EXHIBIT
2.0


EXECUTION COPY   Asset
Purchase Agreement
  by
and among
  Public
Service Company of New Mexico,
  Continental
Energy Systems LLC
  and
  New
Mexico Gas Company, Inc.
  Dated:
January 12, 2008
   
  TABLE OF
CONTENTS
  Article
I
  DEFINITIONS
  1.1
              Definitions
              11.2
              Other
      Definitional and Interpretive Matters
              141.3
              Joint
      Negotiation and Preparation of Agreement
              15
  Article
II
  PURCHASE
AND SALE
  2.1
              The
      Sale
              152.2
              Excluded
      Assets
              182.3
              Assumed
      Obligations
              192.4
              Excluded
      Liabilities
              20
  Article
III
  PURCHASE
PRICE
  3.1
              Purchase
      Price
              223.2
              Determination
      of Purchase Price.
              223.3
              Allocation
      of Purchase Price
              233.4
              Proration.
              24
  Article
IV
  THE
CLOSING
  4.1
              Time
      and Place of Closing
              254.2
              Payment
      of Closing Payment Amount
              264.3
              Deliveries
      by Seller
              264.4
              Deliveries
      by Buyer
              27
  Article
V
  REPRESENTATIONS
AND WARRANTIES OF SELLER
  5.1
              Organization;
      Qualification
              285.2
              Authority
      Relative to this Agreement and the Ancillary Agreements
              285.3
              Consents
      and Approvals; No Violation
              295.4
              Financial
      Information
              295.5
              Title
              305.6
              Environmental
              315.7
              Labor
      Matters
              325.8
              ERISA;
      Benefit Plans.
              32
   i
   5.9
              Certain
      Contracts and Arrangements.
              335.10
              Legal
      Proceedings and Orders
              365.11
              Permits
              365.12
              Compliance
      with Laws
              365.13
              Insurance
              365.14
              Taxes
              375.15
              Fees
      and Commissions
              375.16
              Intellectual
      Property
              375.17
              Inspections
              375.18
              Sufficiency
      of Purchased Assets
              385.19
              Absence
      of Certain Changes or Events; Major Customers
              385.20
              Hedging
              385.21
              Regulatory
      Compliance
              39
  Article
VI
  REPRESENTATIONS
AND WARRANTIES OF BUYER
  6.1
              Organization
              396.2
              Authority
      Relative to this Agreement and the Ancillary Agreements
              396.3
              Consents
      and Approvals; No Violation
              406.4
              Buyer’s
      Knowledge
              406.5
              Fees
      and Commissions
              406.6
              Financial
      Capability
              416.7
              Inspections
              41
  Article
VII
  COVENANTS
OF THE PARTIES
  7.1
              Conduct
      of Business
              427.2
              Access
      to Information.
              447.3
              Expenses
              487.4
              Further
      Assurances; Procedures with Respect to Certain Agreements and other
      Assets
              487.5
              Public
      Statements
              527.6
              Consents
      and Approvals
              527.7
              Transfer
      Taxes
              547.8
              Supplements
      to Schedules
              547.9
              Employees
      and Employee Benefits
              547.10
              Eminent
      Domain; Casualty Loss
              607.11
              Transitional
      Use of Signage and Other Materials Incorporating Seller’s Name or other
      Logos
              607.12
              Litigation
      and Regulatory Support
              617.13
              Notification
      of Customers
              617.14
              Title
      Insurance, Surveys, Estoppel Certificates, and Non-Disturbance
      Agreements
              617.15
              Central
      or Shared Functions for Transition Period
              62
   ii
  7.16
              Post-Closing
      Insurance
              627.17
              Financing.
              627.18
              Cooperation
      Regarding Tax Matters
              637.19
              Master
      Lease Agreement
              647.20
              Annual
      Hedge Strategy
              64
  Article
VIII
  CONDITIONS
TO CLOSING
  8.1
              Conditions
      to Each Party’s Obligations to Effect the Closing
              648.2
              Conditions
      to Obligations of Buyer
              658.3
              Conditions
      to Obligations of Seller
              66
  Article
IX
  INDEMNIFICATION
  9.1
              Survival
      of Representations and Warranties
              669.2
              Indemnification.
              679.3
              Indemnification
      Procedures.
              679.4
              Limitations
      on Indemnification.
              699.5
              Applicability
      of Article IX
              719.6
              Tax
      Treatment of Indemnity Payments
              719.7
              No
      Consequential Damages
              719.8
              Exclusive
      Remedy
              72
  Article
X
  TERMINATION
AND OTHER REMEDIES
  10.1
              Termination.
              7210.2
              Procedure
      and Effect of Termination
              7410.3
              Remedies
      upon Termination
              74
  Article
XI
  PARENT
GUARANTEE
  11.1
              Guarantee
              7611.2
              Nature
      of Guarantee
              7611.3
              Representations
      and Warranties of Parent
              7611.4
              Sole
      Obligation of Parent
              77
   iii
 Article
XII
  MISCELLANEOUS
PROVISIONS
  12.1
              Amendment
      and Modification
              7712.2
              Waiver
      of Compliance; Consents
              7712.3
              Notices
              7812.4
              Assignment
              7912.5
              Governing
      Law
              7912.6
              Severability
              8012.7
              Entire
      Agreement
              8012.8
              Bulk
      Sales or Transfer Laws
              8012.9
              Delivery
              8012.10
              Waiver
      of Jury Trial
              80
  iv
  EXHIBITS
AND SCHEDULES
 
 Exhibit
      1.1-A
              Form
      of Assignment and Assumption AgreementExhibit
      1.1-B
              Form
      of Assignment of EasementsExhibit
      1.1-C
              Form
      of Bill of SaleExhibit
      1.1-D
              Business
      EmployeesExhibit
      1.1-E
              Central
      or Shared FunctionsExhibit
      1.1-F
              Form
      of Special Warranty DeedExhibit
      1.1-G
              Transition
      Services AgreementExhibit
      1.1-H
              Capital
      Expenditure BudgetExhibit
      3.1
              Determination
      of Adjustment Amount
 
 Schedule
      1.1-A
              Business
      AgreementsSchedule
      1.1-B
              Buyer
      Required Regulatory ApprovalsSchedule
      1.1-C
              Permitted
      EncumbrancesSchedule
      1.1-D
              Seller
      Required Regulatory ApprovalsSchedule
      1.1-E
              Seller’s
      KnowledgeSchedule
      1.1-F
              TerritorySchedule
      2.1(a)
              Owned
      Real PropertySchedule
      2.1(b)
              Real
      Property LeasesSchedule
      2.1(m)
              SCADA
      Equipment and SoftwareSchedule 2.1(n)
              Business
      SoftwareSchedule
      2.1(p)
              FCC
      LicensesSchedule
      2.1(r)
              Regulatory
      AssetsSchedule
      2.2(k)
              Retained
      AgreementsSchedule
      2.2(o)
              Retained
      AssetsSchedule
      2.3(i)
              Regulatory
      LiabilitiesSchedule
      5.3
              Seller’s
      Consents and ApprovalsSchedule
      5.4(a)
              Financial
      InformationSchedule
      5.4(b)
              Undisclosed
      LiabilitiesSchedule
      5.5(a)
              Title
      OwnershipSchedule
      5.5(b)
              Title
      ComplianceSchedule
      5.6(a)-1
              Sufficiency
      of Environmental PermitsSchedule
      5.6(a)-2
              Environmental
      PermitsSchedule
      5.6(b)
              Environmental
      NoticesSchedule
      5.6(c)
              Environmental
      Claims or ReleasesSchedule
      5.7
              Labor
      MattersSchedule
      5.8(a)
              Benefit
      PlansSchedule
      5.9(a)
              Material
      Business AgreementsSchedule
      5.9(b)(i)
              Material
      Business Agreements -- Seller ObligationsSchedule
      5.9(b)(ii)
              Material
      Business Agreements -- Other Party ObligationsSchedule
      5.9(c)
              FranchisesSchedule
      5.9(d)
              Seller
      Security and GuaranteesSchedule
      5.10
              Legal
      Proceedings and OrdersSchedule
      5.11
              PermitsSchedule
      5.13
              InsuranceSchedule
      5.14
              Taxes   v
  Schedule
      5.19(a)
              Certain
      ChangesSchedule
      5.20
              Annual
      Hedge StrategySchedule
      5.21
              Business
      Regulatory Proceedings and FilingsSchedule
      6.3
              Buyer’s
      Consents and ApprovalsSchedule
      7.1
              Conduct
      of BusinessSchedule
      7.1(b)
              Rate
      FilingsSchedule
      7.2(h)
              Disclosed
      IndebtednessSchedule
      7.4(e)
              Shared
      AgreementsSchedule
      7.9(a)
              UnionsSchedule
      7.9(f)
              Seller’s
      VEBASchedule
      7.19
              Master
      Lease Agreement -- Sites and TermsSchedule
      11.3(c)
              Parent’s
      Consents and Approvals
  In
accordance with Item 601(b)(2) of Regulation S-K, PNM Resources agrees to
furnish supplementally a copy of any schedule to the Securities and Exchange
Commission upon request.
  vi
  ASSET
PURCHASE AGREEMENT
  Asset
Purchase Agreement (“Agreement”), made as
of January 12, 2008 by and among Public Service Company of New Mexico, a New
Mexico corporation (“Seller”), Continental
Energy Systems LLC, a Delaware limited liability company (“Parent”), and New
Mexico Gas Company, Inc., a Delaware corporation and a wholly owned subsidiary
of Parent (“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.
  NOW
THEREFORE, in consideration of the Parties’ and Parent’s respective covenants,
representations, warranties, and agreements hereinafter set forth, and intending
to be legally bound hereby, the Parties and Parent agree as
follows:
  ARTICLE
I
  DEFINITIONS
  1.1  Definitions.  (a)  As
used in this Agreement, the following terms have the meanings specified in this
Section1.1:
  “2006 Cost Allocation
Manuals” means the cost allocation manuals filed by Seller with the NMPRC
on (a) March 31, 2005, effective for the period between January 1, 2006 and
March 31, 2006, and (b) March 1, 2006, effective for the period between April 1,
2006 and December 31, 2006.
  “2007 Cost Allocation
Manuals” means the cost allocation manuals filed by Seller with the NMPRC
on (a) December 1, 2006, effective for the period between January 1, 2007 and
April 31, 2007, and (b) April 2, 2007, effective for the period between May 1,
2007 and December 31, 2007.
  “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, or a
Person’s property; and (ii) provides such Person with the legal basis to recover
damages or other relief.
  “Adjustment Amount”
may be a positive or negative number, and will be determined in accordance with
Exhibit3.1.
  “Affiliate” has the
meaning set forth in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934.
  “Alternate
Arrangements” means with respect to any Consent Asset, any arrangements
entered into pursuant to Section7.4(c)to provide
Buyer with the benefits and obligations of such Consent Asset from and after the
Effective Time.
  1
  “Ancillary Agreements”
means the Assignment and Assumption Agreement, Assignment of Easements, Bill of
Sale, Special Warranty Deed and Transition Services Agreement.
  “Annual Hedge
Strategy” means (i) with respect to the period from and including October
1, 2007 to and including April 30, 2008, the annual gas hedge strategy attached
hereto as Schedule5.20 and (ii) for
any period thereafter, Seller’s annual gas hedge strategy in effect at such time
as approved by Seller’s Hedge Committee and Risk Management Committee and
presented to the NMPRC.
  “Assignment and Assumption
Agreement” means the Assignment and Assumption Agreement to be executed,
acknowledged and delivered by Seller and Buyer at Closing, substantially in the
form of Exhibit1.1-A.
  “Assignment of
Easements” means the Assignment of Easements to be executed, acknowledged
and delivered by Seller and Buyer at Closing, substantially in the form of Exhibit1.1-B.
  “Bill
of Sale” means the bill of sale to be executed and delivered by Seller at
Closing, substantially in the form of Exhibit1.1-C.
  “Business” means the
natural gas utility business conducted by Seller serving customers in the
Territory including its natural gas transportation business.  The
“Business” does not include (a) Seller’s unregulated gas services business or
(b) the manufactured gas business conducted by Seller or any of its
predecessors.
  “Business Agreement”
means any Contract (other than the Easements, the Shared Easements, the
Franchises, the Real Property Leases, the Retained Agreements and the Shared
Agreements) to which Seller is a party or by which it is bound that
(i) relates exclusively to the Business, including those agreements listed
or described on Schedule1.1-A or Schedule5.9(a),
(ii) does not relate exclusively to the Business but is otherwise listed or
described on Schedule1.1-A or Schedule5.9(a), or
(iii) relates exclusively to the Business and is entered into, renewed,
extended, or otherwise amended after the date hereof in the ordinary course of
business.  Schedule1.1-A was prepared
solely for the convenience of the Parties, and notwithstanding any provision in
the Agreement to the contrary, Seller makes no representation or warranty that
Schedule1.1-A is a complete or
exhaustive list of the Business Agreements or other Contracts.
  “Business Day” means
any day other than Saturday, Sunday, any day which is a legal holiday or any day
on which banking institutions in Albuquerque, New Mexico or New York, New York
are authorized by Law to close.
  “Business Employees”
means the employees of Seller set forth on Exhibit1.1-D, together with all
other persons who are hired by Seller to replace any such
employees.
  “Buyer Designee” means
a direct wholly-owned subsidiary of Buyer named in the approvals by the NMPRC
and the FERC as an entity that may acquire the Purchased
Assets.
   2
  “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 Schedule1.1-B.
  “Capital Expenditure
Budget” means the budget for capital expenditures for the Business for
each of calendar year 2007 and calendar year 2008 attached as Exhibit1.1-H.
  “Central or Shared
Functions” means the business functions provided by Seller or its
Affiliates to the Business set forth on Exhibit1.1-E.
  “CERCLA” means the
Comprehensive Environmental Recovery, Compensation and Liability Act, as
amended.
  “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.
  “Code”
means the Internal Revenue Code of 1986, as amended.
  “Confidentiality
Agreement” means the Confidentiality Agreement, dated August 21,
2007 among PNM Resources, Inc., Cap Rock Holding Corporation and SEMCO Energy,
Inc.
  “Contract” means any
contract, lease, sublease, commitment, indenture, agreement, understanding,
instrument or other legally binding agreement, whether oral or
written.
  “Customer Gas Transportation
Contracts” means Contracts for the transportation of gas by Seller, as
part of the Business, on behalf of customers.
  “Designated Employees”
shall have the meaning set forth in Section 5(b) of the Transition Services
Agreement.
  “Disclosed
Indebtedness” of any Person shall mean without duplication: (a) all
obligations of such Person for the deferred purchase price of property or
services (other than (i) trade payables not overdue by more than 60 days
incurred in the ordinary course of such Person’s business, (ii) obligations
for the deferred purchase price of gas and (iii) obligations under deferred
compensation plans), (b) all obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (c) all capitalized lease obligations of such Person
(calculated in accordance with GAAP), (d) all guaranties, counterindemnities,
reimbursement or similar obligations of such Person in respect of Disclosed
Indebtedness of a primary obligor, (e) all obligations referred to in clauses
(a) through (d) above secured by (or for which the holder of such obligations
has an existing right, contingent or otherwise, to be secured by) any
Encumbrance on property (including accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such obligations and (f) all accrued interest, prepayment premiums, fees,
expenses or penalties related to any of the foregoing.
   3
  “Documents” means all
files, documents, books, reports, customer lists and information, operating data
and plans, technical documentation, user documentation, marketing documentation,
Transferred Employee Records, accounting and Tax documents and other similar
materials related exclusively 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, (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 or
claim of attorney work product 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 any
such information shall not be excluded from the definition of “Documents”
pursuant to this clause (iii) if Seller or one of its Affiliates actually
provided or provides such information to Buyer or one of its Affiliates, (iv)
any valuations or projections of or related to the Business, the Purchased
Assets, or the Assumed Obligations prepared by Seller or any of its Affiliates;
provided, that
any such valuations or projections shall not be excluded from the definition of
“Documents” pursuant to this clause (iv) if Seller or one of its Affiliates
actually provided or provides such valuations or projections to Buyer or one of
its Affiliates, (v) any information management systems of Seller not used
exclusively in the Business, or (vi) any web pages or similar media tools
for communication on Seller’s intranet service.
  “Electric Business”
means the electric utility business conducted by Seller in the State of New
Mexico.
  “Encumbrances” means
any and all mortgages, pledges, liens, claims, charges, security interests,
conditional and installment sale agreements, activity and use limitations,
leases and other occupancy agreements, options, easements, covenants,
encumbrances, obligations, limitations, title defects, deed restrictions, and
all other restrictions of any kind.
  “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.
   4
  “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) 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,
indemnification, cost recovery, compensation, injunctive relief, or property
damage or personal or bodily injury (including death) or threat of injury to
health, safety, cultural resources and historic properties, natural resources,
or the Environment pursuant to any Environmental Law.
  “Environmental Laws”
means all Laws and Orders 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. Section 9601 et seq.; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. Section 136 et seq.; the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq.; the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et
seq.; the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.;
the Oil Pollution Act, 33 U.S.C. Section 2701 et seq.; the Endangered Species
Act, 16 U.S.C. Section 1531 et seq.; the National Environmental Policy Act, 42
U.S.C. Section 4321, et seq.; the National Historic Preservation Act, 16 U.S.C.
Section 110 et seq., the Occupational Safety and Health Act, 29 U.S.C. Section
651 et seq.  (to the extent relating to human exposure to Hazardous
Materials); the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.;
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001 et
seq.; Atomic Energy Act, 42 U.S.C. Section 2014 et seq.; Nuclear Waste Policy
Act, 42 U.S.C. Section 10101 et seq.; and their state, tribal 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, approvals,
consents, waivers, or other authorizations of Governmental Entities issued under
or with respect to applicable Environmental Laws and applicable to the Purchased
Assets or the Business.
  “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.
  “Excluded
Indebtedness” of any Person shall mean without duplication: (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person evidenced by notes, bonds, debentures or similar instruments,
(c) other than as provided under Section7.4(f), all
obligations, contingent or otherwise, of such Person as an account party to
reimburse any bank or other Person under acceptance, letter of credit or similar
facilities, (d) all obligations of such Person in respect of interest rate,
commodity
   5
  or
currency hedge agreements but excluding all Financial Hedges, (e) all
obligations of such Person to purchase, redeem, retire or otherwise acquire for
value any capital stock of such Person or any warrants, rights or options to
acquire such capital stock, (f) negative cash/overdraft, as calculated in
accordance with GAAP, (g) all guaranties, counterindemnities, reimbursement or
similar obligations of such Person in respect of Excluded Indebtedness of a
primary obligor, (h) all obligations referred to in clauses (a) through (g)
above secured by (or for which the holder of such obligations has an existing
right, contingent or otherwise, to be secured by) any Encumbrance on property
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such obligations and
(i) all accrued interest, prepayment premiums, fees, expenses or penalties
related to any of the foregoing.  The Excluded Indebtedness of any
Person shall include the Excluded Indebtedness of any other entity (including
any partnership in which such Person is a general partner) to the extent such
Person is liable therefor as a result of such Person’s ownership interest in or
other relationship with such entity, except to the extent the terms of such
Excluded Indebtedness expressly provide that such Person is not liable
therefore.
  “FCC”
means the Federal Communications Commission.
  “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.
  “Financial Hedge”
means a Contract consisting of a futures contract, options contract or other
derivatives transaction, in any case relating to a physical commodity (but not
including contracts for physical delivery of such commodity), whether entered
into in connection with the Annual Hedge Strategy, off-system sales or
otherwise.
  “Financial Hedge
Orders” means (a) the Order Approving Levelized PGAC, NMPRC Case No.
2777, dated November 3, 1997 and (b) the Final Order in the Matter of the
Petition of the Attorney General and PRC Staff Requesting the Commission to
Investigate the Gas Purchase Hedging Practices of the Gas Services of New
Mexico, NMPRC Case No. 3056, dated July 17, 2001.
  “GAAP” means United
States generally accepted accounting principles.
  “Gas Supply Contract”
means any Contract for the purchase of gas by Seller as part of the
Business.
  “Gas Supply Plan”
means, at any time, the annual gas supply plan filed by Seller with the NMPRC
pursuant to NMPRC Rule 640 and in effect at such time.
   6
  “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 Business is to be conducted at a reasonable
cost in a manner consistent with Laws and Orders applicable to the 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.
  “Governing Documents”
of a Person means the articles or certificate of incorporation and bylaws, or
comparable governing documents, of such Person.
  “Governmental Entity”
means the United States of America and any other federal, state, tribal, local,
municipal or foreign governmental or regulatory authority, department, agency,
commission, body, court, or other governmental entity.
  “Gross Margin” shall
mean access fee plus distribution
rate per therm and transmission rate per therm.
  “GSP Financial Hedge”
means any Financial Hedge entered into in connection with the Annual Hedge
Strategy.
  “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.
  “HSR
Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
  “Independent Accounting
Firm” means KPMG LLP.
  “Inventories” means
materials, spare parts, consumable supplies, fuel supplies and chemical
inventories exclusively relating to the Business.
  “Law”
means any constitution, statute, regulation, rule, charter, ordinance, code,
protocol, proceeding or similar act or promulgation of any Governmental
Entity.
  “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).
   7
  “Master Lease
Agreement” means the lease agreement to be entered into by and between
the Parties at Closing pursuant to Sections7.19, 4.3(m)and 4.4(g).
  “Material Adverse
Effect” means a material adverse effect on (a) the business, assets,
properties, results of operations, or financial condition of the Business (taken
as a whole) other than an effect (i) resulting from an Excluded Matter occurring
after the date of this Agreement or (ii) cured (including by payment of money or
application of insurance proceeds) before the Closing Date or (b) the ability of
Seller to perform its obligations under this Agreement and the Ancillary
Agreements.  “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 that does not disproportionately
affect the Business in any material respect as compared to similarly situated
companies in the industry in which the Business operates, (B) any change
after the date of this Agreement in any Law to the extent not disproportionately
affecting the Business in any material respect (excluding from this
clause (B) any change in any Law issued by, administered by or relating to
the authority or responsibilities of the NMPRC), (C) any change in
accounting standards, principles or interpretations, (D) announcement of
this Agreement or the Ancillary Agreements or the transactions contemplated
hereby or thereby (including disruption or loss of customers, suppliers or
employee relationships to the extent related to any announcement with respect to
this Agreement or the transactions contemplated hereby), (E) any general
change in international, national, regional, or local economic, financial
markets, or political conditions, including prevailing interest rates, that does
not disproportionately affect the Business in any material respect as compared
to similarly situated companies in the industry in which the Business operates,
(F) weather conditions or related customer use patterns, (G) any
change in the market price of commodities or publicly traded securities,
(H) any change resulting from the actions of Buyer or its Affiliates after
the date of this Agreement, (I) war or terrorism, (J) failure by
Seller to meet revenue or earnings predictions related to the Business or
otherwise of Seller or its Affiliates or of any equity analysts, or (K) any
denial by the New Mexico Supreme Court, in whole or in part, of Seller’s appeal
of its general gas rate case filed on July 27, 2007.
  “Material Business
Agreement” means any Contract (a) listed on Schedule5.9(a), (b)
required to be listed on Schedule5.9(a) or (c)
that would be required to be listed on Schedule5.9(a) if such
Contract were in effect on the date of this Agreement.
  “NMPRC” means the New
Mexico Public Regulation Commission.
  “Off-System Net Payment
Amount” has the meaning specified in Exhibit3.1.
  8
  “Off-System Purchases and
Sales” means purchases and sales of physical gas to non-jurisdictional
customers as recognized by the NMPRC in transactions for which Seller is
authorized by Orders of the NMPRC to retain 30% of the gains realized in
connection with such purchases and sales.
  “Order” means any
rule, regulation, order, judgment, writ, injunction, decree, directive, or award
of a court, administrative agency, or other Governmental Entity acting in an
adjudicative, rulemaking or regulatory capacity, or of an arbitrator with
applicable jurisdiction over the subject matter.
  “Owner’s
Certificate” means a
certificate, in connection with each Owned Real Property, conveyed to Buyer duly
executed on behalf of Seller in form and content sufficient to enable Buyer’s
title insurance company to omit the standard exception with respect to
unrecorded leases and rights of occupancy in respect of such Owned Real
Property.
  “Party” means either
Buyer or Seller, as indicated by the context.
  “Permits” means all
permits, certificates, certifications, licenses, 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, use, operation, or maintenance of the Purchased
Assets, other than Environmental Permits and Franchises.
  “Permitted
Encumbrances” means (i) those Encumbrances set forth in Schedule1.1-C;
(ii) statutory liens for Taxes and assessments not yet due and payable or
liens for Taxes being contested in good faith and by appropriate proceedings
(and as set forth in Schedule1.1-C) for which
adequate reserves (in the good faith and judgment of Seller) have been
established; (iii) mechanics’, warehousemen’s, carriers’, mechanics’
workers’, repairers’, landlords’, and other similar liens arising or incurred in
the ordinary course of business relating to the Assumed Obligations, and
(A) which do not in the aggregate materially detract from the value of
property or assets subject to such Encumbrance or materially impair the
continued use thereof in the operation of the Business as currently conducted or
(B) which are being contested in good faith by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of the
property or asset subject to the Encumbrance, or liens (other than liens imposed
by ERISA) incurred or deposits made in the ordinary course of business in
connection with workers’ compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, trade contracts, leases, government contracts,
performance and return-of-money bonds and other similar obligations incurred in
the ordinary course of business (exclusive of obligations in respect of the
payment for borrowed money); (iv) zoning, entitlement, restriction, and
other land use and environmental regulations by Governmental Entities and third
party encroachment agreements which do not materially interfere with the
continued use of any Purchased Asset as currently used in the conduct of the
Business; (v) any Encumbrances set forth in any Franchise or governing ordinance
under which any portion of the Business is conducted; (vi) all rights of
condemnation, eminent domain, or other similar rights of any Person; and
(vii) all Encumbrances of record with respect to the Owned Real Property
other than (A) Encumbrances in favor of Seller or any of its Affiliates,
excluding from this clause (A) all easements and rights-of-way in favor of
the Electric Business and (B) Encumbrances that materially interfere with
the continued use of any Owned Real Property as used in the conduct of the
Business; provided, however, that an
Encumbrance shall not be a Permitted Encumbrance if it secures Disclosed
Indebtedness (unless such Encumbrance is set forth in Schedule1.1-C) or if it secures
Excluded Indebtedness.
   9
  “Person” means any
individual, partnership, limited liability company, joint venture, corporation,
trust, unincorporated organization, or Governmental Entity.
  “PGAC”
means “purchased gas adjustment clause” as defined in NMPRC
Rule 640.
  “Rate Rider 14”
means the miscellaneous surcharge and crediting mechanism established for costs
and credits approved by the NMPRC.
  “Regulatory Order”
means an Order issued by NMPRC or FERC that affects, is related to or governs
the rates, services, activities or operations of the Business.
  “Release” means any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, or disposing of Hazardous Materials into or through
the Environment.
  “Representatives”
means a Party’s accountants, employees, counsel, environmental consultants,
financial advisors, and other representatives.
  “Required Regulatory
Approvals” means the Seller Required Regulatory Approvals and the Buyer
Required Regulatory Approvals.
  “Seller Disclosure
Schedule” means, collectively, all Schedules other than Schedule1.1-B, Schedule6.3 and Schedule11.3(c).
  “Seller Marks” means
all trade names, trademarks, service marks, and logos of
Seller.
  “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 Schedule1.1-D.
  “Seller’s Knowledge,”
or words to similar effect, means the actual knowledge of the persons set forth
in Schedule1.1-E.
  “Special Warranty
Deed” means the special warranty deed or deeds to be executed and
delivered by Seller at Closing, substantially in the form set forth on Exhibit1.1-F.
  “Sub-Lease Agreements”
means the sub-lease agreements to be entered into by and between the Parties at
Closing on terms reasonably acceptable to both Parties pursuant to which Buyer
or Seller, as the case may be, may sub-lease portions of real property leased by
such Party to the other Party for a period of time following
Closing.
   10
  “Taxes” means all
taxes, charges, fees, levies, penalties, or other assessments imposed by any
foreign or United States federal, state, tribal or local Taxing Authority,
including income, excise, property, sales, use, gross receipts, windfall
profits, environmental (including taxes under Code Section 59A), employment,
severance,  stamp, capital stock, unemployment, disability,
registration, value added or add-on minimum,  compensating, transfer,
franchise, license, payroll, withholding, social security, estimated or other
taxes (including any escheat or unclaimed property obligations), in each case
including any interest, penalties, or additions attributable thereto, whether
disputed or not, and including any obligations to indemnify or otherwise assume
or succeed to the tax liability of any other Person.
  “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.
  “Taxable Period” means
the calendar or fiscal year, or fractional part of a year, used by Seller to
calculate Taxes with respect to the Business.
  “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 Schedule1.1-F.
  “Transfer Date” means
(i) for a Business Employee who becomes a Transferred Employee, the Effective
Time, and (ii) for a Designated Employee who becomes a Transferred Employee, the
date on which such Designated Employee performs his or her first hour of service
for Buyer.
  “Transferred Employee
Equipment” shall mean all desktop and personal mobile computing devices
and peripheral equipment assigned to and used by a Transferred Employee in
support of the Business at the time of his or her Transfer Date after re-imaging
and re-loading of such equipment with data and information systems included as
part of the Purchased Assets.
  “Transferred Employee
Records” means the following records relating to Transferred Employees
for the two years prior to the Closing Date: (i) skill and development training
records and resumes, (ii) seniority histories, (iii) salary and benefit
information, (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.
  “Transition Advisory
Team” means the transition team comprised of certain key personnel of
Seller to be mutually agreed upon by Buyer and Seller prior to or within ten
(10) days following the date of this Agreement, the sole purpose of such team to
provide information to Buyer to assist with an orderly transition of the
Business.
   11
  “Transition Services
Agreement” means the Transition Services Agreement dated the date hereof
by and between the Parties attached hereto as Exhibit1.1-G.
  “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:
 
 Location
              Term 
      of
      Term2006 Allocated Cost
      Schedule
              Section5.4(a)2006 Financial
      Statements
              Section5.4(a)Adjustment Dispute
      Notice
              Section3.2(c)Agreement
              PreambleAllocated Cost
      Schedules
              Section5.4(a)Allocated Retiree
      Medical Assets
              Section7.9(f)(v)Allocated Rights and
      Obligations
              Section7.4(e)Allocation
      Schedule
              Section3.3Assigned
      Intellectual Property
              Section2.1(v)Assumed
      Environmental Liabilities
              Section2.3(g)Assumed
      Obligations
              Section2.3Base
      Price
              Section3.1Benefit Continuation
      Period
              Section7.9(f)(ii)Benefit
      Plan
              Section5.8(a)Regulatory
      Entity
              Section7.4(e)Business Regulatory
      Proceeding
              Section5.21Buyer
              PreambleBuyer
      Indemnitee
              Section9.2(a)Buyer’s
      VEBA
              Section7.9(f)(iv)Closing
              Section4.1Closing
      Date
              Section4.1Closing Payment
      Amount
              Section3.2(a)COBRA
              Section7.9(o)Collective
      Bargaining Agreement
              Section5.7Commitment
      Parties
              Section6.6(c)Commitments
              Section6.6(c)Confidential
      Business Information
              Section7.2(c)Confidential
      Information
              Section7.2(b)Consent
      Asset
              Section7.4(c)Customer
      Notification
              Section7.13Debt Commitment
      Letter
              Section6.6(c)Direct
      Loss
              Section9.3(d)Easements
              Section7.4(b)Effective
      Time
              Section4.1Electric
      Accounts
              Section7.1(c)(iii)(A)   12
   Electric
      Bill
                Section7.1(c)(i)Environmental
      Reports
                Section5.6(d)Equity Commitment
      Letter
                Section6.6(b)Excluded
      Assets
                Section2.2Excluded
      Liabilities
                Section2.4Financial
      Statements
                Section5.4(a)Financing
                Section7.17(a)Franchises
                Section5.9(c)Funds
                Section6.6(b)Gas
      Accounts
                Section7.1(c)(iii)(A)Gas
      Bill
                Section7.1(c)(i)Grandfathered Active
      Employee
                Section7.9(f)Guaranteed
      Obligations
                Section11.1(a)Indemnifiable
      Loss
                Section9.2(a)Indemnifying
      Party
                Section9.3(a)Indemnitee
                Section9.2(c)Intellectual
      Property
                Section2.1(v)Interim Allocated
      Cost Schedule
                Section5.4(a)Interim Balance
      Sheet
                Section5.4(a)Interim Financial
      Statements
                Section5.4(a)Leased Real
      Property
                Section2.1(g)Locals
                Section7.9(a)Other
      Arrangements
                Section7.4(e)Owned Real
      Property
                Section2.1(a)Parent
                PreambleParent
      Guarantee
                Section11.2Post-Closing
      Adjustment Statement
                Section3.2(b)Post-Retirement
      Welfare Benefits
                Section7.9(f)Potential Financing
      Failure
                Section10.1(g)Purchase
      Price
                Section3.1Purchased
      Assets
                Section2.1Real Property
      Leases
                Section2.1(b)Regulatory
      Entity
                Section7.4(e)Retained
      Agreements
                Section2.2(k)SCADA
                Section2.1(m)SEC
                Section7.2(c)Seller
                PreambleSeller Common Surety
      Instruments
                Section7.4(g)Seller
      Indemnitee
                Section9.2(b)Seller Insurance
      Policies
                Section7.16Seller Property
      Taxes
                Section3.4(b)Seller’s
      VEBA
                Section7.9(f)(v)Shared
      Agreements
                Section7.4(e)Shared Easement
      Rights
                Section7.4(b)Shared
      Easements
                Section7.4(b)Shared
      Telecommunications Network Element Rights
                Section7.4(h)




13
  Shared Telecommunications
      Network Elements
              Section
      7.4(h)Substitute
Arrangements
              Section
      7.4(e)Successor Retiree Welfare
      Plan
              Section
      7.9(f)Surety Instruments
              Section
      7.4(g)Tangible Personal
      Property
              Section
      2.1(g)Technology
              Section
      2.1(w)Telecommunications Network
      Elements
              Section
      7.4(h)Termination Date
              Section
      10.1(b)Third Party Claim
              Section
      9.3(a)Transferable Environmental
      Permits
              Section
      2.1(k)Transferable Permits
              Section
      2.1(j)Transferred Employees
              Section
      7.9(b)(iii)


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
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)  “Exclusively 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 “exclusively in the Business,” “exclusively to the
Business,” and other statements of similar import will be construed to refer to
assets or liabilities that are devoted exclusively to (or in the case of
liabilities, are related exclusively to) the Business.
  (d)  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.  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.
  (e)  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.
  (f)  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.
   14
 (g)  “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.
  (h)  “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.
  (i)  “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
will remain liable for any failure to perform such obligations prior to the
Effective Time.
  1.3  Joint Negotiation and
Preparation of Agreement.  The Parties and Parent 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 and Parent and no
presumption or burden of proof favoring or disfavoring any Party or Parent 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
assets, real, personal or mixed, tangible or intangible, described below, as the
same exist at the Effective Time (and, as applicable and as permitted or
contemplated hereby, with such additions and deletions as may occur from the
date hereof through the Effective Time), except to the extent that such assets
are Excluded Assets (collectively, the “Purchased
Assets”):
  (a)  those
certain parcels of real property owned by Seller together with all buildings,
structures, facilities, the improvements and fixtures thereon and appurtenances
thereto described on Schedule2.1(a), and such
additional parcels of real property acquired by Seller after the date hereof for
use exclusively in the Business (the “Owned Real
Property”);
   15
  (b)  the real
property leases under which Seller is a lessor or lessee listed on Schedule2.1(b) (the “Real Property
Leases”);
  (c)  the
Easements and Shared Easement Rights to be conveyed at the Closing pursuant to
Section7.4(b);
  (d)  subject
to Section7.1(c), the
accounts receivable (including all related checks in transit) and earned but
unbilled revenues owned by Seller and exclusively related to the Business; for
the purposes of this Agreement, “checks in transit” shall mean checks with
respect to which a corresponding amount has not yet been debited from accounts
receivable and credited to cash and cash equivalents in accordance with Seller’s
customary accounting practices;
  (e)  all
Inventories;
  (f)  the
Documents;
  (g)  the
machinery, equipment, vehicles, furniture, pipeline facilities, and other
tangible personal property owned by Seller and used exclusively in the Business,
including all computing and telecommunications infrastructure used exclusively
in the Business, such as switches, routers, servers and desktop and mobile
computing equipment located within each facility located at any Owned Real
Property or at any facility at any property subject to any Real Property Lease
(“Leased Real
Property”) and all Transferred Employee Equipment (provided, that such
Transferred Employee Equipment shall constitute a Purchased Asset only upon the
Transfer Date for such Transferred Employee) (the “Tangible Personal
Property”);
  (h)  the
Business Agreements and the Franchises;
  (i)  the
Allocated Rights and Obligations to the extent transferred to Buyer pursuant to
Section7.4(e);
  (j)  the
Permits related exclusively to the Business, including the Permits listed on
Schedule5.11, in each case to
the extent the same are transferable (the “Transferable
Permits”);
  (k)  the
Environmental Permits related exclusively to the Business, including the
Environmental Permits listed on Schedule5.6(a)-2, in each case to
the extent the same are transferable (the “Transferable Environmental
Permits”);
  (l)  Claims
and defenses of Seller to the extent such Claims or defenses relate exclusively
to the Purchased Assets or the Assumed Obligations, and all guaranties,
warranties, indemnities and similar rights in favor of Seller exclusively
related to any Purchased Asset or any Assumed Obligation;
   16
  (m)  the
Supervisory Control and Data Acquisition (“SCADA”) software set
forth on Schedule2.1(m);
  (n)  all
software, software licenses, information systems, interfaces and management
systems of Seller used exclusively in the Business (including
internally-developed information systems), including those on Schedule2.1(n);
  (o)  all
credits, prepaid expenses, deferred charges, advance payments, security deposits
and prepaid items that are related exclusively to the Business;
  (p)  the
Telecommunications Network Elements and Shared Telecommunications Network
Element Rights, including the FCC licenses listed on Schedule2.1(p);
  (q)  all
customer deposits, customer advances for construction and other similar items
related exclusively to the Business;
  (r)  the
regulatory related assets of Seller described on Schedule2.1(r);
  (s)  assets
transferred pursuant to Section7.9;
  (t)  all petty
cash and cash drawer held locally for the benefit of the Business;
  (u)  all
Surety Instruments other than Seller Common Surety Instruments;
  (v)  all
patents (including all reissues, divisions, continuations and extensions
thereof), patent applications, patent rights, copyrights, copyright
registrations, and all rights to any of the foregoing (“Intellectual
Property”), owned by Seller that relate exclusively to the Business (such
Intellectual Property being the “Assigned Intellectual
Property”);
  (w)  all
trade secrets, confidential information and know-how of Seller that relate
exclusively to the Business (the “Technology”);
  (x)  all
assets reflected on the Interim Balance Sheet, other than any such assets
(A) disposed of to a third party since the date of the Interim Balance
Sheet or (B) utilized or consumed by the Business, or converted to cash, in
the ordinary course of business since the date of the Interim Balance Sheet or
as otherwise permitted by the terms of this Agreement;
  (y)  all
credits, benefits, emissions reductions, offsets and allowances with respect to
any Environmental Laws purchased by or granted or issued to Seller exclusively
for use by or exclusively with respect to the Business or the Purchased
Assets;
  (z)  all
goodwill generated by or associated with the Business; and
  17
  (aa)  all
other assets owned by or leased or licensed to Seller and used exclusively in,
or arising exclusively out of, the Business.
  2.2  Excluded
Assets.  The Purchased Assets do not include any property or
assets of Seller not described in Section2.1 and,
notwithstanding any provision to the contrary in Section2.1 or elsewhere in
this Agreement, the Purchased Assets do not include the following property or
assets of Seller (all assets excluded pursuant to this Section2.2, the “Excluded
Assets”):
  (a)  cash and
cash equivalents (including checks on hand), in hand or in bank accounts, other
than petty cash held locally for the benefit of the Business; for the purposes
of this Agreement, “checks on hand” shall mean checks with respect to which a
corresponding amount has been debited from accounts receivable and credited to
cash and cash equivalents in accordance with Seller’s customary accounting
practices;
  (b)  certificates
of deposit, shares of stock, securities, bonds, debentures, evidences of
indebtedness for borrowed money, and any other debt or equity interest in any
Person;
  (c)  the
Seller Marks and all goodwill generated by or associated with the Seller
Marks;
  (d)  except to
the extent specifically included in the Purchased Assets, including by virtue of
Section2.1(x), all
assets used in or for the conduct of the Electric Business or any other current
or former business of Seller (other than the Business);
  (e)  all
books, records (including stock record and minute books), or the like other than
the Documents;
  (f)  any
assets disposed of by Seller after the date of this Agreement to the extent such
dispositions are not prohibited by this Agreement;
  (g)  except
as expressly provided in Section2.1(l) and for
Claims described in Section2.1(x) or 2.1(aa), all the
Claims or causes of action of Seller against any Person other than claims under
insurance policies (which are the subject of Section2.2(i));
  (h)  except
to the extent specifically included in the Purchased Assets, including by virtue
of Section2.1(x), assets
used for the performance of the Central or Shared Functions, other than
Transferred Employee Equipment;
  (i)  all
insurance policies, and rights thereunder, including any such policies and
rights in respect of the Purchased Assets, the Assumed Obligations or the
Business, subject to the obligations of Seller to Buyer pursuant to Sections7.10(b), 7.16 and 9.3(e);
  (j)  the
rights of Seller arising under or in connection with this Agreement, the
Ancillary Agreements, any certificate or other document delivered in connection
herewith, and any of the transactions contemplated hereby and
thereby;
   18
  (k)  (i) all
Contracts other than the Real Property Leases, the Easements, the Shared
Easements Rights, the Business Agreements, the Franchises and the other
Contracts specifically included in the Purchased Assets, (ii) all Financial
Hedges and all Contracts set forth on Schedule2.2(k)
(collectively, the “Retained
Agreements”), (iii) all Shared Agreements, and (iv) any and all of
Seller’s rights and interests in all accounts owing by and among Seller and any
of its Affiliates;
  (l)  all
software, software licenses, information systems, and management systems of
Seller not used exclusively in the Business, as well as all hardware, software,
software licenses and interfaces required for the applications not used
exclusively in the Business, and any items set forth in or generally described
in subparts (i) through (vi) of the definition of “Documents” in Section1.1 other than the
software set forth on Schedule2.1(m) or 2.1(n);
  (m)  Seller
Common Surety Instruments;
  (n)  all
deferred tax assets or rights to refunds or credits of Taxes with respect to the
Purchased Assets for Taxable Periods ending on or prior to the Closing Date, and
with respect to a Taxable Period that includes but does not end on the Closing
Date, the portion of such Tax refunds or credits attributable to the portion of
such Taxable Period ending on the Closing Date (determined on a closing of the
books basis for all income Taxes, and, for all other Taxes, in the manner
described in the first sentence of Section3.4(b));
and
  (o)  the
assets set forth on Schedule2.2(o).
  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, exclusively related to the
Purchased Assets or the Business, other than the Excluded Liabilities (the “Assumed
Obligations”), in accordance with the respective terms and subject to the
respective conditions thereof, including the following liabilities and
obligations (in each case, other than the Excluded
Liabilities):
  (a)  (i) all
liabilities and obligations of Seller under the Business Agreements, the Real
Property Leases, the Franchises, the Easements and Shared Easements, the
Transferable Permits, the Transferable Environmental Permits and the Allocated
Rights and Obligations transferred to Buyer pursuant to Section7.4(e), the
Telecommunication Network Elements and any other agreements, obligations or
contractual rights assigned to Buyer pursuant to the terms of this Agreement and
(ii) all liabilities and obligations of Seller to third parties that Buyer
agrees to assume pursuant to any Shared Easement Rights, Alternate Arrangements
or Shared Telecommunication Network Element Rights;
  (b)  all
liabilities and obligations of Seller for trade accounts payable (which shall be
determined net of checks issued by Seller but not yet presented for payment) and
other accrued and unpaid current expenses, in each case in respect of goods
acquired and services incurred exclusively by or for the Business;
   19
  (c)  all
liabilities and obligations of Seller with respect to customer deposits,
customer advances for construction and other similar items related exclusively
to the Business or the Purchased Assets;
  (d)  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 exclusively to the Business
or the Purchased Assets and outstanding on or arising after the Effective
Time;
  (e)  all
liabilities and obligations associated with the Purchased Assets or the Business
in respect of Taxes for which Buyer is liable pursuant to Section3.4 or Section7.7;
  (f)  all
liabilities and obligations for which Buyer is expressly responsible pursuant to
Section7.9, including the
liabilities and obligations described in Section7.9(f) relating
to Post-Retirement Welfare Benefits;
  (g)  all
liabilities, obligations, Environmental Claims, and demands arising under, in
respect of, or relating to compliance or non-compliance by Seller or Buyer with
past, present, and future Environmental Laws, existing, arising, or asserted
exclusively with respect to the Business or the Purchased Assets, whether
before, on, or after the Closing Date (the “Assumed Environmental
Liabilities”);
  (h)  all
liabilities and obligations of Seller or Buyer 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
  (i)  the
regulatory related liabilities and obligations set forth on Schedule2.3(i).
  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)  all
liabilities or obligations of Seller and its Affiliates not related exclusively
to the Purchased Assets or the Business;
  (b)  all
liabilities or obligations of Seller related to any Excluded Asset or any
current or former business of Seller other than the Business;
  (c)  all
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 any Business Agreement, Real Property Lease, Franchise,
Permit, Environmental Permit or Order or any Law of the NMPRC, except to the
extent that such liability or obligation is taken into account in determining
the Adjustment Amount;
   20
  (d)  all
liabilities or obligations in respect of (i) Taxes with respect to the Purchased
Assets for Taxable Periods ending on or prior to the Closing Date, (ii) Taxes of
Seller or its Affiliates to the extent not included in clause (i) and (iii) in
the case of Taxable Periods that include but do not end on the Closing Date, the
Taxes attributable to the portion of such Taxable Period ending on the Closing
Date (in the case of income Taxes determined on an interim closing of the books
basis, and in the case of all other Taxes in the manner described in the first
sentence of Section3.4(b)), except
for Taxes for which Buyer is liable pursuant to Section3.4 or Section7.7;
  (e)  all
obligations of Seller for wages, employment Taxes, or severance pay to the
extent attributable to the period prior to the Effective Time (except as
otherwise expressly provided in Section7.9);
  (f)  except
for the Assumed Environmental Liabilities, (i) all liabilities or
obligations arising from (A) any Claim (including any workers compensation
claim) against Seller or any of its Affiliates to the extent arising prior to
the Effective Time or (B) any breach by Seller of any Order to the extent
occurring or arising prior to the Effective Time, (ii) all liabilities or
obligations arising from any Claim (including any workers compensation claim)
arising from an Actionable Incident to the extent occurring prior to the
Effective Time, and (iii) all criminal fines or penalties imposed by a
Governmental Entity resulting from (A) an investigation or proceeding before a
Governmental Entity regarding acts to the extent occurring prior to the
Effective Time, or (B) intentional fraud by Seller or its Affiliates prior to
the Effective Time;
  (g)  except as
otherwise expressly provided in Section7.9, all liabilities
or obligations 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 plan or any obligation to make any parachute or
retention payment or any obligation under any retention or other benefit program
of the type contemplated by Section7.9(p) (other
than as contemplated by Section7.9(q));
  (h)  all
grievances arising out of or under any Collective Bargaining Agreement, or other
collective bargaining agreement applicable to any of the Transferred Employees,
filed or arising out of conduct occurring prior to the Effective Time, and
except as expressly provided in Section7.9, all other
liabilities or obligations of Seller and its Affiliates relating directly or
indirectly to the employment or termination of employment, including
discrimination, wrongful discharge, unfair labor practices, or constructive
termination, by Seller or any of its Affiliates of any individual;
  (i)  all
Excluded Indebtedness of Seller and its Affiliates, and all liabilities and
obligations of Seller under any Contract or Encumbrance securing any Excluded
Indebtedness;
   21
  (j)  all
liabilities of Seller with respect to checks issued by Seller but not yet
presented;
  (k)  all
liabilities or obligations arising out of the matter described in item II.A of
Schedule5.10;
  (l)  all
liabilities or obligations arising from any Claim (including any workers
compensation Claim) for personal injury (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) arising out of the
matter described in item 3 of Schedule 5.6(c);
and
  (m)  all
liabilities or obligations of Seller and its Affiliates arising under or in
connection with this Agreement, or the Ancillary Agreements delivered in
connection herewith, and any of the transactions contemplated hereby and
thereby.
  ARTICLE
III
 PURCHASE
PRICE
  3.1  Purchase
Price.  (a)The purchase price for the Purchased Assets (the “Purchase Price”) will
be an amount equal to $620,000,000 (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 Exhibit3.1.
  (b)  Within
five Business Days of the settlement of any transaction involving any matched
Off-System Purchases and Sales with a settlement date after the Closing Date,
Buyer will for each such transaction pay Seller the Off-System Net Payment
Amount calculated in accordance with Exhibit3.1.  For
purposes of this Section3.1(b), (i)
“matched Off-System Purchases and Sales” means a transaction in which the
Business purchased physical gas and simultaneously agreed to sell forward an
equivalent volume of gas to a non-jurisdictional customer as part of Seller’s
business of Off-System Purchases and Sales, (ii) the settlement of any such
transaction shall be the later of (A) the date of delivery by the Business of
the physical gas pursuant to such forward sale and (B) the date of payment by
the non-jurisdictional customer and (iii) only Off-System Purchases and Sales
pursuant to Business Agreements shall be taken into account.
  3.2  Determination of Purchase
Price.
  (a)  No later
than five days prior to the Closing Date, Seller will prepare in good faith and
deliver to Buyer a reasonably detailed estimate of the Purchase Price, based on
Seller’s good faith estimate of the Adjustment Amount (such estimated Purchase
Price being referred to herein as the “Closing Payment
Amount”).
  (b)  Within
120 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
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.
   22
  (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 Section3.2(c), then (i) the
undisputed portion of the total proposed Adjustment Amount set forth in the
Post-Closing Adjustment Statement will be paid by the appropriate Party, in
accordance with the payment procedures set forth in Section3.2(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 Business Days following the final determination of the Purchase Price
pursuant to Sections3.2(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 Section3.2(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 Section3.2(d)(i)) to
Buyer.  Any amount, together with interest thereon at a rate equal to
JPMorgan’s prime rate from time to time in effect, from the Closing Date to the
date of payment, to be paid under this Section3.2(e) will be paid
in cash by wire transfer of immediately available funds to the account specified
by the Party receiving payment.
   23
  3.3  Allocation of Purchase
Price.  All amounts constituting consideration within the
meaning of, and for the purposes of, Section 1060 of the Code and the
regulations thereunder shall be allocated among the Purchased Assets inthe manner required by
Section 1060 of the Code and the regulations thereunder and all applicable
Laws.  Within 60 calendar days after the Closing Date, Seller shall
provide Buyer with a proposed schedule (the “Allocation Schedule”)
allocating all such amounts as provided herein.  The Allocation
Schedule shall become final and binding on the parties hereto 15 calendar days
after Seller provides such schedule to Buyer, unless Buyer objects in writing to
Seller, specifying the basis for its objection and preparing an alternative
allocation.  If Buyer does object, the Parties shall in good faith
attempt to resolve the dispute within 15 calendar days of written notice to
Seller of Buyer’s objection.  Any such resolution shall be final and
binding on the parties hereto.  Any unresolved disputes shall be
promptly submitted to the Independent Accounting Firm for determination, which
shall be final and binding on the parties hereto.  Buyer and Seller
will each pay one-half of the fees and expenses of the Independent Accounting
Firm.  Buyer and Seller shall cooperate with each other and the
Independent Accounting Firm in connection with the matters contemplated by this
Section3.3, including,
without limitation, by furnishing such information and access to books, records
(including, without limitation, accountants work papers), personnel and
properties as may be reasonably requested.Each of the parties
hereto agrees to (a) prepare and timely file all Tax Returns, including IRS Form
8594 (and all supplements thereto) in a manner consistent with the Allocation
Schedule as finalized and (b) act in accordance with the Allocation Schedule for
all tax purposes.  The Parties hereto will revise the Allocation
Schedule to the extent necessary to reflect any post-Closing payment made
pursuant to or in connection with this Agreement.  In the case of any
such payment, Seller shall propose a revised Allocation Schedule, and the
parties hereto shall follow the procedures outlined above with respect to
review, dispute and resolution in respect of such revision.
  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 on or prior to the Effective Time, and Buyer liable
to the extent such items relate to any period after the Effective
Time.  Such items to be prorated will include:
  (i)  personal
property and real property Taxes, assessments, franchise fees, 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, Transferable Environmental Permit or other
Purchased Asset; and
  (iii)  rents
under the Real Property Leases or any personal property leases included in the
Purchased Assets.
   24
  (b)  In
connection with any real or personal property Tax prorations, including
installments of special assessments, as between Buyer and Seller, Seller will be
responsible for an amount equal to the amount of the current real or personal
property Tax or installment of special assessments, as the case may be,
multiplied by a fraction, in each instance (i) the numerator of which is the
number of days from the first day of the Taxable Period or assessment period in
which the Closing Date occurs to the Closing Date, and (ii) the denominator of
which is the total number of days in the Taxable Period or assessment period in
which the Closing Date occurs and Buyer will be responsible to reimburse Seller
for the balance of such amount. 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. Seller shall have the sole right to
contest, compromise or request and obtain refunds with respect to all real and
personal property Taxes allocable to periods ending on or prior to the Closing
Date or that are the responsibility of Seller pursuant to this Section3.4(b) (“Seller Property
Taxes”).
  (c)  The
proration of all items under this Section3.4 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
Section3.4.
  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, 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 Seller in Albuquerque, New Mexico, beginning at 10:00
A.M. (Albuquerque, New Mexico time) on the second Business Day following the
date which the conditions set forth inArticle 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.  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.,
Albuquerque, New Mexico time on the Closing Date (the “Effective
Time”).
   25
  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)  one or
more instruments of assignment and assumption substantially in the form of the
Assignment and Assumption Agreement, duly executed and acknowledged by
Seller;
  (c)  all
consents, waivers or approvals obtained by Seller from third parties in
connection with this Agreement;
  (d)  the
certificate contemplated by Section8.2(d);
  (e)  one or
more deeds of conveyance of the parcels of Owned Real Property, substantially in
the form of the Special Warranty Deed, duly executed and acknowledged by Seller
and in recordable form;
  (f)  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 Section7.4(b);
  (g)  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;
  (h)  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;
  (i)  terminations
or releases of Encumbrances on the Purchased Assets other than the Permitted
Encumbrances;
  (j)  a
certificate of good standing with respect to Seller (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 New Mexico;
  (k)  a copy,
certified by an authorized officer of Seller, of resolutions authorizing the
execution and delivery of this Agreement and the Ancillary Agreements, 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;
   26
  (l)  an
affidavit that Seller is not a foreign person under Section 1445(b)(2) of the
Code;
  (m)  the
Master Lease Agreement duly executed by Seller;
  (n)  the
Sub-Lease Agreements duly executed by Seller;
  (o)  to the
extent not previously provided to Buyer, the evidence contemplated by Section7.9(f)(vi);
  (p)  an
Owner’s Certificate in connection with each Owned Real Property;
and
  (q)  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)  one or
more instruments of assignment and assumption, substantially in the form of the
Assignment and Assumption Agreement, duly executed and acknowledged by
Buyer;
  (b)  the
certificate contemplated by Section8.3(c);
  (c)  all
consents, waivers, or approvals obtained by Buyer from third parties in
connection with this Agreement;
  (d)  a
certificate of good standing with respect to Buyer (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;
  (e)  a copy,
certified by an authorized officer of Buyer, of resolutions authorizing the
execution and delivery of this Agreement and the Ancillary Agreements, 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;
  (f)  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;
  (g)  the
Master Lease Agreement duly executed by Buyer;
  (h)  the
Sub-Lease Agreements duly executed by Buyer;
   27
  (i)  to the
extent not previously delivered to Seller, the evidence contemplated by Section7.9(f)(iv);
and
  (j)  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
  Except as
set forth in, or qualified by any matter set forth in, the Seller Disclosure
Schedule (provided, that any
matter disclosed in a Section of the Seller Disclosure Schedule shall be deemed
disclosed for all purposes and all Sections only to the extent that the
relevance of any such disclosure to any other Section is reasonably apparent
from the text of such disclosure) and subject to the limitations set forth in
Sections9.4(e) and 9.4(f), Seller
represents and warrants to Buyer, as of the date of this Agreement and as of the
Effective Time, as set forth in this Article
V.
  5.1  Organization;
Qualification.  Seller is a corporation duly organized, validly
existing, and in good standing under the laws of New Mexico 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, except where the failure to be so qualified has not had
and would not reasonably be expected to have a Material Adverse
Effect.  Seller has heretofore made available to Buyer true, complete,
and correct copies of Seller’s Governing Documents, as currently in
effect.
  5.2  Authority Relative to this
Agreement and the Ancillary Agreements.  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
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
   28
  5.3  Consents and Approvals; No
Violation.  Except as set forth in Schedule5.3, 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, acceleration, or loss of a material benefit
under, or result in the creation of any Encumbrance upon any of the Purchased
Assets, under any of the terms, conditions, or provisions of any note, bond,
mortgage, indenture, agreement, lease, or other instrument or obligation to
which Seller is a party or by which Seller 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,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect;
  (c)  subject
to obtaining the Seller Required Regulatory Approvals, conflict with or result
in a violation of any Law or Order applicable to Seller or any of the Purchased
Assets or the Business which, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect; or
  (d)  require
any declaration, filing, or registration with, or notice to, or authorization,
consent, or approval of any Governmental Entity, other than (i) the Seller
Required Regulatory Approvals, (ii) such declarations, filings, registrations,
notices, authorizations, consents, or approvals which, if not obtained or made,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect 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  Financial
Information.  (a)  Schedule5.4(a) sets forth
(i) the unaudited statement of income of the Business for the fiscal year ended
December 31, 2006 (the “2006 Financial
Statements”), (ii) the unaudited balance sheet of the Business as of
September 30, 2007 (the “Interim Balance
Sheet”) and the unaudited statement of income of the Business for the
nine-month period ended September 30, 2007 (together with the Interim Balance
Sheet, the “Interim Financial
Statements” and, such Interim Financial Statements together with the 2006
Financial Statements, the “Financial
Statements”), (iii) the unaudited direct and allocated income statement
for the nine-month period ending September 30, 2007 (the “Interim Allocated Cost
Schedule”) and (iv) the unaudited direct and allocated income statement
for the fiscal year ended December 31, 2006 (the “2006 Allocated Cost
Schedule” and, together with the Interim Allocated Cost Schedule, the
“Allocated Cost
Schedules”).  Except as set forth in Schedule5.4(a), the
Financial Statements have been prepared in accordance with GAAP, except in the
case of the Interim Financial Statements for normal year-end adjustments and the
omission of full footnotes.  Except as set forth in Schedule5.4(a), the
Interim Balance Sheet
   29
  presents
fairly in all material respects the financial condition of the Business as of
such date, the income statement included in the Interim Financial Statements
presents fairly in all material respects the results of operations of the
Business for the period covered thereby and does not reflect the operations of
any entity or business not intended to constitute a part of the Business after
the Closing Date.  The Interim Allocated Cost Schedule has been
prepared in accordance with the 2007 Cost Allocation Manuals, and the expenses
included in the “Common Utility” and “Shared Services” columns of the Interim
Allocated Cost Schedule have been allocated in accordance with the 2007 Cost
Allocation Manuals.   The 2006 Allocated Cost Schedule has been
prepared in accordance with the 2006 Cost Allocation Manuals, and the expenses
included in the “Common Utility” and “Shared Services” columns of the 2006
Allocated Cost Schedule have been allocated in accordance with the 2006 Cost
Allocation Manuals.  In each of the Allocated Cost Schedules, (1) the
columns headed “Direct” present fairly in all material respects the total direct
operating costs (including all salary, wages and, for the Interim Allocated Cost
Schedule, benefits for the Business Employees) incurred by the Business and
there are no direct costs incurred by the Business in the columns headed “Common
Utility” or “Shared Services” and (2) the columns headed “Total” fairly present
in all material respects the total costs of the Business, in both cases for the
periods covered thereby.
  (b)  Except
for matters reserved against in the Financial Statements or as set forth on
Schedule5.4(b), neither
Seller (in connection with the Business) nor the Business had at September 30,
2007, or has incurred during the period from September 30, 2007 to the date of
this Agreement, any liabilities or obligations (whether absolute, accrued,
contingent, fixed or otherwise, whether due or to become due) of any nature that
would be required by GAAP to be reflected on a balance sheet of the Business
(including the notes thereto), except liabilities or obligations which were
incurred in the ordinary course of business consistent with past
practice.
  5.5  Title.  (a)  Except
as set forth on Schedule5.5(a):  Seller
(i) owns, and has insurable, good and marketable fee simple title to, the
Owned Real Property, (ii) owns, and has good and marketable rights and
title to the Easements and the Shared Easements, (iii) to Seller’s
Knowledge, has a valid and enforceable leasehold interest in the Leased Real
Property and (iv) has good title to the other Purchased Assets, in each
case, free and clear of all Encumbrances other than Permitted
Encumbrances.
  (b)  Except
as set forth on Schedule5.5(b) or as has
not had and would not reasonably be expected to have a Material Adverse Effect,
(i) Seller has complied with the terms of all Real Property Leases, Easements
and Shared Easements to which it is a party or under which it has a right of use
or occupancy, (ii) all Real Property Leases, Easements and Shared Easements are
in full force and effect and (iii) Seller enjoys peaceful and undisturbed
possession and rights under all Real Property Leases, Easements and Shared
Easements.
  (c)  Except as
has not interfered and would not reasonably be expected to interfere with the
conduct of the Business in any material respect, Seller has the necessary rights
to construct, maintain and use its pipes, mains, service lines, tanks,
compressors and other equipment and facilities on, under, and over property,
whether or not pursuant to an Easement, used in the conduct of the Business, and
there are no defects in the entitlement of Seller to construct, maintain or use
such property that have prohibited or interfered with or that are reasonably
likely to prohibit or interfere with the use thereof in any material respect in
accordance with past practice or the requirements of applicable
Law.
   30
  5.6  Environmental.  The
only representations and warranties given in respect to Environmental Laws,
Environmental Permits, Environmental Claims or other environmental matters are
those contained in Sections5.3, 5.4 and 5.13 and this
Section5.6, 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, Environmental Claims, or
other environmental matters.  All such matters are governed
exclusively by Sections5.3, 5.4 and 5.13, this Section5.6, and Article
IX.
  (a)  Except
as set forth on Schedule5.6(a)-1, (i) Seller
possesses all Environmental Permits necessary to operate the Purchased Assets or
the Business as currently being operated, (ii) to Seller’s Knowledge, the
Purchased Assets and the Business are in compliance, in all material respects,
with the requirements of all Environmental Permits and Environmental Laws, and
(iii) to Seller’s Knowledge, Seller has not received any written notice or
information that any applicable Governmental Entity intends to modify, suspend,
revoke, or withdraw (in a manner that would reasonably be considered to have a
material adverse impact on the ownership or operation of the Business or the
Purchased Assets) any Environmental Permit.  Schedule5.6(a)-2 sets forth a list
of all material Environmental Permits held by Seller for the operation of the
Business as presently conducted.
  (b)  Except
as set forth on Schedule5.6(b), Seller
has not received within the last three years any written notice, report, or
other information regarding any actual or alleged violation of Environmental
Laws or Environmental Permits, or any liabilities or potential liabilities,
including any investigatory, remedial, or corrective obligations, relating to
the Business or the Purchased Assets arising under Environmental
Laws.
  (c)  Except
as set forth on Schedule5.6(c), (i) to
Seller’s Knowledge, exclusively in connection with the operation of the Business
or otherwise exclusively relating to the Business or the use, ownership or
operation of the Purchased Assets, there is and has been no Release or
threatened Release (as that term is used or interpreted under or pursuant to
CERCLA) from, in, on, or beneath the Purchased Assets, the Owned Real Property,
the Leased Real Property or any other real property, that could form a basis for
an Environmental Claim against Seller or Buyer, 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 all material correspondence from any Governmental
Entity, studies, audits, reviews, investigations, analyses, and reports on
material environmental matters relating to the Purchased Assets or the Business
that are in the possession or reasonable control of Seller (the “Environmental
Reports”).
   31
  5.7  Labor
Matters.  Schedule5.7 lists each
collective bargaining agreement covering any of the Business Employees or any
Designated Employees to which Seller is a party or is subject (each, a “Collective Bargaining
Agreement”).  Except to the extent set forth in Schedule5.7, and except
as has not had and would not reasonably be expected to have a Material Adverse
Effect, (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) no grievance or arbitration proceeding arising out of or under the
Collective Bargaining Agreements is pending against Seller; and (v) 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.  Seller has made available to Buyer a true, correct,
and complete copy of each Collective Bargaining Agreement.
  5.8  ERISA; Benefit
Plans.
  (a)  Schedule5.8(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 compensation or benefits to
current or former employees that (i) is maintained by, contributed to, or
required to be contributed to by Seller (or any ERISA Affiliate of Seller) or
with respect to which Seller (or any ERISA Affiliate of Seller) has any actual
or contingent liability and (ii) covers any current Business Employees
and/or Designated Employees (each, a “Benefit
Plan”).  Copies of such plans and all amendments, 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
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.  Nothing has occurred since the date of such most recent
determination letter 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.  Each Benefit Plan with respect to which any assets or
liabilities are transferred to Buyer (or any ERISA Affiliate of Buyer) or to any
Benefit Plan maintained by Buyer (or any ERISA Affiliate of Buyer) has been
administered and operated in all material respects in accordance with its terms
and in compliance in all material respects with the applicable provisions of
ERISA.
  (c)  Each
Benefit Plan that utilizes a funding vehicle described in Section 501(c)(9) of
the Code has received notification from the Internal Revenue Service that such
funding vehicle qualifies for tax-exempt status under Section 501(c)(9) of the
Code.  Nothing has occurred since the date of such tax-exempt
notification that would materially adversely affect the exempt status of such
funding vehicle.
   32
  (d)  Seller
has provided Buyer with copies of the annual report (Form 5500) and the
actuarial reports for the most recent three plan years for which such reports
are available with respect to any Benefit Plan that provides Post-Retirement
Welfare Benefits to any Grandfathered Active Employee.
  (e)  Neither
Seller nor any ERISA Affiliate of Seller has contributed in the past five years
to a “multiemployer plan” within the meaning of Section 3(37) of
ERISA.
  (f)  There is
no “accumulated funding deficiency” within the meaning of Section 412 of the
Code with respect to any Benefit Plan that is subject to Section 412 and all
contributions, premium payments and other payments due from Seller to or under
the Benefit Plans have been paid in a timely manner.
  (g)  No event
or liability or lien on assets as described in Section 4069 of ERISA has
occurred or exists in connection with any Benefit Plan.
  (h)  Except as
provided in Section7.9, the
transactions contemplated by this Agreement will not result in any increase in
liability of Buyer with respect to any Benefit Plan (including under any
employment, retention, severance, change in control or similar agreement or
plan).
  5.9  Certain Contracts and
Arrangements.
  (a)  Except
for Business Agreements listed on Schedule5.9(a), as of the
date of this Agreement there is not any Business Agreement that is:
  (i)  a written
employment agreement or employment contract that has an aggregate future
liability in excess of $250,000 and is not terminable by Seller by notice of not
more than 60 days for a cost of less than $250,000;
  (ii)  a
collective bargaining agreement or other Contract with any labor organization,
union or association;
  (iii)  a
covenant not to compete (other than pursuant to any radius restriction contained
in any lease, reciprocal easement or development, construction, operating or
similar agreement) that materially limits the conduct of the Business as
presently conducted or that purports to bind Affiliates of the owner of the
Business;
  (iv)  a
Contract with (A) any shareholder or affiliate of Seller or (B) any current or
former officer or director of Seller or any of its Affiliates (other than
employment agreements);
  (v)  a lease
or sublease or similar Contract material to the Business or the use or operation
of the Purchased Assets under which Seller is a lessor or sublessor of, or makes
available for use to any Person (A) any Owned Real Property or Leased Real
Property or (B) any portion of any premises otherwise occupied by
Seller;
  33
  (vi)  a lease,
sublease or similar Contract under which (A) Seller is lessee of, or holds
or uses, any machinery, equipment, vehicle or other tangible personal property
owned by any Person or (B) Seller is a lessor or sublessor of, or makes
available for use by any Person, any tangible personal property owned or leased
by Seller, in any such case has an aggregate future liability or receivable, as
the case may be, in excess of $500,000 and is not terminable by Seller by notice
of not more than 60 days for a cost of less than $500,000;
  (vii)  a
Contract under which Seller has incurred, or reasonably anticipates as of the
date of this Agreement incurring, an aggregate liability to any Person in excess
of $500,000 in the calendar year 2008, or in any subsequent calendar year, for
(A) the future purchase of materials, supplies or equipment (other than
purchase orders for gas in the ordinary course of business consistent with past
practice), (B) a management, service, consulting or other similar Contract
or (C) an advertising agreement or arrangement;
  (viii)  a
license, sublicense, option or other Contract relating in whole or in part to
the Assigned Intellectual Property (including any license or other Contract
under which Seller is licensee or licensor of any Assigned Intellectual
Property) or to any Technology that has an aggregate future liability to any
Person in excess of $100,000 and is not terminable by Seller by notice of not
more than 60 days for a cost of less than $100,000;
  (ix)  a
Contract (including any so-called take-or-pay or keepwell agreement) under which
(A) any Person has directly or indirectly guaranteed Disclosed Indebtedness,
liabilities or obligations of Seller or (B) Seller has directly or indirectly
guaranteed Disclosed Indebtedness, liabilities or obligations of any other
Person (in each case other than endorsements for the purpose of collection in
the ordinary course of business), in any such case that, individually, is in
excess of $100,000;
  (x)  a
Contract under which Seller has, directly or indirectly, made any advance, loan,
extension of credit or capital contribution to, or other investment in, any
Person (other than Seller and other than extensions of trade credit in the
ordinary course of the Business), in any such case that, individually, is in
excess of $100,000;
  (xi)  a
Contract granting an Encumbrance (other than Permitted Encumbrances) upon any
Owned Real Property, Leased Real Property or other Purchased Asset;
  (xii)  a
Contract made outside the ordinary course of business providing for
indemnification of any Person with respect to liabilities relating to any
current or former business of Seller or any predecessor Person;
  (xiii)  a power
of attorney (other than a power of attorney given in the ordinary course of the
Business);
  34
  (xiv)  a Gas
Supply Contract;
  (xv)  a
Customer Gas Transportation Contract;
  (xvi)  a
Contract for the storage of gas (including park and ride type
agreements);
  (xvii)  a
Contract for the gathering or processing of gas;
  (xviii)  a
Contract for the interconnection or operation of any gas pipeline;
  (xix)  a
Contract for lease of gas pipeline capacity;
  (xx)  a
Contract for the sale of any Purchased Asset (other than inventory sales in the
ordinary course of business) or the grant of any preferential rights to purchase
any such Purchased Asset;
  (xxi)  a
currency exchange or interest rate exchange Contract; or
  (xxii)  a
Contract for any joint venture, partnership or similar arrangement.
  (b)  Except
as disclosed in Schedule5.9(b)(i), each of the
Material Business Agreements 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, except where the
impact of such lack of validity or binding nature, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse 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 or which, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect.  Except as
set forth in Schedule5.9(b)(ii), 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 such breaches or events of default which, individually or in
the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect.
  (c)  Schedule5.9(c)sets forth
a list of each municipal, county or tribal franchise agreement relating to the
Business to which Seller is a party (the “Franchises”).  Except
as disclosed on Schedule5.9(c), Seller is
not in default in any material respect under such Franchises, and, to Seller’s
Knowledge, each such Franchise is in full force and effect.
  35
  (d)  Schedule5.9(d)sets forth
a list, as of the date of this Agreement, of all material arrangements under
which Seller is required to provide security or guarantees for the performance
of obligations of the Business.
  (e)  As of the
date of this Agreement, the aggregate principal amount of all outstanding
Disclosed Indebtedness (other than any Disclosed Indebtedness that is an
Excluded Liability) does not exceed $3,000,000.
  5.10  Legal Proceedings and
Orders.  Except as set forth in Schedule5.10, there are
no Claims relating to the Purchased Assets, the Business or the Assumed
Obligations which are pending or, to Seller’s Knowledge, threatened against
Seller which, individually or in the aggregate, have had or would reasonably be
expected to have a Material Adverse Effect.  Except for any Regulatory
Orders, or as set forth in Schedule5.10, Seller is
not subject to any outstanding Orders that would reasonably be expected to apply
to the Purchased Assets, the Business or the Assumed Obligations following
Closing that would reasonably be expected to have a Material Adverse
Effect.
  5.11  Permits.  Schedule5.11 sets forth a
list of all material Permits held by Seller as of the date of this Agreement in
connection with its ownership of the Purchased Assets and the operation of the
Business as presently conducted.  Except as disclosed on Schedule5.11, there are no
Permits required by Seller for the ownership of the Purchased Assets or the
operation of the Business, other than those Permits the failure to have,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect.  Except as disclosed on
Schedule5.11, Seller has
not received any written notification since December 31, 2006 from any
Governmental Entity exercising regulatory jurisdiction over Seller or the
Business that it is in violation of any such Permits, except notifications of
violations which, individually or in the aggregate, have not had would not
reasonably be expected to have a Material Adverse Effect.  Seller is
in compliance with all such Permits except where such non-compliance,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect.  There are no ongoing
proceedings before any Regulatory Entity or inquiries, investigations,
proceedings or appeals pending for the amendment, termination or revocation of
any Permit or for the determination of compliance therewith or with any Law or
Order applicable to the Business, which, individually or in the aggregate, have
had or would reasonably be expected to have a Material Adverse
Effect.
  5.12  Compliance with
Laws.  Seller is in compliance with all Laws and Orders
applicable to the Purchased Assets or the Business except where the failure to
be in compliance, individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect.
  5.13  Insurance.  Except
as set forth on Schedule5.13, since
December 31, 2006, (a) the Purchased Assets have been continuously insured with
financially sound insurers or through Seller’s self-insurance program in such
amounts and against such risks and losses as are customary in the natural gas
utility industry, and (b) 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 with third-party insurance carriers covering the
Purchased Assets are in full force and effect; however, coverage of the
Purchased Assets under Seller’s insurance policies will terminate as of the
Effective Time.
  36
  5.14  Taxes.  Except
as set forth in Schedule5.14:
  (a)  All Tax
Returns relating to the Business or the Purchased Assets are true, complete and
correct and have been filed in a timely manner, and all Taxes relating to the
Business or the Purchased Assets have been paid in full, except to the extent
such Taxes are being contested in good faith by appropriate
proceedings.
  (b)  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.
  (c)  There are
no Encumbrances for unpaid Taxes on any of the Purchased Assets other than
Encumbrances for Taxes that are not yet due and payable.
  (d)  There
have not been any material elections with respect to Taxes by Seller in respect
of the Business or settlement or compromise by Seller of any material Tax
liability or refund relating to the Business.
  (e)  None of
the Purchased Assets is or has been the subject of an audit or examination with
respect to Taxes (other than income Taxes) by any Taxing Authority.
  5.15  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.
  5.16  Intellectual
Property.  Seller owns, or is validly licensed or otherwise has
the right to use the Assigned Intellectual Property.  Except as set
forth on Schedule5.10, no Claims
are pending or, to Seller’s Knowledge, threatened that Seller or the Business is
infringing or otherwise adversely affecting the rights of any Person with regard
to any patents, patent rights, trademarks, trademark rights, trade names, trade
name rights, service marks, service marks rights, copyrights and other
proprietary intellectual property rights and computer programs, except for
claims that, individually or in the aggregate, have not had and would not
reasonably expected to have a Material Adverse Effect.  To Seller’s
Knowledge, no Person is infringing the rights of Seller or the Business with
respect to any Assigned Intellectual Property, except for infringements that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect.
  5.17  Inspections.  Seller
acknowledges and agrees that the representations and warranties set forth in Article VI
constitute the sole and exclusive representations and warranties of Buyer to
Seller in connection with the transactions contemplated hereby and by the
Ancillary Agreements, and there are no other representations, warranties,
covenants, understandings or agreements, oral or written, in relation thereto
between the Parties other than those incorporated herein.
  37
  5.18  Sufficiency of Purchased
Assets.
  (a)  The
Purchased Assets, together with (i) the Excluded Assets specified in Sections2.2(a), 2.2(c), 2.2(h), 2.2(k)(ii), 2.2(k)(iii), 2.2(k)(iv) and 2.2(l),
(ii) the Easements, Shared Easements and Shared Easement Rights to be
conveyed and assigned to Buyer pursuant to Section7.4(b),
(iii) the Allocated Rights and Obligations to be assigned to and assumed by
Buyer pursuant to Substitute Arrangements or Other Arrangements, as the case may
be, as described in Section7.4(e) and (iv)
the Shared Telecommunications Network Element Rights to be assigned to Buyer
pursuant to Section7.4(h), comprise
assets sufficient for the conduct of Business immediately and without
interruption following the Closing in substantially the same manner as presently
conducted.
  (b)  No asset
which would be a Purchased Asset if owned by Seller is owned by any Affiliate of
Seller.
  5.19  Absence of Certain Changes
or Events; Major Customers.
  (a)  Except
as set forth in Schedule5.19(a), from
September 30, 2007, to the date of this Agreement, there has not been any
event, change or occurrence that, individually or in the aggregate, has had or
would be reasonably expected to have a material adverse change in the business,
assets, properties, results of operations, or financial condition of the
Business, taken as a whole.  Except as set forth in Schedule5.19(a), from
January 1, 2007 to the date of this Agreement, Seller has caused the
Business to be conducted in the ordinary course and in all material respects in
the same manner as previously conducted and has made all reasonable efforts
consistent with past practices to preserve the relationships of the Business
with customers, suppliers and other with whom the Business deals.
  (b)  Between
the date of the Interim Balance Sheet and the date of this Agreement, no Major
Customer has (i) canceled, suspended or otherwise terminated its
relationship with Seller in respect of the Business or (ii) to Seller’s
Knowledge, advised Seller of its intention to (A) cancel, suspend or
otherwise terminate its relationship with Seller in respect of the Business,
(B) materially and adversely change the terms (including pricing) upon
which it pays for transmission and distribution services from the Business or
(C) materially reduce the volume of its transmission and distribution purchases
from the Business.  For purposes of this Section5.19(b), the
“Major Customers” are the 25 largest customers of the Business, measured by
Gross Margin, for the 12-month period ended on the date of the Interim Balance
Sheet.
  5.20  Hedging.  Each
Financial Hedge to which Seller is a party as of the date of this Agreement has
been entered into in compliance with the Annual Hedge Strategy, the Financial
Hedge Orders and all other Orders of the NMPRC.  The Annual Hedge
Strategy in effect as of the date of this Agreement is attached hereto as Schedule5.20.
  38
  5.21  Regulatory
Compliance.  Since December 31, 2006, Seller has filed or
caused to be filed with each of the NMPRC and FERC (each, a “Business Regulatory
Entity”) all material forms, statements, reports and documents (including
all exhibits, amendments and supplements thereto) required by applicable Law or
Order to be filed by Seller in connection with the conduct or operation of the
Business or the ownership of the Purchased Assets.  All information
filed with or provided to any Business Regulatory Entity since December 31,
2006, by Seller in connection with the conduct or operation of the Business or
the ownership of the Purchased Assets, including filings in connection with a
prior or pending investigation, inquiry or proceeding before a Business
Regulatory Entity (a “Business Regulatory
Proceeding”), was true, correct and complete in all material respects and
complied in all material respects with applicable Law.  Schedule5.21 sets forth
the regulatory filings (other than those periodic filings required to be filed
in the ordinary course of business) and Business Regulatory Proceedings that are
pending or that Seller has been ordered by a Business Regulatory Entity as of
the date of this Agreement to make or initiate in the future, including those
relating to operating tariffs or rates charges, or to be charged, including
under special contracts, the subject matter of each filing or Business
Regulatory Proceeding, and the date by which Seller intends to make or initiate,
or has been ordered to make or initiate, such filings or Business Regulatory
Proceedings, in each case, in connection with the conduct or operation of the
Business or the ownership of the Purchased Assets.  Since
December 31, 2006, all charges that have been made by the Business for
utility service and all related fees have, in all material respects, been
charged in accordance with the terms and conditions of valid and effective
tariffs, approved and enforceable special contracts or contracts filed with the
NMPRC.  Except for the PGAC and other gas cost recovery type rates set
forth in Schedule5.21, no rates
which have been or are being collected in connection with the Business are
subject to refund, pending final resolution of any proceeding, inquiry, appeal
or investigation before any Governmental Entity.
  ARTICLE
VI
 REPRESENTATIONS
AND WARRANTIES OF BUYER
  Buyer
represents and warrants to Seller, as of the date of this Agreement and as of
the Effective Time, as set forth in this Article
VI.
  6.1  Organization.  Buyer
is a corporation duly organized, validly existing, and in good standing under
the laws of the state 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 and the Ancillary Agreements.  Buyer has all
corporate power and authority necessary to execute and deliver this Agreement
and the Ancillary Agreements and to consummate the transactions contemplated
hereby.  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 Buyer and no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement and the Ancillary Agreements or to
consummate the transactions contemplated hereby and thereby.  This
Agreement has been and the Ancillary Agreements will be, at Closing, duly and
validly executed and delivered by Buyer, and constitute valid and binding
agreements of Buyer, enforceable against Buyer in accordance with their
respective 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.
  39
  6.3  Consents and Approvals; No
Violation.  Except as set forth in Schedule6.3, 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 the Governing Documents of Buyer or its
Affiliates;
  (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; or
  (d)  require
any declaration, filing, or registration with, or notice to, or authorization,
consent, or approval of any Governmental Entity, 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, individually or in the aggregate, prevent or
materially delay the consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements.
  6.4  Buyer’s
Knowledge.  Buyer represents that it is a sophisticated
party.  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 and that actual future results may vary from such forecasts or
projections based upon numerous factors.
  6.5  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.
  40
  6.6  Financial
Capability.
  (a)  Buyer (i)
will have at the Closing 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 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.
  (b)  Lindsay
Goldberg & Bessemer GP II LLC, the general partner of Lindsay Goldberg &
Bessemer II L.P. and certain affiliated investment partnerships (collectively,
the “Funds”), has
delivered a commitment letter on behalf of the Funds dated as of January 12,
2008 to Buyer (the “Equity Commitment
Letter”), and a copy of such Equity Commitment Letter has been provided
to Seller.  Seller is a third party beneficiary of the Equity
Commitment Letter.
  (c)  Buyer
has received a commitment letter dated January 12, 2008 (the “Debt Commitment
Letter” and together with the Equity Commitment Letter, the “Commitments”) from
the lenders party thereto (the “Commitment Parties”)
relating to the commitment of the Commitment Parties to provide a $250,000,000
senior secured term loan and a $100,000,000 senior secured revolving credit
facility to Buyer.  Buyer has provided to Seller a copy of the Debt
Commitment Letter and any related agreements that materially affect or relate to
the size, duration or conditions of the Debt Commitment Letter.
  (d)  As of the
date of this Agreement, (i) the Commitments have not been amended,
modified, withdrawn or rescinded in any respect, (ii) the Commitments are
in full force and effect, (iii) there are no conditions precedent or other
contingencies related to the funding contemplated by the Commitments, other than
as set forth in, or contemplated therein, and (iv) no event has occurred
which, with or without notice, lapse of time or both, would constitute a default
or breach on the part of Buyer or Parent under any term or condition of the
Commitments.
  6.7  Inspections.  Buyer
is knowledgeable about the Business as engaged in by Seller and of the usual and
customary practices of companies engaged in businesses similar to the
Business.  Buyer acknowledges and agrees that the representations and
warranties set forth in ArticleV constitute the
sole and exclusive representations and warranties of Seller to Buyer in
connection with the transactions contemplated hereby and by the Ancillary
Agreements, and there are no representations, warranties, covenants,
understandings or agreements, oral or written, in relation thereto between the
Parties other than those incorporated herein.  Except for the
representations and warranties expressly set forth in ArticleV, Buyer
disclaims reliance on any representations or warranties, either express or
implied, by or on behalf of Seller or its Affiliates or
Representatives.
  41
 ARTICLE
VII
  COVENANTS
OF THE PARTIES
  7.1  Conduct of
Business.
  (a)  Except
as expressly contemplated in this Agreement, or otherwise described in Schedule7.1, 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, and others having business dealings with the
Business.  Without limiting the generality of the foregoing, except as
expressly contemplated in this Agreement, required by any Franchise, Law, or
Order, or otherwise described in Schedule7.1, prior to the
Closing Date, without the prior written consent of Buyer (which will not be
unreasonably withheld or delayed), Seller will not:
  (i)  create,
incur, assume, or suffer to exist any Encumbrance (other than Permitted
Encumbrances) upon the Purchased Assets;
  (ii)  make any
material change in the level of inventories (including gas in storage)
customarily maintained by Seller with respect to the Business, other than in the
ordinary course of business and consistent with Good Utility
Practice;
  (iii)  other
than any such sales, leases, transfers, or dispositions involving any Purchased
Assets involving less than $250,000 on an individual basis, or $1,500,000 in the
aggregate, sell, lease (as lessor), transfer, or otherwise dispose of any of the
Purchased Assets, other than in the ordinary course of business, and 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, future or former employee of the
Business that would be the responsibility of Buyer;
  (vi)  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;
  (vii)  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;
  42
 (viii)  except as
set forth in Section7.9, (A) grant
any increase in the compensation of or (B) grant or agree to any bonus for any
Business Employee not covered by collective bargaining who will become a
Transferred Employee, except for merit increases and bonuses made in the
ordinary course of business and consistent with past practice;
  (ix)  (A)
enter into or use any GSP Financial Hedge that is inconsistent with the Annual
Hedge Strategy, the Financial Hedge Orders and any other Order of the NMPRC, (B)
enter into, adopt or amend any Gas Supply Plan other than in accordance with
prior practice and after consultation with Buyer or (C) enter into in connection
with the Business any Financial Hedge other than a GSP Financial Hedge;
  (x)  incur
(A) any Disclosed Indebtedness if (1) such Disclosed Indebtedness will
accelerate upon the Closing or (2) such Disclosed Indebtedness is not prepayable
without penalty at the option of Buyer immediately following the Closing or (B)
any Disclosed Indebtedness that, together with all other Disclosed Indebtedness
outstanding at the time, exceeds $3,000,000 in principal amount (excluding from
this clause (x) all Excluded Liabilities);
  (xi)  make or
commit to make any capital expenditures that, in the aggregate, are in excess of
$4,000,000, other than in accordance with the Capital Expenditure
Budget;
  (xii)  (A) permit
any material Permit or Environmental Permit to lapse, other than in accordance
with its terms at the regular expiration thereof, or (B) fail to apply on a
timely basis for any renewal of any material renewable Permit or Environmental
Permit; or
  (xiii)  agree or
commit to take any action which would be a violation of the restrictions set
forth in Section7.1(a)(i) through
Section7.1(a)(x).
  (b)  Prior to
the Closing Date and other than in connection with periodic or routine filings,
applications or appearances in respect of any PGAC applicable to the Business,
Seller (i) shall discuss with Buyer the taking of any action or position that
could result in any change or proposed change in the rates or charges, standards
of service or accounting from those in effect on the date of this Agreement, in
each case in respect of the Business, whether in response to a request by or
requirement of the NMPRC or otherwise, (ii) shall consult with and receive the
input of Buyer prior to making any filing or application (or, in each case, any
amendment thereto), or effecting any agreement, commitment, arrangement or
consent, whether written or oral, formal or informal, with respect thereto and
(iii) except as set forth in Schedule7.1(b), shall
not, without the input and consent of Buyer (such consent not be unreasonably
withheld), make any filing to change the base rates of or any PGAC applicable to
the Business on file with any Business Regulatory Entity or make any filing that
is reasonably likely to have a material adverse effect on the base rates of or
any PGAC applicable to the Business, except as may be required by applicable Law
or valid Order of any Business Regulatory Entity.
  43
 (c)  Seller
shall:
  (i)  develop
the capability to provide separate bills to customers of the Business and of the
Electric Business, such that each customer of the Business can be sent a bill
that invoices only gas purchased from and services provided by the Business (a
“Gas
Bill”) and that does not include or invoice any amounts owed by such
customer in respect of the Electric Business or any other business of Seller (an
“Electric
Bill”).
  (ii)  Upon
application for and the receipt of approval from the NMPRC and prior to such
approval becoming a Final Regulatory Order, commence sending to each customer
that is a customer of the Business and the Electric Business, a Gas Bill and an
Electric Bill.
  (iii)  Commencing
no later than three months prior to the Closing, adopt a system for the
allocation of payments by customers of both the Business and the Electric
Business in respect of joint bills, such that:
  (A)  payments
from such customers are allocated to the portion of such joint bills
attributable to the Business (“Gas Accounts”) and
the portion of such joint bills attributable to the Electric Business (“Electric
Accounts”);
  (B)  payments
received in respect of overdue amounts are allocated on a first-in-first-out
basis; and
  (C)  where
partial payments are submitted in respect of amounts owed in respect of a Gas
Account and an Electric Account, such partial payments are allocated on a pro
rata basis among such accounts.
  (d)  Until the
Closing Date, in connection with the Business Seller will continue to make
capital expenditures (i) at a rate of at least 85% of the aggregate Capital
Expenditure Budget and (ii) otherwise substantially in accordance with the
Capital Expenditure Budget.
  (e)  Until the
Closing Date, Seller will continue in all material respects to pay all fees,
expenses and any other amounts payable or due in respect of any Easement or
Shared Easement, whether public or private, or any Franchise or Permit, in each
case in respect of the operation of the Business and whether or not expired or
lapsed.
  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, Buyer’s
Representatives and its financing providers (including prospective providers of
financing) and their respective counsel, auditors and other authorized
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, Buyer’s Representatives and its financing
providers
   44
  (including
prospective providers of financing) and their respective counsel, auditors and
other authorized representatives to make such reasonable inspections thereof as
they may reasonably request; (iii) furnish Buyer, Buyer’s Representatives and
its financing providers (including prospective providers of financing) and their
respective counsel, auditors and other authorized representatives with such
financial and operating data and other information with respect to the Business
as such Persons may from time to time reasonably request; (iv) furnish Buyer
with a copy of each material report, schedule, or other document relating to the
Business filed by Seller with, or received by Seller from, any Governmental
Entity; (v) give Buyer and Buyer’s Representatives reasonable access to each
member of the Transition Advisory Team; and (vi) give Buyer and Buyer’s
Representatives reasonable access to such personnel, information and assets of
Seller as may be necessary to fulfill Buyer’s obligations under
Section 3(a)(iv) of the Transition Services Agreement; provided, however, that
(A) any investigation permitted by this Section7.2(a) will be
conducted in such a manner as not to interfere unreasonably with the operation
of the Business or any other Person, (B) Seller will not be required to take any
action which would constitute a waiver of the attorney client privilege, and (C)
Seller need not supply Buyer with any information which Seller is under a
contractual or other legal obligation not to supply.  Notwithstanding
anything in this Section7.2 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.
  (b)  Unless
and until the transactions contemplated hereby have been consummated, each Party
will, and will cause its Affiliates and Buyer’s Representatives and potential
financing sources or Seller’s Representatives, as applicable, to, hold in strict
confidence and not use or disclose to any other Person all Confidential
Information.  As to each Party, “Confidential
Information” means all information in any form heretofore or hereafter
obtained from either Party in connection with such Party’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
that (i) was already in such receiving Party’s or its Representatives’ or, in
the case of Buyer, its potential financing sources’ possession; provided, that such
information is not known by such receiving Party, after due inquiry, to be
subject to another confidentiality agreement with or other obligation of secrecy
to the other Party or any other party, (ii) subsequently becomes generally
available to the public other than as a result of a disclosure by such receiving
Party or its Representatives or, in the case of Buyer, its potential financing
sources in breach of this Section7.2(b) or the
Confidentiality Agreement or (iii) subsequently becomes available to such
receiving Party on a non-confidential basis from a source other than the other
Party or its Representatives or, in the case of Buyer, its potential financing
sources; provided, that such
source is not known by such receiving Party, after due inquiry, to be bound by a
confidentiality agreement with or other obligation of secrecy or non-disclosure
to the other Party or any other
   45
  party.  Notwithstanding
the foregoing, each Party, its Affiliates, its Representatives or, in the case
of Buyer, its potential financing sources, may disclose Confidential Information
to the extent that such information is required to be disclosed by it by Law, in
connection with any proceeding by or before a Governmental Entity, including any
disclosure, financial or otherwise, required to comply with any Required
Regulatory Approvals or if requested by any Governmental Entity having
jurisdiction over the Party, its Affiliates, its Representatives or, in the case
of Buyer, its potential financing sources.  In the event that a Party
receives a request (whether by oral questions, interrogatories, requests for
documents in legal proceedings, under the terms of a subpoena or order issued by
a court or governmental body or other similar process or otherwise pursuant to
applicable regulation (including stock exchange) to disclose all or any part of
the Confidential Information, such Party agrees, and shall cause its
Representatives, to promptly notify the other Party of the existence, terms and
circumstances surrounding such a request, so that such other Party may seek, at
its expense, an appropriate protective order and/or waive such notifying Party’s
compliance (or its Representatives’ compliance, as the case may be) with the
provisions of this Section7.2(b) and the
Confidentiality Agreement (and if such Party seeks such an order, to provide
such cooperation as such Party shall reasonably request).  If
disclosure of such information is required in the opinion of a Party’s counsel
(or its Representatives’ counsel, as the case may be), who shall be reasonably
satisfactory to the other Party, the receiving Party agrees, and shall cause its
Representatives to, exercise commercially reasonable efforts to obtain, at the
other Party’s expense, an order or other reliable assurance that confidential
treatment will be accorded to such of the disclosed information which the other
Party so designates.  In addition, if a protective order is not
obtained, such receiving Party will furnish only that portion of the
Confidential Information which is legally required.  In any event, any
Party or its Representatives may disclose Evaluation Material legally required
to be disclosed without liability hereunder.  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.
  (c)  Seller
agrees that for the thirty (30) month period immediately following the Closing
Date, Seller will, and will cause its Affiliates and Seller’s Representatives
to, hold in strict confidence and not disclose to any other Person all
Confidential Business Information.  “Confidential Business
Information” means all commercially sensitive information in any form
heretofore or hereafter obtained by Seller to the extent relating to the
Business or the Purchased Assets, 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.  Notwithstanding the foregoing, Seller may disclose
Confidential Business Information to the extent that such information is
required to be disclosed under contracts existing as of the Closing Date, 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
rules of the Securities and Exchange Commission (the “SEC”) or Required
   46
  Regulatory
Approvals.  In the event that Seller believes any such disclosure is
required by Law or in connection with any proceeding by or before a Governmental
Entity, Seller will give Buyer notice thereof as promptly as possible and will
cooperate with Buyer in seeking any protective orders or other relief as Buyer
may determine to be necessary or desirable.  In no event will Seller
make or permit to be made any disclosure of Confidential Business Information
other than to the extent Seller determines in good faith to be required pursuant
to SEC rules, or rules governing required disclosure in other regulatory
proceedings, or its legal counsel has advised is required to comply with the
terms of a contract existing as of the Closing Date or required by Law, or is
required in connection with any proceeding by or before a Governmental Entity,
and Seller will use its commercially reasonable efforts to assure that any
Confidential Business Information so disclosed is protected from further
disclosure.
  (d)  Buyer
agrees that, without Seller’s written consent, except as otherwise provided for
in this Agreement, for two years from date of this Agreement, neither it nor any
of its Affiliates will, directly or indirectly, (i) solicit any suppliers,
customers and/or any other person with whom Seller has a business relationship,
other than in the ordinary course of business or (ii) solicit for employment or
hire (or cause or seek to cause to leave the employ of Seller) any person with
whom Buyer had contact or who became known to Buyer as a result of the provision
of the Confidential Information and who is an employee of Seller or any
subsidiary thereof; provided, however, that the foregoing clause
(ii) of this Section7.2(d) shall not
preclude Buyer from hiring individuals contacted through good faith generalized
solicitations for employees through advertisements which utilize a public medium
and are not directly or indirectly targeted at employees of Seller or any of its
Affiliates or from hiring any employee of Seller or its Affiliates who has been
terminated by Seller or its Affiliates prior to commencement of employment
discussions between Buyer and such employee.
  (e)  Buyer and
Seller hereby terminate the Confidentiality Agreement.  The provisions
of Sections7.2(b)
and 7.2(d) will
survive for a period of two years following the earlier of (i) the Closing Date
or (ii) the termination of this Agreement, except that if the Closing occurs,
the provisions of Section7.2(b) will expire
with respect to Buyer and its possession or use of any information exclusively
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 the Documents and 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 Assets or, in the
case of access by Buyer and its representatives, in connection with the
preparation of audited financial statements as of or for any period ending on a
date prior to the Effective Time. 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;
   47
  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 Section7.2(f).  If
the Party in possession of such books and records desires to dispose of any such
books and records at any time, 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.  Notwithstanding anything to the contrary in this Section7.2(f), following the
expiration of the seven year period set forth above, each Party agrees to
provide reasonable access to all of the books and records relating to the
Business or the Purchased Assets, including the Documents and all Transferred
Employees Records, in the possession of the other Party to the extent required
to respond to any proceeding before the NMPRC or the FERC.
  (g)  Not later
than June 30, 2008, at Buyer’s expense, Seller will prepare and deliver to
Buyer an audited statement of income of the Business for the fiscal year ended
December 31, 2007.  In the course of preparing such audited
statement of income, any judgment or determination as to materiality shall be
made in light of the Business and not in light of the operations of Seller taken
as a whole.
  (h)  Not
later than 30 days following the date hereof, Seller will prepare and deliver to
Buyer Schedule
7.2(h), which schedule shall include a list of each Business Agreement
under which Seller has incurred Disclosed Indebtedness in an aggregate principal
amount in excess of $100,000.  Not later than ten days prior to the
Closing, Seller will prepare and deliver to Buyer a supplemented Schedule 7.2(h)
pursuant to Section
7.8, which schedule shall include a list of each such Business Agreement
as of such date.
  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 with 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.
  48
  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.  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 (including the obtaining of the Required Regulatory
Approvals).  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) without being required to make any
payment to any third party or to incur any economic burden, cooperate reasonably
with Seller in connection with Seller obtaining any releases or discharges of
Seller from any of the Assumed Obligations; provided, however, that if in
the course of obtaining any release or discharge contemplated by clause (ii) of
this sentence any third party shall require any payment or other form of
consideration to be made or delivered by Buyer, Seller agrees to fully reimburse
Buyer therefor promptly following notice thereof.
  (b)  Seller
has easements, license agreements (including railroad crossing rights),
rights-of-way, and leases for rights-of-way, some of which relate exclusively to
the Business and Purchased Assets (the “Easements”) and
others of which relate to both the Business and Purchased Assets and Seller’s
Electric Business or 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, partial
assignment 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)  To the
extent that Seller’s rights under any asset described in Section2.1(b), 2.1(c), 2.1(h), 2.1(i), 2.1(l), 2.1(m), 2.1(n), 2.1(p), 2.1(r), 2.1(u) or 2.1(y) (each, a
“Consent Asset”) 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.  Upon receipt of the consent required to transfer a Consent
Asset, such Consent Asset shall become a Purchased Asset and all liabilities and
obligations under such Consent Asset shall constitute Assumed
Obligations.  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 or to incur any economic burden (other
than the assumption of Seller’s obligations under the applicable Consent
Asset).  Seller and Buyer agree that if any consent to an assignment
of any such asset is not obtained or if any attempted assignment would be
ineffective or would impair Buyer’s rights and obligations under such Consent
Asset so that Buyer would not acquire the benefit of all such rights and
obligations, then (i) at the Closing the Parties will, to the maximum extent
permitted by Law and such Consent Asset, enter into such arrangements with each
other on commercially reasonable terms as are reasonably necessary to provide
Buyer with the benefits and obligations of such Consent Asset from and after the
Effective Time, and (ii) all liabilities and obligations under such Consent
Asset shall not constitute Assumed Obligations.
   49
 (d)  Buyer
and Seller agree that at Closing, Buyer and Seller will enter into one or more
back-to-back Contracts, in customary form, with appropriate credit terms,
pursuant to which Seller will transfer to Buyer, and Buyer will acquire, the
economic benefits and risks of Seller’s entire portfolio at the Effective Time
of GSP Financial Hedges, such that under the PGAC the customers of the Business
and the Business remain in the same economic position immediately following the
entry into of such new Contracts as immediately preceding the Effective
Time.  Any transaction costs incurred as a result of such transactions
will be borne by the Party that performs the transaction.
  (e)  The
agreements set forth on Schedule7.4(e) (the “Shared Agreements”)
will be governed by this Section7.4(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 Schedule7.4(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 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 on commercially reasonable terms as are reasonably necessary to
provide Buyer with the benefits and obligations of the Allocated Rights and
Obligations under such Shared Agreement, including pursuant to the Transition
Services Agreement, with Seller retaining the other benefits and obligations
under such Shared Agreement from and after the Effective Time (the “Other
Arrangements”).  In the event the entry into any Substitute
Arrangement or Other Arrangement contemplated by this Section7.4(e) gives rise
to any filing, notice, reporting or any other obligation of Buyer or Seller,
including any obligation to appear before, make application or provide
information, to the NMPRC or any other regulatory entity exercising jurisdiction
over Seller or the Business (a “Regulatory Entity”),
Buyer and Seller will use their 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 satisfy any such obligation.
   50
 (f)  Seller
from time to time provides collateral or other security to certain other Persons
in connection with the Business pursuant to 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 at the
Closing (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. 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.
Buyer agrees to provide substitute collateral and other security with respect to
such Business Agreements and Shared Agreements in amounts and on terms of no
less quality than previously provided by Seller. The provisions of this Section7.4(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)  Customers of Seller from time to time provide collateral or other security to
Seller in connection with the Business in the form of surety or similar
agreements (the “Surety
Instruments”).  Buyer acknowledges and agrees that to the
extent any such Surety Instruments are not related exclusively to the Business
(“Seller Common Surety
Instruments”) such Seller Common Surety Instruments are not part of the
Purchased Assets.  If any Seller Common Surety Instrument
disproportionately secures obligations owed by a customer of the Electric
Business, Seller will upon request of Buyer release such security to such
customer to the extent appropriate to eliminate such
overcollateralization.
  (h)  Seller
has tower lease and sub-lease agreements, licenses issued by the FCC, franchise
agreements, wireline telecommunications facilities, dark fiber agreements
including Indefeasible Right of Use Agreements, easements and rights-of-way, and
leases for rights-of-way, some of which relate exclusively to the Business and
Purchased Assets (the “Telecommunications Network
Elements”) and others of which relate to both the Business and Purchased
Assets and Seller’s Electric Business or other businesses (the “Shared Telecommunications
Network Elements”).  At the Closing, Seller will convey and
assign to Buyer, subject to the obtaining of any necessary consents, (i) by
assignment or other appropriate document, all Telecommunications Network
Elements, and (ii) by separate sub-lease, sub-easement, management agreement,
private carriage agreement or other appropriate document, sufficient rights
under the Shared Telecommunications Network Elements to permit Buyer to use the
same, as presently used by Seller with respect to the Business, on a
nonexclusive basis for no more than two (2) years following Closing (the “Shared Telecommunications
Network Element Rights”).
   51
 (i)  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.
  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
Section7.2(b).
  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, execute all agreements and documents and provide all relevant
records and reports to the extent required by Law or Order or to the extent
requested by any Governmental Entity 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), 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.
  52
 (c)  In the
course of obtaining, renewing or securing Franchises as may be deemed necessary
by the Parties in connection with the transactions contemplated herein,
(i) Buyer shall not be required to take any action, and Seller shall not
take or cause to be taken or agree to commit Buyer to take any action, in any
such case individually or in the aggregate which would (A) materially impair the
ability of Buyer to operate the Business immediately following Closing in a
manner substantially similar to that prevailing with respect to the Business
immediately prior to the date hereof or (B) impose any additional
substantially burdensome condition on Buyer and (ii) Seller shall not be
required to take any action, and Buyer shall not take or cause to be taken or
agree to commit Seller to take any action, in any such case individually or in
the aggregate which would (A) materially impair the ability of Seller to operate
the Electric Business immediately following Closing in a manner substantially
similar to that prevailing with respect to the Electric Business immediately
prior to the date hereof or (B) impose any additional substantially burdensome
condition on Seller.  Any failure or refusal by a Governmental Entity
to renew or award any such Franchise will not constitute a breach of this
Agreement by either Party.
  (d)  In
connection with applications and other filings for the Required Regulatory
Approvals, and the prosecution of any pending regulatory proceedings material to
the Business, Buyer and Seller shall jointly, and on an equal basis, coordinate
the overall development of the positions to be taken and the regulatory actions
to be requested in such applications and filings for approval of the sale by
Seller and the purchase by Buyer of the Purchased Assets and the Business, of
all other matters contemplated by this Agreement which require regulatory
approval and of all other regulatory matters incidental thereto which are to be
addressed in such applications and filings.
  (e)  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 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 matterscovered by
Section7.6(e)(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 Section7.6 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 Section7.9.
   53
 7.7  Transfer
Taxes.  All transfer, documentary, stamp, registration, gross
receipts, compensating, 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.
  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 Schedule7.1; provided, however, that the new
disclosures made in any supplement shall not have any effect on the
determination of the satisfaction of the conditions to Closing under Article VIII or
any of Buyer’s rights and claims to indemnification under Article
IX.
  7.9  Employees and Employee
Benefits.
  (a)  From and
after the Effective Time, with respect to the Transferred Employees, Buyer will
recognize the union locals set forth on Schedule7.9(a) (the “Locals”) as the
exclusive bargaining representatives of the bargaining units set forth on Schedule7.9(a) that
include Transferred Employees.  Buyer will assume the Collective
Bargaining Agreements, with respect to the Transferred Employees, at Closing and
will provide to the Transferred Employees covered thereby benefits consistent
with the terms thereof in addition to the other benefits that Buyer is obligated
to provide to Transferred Employees under this Section7.9.
  (b)  Buyer
shall make offers of employment to Business Employees and Designated Employees
in accordance with the following provisions:
  (i)  Buyer
agrees to provide written offers of employment to the Business Employees no
later than 30 Business Days prior to the Closing Date and to hire the Business
Employees who wish to accept the offers of employment.  All offers of
employment will be conditioned on the occurrence of the Closing and will remain
open for a period expiring no earlier than 20 Business Days prior to the Closing
Date.
  (ii)  Buyer
agrees to provide written offers of employment to the Designated Employees in
accordance with Section 5(b) of the Transition Services Agreement. An offer of
employment by Buyer pursuant to this Section7.9(b)(ii) shall
not be considered to be a violation of Section7.2(c).
  (iii)  Any
Business Employees or Designated Employees who accept such offers of employment
shall be considered to be “Transferred
Employees.”
  (c)  Buyer
shall provide to Seller copies of all written offers of employment made to the
Business Employees within five days of providing such written offers to the
Business Employees.  At least seven days prior to the Effective Time,
Buyer shall notify Seller in writing of the Business Employees who have accepted
offers of employment with Buyer.
  54
 (d)  Buyer
agrees to employ the Transferred Employees on terms that are (i) substantially
comparable in the aggregate to the Transferred Employees to their current
employment terms with respect to salary, annual bonus opportunity, base hours,
and vacation (excluding for this purpose any benefits, enhancements or payments
that are contingent upon a change in control or similar transaction) and (ii)
substantially comparable in the aggregate with respect to benefits provided to
the Transferred Employees (including medical, retirement, and severance benefits
and excluding for this purpose any benefits, enhancements or payments that are
contingent upon a change in control or similar transaction and the value of
equity incentives) pursuant to Benefit Plans of Seller in effect as of the date
hereof. Except as provided in Section7.9(f), Buyer’s
obligations pursuant to this Section7.9(d) shall
continue for a period of one year following the Effective Time.
  (e)  From and
after the Transfer Date, the employment of the Transferred Employees with Seller
or Seller’s Affiliates will terminate and the Transferred Employees will not
accrue any additional benefits under any Benefit Plan.  Except as
provided in Section7.9(f), Buyer
shall not assume any of the Benefit Plans and shall have no obligations or
liabilities with respect to the Benefit Plans.  Seller or Seller’s
Affiliates will pay to each Transferred Employee all salary or other
compensation or employment benefits (including any accrued paid-time off) which
has accrued to such Transferred Employee prior to the Transfer
Date.  Buyer or Buyer’s affiliates will pay to each Transferred
Employee all salary or other compensation or employment benefits which accrue to
such Transferred Employee from and after the Transfer Date, at such times as
provided under the terms of the applicable compensation or benefit
programs.
  (f)  Buyer
hereby assumes all liabilities, obligations, and responsibilities of Seller and
Seller’s Affiliates to provide post-retirement health benefits under the Benefit
Plans set forth on Schedule7.9(f) (“Post-Retirement Welfare
Benefits”) to any Grandfathered Active Employee or his or her spouse or
other eligible dependents.  For this purpose a “Grandfathered Active
Employee” is any Transferred Employee who, as of the Transfer Date,
satisfied the eligibility requirements for Post-Retirement Welfare Benefits
under the applicable Benefit Plan sponsored by Seller.  Included
within Schedule7.9(f) is a list
of all Business Employees who are currently eligible for Post-Retirement Welfare
Benefits.  At Closing, Seller will provide Buyer with an updated Schedule7.9(f) that lists
the Business Employees and Designated Employees who as of Closing are eligible
for Post-Retirement Welfare Benefits.  Seller, Seller’s Affiliates and
the Benefit Plans shall not have any liability on or after the Transfer Date for
any Post-Retirement Welfare Benefits of any Grandfathered Active Employee or his
or her spouse or other eligible dependents.  Prior to the Closing
Date, Buyer shall establish a new welfare benefit plan or amend an existing
welfare benefit plan (in either case the “Successor Retiree Welfare
Plan”) which shall expressly assume all of the liabilities, obligations,
and responsibilities of Seller, Seller’s Affiliates and any Benefit Plan to
provide Post-Retirement Welfare Benefits to Grandfathered Active Employees and
their spouses and eligible dependents.  Such liabilities, obligations
and responsibilities will be automatically transferred to the Successor Retiree
Welfare Plan as of the Transfer Date of each Grandfathered Active
Employee.
  55
 (i)  The
Successor Retiree Welfare Plan will recognize all Grandfathered Active
Employee’s service with Seller or Seller’s Affiliates prior to the Transfer Date
of the Grandfathered Active Employee for purposes of determining Post-Retirement
Welfare Benefits.  The Successor Retiree Welfare Plan also shall
provide the Grandfathered Active Employees and their spouses and eligible
dependents with Post-Retirement Welfare Benefits that are comparable to, or more
favorable, in the aggregate than those Post-Retirement Welfare Benefits provided
to such Grandfathered Active Employees and their spouses and eligible dependents
by Seller and the Benefit Plans immediately prior to the Closing Date, under
cost-sharing structures that are at least as favorable to the Grandfathered
Active Employees as the cost-sharing structures in effect from time to time
under the Benefit Plans of Seller from which the benefit obligations were
assumed by the Successor Retiree Welfare Plan.
  (ii)  Effective as of the Closing Date and for a period continuing for at least five
years thereafter (the “Benefit Continuation
Period”), Buyer will continue the Successor Retiree Welfare Plan in
compliance with the provisions of Section7.9(f)(i).
  (iii)  Following
the Benefit Continuation Period, Buyer may amend or terminate the Successor
Retiree Welfare Plan and the Post-Retirement Welfare Benefits for the
Grandfathered Active Employees and their spouses and eligible dependents; provided, however, that Seller
must continue to provide Post-Retirement Welfare Benefits to the Grandfathered
Active Employees until the Allocated Retiree Medical Assets transferred to
Buyer’s VEBA have been exhausted.
  (iv)  On or
prior to the Closing Date, Buyer will provide evidence reasonably satisfactory
to Seller that Buyer has established the Successor Retiree Welfare Plan and is
maintaining one or more trusts meeting the requirements of Section 501(c)(9) of
the Code (the “Buyer’s
VEBA”).
  (v)  In
accordance with the provisions of this Section7.9(f)(v), Seller
will cause one or more of the trusts listed on Schedule7.9(f)
(collectively, “Seller’s VEBA”) to
transfer cash (or other assets as the Parties mutually agree) to the Buyer’s
VEBA.  The transfers will occur on the two dates specified in Section7.9(f)(vii).  Each
transfer will be equal to the Allocated Retiree Medical Assets determined as of
the last Business Day of the month prior to the date of the
transfer.  The “Allocated Retiree Medical
Assets” as of either date shall equal the product of (a) the total value
of the retiree medical assets then held in trusts established by Seller to fund
its retiree medical liability for Post-Retirement Welfare Benefits less assets
set aside or otherwise allocated to fund the retiree medical liability for
Post-Retirement Welfare Benefits for current retirees, times (b) a fraction, the
numerator of which is Seller’s retiree medical liability for Post-Retirement
Welfare Benefits for the Grandfathered Active Employees and their spouses and
eligible dependents and the denominator of which is Seller’s retiree medical
liability for Post-Retirement Welfare Benefits for all active participant’s
(including the Grandfathered Active Employees) and their spouses and eligible
   56
  dependents
(determined prior to the transfer).  The liabilities will be
determined as of the last Business Day of the month prior to the transfer by an
actuary selected by Seller and reasonably acceptable to Buyer and in a manner,
and on the basis of actuarial and other assumptions, consistent with those used
in the most recent actuarial report for Seller’s retiree medical liability for
Post-Retirement Welfare Benefits that is provided to Buyer.  Buyer and
Seller agree that Watson Wyatt or any of its Affiliates shall perform the
actuarial services contemplated by this Section7.9(f)(v).  In
calculating the Allocated Retiree Medical Assets for the initial transfer, the
only Transferred Employees who will be considered to be Grandfathered Active
Employees are those with Transfer Dates occurring on or before the later of the
date on which the calculation is being made or the Effective Time.  In
calculating the Allocated Retiree Medical Assets for the second transfer, the
only Transferred Employees who will be considered to be Grandfathered Active
Employees are those with Transfer Dates occurring after the date as of which the
initial transfer is calculated and on or before the date as of which the second
transfer is calculated.  For purposes of calculating the Allocated
Retiree Medical Assets for the second transfer, the liabilities included in the
numerator of the fraction used in calculating the amount of the initial transfer
will be disregarded both in the numerator and the denominator of the
fraction.  If Seller concludes, in the exercise of its discretion,
that it may not or should not transfer all or any portion of the Allocated
Retiree Medical Assets from Seller’s VEBA to Buyer’s VEBA, Seller may elect to
make a cash payment to Buyer equal to the difference between the Allocated
Retiree Medical Assets and the amount transferred Buyer’s VEBA.
  (vi)  On or
prior to the Closing Date, Seller will provide Buyer with a copy of the Internal
Revenue Service letter for each of the trusts listed Schedule7.9(f) indicating
that such trust is exempt from tax pursuant to the requirements of Section
501(c)(9) of the Code.
  (vii)  The
initial transfer to Buyer’s VEBA will occur as soon as administratively
practicable after both:  (a) Seller either (i) receives a ruling from
the Internal Revenue Service that the transfer of the Allocated Retiree Medical
Assets to Buyer’s VEBA will not cause Seller’s VEBA to fail to qualify under
Section 501(c)(9) of the Code and will not result in taxable income or an excise
Tax to Seller or (ii) notifies Buyer in writing that Seller has determined not
to apply for such a ruling (and Buyer agrees that no ruling should be required),
and (b) Buyer provides evidence reasonably satisfactory to Seller that Buyer’s
VEBA satisfies the requirements of Section 501(c)(9) of the Code.  The
second transfer will occur on the first anniversary of the first transfer or on
such other date as may be mutually agreed upon by Seller and Buyer.
  (viii)  The
amounts transferred to Buyer’s VEBA will be dedicated by Buyer exclusively for
the funding of Post-Retirement Welfare Benefits for the Grandfathered Active
Employees and their spouses and eligible dependents.
  (ix)  Prior to
the Closing, Seller will make contributions to and distributions from Seller’s
VEBA and Seller’s other retiree medical funding arrangements from time to time
in accordance with Seller’s normal policies and past practice determined by
Seller in the exercise of its reasonable discretion.
  57
 (g)  With
respect to any group health plan or program of Buyer or Buyer’s Affiliates in
which a Transferred Employee becomes eligible to participate as of the Transfer
Date or thereafter, Buyer shall take all commercially reasonable steps to ensure
that such Transferred Employee shall (i) receive credit for any deductibles,
co-pays or other out-of-pocket expenses paid under the corresponding group
health plan or program of Seller or Seller’s Affiliates, and (ii) not be subject
to any pre-existing condition limitations to the extent that such pre-existing
condition limitation did not apply to such Transferred Employee under the
corresponding group health plan or program of Seller or Seller’s
Affiliates.
  (h)  Buyer
and Buyer’s Affiliates shall credit each Transferred Employee with the same
number of years of service, including partial years of service, as the
Transferred Employee is credited with by Seller or Seller’s Affiliates (or any
other employer service with which was previously recognized by Seller), under
the applicable benefit plan sponsored by Buyer or Buyer’s
Affiliate.  The service credit required by this Section7.9(h) shall
apply for all purposes under any health, retiree medical, severance, vacation,
sick or any similar paid-time off program or other employee welfare benefit plan
(as such term is defined in Section 3(1) of ERISA) of Buyer or Buyer’s
Affiliates and for purposes of eligibility to participate, vesting, eligibility
for a particular form or type of benefit, and benefit accrual (except for
benefit accrual under a defined benefit pension plan) under any pension,
retirement, savings, or other employee pension benefit plan (as such term is
defined in Section 3(2) of ERISA) of Buyer or Buyer’s Affiliates.
  (i)  Claims
of Transferred Employees and their eligible beneficiaries and dependents for
medical, dental, prescription drug, life insurance, and/or other welfare
benefits (except workers’ compensation or long-term disability benefits) that
are incurred before the Transfer Date shall be the responsibility of Seller and
Seller’s Affiliates.  Claims of Transferred Employees and their
eligible beneficiaries and dependents for medical, dental, prescription drug,
life insurance, and/or other welfare benefits (except workers’ compensation or
long-term disability benefits) that are incurred on or after the Transfer Date
shall be the responsibility of Buyer and Buyer’s Affiliates.  For
purposes of the preceding provisions of this Section7.9(i), a
medical/dental claim shall be considered incurred on the date when the
medical/dental services are rendered or medical/dental supplies are provided,
and not when the condition arose or when the course of treatment
began.
  (j)  Claims of
Transferred Employees and their eligible dependents for health care and
dependent care flexible spending account benefits submitted after the Transfer
Date for expenses incurred by Transferred Employees prior to the Transfer Date
shall be reimbursed by Seller’s or Seller’s Affiliates health care and dependent
care flexible spending account plan to the extent permitted in accordance with
the terms of such plan.  Claims of Transferred Employees and their
eligible dependents for health care and dependent care flexible spending account
benefits submitted after the Transfer Date for expenses incurred by Transferred
Employees subsequent to the Transfer Date shall be reimbursed by Buyer or
Buyer’s Affiliates health care and dependent care flexible spending account plan
to the extent permitted in accordance with the terms of such plan.
  58
  (k)  Claims
for workers’ compensation or long-term disability benefits arising out of
occurrences prior to the Transfer Date shall be the responsibility of Seller and
Seller’s Affiliates.  Claims for workers’ compensation or long-term
disability benefits for Transferred Employees arising out of occurrences on or
subsequent to the Transfer Date shall be the responsibility of Buyer and Buyer’s
Affiliates.
  (l)  Transferred
Employees shall be permitted to rollover any account balances and associated
loans and promissory notes they may have under the PNM Resources, Inc.
Retirement Savings Plan to a Section 401(k) Plan sponsored by Buyer or Buyer’s
Affiliates.
  (m)  If within
the one year period following the Transfer Date, (i) a Transferred Employee
voluntarily terminates his or her employment with Buyer or Buyer’s Affiliates
within 30 days after the date upon which the Transferred Employee is notified
that the principal place of the Transferred Employee’s employment will be 50
miles or more from the location of such Transferred Employee’s principal place
of employment immediately prior to the Transfer Date such that the commute of
such Transferred Employee is materially increased, or (ii) the employment of a
Transferred Employee is terminated for a reason other than “Cause” (as that term
is defined in the PNM Resources, Inc. Non-Union Severance Pay Plan as of the
Transfer Date), then Buyer shall provide such terminated Transferred Employee
with severance payments and benefits at least equal to the severance payments
and benefits that the Transferred Employee would have been entitled to receive
as of the Transfer Date if the terminated Transferred Employee had satisfied all
of the requirements to receive severance benefits under the PNM Resources, Inc.
Non-Union Severance Pay Plan.  Whether the terminated Transferred
Employee’s severance payments and benefits would have been equal to the “Regular
Severance Benefits” or the “Enhanced Severance Benefits” (as those terms are
defined in the PNM Resources, Inc. Non-Union Severance Pay Plan) provided by the
PNM Resources, Inc. Non-Union Severance Pay Plan will depend on whether the
terminated Transferred Employee signs a release that is reasonably acceptable to
Buyer.
  (n)  Buyer
expressly agrees that it assumes all obligations to provide any required notice
under the WARN Act, or other applicable Laws, and to pay all severance payments,
damages for wrongful dismissal and related costs, with respect to the
termination of any Transferred Employee employed by Buyer or Buyer’s Affiliates
that occurs on or after the Closing Date.
  (o)  Seller
and Seller’s Affiliates shall be responsible for compliance with and liability
under Section 4980B of the Code and Sections 601 through 608 of ERISA (“COBRA”) with respect
to any COBRA-qualifying events that occur on or prior to the Closing Date to the
extent mandated by COBRA with respect to the Business Employees, Designated
Employees, Seller’s former employees and the dependents of both of the
foregoing.  Buyer shall be responsible for compliance with and
liability under COBRA with respect to any COBRA-qualifying events that occur
after the Transfer Date with respect to the Transferred Employees, and with
respect to the dependents of such Transferred Employees.
  59
 (p)  Nothing
in this Agreement shall preclude Seller or Seller’s Affiliates, in its sole
discretion, from implementing any retention or other benefit programs, at
Seller’s cost, for the benefit of any group of Business Employees or any
individuals that it deems appropriate.
  (q)  During
the period from the date of this Agreement until the Closing Date, Seller will
work in good faith with Buyer, at Buyer’s cost, to develop retention or other
benefit programs that are reasonably requested by Buyer.  Any such
retention and other benefit programs implemented shall not be considered to be
in effect for any purpose under any other provision of this Agreement, including
but not limited to, the representations in Article
V.
  (r)  Nothing
herein shall be deemed or construed to (i) give rise to any rights, claims,
benefits or causes of action to any Business Employee or Designated Employee or
(ii) prevent, restrict or limit Buyer or Seller or their Affiliates from
terminating the employment of any Business Employee or Designated Employee or
modifying or terminating its pension or other benefit plans, programs or
policies from time to time as they may deem appropriate.
  7.10  Eminent Domain; Casualty
Loss.
  (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
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.
  (b)  If,
before the Closing Date, all or any portion of the Purchased Assets are damaged
or destroyed by fire or other casualty, Seller will notify Buyer in writing of
such fact and, at the Closing (i) pay to Buyer all proceeds from third-party
insurers received by, and assign all of Seller’s right, title, and interest in
and to any such insurance proceeds received, or to be received, in compensation
for such damage or destruction and (ii) reimburse Buyer for any deductible or
self-insured retention amount in connection with such damage or destruction
under any such insurance policy; provided, however, that the
amounts to be paid by Seller to Buyer under clause (i) above shall be reduced by
the amount of proceeds received by Seller and applied with the consent of Buyer
to the repair or restoration of the applicable Purchased Asset and the amounts
to be reimbursed by Seller under clause (ii) above shall be reduced by the
amounts incurred by Seller in connection any such repair or restoration and not
paid or reimbursed by such insurance.
  7.11  Transitional Use of Signage
and Other Materials Incorporating Seller’s Name or other
Logos.  Buyer acknowledges that Seller has the absolute and
exclusive proprietary right to the Seller Marks, all rights to which and the
goodwill represented thereby and pertaining thereto are being retained by
Seller, and that it will have no ongoing claim or rights in or to the Seller
Marks, other than the right to use the Seller Marks for 180 days following the
date hereof.  Except as set forth in the immediately preceding
sentence, Buyer will not use or permit the use of any Seller Marks, and within
180 days following the Closing Date, Buyer will remove or cause the removal the
Seller Marks from all signage or other items relating to or used in the Business
or the Purchased Assets; provided, however, that, Buyer
will not be required to complete the removal of Seller Marks from gas line
markers until the one (1) year anniversary of the Closing
Date.  Except as set forth in this Section7.11, from and
after the Closing Date neither Buyer nor any of its Affiliates will utilize the
name “Public Service Company of New Mexico” or any Seller Marks in the conduct
of the Business.
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  7.12  Litigation and Regulatory
Support.  In the event and for so long as either Party is
actively contesting or defending against any third-party 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 (or Buyer, as successor in interest to the
Business and the Purchased Assets), 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).  In addition, in the event that Buyer is involved in
any proceeding before the NMPRC or the FERC (or any appeal or other judicial
proceeding relating thereto) 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.  The obligations
under this Section7.12 shall
survive the Closing.
  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.
  7.14  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 Owned Real Property, insuring title to the
applicable Owned 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 Owned Real Property,
in form and
   61
 substance
reasonably satisfactory to Buyer; and (iii) all estoppel certificates and
non-disturbance agreements desired by Buyer in respect of any Real Property
Leases, 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, further, 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 Section8.2(f) and as
provided by Section4.3(p), shall not
be required to cure any purported defects, cause any exceptions to be deleted,
or provide any indemnities, or representations to any title company issuing such
title insurance.
  7.15  Central or Shared Functions
for Transition Period.  Seller and Buyer acknowledge that the
Business is currently dependent upon the Central or Shared
Functions.  Seller and Buyer also acknowledge that the Purchased
Assets will not include the assets necessary for Buyer to perform such functions
and that the Designated Employees are not included in the group identified as
the “Business
Employees.”
  7.16  Post-Closing
Insurance.  If Seller has any policies of general, excess,
umbrella, environmental impairment or pollution insurance with third-party
insurance providers (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 be limited to (i) the amount of proceeds
actually received by Seller after the Effective Time under the Seller Insurance
Policies in respect of the Assumed Environmental Liabilities, 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 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,
and Seller will be under no obligation to keep any of the Seller Insurance
Policies in effect following Closing.
  7.17  Financing.
  (a)  Seller
shall, and shall cause its Representatives to, cooperate as reasonably requested
by Buyer and take such actions as Buyer may reasonably request in connection
with the procurement and consummation of the financing by Buyer or its
Affiliates of the transaction contemplated by this Agreement (the “Financing”), which
cooperation shall include provision of such information regarding the Business
as is reasonably requested by the financial institutions providing the
Financing, review and consultation with respect to the preparation of all
agreements, offering memoranda and other documentation (including review of
schedules for completeness) required in connection with the Financing and
attendance
   62
 and
participation at meetings by telephone and in person with respect to syndication
and marketing as is reasonably requested by Buyer; provided, however, that Seller
will not be required to pay any commitment or other similar fee or incur any
other liability, other than out-of-pocket expenses incidental to such
cooperation, in connection with the Financing.  To the extent not
provided prior to the date of this Agreement, Seller shall deliver to Buyer,
within five Business Days of such data being available to Seller’s management,
monthly financial data generated by in respect of the operation of the Business
by Seller’s internal accounting systems in respect of the Business for use by
senior and financial management for any fiscal month ending after the date of
the most recently ended fiscal quarter of Seller for which financial statements
are available and on or prior to 30 days prior to the Closing
Date.  The closing of the Financing shall not be a condition to the
Closing.
  (b)  In the
event the Equity Commitment Letter is terminated prior to the Closing, Buyer
shall promptly obtain a renewal of, or a substitute for, the Equity Commitment
Letter on terms and conditions comparable in all material respects to the terms
and conditions contemplated in the Equity Commitment Letter or on more favorable
terms to Buyer.  In the event any portion of the funds to be provided
under the Equity Commitment Letter becomes unavailable on terms and conditions
comparable in all material respects to the terms and conditions contemplated in
the Equity Commitment Letter, Buyer shall arrange to obtain any such portion
from alternative sources on comparable or more favorable terms to
Buyer.  Buyer shall give Seller prompt notice upon becoming aware of
any breach by any party of the Equity Commitment Letter or Debt Commitment
Letter or any purported termination of the Equity Commitment Letter or Debt
Commitment Letter.  Buyer shall not permit any material amendment or
modification to be made to, or any waiver of any provision or remedy under, the
Equity Commitment Letter if such amendment, modification, waiver or remedy
reduces the aggregate amount of the funds to be provided under the Equity
Commitment Letter or is adverse to the interests of Seller in any other
respect.
  7.18  Cooperation Regarding Tax
Matters.  (a)  Seller and Buyer agree to cooperate,
and shall cause their respective Affiliates, officers, employees, agents,
auditors and representatives to cooperate, and to furnish or cause to be
furnished to the other, upon request, as promptly as practicable, such
information (including access to books and records) and assistance relating to
the Business, Purchased Assets and Assumed Obligations as is reasonably
necessary for the filing of any Tax Return, the preparation for any Tax audit,
the prosecution or defense of any claim, suit or proceeding relating to any
proposed Tax adjustment involving the Business.  Buyer and Seller
shall keep all such information and documents received by them confidential
unless otherwise required by Law.
  (b)  Buyer and
Seller will retain or cause to be retained all books and records related to the
Purchased Assets (including the Documents) until the applicable period for
assessment of Taxes under applicable Law (giving effect to any and all
extensions or waivers) has expired, and such additional period as necessary for
any administrative or judicial proceedings relating to any proposed assessment,
and to abide by all record retention agreements entered into with any Taxing
authority.  Seller and Buyer agree to give the other reasonable notice
prior to transferring, discarding or destroying any such books and records
relating to Tax matters.
  63
  (c)  Buyer and
Seller will cooperate with each other in the conduct of any audit or other
proceedings relating to Taxes related to the Purchased Assets or the Business
and they shall each execute and deliver such powers of attorney and other
documents as are reasonably necessary to carry out the intent of this
Agreement.
  (d)  In the
event that Seller shall on or after the Closing Date take any position in any
Tax Return, or reach any settlement or agreement on audit, which is in any
manner inconsistent with any position taken by Seller in any filing, settlement
or agreement made by Seller on or prior to the Closing Date and such
inconsistent position (i) requires the payment by Buyer of, more Tax than would
have been required to be paid had such position not been taken or such
settlement or agreement not been reached, (ii) affects the determination of
useful life, basis or method of depreciation, amortization or accounting of any
of the Purchased Assets, Assumed Obligations or any of the properties, assets or
rights of Buyer or (iii) accelerates the time at which any Tax must be paid by
Buyer, Seller shall provide timely and reasonable notice to Buyer of such
position.
  7.19  Master Lease
Agreement.  At the Closing, Buyer and Seller shall enter into,
execute and deliver the Master Lease Agreement pursuant to Sections4.4(g) and 4.3(m) and in
form reasonably acceptable to each of the Parties, providing for sharing of
certain facilities for each of the sites listed on Schedule7.19 and
reflecting the terms set forth on Schedule7.19.
  7.20  Annual Hedge
Strategy.  Seller agrees to deliver to Buyer copies of any
Annual Hedge Strategy presented by Seller to the NMPRC no later than
five (5) Business Days following such presentation.
  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
  64
 (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 Schedule5.3 and Schedule6.3), other than
(i) any of such consents or approvals the failure of which to obtain,
individually or in the aggregate, does not have and would not reasonably be
expected to have a Material Adverse Effect and (ii) any Required Regulatory
Approval (which is governed by Sections8.2(e) and 8.3(d)).
  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;
  (c)  The
representations and warranties of Seller which are set forth in Article V shall
be true and correct as of the Effective Time as though made at and as of the
Effective Time (without giving effect to any limitation as to “materiality” or
“Material Adverse Effect” set forth therein), except where the failure of such
representations to be true and correct, individually or in the aggregate, does
not have and is not reasonably expected to have a Material Adverse Effect
(except to the extent that any such representation or warranty speaks as of a
particular date, in which case such representation and warranty need only be
true and correct as of such date);
  (d)  Buyer
shall have received a certificate from the Chief Executive Officer or Chief
Financial Officer of Seller, dated the Closing Date, to the effect that, to the
best of such officer’s knowledge, the conditions set forth in Sections8.2(b) and 8.2(c) have been
satisfied;
  (e)  (i) The
Required Regulatory Approvals shall have been obtained and become Final
Regulatory Orders and (ii) no terms shall have been imposed in connection with
such Final Regulatory Orders by any Governmental Entity which terms would
reasonably be expected to have a Material Adverse Effect or impose any material
adverse requirements on Buyer or any of its Affiliates or any operations or
assets of Buyer or any of its Affiliates (other than the Business);
  (f)  Any
Encumbrances on the Purchased Assets that are not Permitted Encumbrances shall
have been released;
  65
 (g)  Buyer
shall have received (i) (A) consents and approvals from third parties for the
assignment to Buyer of Consent Assets (other than Required Regulatory Approvals
and consents for the assignment of Gas Supply Contracts), or Alternate
Arrangements in lieu thereof, and (B) consents or approvals from Governmental
Entities for the assignment or transfer to Buyer of, or the issuance by
Governmental Entities to Buyer of replacement, Permits in the nature of rights
to place fixed assets of the Business on government land, in the case of the
preceding clauses (A) and (B), sufficient for the conduct and operation of the
Business following Closing in all material respects in the same manner as
conducted immediately prior to Closing, without the imposition of material
conditions, and (ii) consents to the assignment of sufficient Gas Supply
Contracts such that, after taking into account the availability of natural gas
from other sources and the then current Gas Supply Plan and any requirements
imposed by the NMPRC, Buyer will not be subject to any meaningful incremental
risk of significant disallowance of its pass-through of gas costs to ratepayers
pursuant to the PGAC; and
  (h)  Buyer
shall have received the other items to be delivered pursuant to Section4.3.
  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 in all material respects 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 need only be true and correct as of such
date);
  (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 Sections8.3(a) and 8.3(b) have been
satisfied;
  (d)  (i) The
Required Regulatory Approvals shall have been obtained and become Final
Regulatory Orders and (ii) no terms shall have been imposed in connection with
such Final Regulatory Orders by any Governmental Entity which terms would
reasonably be expected to have a material adverse effect or impose any material
adverse requirements, on Seller or any operations or assets of Seller including
any restrictions on Seller’s ability to dividend any portion of the Purchase
Price to any of its Affiliates; and
  (e)  Seller
shall have received the other items to be delivered pursuant to Section4.4.
  ARTICLE
IX
 INDEMNIFICATION
  9.1  Survival of Representations
and Warranties.  The representations and warranties of the
Parties contained in this Agreement will survive the Closing and will expire
April 15, 2010, except that the representations and warranties in Section5.14 will survive
the Closing and will expire upon the expiration of the applicable statute of
limitations.
  66
  9.2  Indemnification.
  (a)  Subject
to Section9.1 and
Section9.4, from and after
the Closing, Seller will indemnify, defend, and hold harmless Buyer and its
officers, directors, employees, agents and Affiliates (and the officers,
directors, employees and agents of such Affiliates (each, a “Buyer Indemnitee”)
from and against any and all Claims and Losses (each, an “Indemnifiable Loss”),
asserted against or suffered by any Buyer Indemnitee relating to, resulting
from, or arising out of (i) any breach by Seller of any covenant or agreement of
Seller contained in this Agreement, (ii) any breach by Seller of the
representations and warranties of Seller contained in this Agreement, or (iii)
the Excluded Liabilities.
  (b)  Subject
to Section9.1 and
Section9.4, from and after
the Closing, Buyer will indemnify, defend, and hold harmless Seller and its
officers, directors, employees, agents and Affiliates (and the officers,
directors, employees and agents of such Affiliates, (each, a “Seller Indemnitee”)
from and against any and all Indemnifiable Losses asserted against or suffered
by any Seller Indemnitee relating to, resulting from, or arising out of (i) any
breach by Buyer of any covenant or agreement of Buyer contained in this
Agreement, (ii) any breach by Buyer of the representations and warranties of
Buyer contained in this Agreement, (iii) the Assumed Obligations, or (iv) any
and all liabilities and obligations (other than the Excluded Liabilities) to the
extent related to the ownership and operation of the Purchased Assets and the
Business from and after the Effective Time.
  (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 to the extent that Indemnitee receives any insurance proceeds 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.
   67
  (b)  Defense of Third Party
Claims.  If the Indemnifying Party assumes the defense of a
Third Party Claim pursuant to Section9.3(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 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, which agreement will not be unreasonably withheld or
delayed.
  (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 Section9.3(d) will not
constitute an admission by the Indemnifying Party with respect to the claim
asserted.
  68
 (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
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 Section9.3 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 Section9.2(a)(ii) or Section9.2(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 Section9.1.  Any
claim pursuant to Section9.2(a)(i) or Section9.2(b)(i) in respect of a
covenant or agreement which by its terms is to be performed prior to or at the
Closing must be asserted within one year following the Closing
Date.  Any claim for indemnification not made in accordance with Section9.3 by a Party on
or prior to the applicable date set forth in Section9.1 or this Section9.4(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,
except as provided in the second sentence of this Section9.4(b): (i) Seller
will not have any indemnification obligations for Indemnifiable Losses under
Sections9.2(a)(i) and 9.2(a)(ii) (A) for any
individual item where the Loss relating thereto is less than $50,000 and (B) in
respect of each individual item where the Loss relating thereto is equal to or
greater than $50,000, 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 Sections9.2(a)(i) and 9.2(a)(ii) exceed 10% of
the Purchase Price.  Notwithstanding the foregoing, the limitations
set forth in Section9.4(b)(i) and 9.4(b)(ii) will not apply
to claims asserted by Buyer arising from the intentional fraud of
Seller.
  69
  (c)  Notwithstanding any other provision of this Article IX,
except as provided in the second sentence of this Section9.4(c): (i) Buyer
will not have any indemnification obligations for Indemnifiable Losses under
Sections9.2(b)(i) and 9.2(b)(ii) (A) for any
individual item where the Loss relating thereto is less than $50,000 and (B) in
respect of each individual item where the Loss relating thereto is equal to or
greater than $50,000, 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 Sections9.2(b)(i) and 9.2(b)(ii) exceed 10% of
the Purchase Price.  Notwithstanding the foregoing, the limitations
set forth in Sections9.4(c)(i) and 9.4(c)(ii) will not apply
to claims asserted by Seller arising from the intentional fraud of
Buyer.
  (d)  Notwithstanding
anything to the contrary in this Agreement, Buyer shall not be entitled to
indemnification under this Article IX with
respect to any breach or inaccuracy of any representation, warranty, covenant or
agreement of Seller if (i) Seller provides written notice to Buyer at least five
Business Days prior to Closing describing in detail such breach or inaccuracy,
(ii) Seller simultaneously and irrevocably informs Buyer that, because of such
breach or inaccuracy Buyer is not required to consummate the transactions
contemplated by this Agreement by reason of Section8.2(b) or 8.2(c), as the
case may be, and (iii) the Closing occurs.
  (e)  Notwithstanding anything contained in this Agreement to the contrary, except for
the representations and warranties contained in ArticleV, neither Seller
nor any other Person is making any other express or implied representation or
warranty, whether arising by operation of law or otherwise, with respect to
Seller, the Business, the Purchased Assets, the Assumed Obligations or the
transactions contemplated by this Agreement, including, but in no way limited
to, any representation or warranty, as to liabilities, operations of the
Purchased Assets, condition, merchantability, habitability or fitness for a
particular use, marketability, value or quality of the Purchased Assets or the
prospects (financial and otherwise), risks and other incidents of the Purchased
Assets.  Except for the representations and warranties contained in
ArticleV, Seller
expressly disclaims, whether made by Seller or its Affiliates, officers,
directors, employees, agents, or representatives, any representation or warranty
of merchantability, usage, suitability or fitness for any particular purpose
with respect to the Purchased Assets, or any part thereof, or as to the
workmanship thereof, or the absence of any defects therein, whether latent or
patent, or compliance with pipeline safety or environmental requirements, or the
applicability of any governmental requirements, including but not limited to any
environmental protection, pollution control and land use laws, rules,
regulations, orders and requirements, including but not limited to those
pertaining to the use, handling, generation, treatment, storage or disposal of
any toxic or hazardous waste or toxic, hazardous or regulated substance, or
whether Seller possesses sufficient owned real property or personal property to
operate the Purchased Assets. Except as otherwise expressly provided in ArticleV, Seller further
specifically disclaims any representation or warranty regarding the absence of
hazardous substances or liability or potential liability arising under
Environmental Laws with respect to the Purchased Assets.
  70
 (f)  Any claims Buyer may have for breach of any representation or warranty in this
Agreement or any Ancillary Agreement must be based solely on the representations
and warranties of Seller set forth in ArticleV.  In
furtherance of the foregoing, except for the representations and warranties
contained in ArticleV, 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 expressly 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 REPRESENTATIONS AND WARRANTIES EXPRESSLY SET
FORTH IN ARTICLEV, THE BUSINESS
AND THE PURCHASED ASSETS ARE BEING PURCHASED ON AN “AS IS, WHERE IS” BASIS, WITH
ALL FAULTS AND WITH ALL KNOWN AND UNKNOWN ENVIRONMENTAL CONDITIONS AND
LIABILITIES (INCLUDING WITHOUT LIMITATION STRICT LIABILITY).
  9.5  Applicability ofArticle
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.
  9.6  Tax Treatment of Indemnity
Payments.  Seller and Buyer agree to treat any payment made
pursuant to this Article IX as an
adjustment to the Purchase Price for federal, state, and local income Tax
purposes.
  71
  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 Sections10.3(b), 10.3(c) and the
proviso to this Section9.7, none of
either Party or Parent will, in any event, be liable to the other Party and
Parent, or to the Parties, as the case may be, either in contract or in tort,
for any consequential, indirect, special, lost profits or punitive damages,
including loss of future revenue, income, or profits, or loss of business
reputation or opportunity of the other Party and Parent, or of the other
Parties, as the case may be, 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 and Parent, or any one of them, or to the Parties, or any one of
them, as the case may be, in advance or could have been reasonably foreseen by
such other Party and Parent, or any one of them, or such Parties, or any one of
them, as the case may be; provided, that the
limitations contained in this Section9.7 shall not
apply to any Claim for diminution in value.
  9.8  Exclusive
Remedy.  Seller and Buyer acknowledge and agree that, from and
after the Closing, the sole and exclusive monetary remedy for any breach or
inaccuracy, or alleged breach or inaccuracy, of any representation or warranty
in this Agreement or the Ancillary Agreements (other than the Transition
Services Agreement) or any covenant or agreement to be performed hereunder or
thereunder will be indemnification in accordance with this Article
IX.  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
Ancillary Agreements (other than the Transition Services Agreement), or the
negotiation, execution, or performance of this Agreement or the Ancillary
Agreements (other than the Transition Services 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 the Ancillary Agreement (other than the Transition Services
Agreement) or as an inducement to enter into this Agreement or the Ancillary
Agreements (other than the Transition Services 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 will terminate 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
if on the Termination Date, either (i) one of the Parties has failed to fulfill
any obligation under this Agreement which has been the cause of, or resulted in,
the failure of the Closing to occur, or (ii) the conditions to the Closing set
forth in Section8.2(e) or Section8.3(d) have not
been fulfilled but all other conditions to the 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.
  72
 (c)  This
Agreement may be terminated by Buyer if (i) any Required Regulatory Approval (A)
has been denied by the applicable Governmental Entity and all appeals of such
denial have been taken and have been unsuccessful, or (B) has become a Final
Regulatory Order and such Final Regulatory Order imposes conditions or
requirements that would result in the failure of the condition in Section8.2(e), 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 as of
the date of this Agreement of any representation or warranty or any breach by
Seller of any covenant, in each case 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.
  (e)  This
Agreement may be terminated by Seller if there has been a breach by Buyer as of
the date of this Agreement of any representation or warranty or any breach by
Buyer of any covenant, in each case 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.
  (f)  This
Agreement may be terminated by Seller if (i) any Required Regulatory Approval
(A) has been denied by the applicable Governmental Entity and all appeals of
such denial have been taken and have been unsuccessful, or (B) has become a
Final Regulatory Order and such Final Regulatory Order imposes conditions or
requirements that would result in the failure of the condition in Section8.3(d) 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.
  (g)  This
Agreement will terminate if (i) (A) the lenders under the Debt Commitment Letter
assert the failure of a condition precedent to the funding of their commitments
thereunder, assert that they would not be required to or would not, fund their
commitments thereunder were the Closing to occur at that time, purport to
terminate their commitments thereunder or assert that their commitments have
been terminated or (B) the Debt Commitment Letter is otherwise terminated
(collectively, a “Potential Financing
Failure”) and (ii) Buyer fails to obtain a renewal of, or comparable
substitute for, the Debt Commitment Letter or otherwise resolve such Potential
Funding Failure within 30 days following such assertion, purported termination
or termination.
  (h)  This
Agreement may be terminated by Seller if any Required Regulatory Approval has
become an Order and Buyer asserts that the Order, if it becomes a Final
Regulatory Order, will not meet the closing condition in Section8.2(e)(ii) and Buyer does
not agree to waive such closing condition within 30 days of receipt of such
Order.
  73
 (i)  This
Agreement may be terminated by Buyer if any Required Regulatory Approval has
become an Order and Seller asserts that the Order, if it becomes a Final
Regulatory Order, will not meet the closing condition in Section8.3(d)(ii) and Seller does
not agree to waive such closing condition within 30 days of receipt of such
Order.
  10.2  Procedure and Effect of
Termination.  In the event of termination of this Agreement by
either or both of the Parties pursuant to Section10.1, subject to
any cure periods contemplated therein, 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 and
Parent hereunder will terminate, except as provided in Section10.3.  If
prior to Closing either Party resorts to legal proceedings to enforce this
Agreement, the prevailing Party in such proceedings shall be entitled to recover
all costs incurred by such Party, including reasonable attorney’s fees, in
addition to any other relief to which such Party may be entitled; provided, however, and
notwithstanding anything to the contrary in this Agreement, in no event shall
either Party be entitled under this Section10.2 to receive
any punitive, indirect or consequential damages.
  10.3  Remedies upon
Termination.  If this Agreement is terminated as provided
herein:
  (a)  The
obligations of the Parties under Article I, Article X and Article XII, and
Sections7.2(b), 7.2(c), 7.2(d), 7.3, 7.5 and 11.1 will survive
the termination of this Agreement pursuant to Section10.1.
  (b)  Buyer
will pay to Seller a fee equal to $25,000,000 if Seller terminates this
Agreement pursuant to Section10.1(e).
  (c)  Seller
will pay to Buyer a fee equal to $25,000,000 if Buyer terminates this Agreement
pursuant to Section10.1(d).
  (d)  In view
of the difficulty of determining the amount of damages which may result to the
non-terminating Party from a termination pursuant to any of the Sections of this
Agreement referenced in Section10.3(b) or 10.3(c), and the
failure of the terminating Party to consummate the transactions contemplated by
this Agreement or which may result to Seller from a termination pursuant to
Section10.1(g), Buyer
and Seller have mutually agreed that each of the payments set forth in Sections10.3(b) and 10.3(c) shall be
made to the non-terminating Party, or the payment set forth in Section10.3(f) shall be
made to Seller, as liquidated damages, and not as a penalty, and this Agreement
shall thereafter terminate except for those provisions which by their terms
survive termination of this Agreement.  In the event of any
termination of this Agreement, the Parties have agreed that each of the payments
set forth in Sections10.3(b), 10.3(c), 10.3(e) and 10.3(f) shall be
the sole and exclusive remedy of each Party and Parent against the other Party
and Parent and their respective
   74
  Affiliates.  ACCORDINGLY,
THE PARTIES HEREBY ACKNOWLEDGE THAT (1) THE EXTENT OF DAMAGES TO THE
NON-TERMINATING PARTY CAUSED BY THE FAILURE OF THIS TRANSACTION TO BE
CONSUMMATED WOULD BE IMPOSSIBLE OR EXTREMELY DIFFICULT TO ASCERTAIN, (2) THE
AMOUNT OF THE LIQUIDATED DAMAGES PROVIDED FOR IN EACH OF SECTIONS10.3(b), 10.3(c) AND 10.3(f) ARE FAIR
AND REASONABLE ESTIMATES OF SUCH DAMAGES UNDER THE CIRCUMSTANCES AND (3) RECEIPT
OF SUCH LIQUIDATED DAMAGES BY THE NON-TERMINATING PARTY DOES NOT CONSTITUTE A
PENALTY.  THE PARTIES HEREBY FOREVER WAIVE AND AGREE TO FOREGO TO THE
FULLEST EXTENT UNDER APPLICABLE LAW ANY AND ALL RIGHTS THEY HAVE OR IN THE
FUTURE MAY HAVE TO BRING ANY ACTION OR PROCEEDING DISPUTING OR OTHERWISE
OBJECTING TO ANY OR ALL OF THE FOREGOING PROVISIONS OF THIS SECTION10.3.
  (e)  (i)
Buyer will pay to Seller a fee equal to $25,000,000 if (A) this Agreement
is terminated pursuant to Section10.1(b), 10.1(c) or 10.1(h) primarily
as a result of the failure to satisfy the condition set forth in Section8.2(e)(ii) or (B) this
Agreement is terminated pursuant to Section10.1(b), 10.1(c) or 10.1(h),
primarily as a result of the failure to satisfy the conditions set forth in
Section8.2(a), 8.2(c) or 8.2(d) arising
out of Buyer's assertion that a Material Adverse Effect has occurred as a result
of a change in Law issued by, administered by or relating to the authority or
responsibilities of the NMPRC and (ii) Seller will pay to Buyer a fee equal
to $25,000,000 if this Agreement is terminated pursuant to Section10.1(b), 10.1(f) or 10.1(i) primarily
as a result of the failure to satisfy the condition set forth in Section8.3(d)(ii).  Neither
Buyer nor Seller shall be obligated to pay any fee set forth in this Section10.3(e) if the
failure to satisfy the condition set forth in Section8.2(e)(ii) or 8.3(d)(ii), as the case may
be, primarily results from the failure to obtain, renew or secure any Franchise
as may be deemed necessary  by the Parties in connection with the
transactions contemplated hereby.  Under no circumstances shall any
Party be entitled to receive a payment pursuant to this Section10.3(e) and a
payment pursuant to Section10.3(b), 10.3(c) or 10.3(f), as the
case may be.
  (f)  Buyer
will pay to Seller a fee equal to $25,000,000 if this Agreement is terminated
pursuant to Section10.1(g) unless,
at the time of such termination, the conditions set forth in Sections8.2(a) and 8.2(c) shall not
be satisfied (determined as if the time of termination were the Effective
Time).  Under no circumstances shall Seller be entitled to receive a
payment pursuant to this Section10.3(f) and a
payment pursuant to Section10.3(b) or 10.3(e).
  (g)  All
payments under this Section10.3 shall be
from payor to payee by wire transfer of immediately available funds to a bank
account in the United States of America designated in writing by payee not later
than three (3) Business Days following payor’s receipt of such account
designation from payee.
  75
 (h)  No amount
shall be due by Buyer or Seller under Section10.3(b) or 10.3(c) if this
Agreement is terminated prior to the Closing and the Closing does not occur
primarily because a representation and warranty of a Party or Parent that was
true and correct on the date of this Agreement became not true and correct
thereafter not as a result of a breach of covenant by such Party or
Parent.
  ARTICLE
XI
 PARENT
GUARANTEE
  11.1  Guarantee.  (a)  Parent
hereby absolutely, unconditionally and irrevocably guarantees to Seller, as
primary obligor and not merely as a surety, (i) the due and punctual payment of
all monetary obligations of Buyer under this Agreement and the Ancillary
Agreements and (ii) the full and complete performance of all covenants and
agreements of Buyer under this Agreement and the Ancillary Agreements (the
obligations of Buyer specified in clauses (i) and (ii) above, collectively, the
“Guaranteed
Obligations”).
  (b)  The
guarantee contained in this Article XI shall
remain in full force and effect until all of the Guaranteed Obligations shall
have been satisfied by payment in full.
  11.2  Nature of
Guarantee.  Parent guarantees that the Guaranteed Obligations
will be duly and punctually paid and performed in accordance with the terms of
this Article
XI.  If for any reason Buyer shall fail or be unable to
duly and punctually pay or perform, or cause to be duly and punctually paid or
performed, the Guaranteed Obligations as and when the same shall become due and
payable, Parent shall, subject to the terms and conditions of this Article XI,
forthwith duly and punctually pay or perform, or cause to be duly and punctually
paid or performed, such Guaranteed Obligations.  Parent further agrees
that the guarantee contained in this Article XI (the
“Parent Guarantee”)
constitutes a guarantee of payment and performance when due and not of
collection and is in no way conditioned or contingent upon any attempt to
collect from Buyer.
  11.3  Representations and
Warranties of Parent.  Solely for the purpose of this Article XI,
Parent represents and warrants to Seller as follows:
  (a)  Organization.  Parent
is a limited liability company duly organized, validly existing, and in good
standing under the laws of the state 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.
  (b)  Authority Relative to this
Agreement and the Parent Guarantee.  Parent has all corporate
power and authority necessary to execute and deliver this Agreement and to
perform its obligations in connection with the Parent Guarantee.  The
execution and delivery of this Agreement and the performance of the obligations
under the Parent Guarantee have been duly and validly authorized by the managing
members of Parent and no other proceedings on the part of Parent are necessary
to authorize this Agreement or the performance of Parent’s obligations under the
Parent Guarantee.  This Agreement has been duly and validly executed
and delivered by Parent, and constitutes a valid and binding agreement of
Parent, enforceable against Parent 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.
  76
  (c)  Consents and Approvals; No
Violation.  Except as set forth in Schedule11.3(c), the
execution and delivery of this Agreement and the performance by Parent of its
obligations under the Parent Guarantee, do not:
  (i)  conflict
with or result in any breach of the Governing Documents of Parent;
  (ii)  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 Parent is a party or by which
Parent or any of its 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 performance by Parent of its obligations under the Parent
Guarantee;
  (iii)  violate
any Law or Order applicable to Parent or any of its assets; or
  (iv)  require
any declaration, filing, or registration with, or notice to, or authorization,
consent, or approval of any Governmental Entity, other than 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 the performance by Parent of its obligations under the Parent
Guarantee.
  11.4  Sole Obligation of
Parent.  This Article XI
contains the only provisions in this Agreement that are applicable to
Parent.  Parent shall not have any obligations under this Agreement
other than those expressly set forth in this Article
XI.
  ARTICLE
XII
 MISCELLANEOUS
PROVISIONS
  12.1  Amendment and
Modification.  Except as provided in Section7.8, this
Agreement and any Ancillary Agreement may be amended, modified, or supplemented
only by written agreement of Seller, Buyer and Parent.
  12.2  Waiver of Compliance;
Consents.  Except as otherwise provided in this Agreement, any
failure of either Party or Parent to comply with any obligation, covenant,
agreement, or condition herein may be waived by the Party or Parent, as the case
may be, entitled to the benefits thereof only by a written instrument signed by
the Party or Parent, as the case may be, 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.
  77
  12.3  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 or Parent, as the case may be, being notified at such Party’s or
Parent’s address indicated below (or at such other address for a Party or Parent
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:
  Public
Service Company of New Mexico
 Attn:     General
Counsel
 414
Silver Street, SW
 Albuquerque,
New Mexico 87102
 Fax:
(505) 241-2368
  with a
copy to:
  Troutman
Sanders LLP
 Attn:     
Terry C. Bridges
 R. Mason Bayler, Jr.
 600
Peachtree Street, NE
 Suite
5200
 Atlanta,
GA 30308-2216
 Fax:
(404) 885-3900
  (b)  if to
Buyer, to:
  New
Mexico Gas Company, Inc.
 Attn:    J.
Russell Triedman
 630 Fifth
Avenue
 30th
Floor
 New York,
NY 10111
 Fax:
(212) 757-5313
  with a
copy to:
  Cravath,
Swaine & Moore LLP
 Attn:     Richard
Hall, Esq.
 Worldwide
Plaza
 825
Eighth Avenue
 New York,
NY 10019
 Fax:
(212) 474-3700
  78
 (c)  if to
Parent, to:
  Continental
Energy Systems LLC
 Attn:     J.
Russell Triedman
 630 Fifth
Avenue
 30th
Floor
 New York,
NY 10111
 Fax:
(212) 757-5313
  with a
copy to:
  Cravath,
Swaine & Moore LLP
 Attn:     Richard
Hall, Esq.
 Worldwide
Plaza
 825
Eighth Avenue
 New York,
NY 10019
 Fax:
(212) 474-3700
  12.4  Assignment.  This
Agreement and any Ancillary Agreement and all of the provisions hereof and
thereof will be binding upon and inure to the benefit of the Parties and Parent
and their respective successors and permitted assigns, but neither this
Agreement nor any Ancillary Agreement nor any of the rights, interests, or
obligations hereunder or thereunder may be assigned by either Party or Parent,
without the prior written consent of the other Party and Parent, or the Parties,
as the case may be, nor is this Agreement or any Ancillary Agreement intended to
confer upon any other Person except the Parties and Parent any rights or
remedies hereunder.  Notwithstanding the foregoing, Buyer may assign
any or all of its rights and obligations hereunder to a Buyer Designee, or as
security in connection with the Financing or any other financing
transaction.  Upon receipt of notice by Seller from Buyer of any such
assignment to a Buyer Designee, such assignee will be deemed to have assumed,
ratified, agreed to be bound by and perform all such obligations, and all
references herein to “Buyer” shall thereafter be deemed to be references to such
assignee, in each case without the necessity for further act or evidence by the
Parties hereto or Parent or such assignee; provided, however, that no such
assignment shall relieve or discharge Buyer from any of its obligations
hereunder or under any of the Ancillary Agreements.  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.
  12.5  Governing
Law.  This Agreement and any Ancillary Agreement
are  governed by and construed in accordance with the laws of the
State of New Mexico (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.  EACH OF THE PARTIES AND PARENT AGREES THAT VENUE IN ANY AND
ALL ACTIONS AND PROCEEDINGS RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT AND
ANY ANCILLARY AGREEMENT (OTHER THAN THE TRANSITION SERVICES AGREEMENT) SHALL BE
IN THE STATE AND FEDERAL COURTS IN AND FOR ALBUQUERQUE, NEW MEXICO WHICH COURTS
SHALL HAVE EXCLUSIVE JURISDICTION FOR SUCH PURPOSE, AND THE PARTIES AND PARENT
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND IRREVOCABLY
WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION
OR PROCEEDING.  SERVICE OF PROCESS MAY BE MADE IN ANY MANNER
RECOGNIZED BY SUCH COURTS.
  79
 12.6  Severability.  Any
term or provision of this Agreement or any Ancillary 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
thereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
  12.7  Entire
Agreement.  This Agreement will be a valid and binding
agreement of the Parties and Parent only if and when it is fully executed and
delivered by the Parties and Parent, 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 and Parent in respect of the transactions contemplated by this
Agreement.  This Agreement supersedes all prior agreements and
understandings between the Parties and Parent 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).
  12.8  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.
  12.9  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).
  12.10  Waiver of Jury
Trial.  EACH OF THE PARTIES AND PARENT 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.
   80
  IN WITNESS WHEREOF, the Parties and
Parent have caused this agreement to be signed by their respective duly
authorized officers as of the date first above written.
  PUBLIC
SERVICE COMPANY OF NEW MEXICO, as Seller
 
 
 By:     /s/
Jeffry E. Sterba
 Name:      Jeffry
E.
Sterba
 Title:        President
& CEO
 
 
 NEW
MEXICO GAS COMPANY, INC., as Buyer
 
 
 By:
 Name:
 Title:
 
 
 CONTINENTAL
ENERGY SYSTEMS LLC, as Parent
 
 
 By:
 Name:
 Title:
 
 
 [Signature
Page to Asset Purchase Agreement]