactions contemplated by this Agreement
(including the Required Regulatory Approvals) (including by taking all
structural corporate actions necessary to consummate the transactions
contemplated hereby in a timely manner), and (iv) obtain all consents,
approvals, and authorizations of all other Persons to the extent necessary to
consummate the transactions contemplated by this Agreement as required by the
terms of any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease, or other instrument to which Seller or
Buyer is a party or by which either of them is bound. Seller and Buyer each will
have the right to review in advance all characterizations of the information
relating to it or the transactions contemplated by this Agreement which appear
in any filing made by the other in connection with the transactions contemplated
hereby.

(c)          Neither Party will on an ex parte basis initiate, directly or
indirectly, any communications, meetings, or other contacts with any
Governmental Entity in connection with the transactions contemplated hereby or
any matters relating to any declaration, filing, or registration with, notice
to, or authorization, consent, or approval of any such Governmental Entity in
connection with this Agreement. In connection with any communications, meetings,
or other contacts, formal or informal, oral or written, with any Governmental
Entity in connection with the transactions contemplated hereby or any

 

42

 

 

MINNESOTA GAS

 

 

such declaration, filing, registration, notice, authorization, consent, or
approval, each Party agrees: (i) to inform the other in advance of any such
communication, meeting, or other contact which such Party proposes or intends to
make, including the subject matter, contents, intended agenda, and other aspects
of any of the foregoing; (ii) to consult and cooperate with the other Party, and
to take into account the comments of such other Party in connection with any of
the matters covered by Section 7.6(c)(i); (iii) to arrange for representatives
of the other Party to participate to the maximum extent possible in any such
communications, meetings, or other contacts; (iv) to notify the other Party of
any oral communications with any Governmental Entity relating to any of the
foregoing; and (v) to provide the other Party with copies of all written
communications with any Governmental Entity relating to any of the foregoing.
Notwithstanding the foregoing, nothing in this Section 7.6 will apply to or
restrict communications or other actions by Seller with or with regard to
Governmental Entities in connection with (x) the Purchased Assets or the
Business in the ordinary course of business, or (y) the transactions
contemplated by Section 7.9.

(d)          Seller and Buyer will cooperate with each other and promptly
prepare and file notifications with, and request Tax clearances from, state and
local taxing authorities in jurisdictions in which a portion of the Purchase
Price may be required to be withheld or in which Buyer would otherwise be liable
for any Tax liabilities of Seller pursuant to such state and local Tax Law
(other than any such liabilities which under the terms hereof are to be paid by
Buyer).

 

7.7

Tax Matters.

(a)          All transfer, documentary, stamp, registration, sales and use
Taxes, including real property conveyance Taxes, incurred in connection with
this Agreement and the transactions contemplated hereby will be paid by Buyer,
and Buyer, at its own expense, will file, to the extent required by applicable
Law, all necessary Tax Returns and other documentation with respect to all such
transfer or sales and use Taxes, and, if required by applicable Law, Seller will
join in the execution of any such Tax Returns or other documentation.

(b)          Seller will be responsible for the preparation and timely filing of
all Tax Returns reflecting Taxes payable by Seller and the timely payment of all
Taxes shown to be due on such returns. Buyer will be responsible for the
preparation and timely filing of all Tax Returns reflecting Taxes payable by
Buyer and the timely payment of all Taxes shown to be due on such returns. Any
Tax Return that reflects Taxes to be prorated in accordance with Section 3.4
will be subject to the approval of the Party not preparing such return, which
approval will not be unreasonably withheld or delayed. Each Party will make any
such Tax Return prepared by it available for the other Party’s review and
approval no later than 20 Business Days prior to the due date for filing such
Tax Return. Within 15 Business Days after receipt of such Tax Return, the
approving Party will pay to the Party preparing the Tax Return the amount of
such prorated Taxes shown as due on such approved Tax Return for which such
approving Party is responsible under Section 3.4.

 

43

 

 

MINNESOTA GAS

 

 

(c)          Buyer and Seller will provide each other with such assistance as
may reasonably be requested by the other Party in connection with the
preparation of any Tax Return, any audit or other examination by any Taxing
Authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each Party will retain (until the expiration of the applicable
statutes of limitation) and provide the other with any records or information
which may be relevant to such return, audit or examination or proceedings. Any
information obtained pursuant to this Section 7.7(c) or pursuant to any other
Section hereof providing for the sharing of information in connection with the
preparation of, or the review of, any Tax Return or other schedule relating to
Taxes will be kept confidential by the Parties hereto in accordance with Section
7.2(b).

7.8          Supplements to Schedules. Prior to the Closing Date, Seller may
supplement or amend the Schedules furnished by it under this Agreement except
for Schedule 7.1. In the event that the changes to the Schedules resulting from
such supplements and amendments, considered collectively, give rise to a
Material Adverse Effect (considered without giving effect to part (G) of the
definition of “Excluded Matter” set forth in the definition of “Material Adverse
Effect”), Buyer may either (i) terminate this Agreement without liability to
either Party, or (ii) not so terminate this Agreement (in which event any breach
of any representation or warranty made by Seller which would otherwise exist
absent such supplements and amendments will be deemed cured for all purposes of
this Agreement). In order to terminate this Agreement pursuant to this Section
7.8, Buyer must give notice of such termination to Seller within 10 Business
Days following receipt of such supplemented or amended Schedules from Seller. In
the event that Buyer terminates this Agreement pursuant to this Section 7.8,
such termination will be Buyer’s sole remedy hereunder, and Seller will have no
further liability or obligation to Buyer.

 

7.9

Employees and Employee Benefits.

(a)          From and after the Effective Time, Buyer will recognize the union
locals set forth on Schedule 7.9(a) (the “Locals”) as the exclusive bargaining
representatives of the bargaining units set forth on Schedule 7.9(a) that
include Transferred Employees. No later than 20 Business Days prior to the
Closing Date, Buyer will negotiate and reach agreement with each Local on the
terms and conditions of a new collective bargaining agreement to be effective
from and after the Effective Time with respect to the applicable bargaining unit
represented by such Local (each such agreement being referred to as a “New
CBA”). Should Buyer fail to successfully negotiate a New CBA with a Local at
least 20 Business Days prior to the Closing Date, then at the Closing, Buyer
will assume the existing Collective Bargaining Agreement to the extent
applicable to the bargaining unit represented by such Local and to the extent
consistent with applicable Law; provided that Buyer shall not assume any of the
Seller Benefit Plans, and Buyer will instead provide benefits of the type and
amount described in the existing Collective Bargaining Agreements through
Buyer’s own benefit plans and arrangements. Buyer agrees that (i) upon request
by Seller, Buyer will notify Seller of the status of negotiations with each
Local, and (ii) no later than 19 Business Days prior to the Closing Date, Buyer
will notify Seller whether a New CBA has been successfully negotiated with such
Local.

(b)          No later than 20 Business Days prior to the Closing, Buyer will
give Qualifying Offers of employment to all Business Employees. Each such person
who

 

44

 

 

MINNESOTA GAS

 

 

becomes employed by Buyer pursuant to this Section 7.9(b) is referred to herein
as a “Transferred Employee.” For this purpose, a “Qualifying Offer” means
employment at a level of base pay at least equal to the Transferred Employee’s
base pay in effect immediately prior to the Closing Date, and with a primary
work location no more than 50 miles from the Transferred Employee’s primary work
location immediately prior to the Closing Date. Buyer will assume the severance
compensation agreements listed on Schedule 7.9 (b).

(c)          Subject to Section 7.9(d)(vii), all offers of employment made by
Buyer pursuant to Section 7.9(b) will be made in accordance with all applicable
Laws, will be conditioned only on the occurrence of the Closing, and will remain
open for a period expiring no earlier than ten Business Days prior to the
Closing Date. Any such offer which is accepted before it expires will thereafter
be irrevocable, except for good cause. Following acceptance of such offers,
Buyer will provide written notice thereof to Seller and Seller will provide
Buyer with either the original or a copy of the Transferred Employee Records.

(d)          The following will be applicable with respect to the Transferred
Employees, Business Employees, Current Retirees, and Other Plan Participants, as
appropriate:

(i)           From and after the Effective Time, the Transferred Employees will
accrue no additional benefits under any employee benefit plan, policy, program,
or arrangement of Seller or its Affiliates.

(ii)          As of the Effective Time, Buyer will cause the Transferred
Employees whose terms and conditions of employment are governed by a Collective
Bargaining Agreement to be covered by Buyer benefit plans providing coverage or
benefits required under such agreement, and Buyer will cause all other
Transferred Employees to be covered by Buyer benefit plans available to
similarly situated employees of Buyer and, except as provided in this Section
7.9, on the same terms and conditions as are made available to such similarly
situated employees, or to be covered by Buyer-sponsored benefit plans that
provide benefits that are comparable, in the aggregate, to the benefits provided
to the Transferred Employees as of the date immediately preceding the Closing
Date. Subject to the terms of any Collective Bargaining Agreement, the
commitments under this Section 7.9(d)(ii) require the following:

(A)         With respect to welfare benefit plans, Buyer agrees to waive or to
cause the waiver of all limitations as to pre-existing conditions and
actively-at-work exclusions and waiting periods for the Transferred Employees
(except and then only to the extent that a Transferred Employee was subject to
and had not, as of the Closing Date, satisfied any such condition, exclusion, or
waiting period under the Benefit Plans). With respect to the calendar year in
which the Closing Date occurs, all health care expenses incurred by any such
employees or any eligible dependent thereof, including any alternate recipient
pursuant to qualified medical child support orders, in the portion of the
calendar year preceding the

 

45

 

 

MINNESOTA GAS

 

 

Closing Date that were qualified to be taken into account for purposes of
satisfying any deductible or out-of-pocket limit under any Seller health care
plans will be taken into account for purposes of satisfying any deductible or
out-of-pocket limit under the health care plan of Buyer for such calendar year.
As soon as practicable, but in no event later than 60 days after the Closing
Date, Seller will provide Buyer with all relevant information necessary or
reasonably requested by Buyer for purposes of administering this provision.

(B)         With respect to service and seniority, Buyer will recognize the
service and seniority of each of the Transferred Employees recognized by Seller
for all non-pension purposes, including the determination of eligibility, the
extent of service or seniority-related welfare benefits such as vacation and
sick pay benefits, and levels of benefits other than pension benefits, including
eligibility for and level of retiree health benefits.

(C)         The Parties will comply with the provisions set forth on Exhibit
7.9(d)(ii)(C).

(D) Retiree Health. Buyer will assume the liability, obligation, and
responsibility with respect to providing post-retirement health and life
insurance benefits in accordance with this Section 7.9(d)(ii)(D), Section
7.9(a), and Schedule 5.12(g) (“Post-Retirement Welfare Benefits”) to (i) the
persons listed on Schedule 7.9(d)(ii)(D) and any Business Employee who retires
between the date hereof and the Closing Date (such listed persons and Business
Employees, the “Current Retirees”) and their spouses and eligible dependents,
and (ii) the Business Employees who have, as of the Closing Date, satisfied the
age and service eligibility requirements for Post-Retirement Welfare Benefits
under the applicable Seller plans (the “Grandfathered Active Employees” and,
together with the Current Retirees, the “Grandfathered Individuals”) and their
spouses and eligible dependents. The Grandfathered Individuals as of the date
hereof are listed on Schedule 7.9(d)(ii)(D). Effective on the Closing Date and
for a period continuing at least through the last day of the calendar year that
follows the calendar year in which the Closing Date occurs (the “Benefit
Continuation Period”), Buyer will provide to the Current Retirees
Post-Retirement Welfare Benefits that are comparable in the aggregate to those
Post-Retirement Welfare Benefits provided to such Current Retirees immediately
prior to the Closing Date, at a premium rate that is at least as favorable as
the premium rate in effect for and available to the Current Retirees immediately
prior to the Closing Date (subject to cost increases in accordance with Seller’s
past practice), provided that Buyer will provide a premium reduction credit to
each Current Retiree (and surviving spouse of any Current Retiree) equal to the
premium reduction credit accrued by such Current Retiree as of the Closing Date
under the Seller’s Post-Retirement Welfare Benefit plans, if any. Buyer will
provide to the Grandfathered Active Employees, for a period commencing at the
time such Grandfathered Active Employee retires and continuing at least through
the last day of the Benefit Continuation Period, Post-Retirement Welfare
Benefits that are comparable in the aggregate to those Post-Retirement Welfare
Benefits that would have been available to such

 

46

 

 

MINNESOTA GAS

 

 

Grandfathered Active Employees immediately prior to the Closing Date(if such
employees had retired immediately prior to the Closing Date), at a premium rate
that is at least as favorable as the premium rate in effect for and available to
the Grandfathered Active Employees immediately prior to the Closing Date
(subject to cost increases in accordance with Seller’s past practice); provided
that Buyer will provide a premium reduction credit to each Grandfathered Active
Employee (and surviving spouse) equal to the premium reduction credit accrued by
such Grandfathered Active Employee as of the Closing Date under the Seller’s
Post-Retirement Welfare Benefits plans, if any. For the avoidance of doubt, any
Grandfathered Active Employee who earns 1,000 hours of service with Seller in
the calendar year in which the Closing occurs will be given credit for a year of
service for the calendar year during which the Closing occurs for purposes of
Seller’s Post-Retirement Welfare Benefits. Following the Benefit Continuation
Period, Buyer may exercise any rights that Seller would have had to modify the
post-retirement health and life insurance plans applicable to Grandfathered
Individuals, all other Transferred Employees, and the spouses and eligible
dependents of all the above; provided that (i) Buyer will not eliminate
Post-Retirement Welfare Benefits for a period of five years from the Closing
Date, (ii) Buyer will honor any premium reduction credit in full for any
Grandfathered Individual, and (iii) the Current Retirees, Grandfathered
Individuals, or other Transferred Employees, or their spouses and eligible
dependents, shall not, as the result of any such modification, be treated less
favorably than are treated similarly situated non-union retirees of Buyer (and
the spouses and eligible dependents of any such retirees) who retire during 2005
(or, if later, the Grandfathered Individual’s or Transferred Employee’s actual
retirement date).

(E)          With respect to the Aquila, Inc. Retirement Investment Plan (the
“Savings Plan”), Seller will vest Transferred Employees in their Savings Plan
account balances as of the Closing Date. Buyer will take all actions necessary
to cause a Buyer 401(k) plan in which Transferred Employees are eligible to
participate (x) to recognize the service that the Transferred Employees had in
the Savings Plan for purposes of determining such Transferred Employees’
eligibility to participate, vesting, attainment of retirement dates,
contribution levels, and, if applicable, eligibility for optional forms of
benefit payments, and (y) to accept direct rollovers (in accordance with section
401(a)(31) of the Code) of Transferred Employees’ account balances in the
Savings Plan, such direct rollovers to be in cash with the exception that the
direct rollovers may include transfers of loan balances and related promissory
notes, provided that such loans would not be treated as taxable distributions at
any time prior to such transfer. Buyer is not, in accepting direct rollovers of
Transferred Employees’ account balances, assuming sponsorship of any portion of
Seller’s Savings Plan or any other liability or obligation that Seller or an
ERISA Affiliate of Seller might have or incur with respect to the Savings Plan,
including liability (if any) for breaches of fiduciary duty or excise Tax
amounts.

(F)          As soon as practicable but in no event later than 60 days after the
Closing Date, Seller will transfer to a flexible spending plan maintained by
Buyer

 

47

 

 

MINNESOTA GAS

 

 

any balances standing to the credit of Transferred Employees under Seller’s
flexible spending plan as of the day immediately preceding the Closing Date.
Following the Closing Date and for the remainder of the calendar year in which
the Closing Date occurs, the Transferred Employees will continue to make salary
reduction contributions to Buyer’s flexible spending plan in accordance with
such Transferred Employees’ elections under Seller’s flexible spending plan.
Buyer will establish for each Transferred Employee who participated in Seller’s
flexible spending plan on the Closing Date a book-keeping account with a balance
(positive or negative, as applicable) equal to the Transferred Employee’s
balance under Seller’s flexible spending plan on the Closing Date. Seller also
will transfer to Buyer, within 10 Business Days following the Closing, an amount
of cash equal to the aggregate unused balances of the book-keeping accounts of
the Transferred Employees on the Closing Date. As soon as practicable but in no
event later than 60 days after the Closing Date, Seller will provide to Buyer a
list of those Transferred Employees that have participated in the health or
dependent care reimbursement accounts of Seller, together with (x) their
elections made prior to the Closing Date with respect to such account and (y)
balances standing to their credit as of the day immediately preceding the
Closing Date.

(G)         Buyer will honor all vacation days accrued by the Transferred
Employees during the calendar year of the Closing but not used as of the Closing
(but not any unused vacation days carried over from a prior calendar year into
the calendar year in which the Closing occurs).

(iii)         With respect to severance benefits, Buyer will provide to any
Transferred Employee who is not subject to a Collective Bargaining Agreement and
whose employment is involuntarily terminated by Buyer (other than for cause)
prior to the date which is one year following the Closing Date, severance
benefits comparable to those provided by Seller under Seller’s severance plans
and policies (other than any plans or policies with respect to stock options) in
effect immediately prior to the Closing Date. Any employee who is provided
severance benefits under this Section 7.9(d)(iii) may be required to execute a
release of claims against Seller and Buyer, in such form as Buyer reasonably
prescribes, as a condition for the receipt of such benefits.

(iv)         Seller will be responsible, with respect to the Business, for
performing and discharging all requirements under the WARN Act and under
applicable state and local laws and regulations for the notification of its
employees of any “employment loss” within the meaning of the WARN Act which
occurs prior to the Effective Time.

(v)          Seller will be responsible for providing COBRA Continuation
Coverage to any current and former Business Employees, or to any qualified
beneficiaries of such Business Employees, who become or became entitled to COBRA
Continuation Coverage on or before the Closing, including those for whom the
Closing occurs during their COBRA election period. Buyer is responsible for
extending and continuing to extend COBRA Continuation

 

48

 

 

MINNESOTA GAS

 

 

Coverage to all Transferred Employees (and their qualified beneficiaries) who
become entitled to such COBRA Continuation Coverage following the Closing.

(vi)         Seller or its Affiliates will pay or cause to be paid to all
Transferred Employees, all compensation (including any accrued vacation carried
over to the calendar year of the Closing from a previous calendar year and any
compensation attributable to stock options granted by Seller), workers’
compensation or other employment benefits to which they are entitled under
applicable Law or under the terms of the applicable compensation or Seller
benefit plans or programs with respect to employment or events occurring prior
to the Effective Time. Buyer will pay to each Transferred Employee all unpaid
salary or other compensation or employment benefits which accrue to such
employee from and after the Effective Time, at such times as provided under the
terms of the applicable compensation or benefit programs.

(vii)       Individuals who would otherwise be Transferred Employees but who on
the Closing Date are not actively at work due to a leave of absence covered by
the Family and Medical Leave Act or other authorized leave of absence, including
short-term or long-term disability or workers’ compensation leave, will be
treated as Transferred Employees on the date that they are able to return to
work (provided that such return to work occurs within the authorized period of
their leaves following the Closing Date) and perform the essential functions of
their jobs with or without reasonable accommodation. Seller will be responsible
for all compensation and benefits provided to the individual (or the
individual’s spouse and eligible dependents) prior to the date on which the
individual becomes a Transferred Employee.

(viii)      Buyer will be responsible, with respect to the Business, for
performing and discharging all requirements under the WARN Act and under
applicable state and local laws and regulations for the notification of its
employees of any “employment loss” within the meaning of the WARN Act which
occurs at or following the Effective Time.

(ix)         Buyer will assume Seller’s obligations as of the Effective Time to
pay nonqualified deferred compensation to the persons and in the amounts set
forth on Schedule 7.9(d)(ix) (as such schedule is updated at Closing).

(x)          Seller will vest the Transferred Employees in any outstanding stock
options that Seller had issued to the Transferred Employees.

(xi)         Except for Section 7.9(d)(ii)(D), the provisions of this Section
7.9 are not, and will not be construed as being, for the benefit of any Person
other than the Parties hereto, and are not enforceable by any Persons (including
Transferred Employees, Current Retirees, and Other Plan Participants) other than
such Parties.

 

7.10

Eminent Domain; Casualty Loss.

 

 

49

 

 

MINNESOTA GAS

 

 

(a)          If, before the Closing Date, any of the Purchased Assets are taken
by eminent domain or condemnation, or are the subject of a pending or (to
Seller’s Knowledge) contemplated taking which has not been consummated, Seller
will (i) notify Buyer promptly in writing of such fact and (ii) at the Closing
assign to Buyer all of Seller’s right, title, and interest in and to any
proceeds or payments received, or to be received, in compensation for such
taking. Upon such assignment, such taking or takings, and their effects, will be
disregarded in determining whether a Material Adverse Effect has occurred.

(b)          If, before the Closing Date, all or any material portion of the
Purchased Assets are damaged or destroyed by fire or other casualty, Seller will
notify Buyer promptly in writing of such fact and, at the Closing assign all of
Seller’s right, title, and interest in and to any insurance recoveries received,
or to be received, in compensation for such damage or destruction less any such
amounts received, or to be received, to reimburse Seller for expenditures
incurred by Seller. If such damage or destruction, individually or in the
aggregate, would create a Material Adverse Effect, Buyer may terminate this
Agreement within 20 Business Days following Buyer’s receipt of such notice from
Seller unless (i) Seller notifies Buyer within such 20 Business Day period of
Seller’s intention to cure such Material Adverse Effect, and (ii) Seller effects
such cure (or, to the extent that such cure cannot be effected within 20
Business Days, Seller commences the process to effect such cure as soon as
practicable and diligently pursues such cure). Any such termination by Buyer
will be treated as a termination by the Parties pursuant to Section 10.1(a).

(c)          Seller and Buyer will use their commercially reasonable efforts
(without being required to make payment to any third party or to incur any
economic burden) to obtain from each holder of any Preferential Purchase Right a
written waiver of such Preferential Purchase Right if required with respect to
the transactions contemplated by this Agreement (an “Applicable Preferential
Purchase Right”). If the Parties cannot obtain such a required waiver of an
Applicable Preferential Purchase Right, the Parties will cooperate, using
commercially reasonable efforts, to provide for compliance with the terms of
such Applicable Preferential Purchase Right. In the event that any Purchased
Asset remains subject to an Applicable Preferential Purchase Right as of the
Closing, in lieu of any adjustment to the Purchase Price Seller will at the
Closing assign to Buyer, as a Purchased Asset, all of Seller’s right, title, and
interest in and to all rights of Seller with respect to such Applicable
Preferential Purchase Right, including proceeds received or to be received in
respect to such Applicable Preferential Purchase Right, and will assign to Buyer
and Buyer will assume, as Assumed Obligations, all obligations of Seller with
respect to such Applicable Preferential Purchase Right.

(d)          Except to the extent expressly provided in this Section 7.10, no
condemnation or taking of, or exercise of a Preferential Purchase Right set
forth in Schedule 5.8 with respect to, any Purchased Asset, nor any effects
thereof (including any resulting termination of any Franchise or other agreement
principally related to such Purchased Asset), or any supplements or amendments
to any Schedules in relation thereto, will constitute or be taken into account
in determining whether there has occurred a breach of any representation,
warranty, or covenant of Seller, a Material Adverse

 

50

 

 

MINNESOTA GAS

 

 

Effect, or a grounds for asserting a failure to satisfy any condition to Closing
under this Agreement.

(e)          Buyer and Seller hereby expressly acknowledge and agree that
nothing in this Agreement constitutes an offer or agreement to sell, transfer,
dispose of, purchase, assume, or acquire any asset subject to a Preferential
Purchase Right except upon the Closing following the satisfaction of all
conditions to Closing specified in this Agreement. Neither this Agreement nor
anything herein or in connection herewith will be deemed to obligate Seller to
sell, transfer, assign or otherwise dispose of any Purchased Asset or Assumed
Obligation, to Buyer or any other Person, except upon the Closing following the
satisfaction or waiver of all conditions to Closing specified in this Agreement.

7.11       Transitional Use of Signage and Other Materials Incorporating
Seller’s Name or other Logos. Buyer acknowledges that it will have no ongoing
claim or rights in or to the Seller Marks. Buyer will not use or permit the use
of any Seller Marks, and within 120 days following the Closing Date, Buyer will
remove or cause the removal of the Seller Marks from all signage or other items
relating to or used in the Business or the Purchased Assets.

7.12       Litigation and Regulatory Support. In the event and for so long as
either Party is actively contesting or defending against any Claim in connection
with (i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Seller, the other Party will cooperate with the
contesting or defending Party and its counsel in the contest or defense, make
available its personnel, and provide such testimony and access to its books and
records as is reasonably necessary in connection with the contest or defense,
all at the sole cost and expense of the contesting or defending Party (unless
the contesting or defending Party is entitled to indemnification therefor under
Article IX hereof). In addition, in the event that Buyer is involved in any
proceeding before the PUC or the FERC relating to any obligations (including
payment obligations) for which Seller could be liable or responsible under this
Agreement, Buyer agrees to consult with Seller concerning such obligations
(including the positions taken with respect thereto), to allow Seller to
participate in the proceeding to the extent necessary to protect or defend
Seller’s interests, and to allow Seller, at Seller’s cost but if necessary in
Buyer’s name, to exhaust any appeals available to challenge any appealable
decision that is adverse to Seller’s interests in respect of such obligation.
The Parties expressly agree that the types of proceedings to which the
obligations in the foregoing sentence relate include purchased gas adjustment or
gas cost recovery proceedings as well as any other proceedings involving rates
charged to customers of the Business. Buyer agrees not to take any position in
any administrative or regulatory proceeding that is contrary to Seller’s
interests and that relates to the operation of the Business (or the conduct of
any Central or Shared Function) prior to the Effective Time.

7.13       Notification of Customers. As soon as practicable following the
Closing, Seller and Buyer will cause to be sent to customers of the Business a
notice of the transfer of the customers from Seller to Buyer (the “Customer
Notification”). The Customer Notification will contain such information as is
required by Law and approved by Buyer and Seller, which approval will not be
unreasonably withheld or delayed.

 

51

 

 

MINNESOTA GAS

 

 

7.14       Document Delivery. The Parties will work cooperatively to make
available to Buyer at a reasonable date prior to the Closing such Documents as
are reasonably necessary for Buyer and Seller, at the Effective Time, to effect
the transition of control of the Business and a transfer of operation of the
Business to Buyer with minimal interruptions or disruptions in the conduct of
the Business. At or within a reasonably practicable period of time after the
Closing Date, Buyer shall receive from Seller, at such location mutually agreed
upon by the Parties, any remaining Documents. At Buyer’s reasonable request,
Seller will use commercially reasonable efforts to make available in an
electronic format compatible with Buyer’s electronic systems any Documents and
other books and records relating to the Purchased Assets which are maintained by
Seller in electronic form.

7.15       Title Insurance, Surveys, Estoppel Certificates, and Non-Disturbance
Agreements. At Buyer’s option and at Buyer’s sole cost and expense, Buyer may
obtain (i) title insurance policies in respect of the Real Property, insuring
title to the applicable Real Property as vested in Buyer (free and clear of all
Encumbrances other than Permitted Encumbrances), and in form, substance, and
amount reasonably satisfactory to Buyer (and without limiting the generality of
the foregoing, with all requirements satisfied or waived, with all exceptions
deleted, and with all endorsements thereto, to the extent reasonably desired by
Buyer); (ii) all surveys desired by Buyer in respect of the Real Property, in
form and substance reasonably satisfactory to Buyer; and (iii) all estoppel
certificates and non-disturbance agreements desired by Buyer in respect of any
real property leases included in the Purchased Assets, in form and substance
reasonably satisfactory to Buyer and to the parties providing such certificates
and agreements. Seller agrees to cooperate as reasonably requested by Buyer (and
at Buyer’s expense) in its efforts to obtain any such items, provided that
Seller shall not be required to make any payment to any third party or incur any
economic burden in connection therewith, and provided that Buyer’s obtaining any
such item shall not be a requirement of or a condition to the Closing. In
addition, with respect to Seller’s cooperation with Buyer’s reasonable requests
to obtain title insurance under subsection (i) above, Seller, except to the
extent required to satisfy the Closing condition set forth in Section 8.2(f),
and except for such actions as may be necessary to enable Buyer’s title
insurance company to insure title to the applicable Real Property as vested in
Buyer, shall not be required to cure any purported defects, cause any exceptions
to be deleted, or provide any affidavits, indemnities, or representations to any
title company issuing such title insurance.

7.16       Central or Shared Functions for Transition Period. Seller and Buyer
acknowledge that the Natural Gas Distribution Business is currently dependent
upon the Central or Shared Functions, and that the Purchased Assets will not
include the employees or assets necessary for Buyer to perform such functions.
Buyer intends to replace the Central or Shared Functions through affiliated
interest arrangements that will require certain regulatory approvals, and Buyer
will use commercially reasonable efforts to obtain such regulatory approvals
prior to Closing. If Buyer is unable to obtain such regulatory approvals prior
to Closing, at the written request of Buyer made not fewer than 90 days prior to
Closing, Seller agrees to provide those Central or Shared Functions requested by
Buyer, in accordance with the terms and conditions of the Transitional Services
Agreement from and after the Effective Time until such regulatory approvals are
obtained, but in any event for a period no greater than six months after the
Effective Time. Buyer may also request transitional services under other
circumstances, and Seller will provide such transitional services subject to the
Transitional Services Agreement to

 

52

 

 

MINNESOTA GAS

 

 

the extent that it provided similar services for the Natural Gas Distribution
Business immediately prior to Closing and to the extent that it is reasonably
able to provide such services. Buyer shall keep Seller reasonably informed of
its progress in obtaining the regulatory approvals referred to in this Section
7.16 and will upon Seller’s written request promptly report upon the likelihood
of its need to make a request for services under this Section 7.16. Any
arrangement for provision of transitional services by Seller after the Effective
Time in accordance with this Section 7.16 will be set forth in the Transitional
Services Agreement reflecting the requirements of this Section 7.16.

 

7.17

Post-Closing Insurance.

(a)          Seller agrees to use commercially reasonable efforts to effect the
assignment to Buyer of any and all known policies of general, excess or umbrella
liability insurance that were issued, prior to Seller’s acquisition of Northern
Minnesota Utilities (“NMU”) by any insurer directly to or for the benefit of NMU
or any of its corporate predecessors, or Peoples Natural Gas or any of its
corporate predecessors (provided, in the case of Peoples Natural Gas or any of
its corporate predecessors, any such policy relates solely to the Purchased
Assets or any subset thereof) (the “Historical Insurance Policies”). Seller will
cooperate with Buyer to obtain from any such insurer such consent as may be
required to effect any such assignment. Further, upon Buyer’s reasonable request
and at Buyer’s cost, Seller will cooperate with Buyer in its efforts to pursue
coverage under the Historical Insurance Policies.

(b)          Should any insurer withhold consent to the assignment of any
Historical Insurance Policy to Buyer, then Seller will indemnify Buyer for any
Losses incurred by Buyer in respect of the Assumed Environmental Liabilities;
provided, however, that such indemnification obligation will exist if and only
if Seller actually receives proceeds under such Historical Insurance Policy;
and, provided further, that such indemnification obligation will be limited to
the amount of such proceeds actually received by Seller after the Effective
Time, less Seller’s reasonable costs incurred in recovering those proceeds.
Seller will use commercially reasonable efforts to maximize the recovery of
proceeds after the Effective Time in respect of the Assumed Environmental
Liabilities under the Historical Insurance Policies; provided, however, that
Seller will not be liable for the failure to recover any specific amount of
proceeds in the absence of gross negligence.

(c)          If Seller has any policies of general, excess, umbrella,
environmental impairment or pollution insurance other than the Historical
Insurance Policies (the “Seller Insurance Policies”) that provide coverage in
respect of the Assumed Environmental Liabilities, Seller will indemnify Buyer
for any Losses incurred by Buyer in respect of the Assumed Environmental
Liabilities; provided, however, that such indemnification obligation will exist
if and only if Seller actually receives proceeds under the Seller Insurance
Policies; and, provided further, that such indemnification obligation will be
limited to (i) the amount of such proceeds actually received by Seller after the
Effective Time and allocated by Seller to the Assumed Environmental Liabilities
in a fair and equitable manner and otherwise in accordance with Seller’s
historical practices, less (ii) Seller’s reasonable costs incurred in recovering
such proceeds, to the extent allocated by Seller in a fair and equitable manner
and otherwise in accordance with Seller’s historical

 

 

MINNESOTA GAS

 

53

 

practices to the receipt of the proceeds described in clause (i) of this
Section. Seller will use commercially reasonable efforts to maximize the
recovery of proceeds after the Effective Time in respect of the Assumed
Environmental Liabilities under the Seller Insurance Policies; provided,
however, that Seller will not be liable for the failure to recover any specific
amount of proceeds in the absence of gross negligence.

(d)          Seller’s indemnification obligations under Section 7.17(b), Section
7.17(c), and Article IX are mutually exclusive.

 

ARTICLE VIII

CONDITIONS TO CLOSING

8.1          Conditions to Each Party’s Obligations to Effect the Closing. The
respective obligations of each Party to effect the transactions contemplated
hereby are subject to the fulfillment at or prior to the Closing Date of the
following conditions:

(a)          The waiting period under the HSR Act, including any extension
thereof, applicable to the consummation of the transactions contemplated hereby
shall have expired or been terminated;

(b)          No Order which prevents the consummation of any material aspect of
the transactions contemplated hereby shall have been issued and remains in
effect (each Party agreeing to use its commercially reasonable efforts to have
any such Order lifted) and no Law shall have been enacted which prohibits the
consummation of the transactions contemplated hereby; and

(c)          All consents and approvals for the consummation of the transactions
contemplated hereby required from third parties shall have been obtained
(including the consents and approvals set forth in Schedule 5.3 and Schedule
6.3), other than any of such consents or approvals that the failure to obtain
would not, in the aggregate, create a Material Adverse Effect; provided that
satisfaction of the foregoing condition shall be determined (i) without
consideration of any Required Regulatory Approval, and (ii) after taking into
account the reasonably expected effects of any actions taken, or to be taken, by
the Parties pursuant to Section 7.4.

8.2          Conditions to Obligations of Buyer. The obligation of Buyer to
effect the transactions contemplated hereby is subject to the fulfillment at or
prior to the Closing Date of the following additional conditions:

(a)          Since the date of this Agreement and through the period ending
immediately prior to the Effective Time, no Material Adverse Effect shall have
occurred and be continuing;

(b)          Seller shall have performed and complied in all material respects
with the covenants and agreements contained in this Agreement which are required
to be performed and complied with by Seller on or prior to the Closing Date;

 

54

 

 

MINNESOTA GAS

 

 

(c)          The representations and warranties of Seller which are set forth in
Article V of this Agreement shall be true and correct as of the Effective Time
as though made at and as of the Effective Time (except to the extent that any
such representation or warranty speaks as of a particular date, in which case
such representation and warranty will be true and correct only as of such date),
except for any failure or failures of such representations and warranties to be
true and correct that would not, individually or in the aggregate, cause,
constitute, or represent a Material Adverse Effect;

(d)          Buyer shall have received a certificate from the Chief Executive
Officer of Seller, dated the Closing Date, to the effect that, to the best of
such officer’s knowledge, the conditions set forth in Sections 8.2(b) and 8.2(c)
have been satisfied;

(e)          The Required Regulatory Approvals shall have been obtained and
become Final Regulatory Orders, and no terms in addition to the Required
Regulatory Approvals shall have been imposed in connection with such Final
Regulatory Orders by any Governmental Entity which terms, individually or in the
aggregate, would cause a Material Adverse Effect;

(f)           Any Encumbrances on the Purchased Assets that are not Permitted
Encumbrances shall have been released other than such releases the failure of
which to obtain would not, in the aggregate, create a Material Adverse Effect;
and

(g)          Buyer shall have received the other items to be delivered pursuant
to Section 4.3.

8.3          Conditions to Obligations of Seller. The obligation of Seller to
effect the transactions contemplated hereby is subject to the fulfillment at or
prior to the Closing Date of the following additional conditions:

(a)          Buyer shall have performed and complied in all material respects
with the covenants and agreements contained in this Agreement which are required
to be performed and complied with by Buyer on or prior to the Closing Date;

(b)          The representations and warranties of Buyer which are set forth in
Article VI shall be true and correct as of the Effective Time as though made at
and as of the Effective Time (except to the extent that any such representation
or warranty speaks as of a particular date, in which case such representation
and warranty will be true and correct only as of such date), except for any
failure or failures of such representations and warranties to be true and
correct that do not, individually or in the aggregate, cause such
representations and warranties of Buyer to be materially inaccurate taken as a
whole.

(c)          Seller shall have received a certificate from the Chief Executive
Officer of Buyer, dated the Closing Date, to the effect that, to the best of
such officer’s knowledge, the conditions set forth in Sections 8.3(a) and 8.3(b)
have been satisfied;

(d)          The Required Regulatory Approvals shall have been obtained and
become Final Regulatory Orders; and no terms in addition to the Required
Regulatory Approvals shall have been imposed in connection with such Final
Regulatory Orders by any

 

55

 

 

MINNESOTA GAS

 

 

Governmental Entity which terms, individually or in the aggregate, would cause
(i) a Material Adverse Effect, or (ii) any other material adverse effect, or the
imposition of any material adverse requirements, on Seller or any other
operations or assets of Seller; and

(e)          Seller shall have received the other items to be delivered pursuant
to Section 4.4.

ARTICLE IX

INDEMNIFICATION

9.1          Survival of Representations and Warranties. The representations and
warranties of the Parties contained in this Agreement and the Ancillary
Agreements will survive the Closing and will expire one year after the Closing
Date, except that (i) the representations and warranties in the Special Warranty
Deed and in Sections 5.8 and 5.10 of this Agreement will survive the Closing and
will expire three years after the Closing Date, and (ii) the representations and
warranties in Sections 5.1, 5.2, 5.3(a), 5.12, 5.18, 5.20, 6.1, 6.2, 6.3(a),
6.5, and 6.6 of this Agreement will survive the Closing and will expire upon the
expiration of the applicable statute of limitations (unless, in the case of any
representation in Section 5.18(a), with respect to which there is no applicable
statute of limitations, then the relevant representations and warranties will
survive for four years following Closing Date).

 

9.2

Indemnification.

(a)          Subject to Section 9.1 and Section 9.4 hereof, from and after the
Closing, Seller will indemnify, defend, and hold harmless Buyer from and against
any and all Claims and Losses (each, an “Indemnifiable Loss”), asserted against
or suffered by Buyer relating to, resulting from, or arising out of (i) any
breach by Seller of any covenant or agreement of Seller contained in this
Agreement which by its terms is to be performed prior to or at the Closing, (ii)
any breach by Seller of the representations and warranties of Seller contained
in this Agreement or any Ancillary Agreement, (iii) any breach by Seller of any
covenant or agreement of Seller contained in this Agreement or any Ancillary
Agreement not covered by Section 9.2(a)(i), (iv) the Excluded Liabilities, or
(v) Seller’s failure to comply with any bulk sales or bulk transfer laws of any
jurisdiction applicable to the transactions contemplated by this Agreement.

(b)          Subject to Section 9.1 and Section 9.4 hereof, from and after the
Closing, Buyer will indemnify, defend, and hold harmless Seller from and against
any and all Indemnifiable Losses asserted against or suffered by Seller relating
to, resulting from, or arising out of (i) any breach by Buyer of any covenant or
agreement of Buyer contained in this Agreement which by its terms is to be
performed prior to the Closing, (ii) any breach by Buyer of the representations
and warranties of Buyer contained in this Agreement or any Ancillary Agreement,
(iii) any breach by Buyer of any covenant or agreement of Buyer contained in
this Agreement or any Ancillary Agreement not covered by Section 9.2(b)(i), (iv)
the Assumed Obligations, or (v) any and all liabilities and obligations (other
than the Excluded Liabilities) associated with the ownership and operation of
the Purchased Assets and the Business from and after the Effective Time.

 

56

 

 

MINNESOTA GAS

 

 

(c)          Any Person entitled to receive indemnification under this Agreement
(an “Indemnitee”) having a claim under these indemnification provisions will use
commercially reasonable efforts to mitigate any Losses, including commercially
reasonable efforts to recover all Losses from insurers of such Indemnitee under
applicable insurance policies so as to reduce the amount of any Indemnifiable
Loss hereunder, and will not take any action specifically excluding from any of
its insurance policies any Indemnifiable Losses if Losses of such type are
otherwise covered by such policies. The amount of any Indemnifiable Loss will be
reduced (i) to the extent that Indemnitee receives any insurance proceeds with
respect to an Indemnifiable Loss and (ii) to take into account any net Tax
benefit recognized by the Indemnitee arising from the recognition of the
Indemnifiable Loss and any payment actually received with respect to an
Indemnifiable Loss.

 

9.3

Indemnification Procedures.

(a)          Third Party Claims. If an Indemnitee receives notice of the
assertion or commencement of any Claim by any Person who is neither a Party to
this Agreement nor an Affiliate of a Party to this Agreement (a “Third Party
Claim”) for which the Indemnitee claims a right to indemnification hereunder
from the other Party (the “Indemnifying Party”), the Indemnitee will promptly
give written notice of such Third Party Claim to the Indemnifying Party. Such
notice will describe the nature of the Third Party Claim in reasonable detail
and will indicate the estimated amount, to the extent practicable, of the
Indemnifiable Loss that the Indemnitee claims it has sustained or may sustain as
a result of such Third Party Claim. The Indemnifying Party, at its sole cost and
expense, will have the right, upon written notice to the Indemnitee, to assume
the defense of the Third Party Claim while reserving its right to contest the
issue of whether it is liable to the Indemnitee for any indemnification
hereunder with respect to such Third Party Claim.

(b)          Defense of Third Party Claims. If the Indemnifying Party assumes
the defense of a Third Party Claim pursuant to Section 9.3(a), the Indemnifying
Party will appoint counsel reasonably satisfactory to the Indemnitee for the
defense of such Third Party Claim, will diligently pursue such defense, and will
keep the Indemnitee reasonably informed with respect to such defense. The
Indemnitee shall cooperate with the Indemnifying Party and its counsel,
including permitting reasonable access to books, records, and personnel, in
connection with the defense of any Third Party Claim (provided, that any
out-of-pocket costs incurred by the Indemnitee in providing such cooperation
shall be paid by the Indemnifying Party). The Indemnitee will have the right to
participate in such defense, including appointing separate counsel, but the
costs of such participation shall be borne solely by the Indemnitee. The
Indemnifying Party will have full authority, in consultation with the
Indemnitee, to make all decisions and determine all actions to be taken with
respect to the defense and settlement of the Third Party Claim, including the
right to pay, compromise, settle, or otherwise dispose of such Third Party Claim
at the Indemnifying Party’s expense; provided, that any such settlement will be
subject to the prior consent of the Indemnitee, which shall not be unreasonably
withheld or delayed. If a firm offer is made to settle a Third Party Claim,
which the Indemnifying Party desires to accept and which acceptance requires the
consent of the

 

57

 

 

MINNESOTA GAS

 

 

Indemnitee pursuant to the immediately preceding sentence, the Indemnifying
Party will give written notice to the Indemnitee to that effect. If the
Indemnitee fails to consent to such firm offer within 10 days after its receipt
of such notice, and such firm offer involves only the payment of money, the
maximum liability of the Indemnifying Party with respect to such Third Party
Claim will be the amount of such settlement offer, plus reasonable costs and
expenses paid or incurred by the Indemnitee up to the date of such notice for
which the Indemnifying Party is otherwise liable. In no event will the
Indemnifying Party have authority to agree to any relief binding on the
Indemnitee other than the payment of money damages by the Indemnifying Party
unless agreed to by the Indemnitee.

(c)          Failure of Indemnifying Party to Assume Defense. If the
Indemnifying Party does not assume the defense of a Third Party Claim in
accordance with the terms hereof within 20 Business Days after the receipt of
notice thereof, the Indemnitee may elect to defend against the Third Party
Claim, and the Indemnifying Party will be liable for all reasonable expenses of
such defense to the extent the Indemnifying Party is otherwise obligated
hereunder to indemnify Indemnitee with respect to such Third Party Claim.

(d)          Direct Losses. Any claim by an Indemnitee on account of an
Indemnifiable Loss which does not result from a Third Party Claim (a “Direct
Loss”) will be asserted by giving the Indemnifying Party prompt written notice
thereof, stating the nature of such Loss in reasonable detail and indicating the
estimated amount, if practicable. The Indemnifying Party will have a period of
20 Business Days within which to respond to such claim of a Direct Loss. If the
Indemnifying Party rejects such claim, or does not respond within such period,
the Indemnitee may seek enforcement of its rights to indemnification under this
Agreement. Any failure by the Indemnifying Party to respond under this Section
9.3(d) will not constitute an admission by the Indemnifying Party with respect
to the claim asserted.

(e)          If the amount of any Indemnifiable Loss, at any time subsequent to
the making of an indemnity payment in respect thereof, is reduced by recovery,
settlement, or otherwise under or pursuant to any insurance coverage, or
pursuant to any claim, recovery, settlement, or payment by or against any other
Person, the amount of such reduction, less any costs, expenses, or premiums
incurred in connection therewith, will promptly be repaid by the Indemnitee to
the Indemnifying Party. Upon making any indemnity payment, the Indemnifying
Party will, to the extent of such indemnity payment, be subrogated to all rights
of the Indemnitee against any third party in respect of the Indemnifiable Loss
to which the indemnity payment relates; provided, however, that (i) the
Indemnifying Party is then in compliance with its obligations under this
Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee
recovers full payment of its Indemnifiable Loss, any and all claims of the
Indemnifying Party against any such third party on account of said indemnity
payment will be subordinated to the Indemnitee’s rights against such third
party. Without limiting the generality or effect of any other provision hereof,
the Indemnitee and the Indemnifying Party will duly execute upon request all
instruments reasonably necessary to evidence and perfect the

 

58

 

 

MINNESOTA GAS

 

 

above described subrogation and subordination rights, and otherwise cooperate in
the prosecution of such claims at the direction of the Indemnifying Party.

(f)           A failure to give timely notice as provided in this Section 9.3
will affect the rights or obligations of a Party hereunder only to the extent
that, as a result of such failure, the Party entitled to receive such notice was
actually prejudiced as a result of such failure. Notwithstanding the foregoing,
no claim for indemnification made after expiration of the applicable time
periods set forth in this Article IX will be valid.

 

9.4

Limitations on Indemnification.

(a)          A Party may assert a claim for indemnification under Section
9.2(a)(ii) or Section 9.2(b)(ii), as the case may be, only to the extent the
Indemnitee gives notice of such claim to the Indemnifying Party prior to the
expiration of the applicable time period set forth in Section 9.1. Any claims
pursuant to Section 9.2(a)(i) or Section 9.2(b)(i) must be asserted within one
year following the Closing Date. Any claim for indemnification not made in
accordance with Section 9.3 by a Party on or prior to the applicable date set
forth in Section 9.1 or this Section 9.4(a), and the other Party’s
indemnification obligations with respect thereto, will be irrevocably and
unconditionally released and waived.

(b)          Notwithstanding any other provision of this Article IX: (i) Seller
will not have any indemnification obligations for Indemnifiable Losses under
Sections 9.2(a)(i) and 9.2(a)(ii) (A) for any individual item where the Loss
relating thereto is less than $25,000 and (B) in respect of each individual item
where the Loss relating thereto is equal to or greater than $25,000, unless the
aggregate amount of all such Losses exceeds 1% of the Purchase Price, and then
only to the extent of such excess; and (ii) in no event will the aggregate
indemnification to be paid by Seller under Sections 9.2(a)(i) and 9.2(a)(ii)
exceed 50% of the Purchase Price. Notwithstanding the foregoing, (x) the
limitations set forth in Section 9.4(b)(i) will not apply to claims asserted by
Buyer for breaches of Sections 5.1, 5.2, 5.3(a), 5.8(i), 5.18, and 5.20, and (y)
the limitations set forth in Sections 9.4(b)(i) and 9.4(b)(ii) will not apply to
claims asserted by Buyer arising from the intentional fraud of Seller.

(c)          Notwithstanding any other provision of this Article IX: (i) Buyer
will not have any indemnification obligations for Indemnifiable Losses under
Sections 9.2(b)(i) and 9.2(b)(ii) (A) for any individual item where the Loss
relating thereto is less than $25,000 and (B) in respect of each individual item
where the Loss relating thereto is equal to or greater than $25,000, unless the
aggregate amount of all such Losses exceeds 1% of the Purchase Price, and then
only to the extent of such excess; and (ii) in no event will the aggregate
indemnification to be paid by Buyer under Sections 9.2(b)(i) and 9.2(b)(ii)
exceed 50% of the Purchase Price. Notwithstanding the foregoing, (x) the
limitations set forth in Section 9.4(c)(i) will not apply to claims asserted by
Seller for breaches of Sections 6.1, 6.2, 6.3(a), 6.5, and 6.6, and (y) the
limitations set forth in Sections 9.4(c)(i) and 9.4(c)(ii) will not apply to
claims asserted by Seller arising from the intentional fraud of Buyer.

 

59

 

 

MINNESOTA GAS

 

 

(d)          Except as otherwise expressly provided herein, no representation or
warranty of either Party contained in this Agreement or in any Ancillary
Agreement will be deemed untrue or incorrect, and such Party will not be deemed
to have breached a representation, warranty, or covenant as a consequence of the
existence of any fact, circumstance, action, or event that is permitted to be
taken by such Party under the terms of this Agreement or any Ancillary
Agreement, or that is disclosed in this Agreement, any Ancillary Agreement, any
Schedule, or Exhibit hereto, or any certificate or other instrument delivered in
accordance with the terms hereof.

(e)          Notwithstanding anything contained in this Agreement to the
contrary, except for the representations and warranties contained in this
Agreement or in the Ancillary Agreements, neither Seller nor any other Person is
making any other express or implied representation or warranty with respect to
Seller, the Business, the Purchased Assets, the Assumed Obligations or the
transactions contemplated by this Agreement, and Seller disclaims any other
representations or warranties, whether made by Seller or its Affiliates,
officers, directors, employees, agents, or representatives, INCLUDING THE
IMPLIED WARRANTY OF MERCHANTABILITY AND ANY IMPLIED WARRANTY OF FITNESS. Any
claims Buyer may have for breach of representation or warranty must be based
solely on the representations and warranties of Seller set forth in this
Agreement or the Ancillary Agreements. In furtherance of the foregoing, except
for the representations and warranties contained in this Agreement or the
Ancillary Agreements, Buyer acknowledges and agrees that none of Seller, any of
its Affiliates or any other Person will have or be subject to any liability to
Buyer or any other Person for, and Seller hereby disclaims all liability and
responsibility for, any representation, warranty, projection, forecast,
statement, or information made, communicated, or furnished (orally or in
writing) to Buyer or any of Buyer’s Representatives, including any confidential
memoranda distributed on behalf of Seller relating to the Business, the
Purchased Assets, or the Assumed Obligations or other publications or data room
information provided to Buyer or Buyer’s Representatives, or any other document
or information in any form provided to Buyer or Buyer’s Representatives in
connection with the sale of the Purchased Assets, the assumption of the Assumed
Obligations, and the transactions contemplated hereby (including any opinion,
information, projection, or advice that may have been or may be provided to
Buyer or Buyer’s Representatives by any of Seller’s Representatives). BUYER
HEREBY ACKNOWLEDGES THAT, EXCEPT FOR THE WARRANTIES EXPRESSLY SET FORTH IN
ARTICLE V AND THE ANCILLARY AGREEMENTS, THE BUSINESS AND THE PURCHASED ASSETS
ARE BEING PURCHASED ON AN “AS IS, WHERE IS” BASIS, WITH ALL FAULTS.

9.5          Applicability of Article IX. For the avoidance of doubt, Seller and
Buyer agree that the remedies and obligations under this Article IX apply only
following the Closing, and that prior to the Closing or in the event that this
Agreement is terminated the Parties’ remedies will be determined by applicable
Law and the provisions of Article X.

 

60

 

 

MINNESOTA GAS

 

 

9.6          Tax Treatment of Indemnity Payments. Seller and Buyer agree to
treat any indemnity payment made pursuant to this Article IX as an adjustment to
the Purchase Price for federal, state, and local Income Tax purposes.

9.7          No Consequential Damages. Notwithstanding anything to the contrary
elsewhere in this Agreement or provided for under any applicable Law, except as
specifically provided in Sections 10.3(b) and 10.3(c), no Party will, in any
event, be liable to the other Party, either in contract or in tort, for any
consequential, incidental, indirect, special, or punitive damages of the other
Party, including loss of future revenue, income, or profits, diminution of
value, or loss of business reputation or opportunity, relating to the breach or
alleged breach hereof or otherwise, whether or not the possibility of such
damages has been disclosed to the other Party in advance or could have been
reasonably foreseen by such other Party. The exclusion of consequential,
incidental, indirect, special, and punitive damages as set forth in the
preceding sentence does not apply to any such damages sought by third parties
against Buyer or Seller, as the case may be, in connection with Losses that may
be indemnified pursuant to this Article IX.

9.8          Exclusive Remedy. Seller and Buyer acknowledge and agree that, from
and after the Closing, the sole and exclusive remedy for any breach or
inaccuracy, or alleged breach or inaccuracy, of any representation or warranty
in this Agreement or the Ancillary Agreements or any covenant or agreement to be
performed hereunder will be indemnification in accordance with this Article IX
and the remedies provided for in Section 10.4. In furtherance of the foregoing,
Seller and Buyer hereby waive, to the fullest extent permitted by applicable
Law, any and all other rights, claims, and causes of action (including rights of
contributions, if any) that may be based upon, arise out of, or relate to this
Agreement, or the negotiation, execution, or performance of this Agreement
(including any tort or breach of contract claim or cause of action based upon,
arising out of, or related to any representation or warranty made in or in
connection with this Agreement or as an inducement to enter into this
Agreement), known or unknown, foreseen or unforeseen, which exist or may arise
in the future, that it may have against the other arising under or based upon
any Law (including any such Law under or relating to environmental matters),
common law, or otherwise.

ARTICLE X

TERMINATION AND OTHER REMEDIES

 

10.1

Termination.

(a)          This Agreement may be terminated at any time prior to the Closing
Date by mutual written consent of Seller and Buyer.

(b)          This Agreement may be terminated by Seller or Buyer if the Closing
has not occurred on or before the date which is 12 months following the date of
this Agreement (the “Termination Date”); provided that the right to terminate
this Agreement under this Section 10.1(b) will not be available to a Party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before the Termination
Date; and provided, further, that if 10 months following the date of this
Agreement the conditions to the Closing set forth in Section 8.2(e) or Section
8.3(d) have not been fulfilled but all other conditions to the

 

61

 

 

MINNESOTA GAS

 

 

Closing have been fulfilled or are capable of being fulfilled, then the
Termination Date will be the day which is 18 months following the date of this
Agreement.

(c)          This Agreement may be terminated by either Seller or Buyer if (i)
any Required Regulatory Approval has been denied by the applicable Governmental
Entity and all appeals of such denial have been taken and have been
unsuccessful, or (ii) one or more courts of competent jurisdiction in the United
States or any State has issued an Order permanently restraining, enjoining, or
otherwise prohibiting the Closing, and such Order has become final and
nonappealable.

(d)          This Agreement may be terminated by Buyer if there has been a
breach by Seller of any representation, warranty, or covenant made by it in this
Agreement which has prevented the satisfaction of any condition to the
obligations of Buyer to effect the Closing and such breach has not been cured by
Seller or waived by Buyer within 20 Business Days after all other conditions to
Closing have been satisfied or are capable of being satisfied. For the avoidance
of doubt, supplements or amendments to Schedules pursuant to Section 7.8 will
not be deemed a breach giving rise to a right to terminate pursuant to this
Section 10.1(d).

(e)          This Agreement may be terminated by Buyer in accordance with the
terms of Section 7.8.

(f)           This Agreement may be terminated by Seller if there has been a
breach by Buyer of any representation, warranty, or covenant made by it in this
Agreement which has prevented the satisfaction of any condition to the
obligations of Seller to effect the Closing and such breach has not been cured
by Buyer or waived by Seller within 20 Business Days after all other conditions
to Closing have been satisfied or are capable of being satisfied.

10.2       Procedure and Effect of Termination. In the event of termination of
this Agreement by either or both of the Parties pursuant to Section 10.1,
written notice thereof will forthwith be given by the terminating Party to the
other Party and this Agreement will terminate and the transactions contemplated
hereby will be abandoned, without further action by either Party, whereupon the
liabilities of the Parties hereunder will terminate, except as otherwise
expressly provided in this Agreement (including Section 10.3).

 

10.3

Remedies upon Termination. If this Agreement is terminated as provided herein:

(a)          The obligations of the Parties under Articles I, X, and XI, and
Sections 7.2(b), 7.2(c), 7.2(d), 7.3, and 7.5 will survive the termination of
this Agreement pursuant to Section 10.1.

(b)          Buyer will pay to Seller a fee equal to 10 percent of the Base
Price if Seller terminates this Agreement pursuant to Section 10.1(f).

(c)          Seller will pay to Buyer a fee equal to five percent of the Base
Price if Buyer terminates this Agreement pursuant to Section 10.1(d).

 

62

 

 

MINNESOTA GAS

 

 

10.4       Specific Performance. This Agreement is being entered into (i) by
Buyer as a strategic action in furthering Buyer’s business strategy, and (ii) by
Seller as part of a strategic corporate-wide restructuring process, and
consummation of the transactions contemplated hereby will be a significant
contributing factor to the success of such process. The Parties acknowledge that
any failure to consummate the transactions provided for herein will frustrate
the Parties’ respective objectives in entering into this Agreement. Accordingly,
the Parties agree and stipulate that the Purchased Assets are unique, and that
(x) any failure to consummate the transactions provided for in this Agreement
due to breach of this Agreement by either Party would result in irreparable
injury to the other Party, (y) in the event of any such failure to consummate
such transactions, it would be very difficult or impracticable to determine
monetary damages caused by such a breach, and (z) in any event, monetary damages
would not be an adequate remedy for any such breach. Therefore, the Parties
expressly agree that, in the event of breach of this Agreement by either Party,
the other Party will, in addition to any other rights and remedies hereunder
(except under Section 10.3(b) or Section 10.3(c)), have the right to enforce
this Agreement by obtaining an order for specific performance of the Parties’
obligations hereunder.

 

ARTICLE XI

MISCELLANEOUS PROVISIONS

11.1       Amendment and Modification. Except as provided in Section 7.8, this
Agreement may be amended, modified, or supplemented only by written agreement of
Seller and Buyer.

11.2       Waiver of Compliance; Consents. Except as otherwise provided in this
Agreement, any failure of either Party to comply with any obligation, covenant,
agreement, or condition herein may be waived by the Party entitled to the
benefits thereof only by a written instrument signed by the Party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement, or condition will not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.

11.3       Notices. All notices and other communications hereunder will be in
writing and will be deemed given if delivered personally or by facsimile
transmission, or mailed by overnight courier or certified mail (return receipt
requested), postage prepaid, to the Party being notified at such Party’s address
indicated below (or at such other address for a Party as is specified by like
notice; provided that notices of a change of address will be effective only upon
receipt thereof):

 

(a)

If to Seller, to:

Aquila, Inc.

 

Attn: General Counsel

 

 

20 West Ninth Street

 

 

Kansas City, Missouri 64105

 

Fax:

(816) 467-3486

 

 

with copies to:

 

63

 

 

MINNESOTA GAS

 

 

 

 

Blackwell Sanders Peper Martin LLP

 

Attn: Robin V. Foster, Esq.

 

 

4801 Main Street, Suite 1000

 

 

Kansas City, Missouri 64112

 

 

Fax:

(816) 983-8080

 

 

 

and

 

 

 

Blackwell Sanders Peper Martin LLP

 

Attn: Frederick R. Strasheim, Esq.

 

 

720 Olive Street, Suite 2400

 

 

St. Louis, Missouri 63101

 

 

Fax: (314) 345-6060

 

 

 

(b)

if to Buyer, to:

WPS Minnesota Utilities, Inc.

c/o WPS Resources Corporation

Attn: Barth J. Wolf, Esq.

700 North Adams Street

P.O. Box 19002

Green Bay, Wisconsin 54307

Fax: (920) 433-1526

 

with a copy to:

 

Foley & Lardner LLP

 

 

Attn: Mary Ann C. Halloin, Esq.

 

777 East Wisconsin Avenue

 

 

Milwaukee, Wisconsin 53202

 

 

Fax: (414) 297-4900

 

 

11.4       Assignment. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the Parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests, or obligations hereunder may be assigned by either Party,
without the prior written consent of the other Party, nor is this Agreement
intended to confer upon any other Person except the Parties any rights or
remedies hereunder. No provision of this Agreement creates any third party
beneficiary rights in any employee or former employee of Seller (including any
beneficiary or dependent thereof) in respect of continued employment or resumed
employment, and no provision of this Agreement creates any rights in any such
Persons in respect of any benefits that may be provided, directly or indirectly,
under any employee benefit plan or arrangement except as expressly provided for
thereunder.

11.5       Governing Law. This Agreement is governed by and construed in
accordance with the laws of the state of Minnesota (regardless of the laws that
might otherwise govern under

 

64

 

 

MINNESOTA GAS

 

 

applicable principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.

11.6       Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction will not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

11.7       Entire Agreement. This Agreement will be a valid and binding
agreement of the Parties only if and when it is fully executed and delivered by
the Parties, and until such execution and delivery no legal obligation will be
created by virtue hereof. This Agreement and the Ancillary Agreements, together
with the Schedules and Exhibits hereto and thereto and the certificates and
instruments delivered under or in accordance herewith or therewith, embody the
entire agreement and understanding of the Parties hereto in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants, or undertakings in respect of
the transactions contemplated by this Agreement, other than those expressly set
forth or referred to herein or therein, and it is expressly acknowledged and
agreed that there are no restrictions, promises, representations, warranties,
covenants, or undertakings contained in any other material made available to
Buyer, including any such material made available in any data room information,
confidential information memoranda, management information presentations, or
otherwise. This Agreement supersedes all prior agreements and understandings
between the Parties with respect to such transactions. All conflicts or
inconsistencies, if any, between the terms hereof and the terms of any of the
Ancillary Agreements shall be resolved in favor of this Agreement (except in the
case of any Special Warranty Deed, in which event such Special Warranty Deed
shall govern and control with respect to the matters addressed therein).

11.8       Bulk Sales or Transfer Laws. Buyer acknowledges that Seller will not
comply with the provision of any bulk sales or transfer laws of any jurisdiction
in connection with the transactions contemplated by this Agreement. Buyer hereby
waives compliance by Seller with the provisions of the bulk sales or transfer
laws of all applicable jurisdictions.

11.9       Delivery. This Agreement, and any certificates and instruments
delivered under or in accordance herewith, may be executed in multiple
counterparts (each of which will be deemed an original, but all of which
together will constitute one and the same instrument), and may be delivered by
facsimile transmission, with originals to follow by overnight courier or
certified mail (return receipt requested).

11.10     Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW. ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
ANCILLARY AGREEMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

[Signature Page Follows]

 

65

 

 

MINNESOTA GAS

 

 

IN WITNESS WHEREOF, the Parties have caused this agreement to be signed by their
respective duly authorized officers as of the date first above written.

 

Aquila, Inc.

 

By: __/s/ Richard C. Green___________

 

Name:

Richard C. Green

 

 

Title:

Chief Executive Officer

 

 

 

WPS Minnesota Utilities, Inc.

 

By: __/s/ Barth J. Wolf_____________

 

Name:

Barth J. Wolf

 

Title:

Secretary

 

 

 

66

 

 

MINNESOTA GAS

 

 

Exhibit 1.1-A

Form of Assignment and Assumption Agreement

 

Assignment and Assumption Agreement (“Agreement”), made as of ________________,
____ by and between Aquila, Inc., a Delaware corporation (“Seller”), and WPS
Minnesota Utilities, Inc., a Delaware corporation (“Buyer”). Unless otherwise
indicated, capitalized terms used but not otherwise defined herein have the
meanings ascribed to such terms in the Asset Purchase Agreement (as defined
below).

WHEREAS, Seller and Buyer have entered into that certain Asset Purchase
Agreement, dated September 21, 2005 (the “Asset Purchase Agreement”), pursuant
to which, among other things, Buyer agreed to assume from Seller the Assumed
Obligations, and Seller agreed to assign to Buyer all of Seller’s rights to the
Purchased Assets.

 

NOW, THEREFORE, pursuant and subject to the terms of Asset Purchase Agreement
and in consideration of the mutual covenants set forth below and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Buyer agree as follows:

 

1.           Seller hereby assigns and transfers all of the Assumed Obligations
and all of Seller’s rights to the Purchased Assets to Buyer, and Buyer hereby
accepts such assignment and hereby assumes and agrees to pay, perform, and
discharge when due all of the Assumed Obligations.

 

2.          The Parties agree, on behalf of themselves and their respective
successors and assigns, to do, execute, acknowledge, and deliver, or to cause to
be done, executed, acknowledged, and delivered, all such further acts,
documents, and instruments that may reasonably be required to give full effect
to the intent of this Agreement.

 

3.          This Agreement is being delivered pursuant to the Asset Purchase
Agreement and will be construed consistently therewith. This Agreement is not
intended to, and does not, in any manner enhance, diminish, or otherwise modify
the rights and obligations of the Parties under the Asset Purchase Agreement. To
the extent that any provision of this Agreement conflicts or is inconsistent
with the terms of the Asset Purchase Agreement, the terms of the Asset Purchase
Agreement will govern.

 

4.          This Agreement may be executed in multiple counterparts (each of
which will be deemed an original, but all of which together will constitute one
and the same instrument), and may be delivered by facsimile transmission, with
originals to follow by overnight courier or certified mail (return receipt
requested).

 

5.          This Agreement and all of the provisions hereof will be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns.

 

[Signature Page Follows]

 

 

67

 

 

MINNESOTA GAS

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their
respective duly authorized officers as of the date first above written.

 

Aquila, Inc.

 

By: _______________________________

 

Name:

 

Title:

 

 

 

 

WPS Minnesota Utilities, Inc.

 

By: _______________________________

 

Name:

 

Title:

 

 

 

68

 

 

MINNESOTA GAS

 

 

Exhibit 1.1-B

Form of Assignment of Easements

 

Prepared by and please return to:

 

                                             

                                             

                                             

                                             

 

ASSIGNMENT OF EASEMENTS

 

In consideration of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
AQUILA, INC., a Delaware corporation (“Assignor”), with an address of 20 West
Ninth Street, Kansas City, Missouri 64105, has granted, sold, conveyed,
transferred, and assigned, and by these presents does hereby grant, sell,
convey, transfer, and assign unto WPS Minnesota Utilities, Inc., a Delaware
corporation (“Assignee”), with a mailing address of 700 North Adams Street, P.O.
Box 19001, Green Bay, WI 54307-9001, without representation or warranty of any
kind except as set forth in that certain “Asset Purchase Agreement” dated as of
September 21, 2005 by and between Assignor and Assignee, all of Assignor’s
right, title, and interest in and to the Easements (as such term is defined in
the Asset Purchase Agreement) and the Shared Easement Rights (as such term is
defined in the Asset Purchase Agreement), including the interests and rights
described or set forth on Exhibit A attached hereto and by this reference made a
part hereof.

This Assignment is being delivered pursuant to the Asset Purchase Agreement and
will be construed consistently therewith. This Assignment is not intended to,
and does not, in any manner enhance, diminish, or otherwise modify the rights
and obligations of Assignor and Assignee under the Asset Purchase Agreement. To
the extent that any provision of this Assignment conflicts or is inconsistent
with the terms of the Asset Purchase Agreement, the terms of the Asset Purchase
Agreement will govern.

TO HAVE AND TO HOLD the above-described premises unto Assignee and its
successors and assigns, forever.

IN WITNESS WHEREOF, the undersigned has executed this Assignment effective the
____ day of ___________, 20              .

AQUILA, INC., a Delaware corporation

 

 

By: ______________________________________

 

Name:

 

Title:

 

69

 

 

MINNESOTA GAS

 

 

[INSERT NOTARY BLOCK and SCHEDULE OF EASEMENTS]

 

 

70

 

 

MINNESOTA GAS

 

 

Exhibit 1.1-C

Form of Bill of Sale

 

Bill of Sale, made as of ________________, ______ by and between Aquila, Inc., a
Delaware corporation (“Seller”), and WPS Minnesota Utilities, Inc., a Delaware
corporation (“Buyer”). Unless otherwise indicated, capitalized terms used but
not otherwise defined herein have the meanings ascribed to such terms in the
Asset Purchase Agreement (as defined below).

WHEREAS, Seller and Buyer have entered into that certain Asset Purchase
Agreement, dated September 21, 2005 (the “Asset Purchase Agreement”), pursuant
to which, among other things, Seller agreed to sell to Buyer and Buyer agreed to
purchase from Seller the Purchased Assets.

 

NOW, THEREFORE, pursuant and subject to terms of the Asset Purchase Agreement
and in consideration of the mutual covenants set forth below and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Buyer agree as follows:

 

1.           Seller hereby sells, assigns, conveys, transfers, and delivers to
Buyer all of Seller’s right, title, and interest in, to, and under the Purchased
Assets, and Buyer hereby purchases and accepts from Seller, as of the date
hereof, all right, title, and interest of Seller in, to, and under the Purchased
Assets.

 

2.           From time to time, at the request of Buyer, Seller will do,
execute, acknowledge, and deliver, or will cause to be done, executed,
acknowledged, and delivered, all such further acts, documents, and instruments
that may reasonably be required to give full effect to the intent of this Bill
of Sale.

 

3.          This Bill of Sale is being delivered pursuant to the Asset Purchase
Agreement and will be construed consistently therewith. This Bill of Sale is not
intended to, and does not, in any manner enhance, diminish, or otherwise modify
the rights and obligations of the Parties under the Asset Purchase Agreement. To
the extent that any provision of this Bill of Sale conflicts or is inconsistent
with the terms of the Asset Purchase Agreement, the terms of the Asset Purchase
Agreement will govern.

 

4.          This Bill of Sale may be executed in multiple counterparts (each of
which will be deemed an original, but all of which together will constitute one
and the same instrument), and may be delivered by facsimile transmission, with
originals to follow by overnight courier or certified mail (return receipt
requested).

 

5.          This Bill of Sale and all of the provisions hereof will be binding
upon and inure to the benefit of the Parties and their respective successors and
permitted assigns.

 

[Signature Page Follows]

 

71

 

 

MINNESOTA GAS

 

 

IN WITNESS WHEREOF, the Parties have caused this Bill of Sale to be signed by
their respective duly authorized officers as of the date first above written.

 

Aquila, Inc.

 

By: _______________________________

 

Name:

 

Title:

 

 

 

 

WPS Minnesota Utilities, Inc.

 

By: _______________________________

 

Name:

 

Title:

 

 

 

72

 

 

MINNESOTA GAS

 

 

Exhibit 1.1-D

Form of Guaranty

 

THIS GUARANTY (this “Guaranty”) is made as of September __, 2005, by WPS
Resources Corporation, a Wisconsin corporation (the “Guarantor”), in favor of
Aquila, Inc., a Delaware corporation (the “Guaranteed Party”).

RECITALS

A.           The Guaranteed Party and WPS Minnesota Utilities, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Guarantor (“Buyer”), have
entered into an Asset Purchase Agreement, dated as of the date hereof (the
“Purchase Agreement”), for, among other things, the sale to and purchase by
Buyer of the Purchased Assets (as defined in the Purchase Agreement).

B.           To induce the Guaranteed Party to enter into the Purchase Agreement
and consummate the transactions contemplated thereby, the Guarantor has agreed
to execute and deliver this Guaranty.

C.           The execution and performance by the Guaranteed Party of the
Purchase Agreement and the transactions contemplated thereby will benefit the
Guarantor. Without this Guaranty, the Guaranteed Party would not execute and
deliver the Purchase Agreement or consummate the transactions contemplated
thereby. Therefore, in consideration of the execution and delivery by the
Guaranteed Party of the Purchase Agreement and consummation of the transactions
contemplated thereby, the Guarantor has agreed to execute and deliver this
Guaranty.

NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor agrees as follows:

1.            Capitalized Terms. Any capitalized terms used herein and not
defined herein shall have the respective meanings assigned thereto in the
Purchase Agreement.

 

2.            Guaranty. The Guarantor hereby guarantees the full and prompt
payment and performance when due of all of the obligations of Buyer arising
under the Purchase Agreement on or before the Closing Date (such obligations,
collectively, the “Guaranteed Obligations”).

 

3.            Nature of Guaranty. Subject to the terms and conditions hereof,
this Guaranty is a guaranty of payment and performance and not of collection and
is an absolute, unconditional and irrevocable guarantee of the full and prompt
payment and performance when due of all of the Guaranteed Obligations, whether
or not from time to time reduced or extinguished, and whether or not recovery
may be, or hereafter may become, barred by any statute of limitations or
otherwise. If any payment made by Buyer or any other Person, and applied to the
Guaranteed Obligations is at any time annulled, set aside, rescinded,
invalidated, declared to be fraudulent or preferential or otherwise required to
be repaid or refunded for any reason, including bankruptcy, insolvency, or
reorganization, then, to the extent of such payment or repayment, the liability
of the Guarantor will continue to be in full force and effect (or be reinstated,
if applicable) as fully as if such payment had never been made. Subject to the
terms and conditions hereof, the Guarantor covenants that this Guaranty will not
be fulfilled or discharged, except by the

 

73

 

 

MINNESOTA GAS

 

 

complete payment and performance of the Guaranteed Obligations, whether by the
Buyer or the Guarantor under this Guaranty.

 

4.            Termination of Guaranty. This Guaranty shall be valid and
enforceable and shall remain in full force and effect until the earlier to occur
of (i) the date on which all Guaranteed Obligations have been indefeasibly paid
and performed following the termination of the Purchase Agreement in accordance
with the terms thereof, and (ii) the consummation of the Closing. Upon the
occurrence of either of the foregoing, this Guaranty shall be deemed
automatically terminated without further action by the Guarantor or the
Guaranteed Party and shall thereafter be of no further force or effect.

 

5.            Waivers. The Guarantor hereby unconditionally waives (a)
presentment, notice of dishonor, protest, demand for payment and all notices of
any kind, including without limitation: notice of acceptance hereof; notice of
the creation of any of the Guaranteed Obligations; notice of nonpayment,
nonperformance or other default on any of the Guaranteed Obligations; and notice
of any action taken to collect upon or enforce any of the Guaranteed
Obligations; (b) any subrogation to the rights of the Guaranteed Party against
the Buyer and any other claim against the Buyer which arises as a result of
payments made by the Guarantor pursuant to this Guaranty, and any claim for
contribution against any co-guarantor whether or not the Guaranteed Obligations
have been paid or performed in full; and (c) any setoffs or counterclaims
against the Guaranteed Party.

 

6.            Independent Obligations. The Guarantor agrees that the Guaranteed
Obligations are independent of the obligations of Buyer under the Purchase
Agreement and if any default occurs hereunder, a separate action or actions may
be brought and prosecuted against the Guarantor whether or not Buyer is joined
therein. The Guaranteed Party may maintain successive actions for other defaults
of the Guarantor hereunder. The Guaranteed Party’s rights hereunder will not be
exhausted by the exercise of any of its rights or remedies or by any such action
or by any number of successive actions until and unless all Guaranteed
Obligations have been paid and fully performed.

 

 

7.

Representations and Warranties. The Guarantor represents and warrants that:

 

(a)          it is a corporation duly organized, validly existing, and in active
status under the laws of the State of Wisconsin and has all requisite corporate
powers and authority to own its properties and carry on its business as now
conducted;

(b)          it has all requisite corporate power and authority to execute,
deliver and perform this Guaranty; and

(c)          the execution, delivery, and performance by the Guarantor of this
Guaranty had been duly authorized by all necessary corporate action on the part
of the Guarantor.

8.            Fees. The Guarantor agrees to pay all reasonable costs and
expenses (including, but not limited to, court costs and reasonable attorneys’
fees) paid or incurred by the Guaranteed Party in endeavoring to collect or
enforce performance of this Guaranty.

 

74

 

 

MINNESOTA GAS

 

 

 

9.            Governing Law. The validity, interpretation and effect of this
Guaranty are governed by and will be construed in accordance with the laws of
the State of Minnesota applicable to contracts made and performed in such state,
without regard to conflicts of law doctrines.

 

10.          Severability. If any provision of this Guaranty is determined to be
unenforceable for any reason by a court of competent jurisdiction, this Guaranty
will be adjusted rather than voided, to achieve the intent of the parties, and
all of the provisions not deemed unenforceable will be deemed valid and
enforceable to the greatest extent possible.

 

11.          Notices. All notices, requests, demands and other communications
under this Guaranty must be in writing and must be delivered in person or sent
by certified mail, postage prepaid, or by overnight delivery, and properly
addressed as follows:

 

If to the Guarantor:

WPS Resources Corporation

700 N. Adams Street

Green Bay, WI 54301

Attention: Barth J. Wolf, Esq.

With a copy to:

Foley & Lardner LLP

 

777 East Wisconsin Ave

Milwaukee, WI 53202-5367

Attention: Mary Ann C. Halloin, Esq.

If to the Guaranteed Party:

Aquila, Inc.

 

20 West Ninth Street

 

 

Kansas City, Missouri 64105

 

Attn: General Counsel

 

 

with copies to:

Blackwell Sanders Peper Martin LLP

4801 Main Street, Suite 1000

Kansas City, Missouri 64112

Attn: Robin V. Foster, Esq.

 

and

 

Blackwell Sanders Peper Martin LLP

720 Olive Street, Suite 2400

 

75

 

 

MINNESOTA GAS

 

 

St. Louis, Missouri 63101

Attn: Frederick R. Strasheim, Esq.

 

Either the Guarantor or the Guaranteed Party may from time to time change its
address for the purpose of notices by a similar notice specifying a new address,
but no such change is effective until actually received by the party sought to
be charged with its contents.

All notices and other communications required or permitted under this Guaranty
which are addressed as provided in this Section 11 shall be effective upon
delivery, if delivered personally or by overnight mail, and shall be effective
five (5) days following deposit in the United States mail, postage prepaid, if
delivered by mail.

12.          Entire Agreement. This Guaranty constitutes the entire agreement
between the Guaranteed Party and the Guarantor with respect to the subject
matter hereof, superseding all previous communications and negotiations, and no
representation, understanding, promise or condition concerning the subject
matter hereof shall be binding upon the Guaranteed Party unless expressed
herein.

 

13.          Assignability. This Guaranty is binding upon and inures to the
benefit of the permitted successors and assigns of the Guarantor and the
Guaranteed Party. The Guaranteed Party (and any of the Guaranteed Party’s
permitted assignees) may not assign this Guaranty without obtaining the prior
written consent of the Guarantor (which consent shall not be unreasonably
withheld), and any attempt to make any such assignment without such consent will
be null and void. The Guarantor may not assign this Guaranty without the prior
written consent of the Guaranteed Party.

 

14.          Construction. Ambiguities or uncertainties in the wording of this
Guaranty will not be construed for or against any party, but will be construed
in the manner that most accurately reflects the parties’ intent as of the date
hereof.

 

15.          Captions. The captions of the various sections of this Guaranty
have been inserted for convenience of reference only and do not modify, explain,
enlarge or restrict any of the provisions of this Guaranty.

 

[Signature page follows]

 

76

 

 

MINNESOTA GAS

 

 

IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the date
first written above.

WPS RESOURCES CORPORATION

 

By:                                                                    

Name:

Title:

 

 

 

77

 

 

MINNESOTA GAS

 

 

Exhibit 1.1-E

Form of Special Warranty Deed

 

[ADD ANY STATE RECORDING REQUIREMENTS]

 

Special Warranty Deed

 

THIS INDENTURE, made on the          day of                             , 20  ,
by and between AQUILA, INC., a Delaware corporation, Grantor, and WPS Minnesota
Utilities, Inc., a Delaware corporation, Grantee, with a mailing address of 700
North Adams Street, P.O. Box 19001, Green Bay, WI 54307-9001.

 

WHEREAS, Grantor and Grantee have signed that certain “Asset Purchase Agreement”
dated as of September 21, 2005 (the “Agreement”), which Agreement provides for
the conveyance of certain assets to Grantee, including, without limitation, the
real estate lying, being, and situate in the County of ____________ and State of
__________ legally described on Exhibit A attached hereto (the “Property”).

 

WITNESSETH: THAT GRANTOR, in consideration of the sum of Ten and 00/100 Dollars
($10.00), and other valuable consideration, to it in hand paid by Grantee, the
receipt of which is hereby acknowledged, does by these presents, sell and convey
unto Grantee and its successors and assigns, the Property;

 

 

SUBJECT TO all Permitted Encumbrances, as defined in the Agreement.

 

TO HAVE AND TO HOLD, the Property aforesaid, with all and singular the rights,
privileges, appurtenances, and immunities thereto belonging or in anywise
appertaining, unto Grantee and unto its successors and assigns forever, Grantor
hereby covenanting that the Property is free and clear from any encumbrance done
by it, except as hereinabove stated; and that Grantor will warrant and defend
the title of the Property unto Grantee and unto its successors and assigns
forever, against the lawful claims and demands of all persons whomsoever,
lawfully claiming the same by, through, or under the party of the Grantor,
except as hereinafter stated; PROVIDED, HOWEVER, notwithstanding the foregoing,
Grantee shall not be entitled to recover any remedies otherwise available to
Grantee for any and all breaches of the foregoing deed warranties unless such
remedies are available to Grantee under the Agreement (and then only to the
extent and subject to all limitations provided in the Agreement).

 

 

78

 

 

MINNESOTA GAS

 

 

                IN WITNESS WHEREOF, Grantor has caused this Indenture to be
executed by its duly authorized officer, the day and the year first above
written.

 

 

AQUILA, INC., a Delaware corporation

 

By:                                                                    

 

Name:

 

Title:

 

 

 

[INSERT STATE NOTARY ACKNOWLEDGMENT]

 

 

79

 

 

MINNESOTA GAS

 

 

EXHIBIT A

Legal Description

 

 

80

 

 

MINNESOTA GAS

 

 

Exhibit 1.1-F

Form of Transitional Services Agreement

 

Transitional Services Agreement (“Services Agreement”) made as of _____________
__, 200___ (the “Execution Date”) by and between Aquila, Inc., a Delaware
corporation (“Aquila”), and WPS Minnesota Utilities, Inc., a Delaware
corporation (“Buyer”). Aquila and Buyer are referred to collectively as the
“Parties” and each individually as a “Party.”

WHEREAS, Aquila is selling certain assets and assigning certain liabilities to
Buyer pursuant to that certain Asset Purchase Agreement dated as of September
21, 2005 between Aquila and Buyer (the “Purchase Agreement”);

WHEREAS, in connection with the transactions contemplated by the Purchase
Agreement, Buyer desires that Aquila provide certain transitional services to
Buyer in respect of the Business;

WHEREAS, Aquila has agreed to provide certain transitional services to Buyer in
accordance with the terms and conditions of this Services Agreement; and

WHEREAS, capitalized terms used but not defined herein have the meanings
ascribed to them in the Purchase Agreement;

NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:

ARTICLE I

SERVICES

 

1.1          The Services. Aquila will provide Buyer the transitional services
set forth on Schedule 1.1 (the “Services”).

 

1.2          Service Parameters. Aquila will provide the Services only to the
extent that the Services were provided by Aquila for the Business prior to the
date hereof, and only for purposes of supporting the conduct of the Business
substantially in the manner it was conducted prior to the date hereof.

 

1.3          Performance Exceptions. Aquila is not required to provide any
Service to the extent the provision thereof (i) becomes impracticable, in any
material respect, as a result of a cause or causes outside of Aquila’s
reasonable control (including any labor dispute or labor or materials shortage
or interruption), or (ii) would require Aquila to violate any Law, Order, or
other binding commitment or obligation of Aquila to any Governmental Entity or
other third party.

 

1.4          Cooperation; Information and Access. The Parties will cooperate in
good faith in all matters relating to the provision and receipt of the Services.
Without limiting the generality

 

81

 

 

MINNESOTA GAS

 

 

of the foregoing, Buyer will provide Aquila, in a timely manner, all information
and access to facilities required or reasonably requested by Aquila in
connection with providing the Services.

 

1.5          Additional Resources. In providing the Services, Aquila is not
obligated to (i) hire any additional employees, (ii) maintain the employment of
any specific employee, or (iii) purchase, lease, or license any additional
equipment or materials.

 

ARTICLE II

TERM AND TERMINATION

 

2.1        Term. Except as otherwise provided on Schedule 1.1, the Services will
commence on the date hereof and terminate no later than _______________________.

 

2.2        Termination. This Services Agreement or Aquila’s obligation to
provide all or any of the Services may be terminated by the mutual written
consent of the Parties at any time. In addition, except as otherwise provided on
Schedule 1.1, Buyer may terminate this Services Agreement, or Aquila’s
obligation to provide any particular Service hereunder, at any time by providing
not less than 30 days prior written notice to Aquila. If any such termination is
with respect to less than all of the Services, then Aquila will continue to be
obligated to provide the remaining Services in accordance with this Services
Agreement.

 

2.3        Effect of Termination. Upon the termination of this Services
Agreement or Aquila’s obligation to provide all or any of the Services, the
Parties will have no further obligations hereunder with respect to the
terminated Service or Services; provided, however, that notwithstanding such
termination (i) Buyer will remain liable to Aquila for all amounts payable in
respect of the terminated Services provided prior to the effective date of the
termination, and (ii) the provisions of Articles II, IV, V, and VII of this
Services Agreement will survive any such termination indefinitely.

 

ARTICLE III

COMPENSATION

3.1          Fee for Services. Buyer will compensate Aquila for the Services in
accordance with Schedule 1.1 and this Article III.

 

3.2          Payment Terms. Aquila will bill Buyer on a monthly basis for all
Services provided hereunder. Such bills will be accompanied by documentation
reasonably supporting the amounts shown as payable thereunder, and must be paid
by Buyer within 30 days after receipt. Late payments will bear interest at the
Prime Rate plus 5%.

 

3.3          Sales and Use Taxes. For state and local sales and use tax
purposes, Aquila and Buyer will cooperate in good faith to segregate amounts
payable under this Services Agreement into the following categories: (i) taxable
Services; (ii) non-taxable Services; and (iii) payments made by Aquila merely as
a purchasing agent for Buyer in procuring goods or services. Aquila will collect
from Buyer all state and local sales and use taxes in respect of the Services
and will timely remit such taxes to the appropriate state and local tax
authorities. Buyer will pay such

 

82

 

 

MINNESOTA GAS

 

 

taxes to Aquila monthly, or as otherwise reasonably required by Aquila. Within
20 days following the receipt by Aquila of notice thereof, Aquila will notify
Buyer of the commencement of any sales or use tax audit by a taxing authority
which involves any Services provided hereunder or any payments made by Aquila as
purchasing agent pursuant hereto. Thereafter, Buyer may, at its own expense,
participate in the defense of that audit to the extent related to any such
Services or payments. Buyer will be responsible for any additional taxes imposed
in respect of the Services, and all related interest, as a result of any such
sales or use tax audit.

 

ARTICLE IV

PERFORMANCE STANDARDS; DISCLAIMER; LIMITATION OF LIABILITY

4.1          Performance Standards. Aquila will provide the Services in
accordance with its policies, procedures, and practices in effect immediately
prior to the date hereof and, in providing the Services, will exercise the same
degree of care and skill as it exercises in providing similar functions for its
own operations.

 

4.2          DISCLAIMER OF WARRANTIES. EXCEPT AS OTHERWISE SET FORTH HEREIN,
AQUILA MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY,
INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE SERVICES OR OTHER
DELIVERABLES PROVIDED BY IT HEREUNDER.

 

4.3          Indemnification. Buyer agrees to indemnify and hold harmless Aquila
and its directors, officers, employees, and agents from and against any and all
Losses arising out of, or resulting from, the provision of the Services by
Aquila hereunder, other than Losses arising or resulting from Aquila’s gross
negligence or willful misconduct.

 

4.4          Limitation of Liability. In no event will Aquila be liable to Buyer
for any lost profits, loss of data, loss of use, business interruption, or other
special, incidental, indirect, punitive, or consequential damages, however
caused, under any theory of liability, arising from Aquila’s performance of, or
relating to, the Services or this Services Agreement.

 

ARTICLE V

RELATIONSHIP BETWEEN THE PARTIES

 

The relationship of Aquila to Buyer under this Services Agreement is that of an
independent contractor, and Aquila will not be deemed an employee, partner,
joint venturer, or agent of Buyer in connection with the provision of the
Services by Aquila. Aquila will be solely responsible for the payment of any
employment-related costs, taxes, or benefits in respect of the provision of the
Services.

 

83

 

 

MINNESOTA GAS

 

 

ARTICLE VI

SUBCONTRACTORS

 

Subject to Buyer’s prior written approval, which shall not be unreasonably
withheld, Aquila may engage one or more subcontractors to provide all or any
portion of the Services, provided that Aquila remains directly responsible for
its obligations hereunder.

ARTICLE VII

MISCELLANEOUS

7.1          Confidentiality. For a period of three years after the date hereof,
each Party will, and will cause its Affiliates and Buyer’s Representatives or
Seller’s Representatives, as applicable, to, hold in strict confidence and not
use or disclose to any other Person any Confidential Information. “Confidential
Information” means all information in any form heretofore or hereafter obtained
from either Party in connection with this Agreement, other than information
which is in the public domain through no violation of this Agreement, the
Purchase Agreement, or the Confidentiality Agreement by either Party, its
Affiliates, Buyer’s Representatives, or Seller’s Representatives.
Notwithstanding the foregoing, each Party may disclose Confidential Information
to the extent that such information is required to be disclosed by such Party by
Law or in connection with any proceeding by or before a Governmental Entity,
including any disclosure, financial or otherwise, required to comply with any
SEC rules. In the event that a Party believes any such disclosure is required,
such Party will give the other Party notice thereof as promptly as possible and
will cooperate with the other Party in seeking any protective orders or other
relief as such Party may determine to be necessary or desirable. In no event
will a Party make or permit to be made any disclosure of Confidential
Information other than to the extent such Party’s legal counsel has advised in
writing it is required by Law, and such Party will use its best efforts to
assure that any Confidential Information so disclosed is protected from further
disclosure to the maximum extent permitted by Law.

 

7.2          Amendment and Modification. This Services Agreement may be amended,
modified, or supplemented only by written agreement of the Parties.

 

7.3          Waiver of Compliance; Consents. Except as otherwise provided in
this Services Agreement, any failure of either Party to comply with any
obligation, covenant, agreement, or condition herein may be waived by the Party
entitled to the benefits thereof only by a written instrument signed by the
Party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement, or condition will not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.

 

7.4          Notices. All notices and other communications hereunder shall be
made in accordance with, and in the manner provided by, the provisions for
notices and other communications in the Purchase Agreement.

 

7.5          Assignment. This Services Agreement is binding upon and inures to
the benefit of the Parties and their respective successors and permitted
assigns, but neither this Services Agreement nor any of the rights, interests,
or obligations hereunder may be assigned by either

 

84

 

 

MINNESOTA GAS

 

 

Party without the prior written consent of the other Party, except that Aquila
may (i) engage one or more subcontractors to provide all or any portion of the
Services in accordance with Article VI above or (ii) assign this Agreement,
without the consent of Buyer, to any Person that acquires, by purchase, merger,
reorganization, or otherwise, all or substantially all of Aquila’s assets. Other
than as provided in the preceding sentence, this Services Agreement does not
confer upon any Person other than the Parties any rights or remedies hereunder.

 

7.6          Governing Law. This Services Agreement is governed by and construed
in accordance with the laws of the State of Minnesota (regardless of the laws
that might otherwise govern under applicable principles of conflicts of law) as
to all matters, including but not limited to matters of validity, construction,
effect, performance, and remedies.

 

7.7          Severability. Any term or provision of this Services Agreement that
is invalid or unenforceable in any situation in any jurisdiction will not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

 

7.8          Entire Agreement. This Services Agreement will be a valid and
binding agreement of the Parties only if and when it is fully executed and
delivered by the Parties, and until such execution and delivery no legal
obligation will be created by virtue hereof. This Services Agreement, together
with the Schedules hereto (which are incorporated herein by this reference), (i)
embodies the entire agreement and understanding of the Parties hereto in respect
of provision of transitional services by Aquila to Buyer in connection with the
transactions contemplated by the Purchase Agreement, and (ii) supersedes all
prior agreements and understandings between the Parties with respect to such
transitional services.

 

7.9          Delivery. This Services Agreement may be executed in multiple
counterparts (each of which will be deemed an original, but all of which
together will constitute one and the same instrument), and may be delivered by
facsimile transmission, with originals to follow by overnight courier or
certified mail (return receipt requested).

[Signature Page Follows]

 

85

 

 

MINNESOTA GAS

 

 

IN WITNESS WHEREOF, the Parties have caused this Services Agreement to be signed
by their respective duly authorized officers as of the date first above written.

 

Aquila, Inc.

 

 

By: _______________________________

 

Name:

                                                               

 

Title:

                                                               

 

 

 

WPS Minnesota Utilities, Inc.

 

 

By: _______________________________

 

Name:

                                                               

 

Title:

                                                               

 

 

86

 

 

MINNESOTA GAS

 

 

Schedule 1.1

The Services (and Terms); Fee for Services

 

The Services, together with the termination date for each (if different than the
termination date set forth in Section 2.1 of the Services Agreement), are set
forth below:

 

 

•

 

 

•

 

 

•

 

 

 

•

 

 

 

•

 

 

The fee to be paid by Buyer to Aquila for the Services is as follows:

 

The Parties will mutually agree to the fee for each of the Services; but absent
any such agreement, the fee will be Seller’s reasonable cost plus 5%.

 

 

87

 

 

MINNESOTA GAS

 

 

Exhibit 3.1

Determination of Purchase Price

 

A.           The following principles (the “Accounting Principles”) will govern
certain accounting matters provided for herein:

 

1.            Unless otherwise indicated, all amounts will be determined in
accordance with GAAP, applicable FERC Accounting Rules and applicable PUC
accounting rules.

 

2.            The amount of any item reflected in Seller’s financial statements
or in the attached Exhibit 3.1.A, Exhibit 3.1.B, or Exhibit 3.1.C as of any
specified time, including in any FERC Account, as determined in accordance with
GAAP, the FERC Accounting Rules, and PUC accounting rules, is referred to as the
“Book Value” of such item as of such specified time.

 

3.            “GAAP” means United States generally accepted accounting
principles, applied on a consistent basis.

 

4.            “FERC Accounting Rules” means the requirements of FERC with
respect to and in accordance with the Uniform System of Accounts established by
FERC.

 

5.            All determinations and calculations will be made and performed in
a manner to (a) avoid double counting of any item, to the extent that any such
item is otherwise accounted for in such determination or calculation, and (b)
give effect to the change in accounting policies described in note 1 to Exhibit
3.1.C. For purposes of computing the Adjustment Amount, any changes in
applicable accounting rules, including the FERC Accounting Rules, following the
date of this Agreement (other than the changes described in note 1 to Exhibit
3.1.C) will not be given effect for purposes of computing the Adjustment Amount
to the extent that such changes would have the effect of changing any of the
items included in Net Plant or the FERC Accounts in a manner that would cause
the Adjustment Amount, if computed taking such changes into account, to be
greater or lesser than the Adjustment Amount, as computed without taking such
changes into account.

 

6.            Certain account balances and other values will be determined as
set forth below:

 

“Base Net Plant Amount” equals the Net Plant as of June 30, 2005, which the
Parties stipulate is $144,345,000.

 

“Extraordinary Expenditures” means any expenditures by Seller during the period
from the date hereof through the Effective Time incurred for the purpose of
repair, replacement, or addition to assets, other than expenditures reflected as
Net Plant or in any FERC Account, as a result of (i) damage resulting from
weather or other extraordinary or catastrophic occurrence, except to the extent
attributable to Seller’s gross negligence or willful misconduct; or (ii) the
imposition of any requirement by a Governmental Entity,

 

88

 

 

MINNESOTA GAS

 

 

except to the extent that but for Seller’s gross negligence or willful
misconduct, or Seller’s breach or violation of any Permit, Environmental Permit,
Law, or Order, such requirement would not have been imposed; provided, however,
that any expenditure (which, with respect to any matter referred to in clauses
(i) or (ii) of this definition, will be deemed to include all costs, expenses,
and payments incurred by Seller in respect of such matter (e.g., all costs
incurred due to a catastrophic storm), net of all insurance proceeds and other
amounts recovered from third parties) of the type described in clauses (i) and
(ii) of this definition will be deemed an Extraordinary Expenditure only if such
expenditure exceeds five percent of the Extraordinary Expenditures Reference
Amount, in which case the full amount of such expenditure (from dollar one) will
be deemed an Extraordinary Expenditure.

 

“Extraordinary Expenditures Adjustment” means all Extraordinary Expenditures,
plus interest on each such expenditure at the Prime Rate from the date of the
expenditure until the Closing Date.

 

“Extraordinary Expenditures Reference Amount” means the earnings before interest
and Income Taxes attributed to the Business after deducting all corporate-level
charges, determined in a manner consistent with Seller’s normal accounting
practices, for the annual period ended December 31, 2004, which Extraordinary
Expenditures Reference Amount is $9,524,000.

 

“FERC Accounts” means the accounts listed on lines 12-32 and 39-47 of Exhibit
3.1.C maintained by Seller with respect to the Business in accordance with the
FERC Accounting Rules.

 

“Lease Buy-Out Amount” is the total amount paid or to be paid by Seller pursuant
to Section 7.4(d) of the Agreement in connection with the purchase of leased
assets to be included in the Purchased Assets. For purposes of calculating the
Purchase Price and the Adjustment Amount, the Book Value of assets purchased
pursuant to Section 7.4(d) will be excluded from Net Plant and the FERC Accounts
(even if the assets purchased would normally be reflected as Net Plant or in one
or more FERC Accounts following such purchase).

 

“Net Insurance Settlement Amount” means an amount equal to the positive
difference, if any, between (a) the proceeds of any settlement to which Seller
has agreed with any insurance carrier through which the insurance carrier has
reduced or extinguished its potential liability or coverage for environmental
Claims related to the Business, including manufactured gas plant site
remediation, and (b) the amount Seller has actually spent to address such
environmental Claims related to the Natural Gas Distribution Business through
the Closing Date, in each case since the effective date of the rates authorized
in Seller’s last rate case.

 

“Net Plant” means the Book Value of net plant of the Business, which is
comprised of the amounts listed on lines 3-6 of Exhibit 3.1.C.

 

 

89

 

 

MINNESOTA GAS

 

 

“Net Plant Adjustment” may be a positive or negative number, and means Net Plant
at Closing minus the Base Net Plant Amount.

 

“Net Plant at Closing” will be the Net Plant, determined as of the Effective
Time.

 

 

B.

Determination of the Adjustment Amount

 

The Adjustment Amount will equal the sum of the following amounts, in each case
determined as of the Effective Time: (i) the Net Plant Adjustment; (ii) the net
total Book Value of the FERC Accounts; (iii) the Lease Buy-Out Amount; and (iv)
the Extraordinary Expenditures Adjustment; minus the Net Insurance Settlement
Amount.

 

 

C.

Payments Unrelated to the Adjustment Amount.

 

The Adjustment Amount will not include or otherwise take into account any
amounts attributable to the adjustments and payments made with respect to (i)
items and amounts prorated pursuant to Section 3.4, (ii) collateral or other
security, as contemplated by Section 7.4(f), (iii) any and all payments made or
to be made under any provision of Section 7.9, (iv) any and all proceeds or
payments received or to be received by a Party under any provision of Section
7.10, (v) any payment under Section 7.4(c)(ii), or (vi) indemnification, as
contemplated by Article IX.

 

 

D.

Example of Computation of Purchase Price.

 

An example of the computation of the Purchase Price (using financial information
for the Business as of June 30, 2005) is depicted on Exhibit 3.1.A, Exhibit
3.1.B, and Exhibit 3.1.C. Specifically, (i) Exhibit 3.1.A provides a high-level
overview of the computation of the Closing Payment Amount, (ii) Exhibit 3.1.B
provides an example (in summary form) of the Post-Closing Adjustment Statement,
and (iii) Exhibit 3.1.C provides a sample determination of the Purchase Price
(including the Adjustment Amount) in detailed form.

 

 

90

 

 

MINNESOTA GAS

 

 

Exhibit 3.1.A

Example of Minnesota Gas Closing Payment Amount

 

See attached.

 

91

 

 

MINNESOTA GAS

 

 

Exhibit 3.1.B

Example of Minnesota Gas Post-Closing Adjustment Statement

 

See attached.

 

92

 

 

MINNESOTA GAS

 

 

Exhibit 3.1.C

Sample Calculation of Minnesota Gas Purchase Price

 

See attached.

 

 

93

 

 

MINNESOTA GAS

 

 

Exhibit 7.9(d)(ii)(C)

Pension Matters

 

The following terms will govern the Parties’ obligations under Section
7.9(d)(ii)(C) of the Agreement (and any reference to Section 7.9 will be deemed
to include a reference to this Exhibit):

 

A.

Post-Closing Spin-Off to Buyer Plan

 

(1)

Transfer of Liabilities.

(a)          As of the Effective Time, Buyer will cause a Buyer Pension Plan to
accept the liability for benefits under the Seller Pension Plan that would have
been paid or payable (but for the transfer of assets and liabilities pursuant to
this Paragraph A) to or with respect to the Transferred Employees and Other Plan
Participants (as defined below), and Buyer will become with respect to each
Transferred Employee and Other Plan Participant responsible for all benefits due
under the Seller Pension Plan. Buyer is assuming only the obligation to provide
benefits in the amount determined in accordance with the terms of the Seller
Pension Plan, and Buyer is not assuming any other liability or obligation that
Seller or an ERISA Affiliate of Seller might have or incur with respect to the
Seller Pension Plan, including liability (if any) for breaches of fiduciary duty
or other penalty or excise Tax amounts. Seller will not take any action to fully
vest the Business Employees in their accrued benefits under the Seller Pension
Plan. Buyer will not amend the Buyer Pension Plan, or permit the Buyer Pension
Plan to be amended, to eliminate any benefit accrued as of the Effective Time,
whether or not vested, with respect to which liabilities are transferred
pursuant to this Paragraph A; provided that Buyer may amend the Buyer Pension
Plan or permit the Buyer Pension Plan to be amended to eliminate an optional
form of distribution to the extent that such action is consistent with
regulations under section 411(d)(6) of the Code. Notwithstanding any other
provision of this Agreement, the Seller Pension Plan will continue to make all
benefit payments to Transferred Employees and Other Plan Participants due under
the Seller Pension Plan until both the Initial Transfer Amount and the True-Up
Amount have been transferred to the Buyer Pension Plan. “Other Plan
Participants” mean any individuals (x) who have an accrued benefit under the
Seller Pension Plan but who are not actively employed by Seller on the Closing
Date, or whose employment is terminated by Seller on the Closing Date, and (y)
whose employment was principally associated with the Business. The Other Plan
Participants are set forth on Schedule 7.9(d)(ii)-A, as the same is amended by
Seller on the Closing Date.

(b)        As soon as practicable after the Closing Date, Seller will deliver to
Buyer a list reflecting each Transferred Employee’s and each Other Plan
Participant’s service and compensation under the Seller Pension Plan, each
Transferred Employee’s and Other Plan Participant’s accrued benefit thereunder
as of the Closing Date, and a copy of each pending or final domestic relations
order affecting the benefit of any Transferred Employee or Other Plan
Participant.

(2)

Transfer of Assets.

 

 

94

 

 

MINNESOTA GAS

 

 

(a)          Not later than 10 days after the Closing, Seller will direct its
actuary to determine the amount of assets allocable to the benefits with respect
to the Transferred Employees and Other Plan Participants in the Seller Pension
Plan based on section 4044 of ERISA and the Pension Benefit Guaranty Corporation
regulations promulgated thereunder, and in compliance with section 414(l) of the
Code using the safe harbor assumptions set forth therein (the “Section 4044
Amount”). Buyer’s actuary will review the determination of the Section 4044
Amount. In the event of any disagreement, Seller and Buyer will appoint a third
actuary from a nationally recognized actuarial firm to resolve their differences
(the costs of the third actuary will be shared equally by Seller and Buyer). The
third actuary’s determination of any dispute will be final. In reaching such
resolution, the third actuary will consider only the issues of disagreement
between the first two actuaries, it being understood that the third actuary will
not be retained to conduct its own independent review but rather will be
retained to resolve specific differences between Buyer’s actuary and Seller’s
actuary.

(b)          In accordance with the procedures set forth in this Paragraph
A(2)(b), Seller will cause cash (or other assets as Seller and Buyer mutually
agree) equal to the Section 4044 Amount to be transferred to the trust
established by Buyer as part of the Buyer Pension Plan (the “Buyer Pension Plan
Trust”). On the Initial Transfer Date, Seller will cause the trust which is a
part of the Seller Pension Plan (the “Seller Pension Plan Trust”) to make a
transfer of cash (or other assets as Seller and Buyer mutually agree) equal to
the Initial Transfer Amount to the Buyer Pension Plan Trust. The “Initial
Transfer Date” is the date that is five Business Days after the requirements of
Paragraphs A(2)(d) and A(2)(e) have been met. The “Initial Transfer Amount”
means 75% of Seller’s good faith estimate of the Section 4044 Amount. As soon as
practicable after the Section 4044 Amount is determined in accordance with the
requirements of Paragraph A(2)(a) (the “True-Up Date”), and in no event more
than 60 days after such final determination, the True-Up Amount will be
transferred as provided below. If the Section 4044 Amount is greater than the
Reduction Amount, then Seller will cause a transfer in cash (or other assets as
Seller and Buyer mutually agree) equal to the True-Up Amount to be made from the
Seller Pension Plan Trust to the Buyer Pension Plan Trust. If the Reduction
Amount is greater than the Section 4044 Amount, then Buyer will cause a transfer
in cash (or other assets as Seller and Buyer mutually agree) equal to the
True-Up Amount to be made from the Buyer Pension Plan Trust to the Seller
Pension Plan Trust. The “True-Up Amount,” if any, means the difference between
the Section 4044 Amount, adjusted for interest pursuant to Paragraph A(2)(c),
and the Reduction Amount, adjusted for interest pursuant to Paragraph A(2)(c).
The “Reduction Amount” equals the sum of (x) the Initial Transfer Amount, plus
(y) benefit payments made to any Transferred Employees and Other Plan
Participants by the Seller Pension Plan after the Effective Time.

(c)          For purposes of Paragraph A(2)(b), (x) the Section 4044 Amount will
be increased by interest from the Closing Date through the True-Up Date, and (y)
interest on each payment that is included in the Reduction Amount will be
computed, and added to the Reduction Amount, from the date of such payment
through the True-Up Date. All interest will be compounded daily, and computed at
the Prime Rate as of the Closing Date.

(d)          In connection with the transfer of assets and liabilities pursuant
to this Section, Seller will provide to Buyer, and Buyer will provide to Seller,
evidence reasonably satisfactory to the other Party that the Party’s Pension
Plan is or continues to be qualified under section

 

95

 

 

MINNESOTA GAS

 

 

401(a) of the Code and is in compliance with the funding requirements of section
302 of ERISA and section 412 of the Code.

(e)          In connection with the transfer of assets and liabilities pursuant
to Paragraph A, Seller and Buyer will cooperate with each other in making all
appropriate filings required by the Code or ERISA, and the transfer of assets
and liabilities pursuant to this Section will not take place until after the
expiration of the 30-day period following the filing of any required notices
with the Internal Revenue Service pursuant to section 6058(b) of the Code.

(3)

Benefits.

Subject to Sections 7.9(a) and 7.9(d)(ii), the benefit provided by the Buyer
Pension Plan to each Transferred Employee who is not covered by a Collective
Bargaining Agreement and who becomes a participant in the Buyer Pension Plan
will be at least equal to (x) the benefits accrued by such Transferred Employee
under the Seller Pension Plan on the Closing Date, computed by taking into
account the service credited to such Transferred Employee with Seller and Buyer
(in the case of service with Buyer, such service will be taken into account only
for the purpose of vesting and early retirement subsidies), plus (y) such
Transferred Employee’s benefit determined under the terms of the Buyer Pension
Plan, as it may be amended from time to time, taking into account the
Transferred Employee’s service and compensation earned with Buyer, except that
service credited by and compensation with Seller will be taken into account for
purposes of eligibility, vesting, computation of compensation, level of
contributions, and eligibility for (but not the computation of) early retirement
subsidies or supplements. For the avoidance of doubt, Transferred Employees
shall not be eligible for the “Pension Transition Percentage Credit” payable
under the Buyer Pension Plan.

B.

Option to Transfer Assets to New Pension Plan.

(1)          Notwithstanding Paragraph A, at Seller’s option and in Seller’s
sole discretion, Seller may elect to transfer prior to Closing the assets and
liabilities for accrued benefits, whether or not vested, that would have been
paid or payable (but for this Paragraph B) to or with respect to the Business
Employees and Other Plan Participants to a new pension plan (“New Pension Plan”)
to be established by Seller. Seller will not take any action to fully vest the
Business Employees in their accrued benefits in the New Pension Plan. Buyer will
not amend the New Pension Plan, or permit the New Pension Plan to be amended, to
eliminate any benefit accrued as of the Effective Time, whether or not vested,
with respect to which liabilities are transferred pursuant to this Paragraph B.
The New Pension Plan will be a defined benefit pension plan qualified under
section 401(a) of the Code and will be identical to the Seller Pension Plan with
respect to the Transferred Employees and Other Plan Participants and provide a
future rate of benefit accrual equal to the future rate of benefit accrual
provided under the Seller Pension Plan.

(2)          In the event that Seller elects to spin off assets and liabilities
prior to Closing to a New Pension Plan, Seller will cause its actuary to
determine the amount of assets allocable to the accrued benefits with respect to
the Business Employees and Other Plan Participants in the Seller Pension Plan
based on section 4044 of ERISA, and in compliance with section 4141(l) of the
Code, using the safe harbor assumptions set forth therein (the “New Plan Section
4044 Amount”) as of the effective date of the transfer of assets and liabilities
to the New Pension Plan pursuant

 

96

 

 

MINNESOTA GAS

 

 

to Paragraph B(1) (the “Spin-Off Date”). Interest from the date of determination
of the Section 4044 Amount to the date of the transfer of assets to the New
Pension Plan will be compounded daily, and computed at the Prime Rate as of the
Spin-Off Date.

(3)          As soon as practicable after the final determination of the New
Plan Section 4044 Amount for the New Pension Plan is made, Seller will cause the
Seller Pension Plan to transfer cash or other assets equal to the New Plan
Section 4044 Amount, less any benefit payments made by the Seller Pension Plan
to Business Employees and Other Plan Participants from the Spin-Off Date to the
date of transfer of assets, to the New Pension Plan. From and after such date,
the New Pension Plan will be solely responsible for all benefits due to Business
Employees and Other Plan Participants under the Seller Pension Plan, whether
arising prior to, or after, the Closing Date.

(4)          Effective as of the Effective Time, Buyer will assume sponsorship
of the New Pension Plan. Seller will provide to Buyer evidence reasonably
satisfactory to Buyer that the New Pension Plan is qualified under section
401(a) of the Code and is in compliance with the funding requirements of section
302 of ERISA and section 412 of the Code.

(5)          In connection with the change in sponsorship of the New Pension
Plan, Seller and Buyer will cooperate with each other in making all appropriate
filings required by the Code or ERISA.            

(6)

Benefits.

Subject to Sections 7.9(a) and 7.9(d)(ii), the benefit provided by the Buyer
Pension Plan to each Transferred Employee who is not covered by a Collective
Bargaining Agreement and who becomes a participant in the Buyer Pension Plan
will be at least equal to (x) the benefits accrued by such Transferred Employee
under the New Pension Plan on the Closing Date, computed by taking into account
the service credited to such Transferred Employee with Seller and Buyer (in the
case of service with Buyer, such service will be taken into account only for the
purpose of vesting and early retirement subsidies), plus (y) such Transferred
Employee’s benefit determined under the terms of the Buyer Pension Plan, as it
may be amended from time to time, taking into account the Transferred Employee’s
service and compensation earned with Buyer, except that service credited by and
compensation with Seller will be taken into account for purposes of eligibility,
vesting, computation of compensation, level of contributions, and eligibility
for (but not the computation of) early retirement subsidies or supplements. For
the avoidance of doubt, Transferred Employees shall not be eligible for the
“Pension Transition Percentage Credit” payable under the Buyer Pension Plan.

 

 

97