Exhibit 10.20


 


 


TAX SHARING AGREEMENT


 


by and among


 


ALLETE, INC.


 


AND ITS AFFILIATES


 


and


 


ADESA, INC.


 


AND ITS AFFILIATES


 

















 


TAX SHARING AGREEMENT


 


THIS TAX
SHARING AGREEMENT (this “Agreement”) dated as of
     , 2004, by and among ALLETE, Inc.(“ALLETE”), a
Minnesota corporation, each ALLETE Affiliate (as defined below), ADESA, Inc.
(“ADESA”), a Delaware corporation and indirect wholly owned subsidiary of
ALLETE, and each ADESA Affiliate (as defined below) is entered into in
connection with the Distribution (as defined below).


 


RECITALS


 


WHEREAS, as of the date hereof,
ALLETE and its direct and indirect domestic subsidiaries are members of an
Affiliated Group (as defined below), of which ALLETE is the common parent
corporation;


 


WHEREAS, in
anticipation of the Distribution (as defined below), ADESA has caused certain
of its subsidiaries to be converted to single member limited liability
companies (“ADESA Subsidiary Conversions”);


 


WHEREAS, as set forth in the
Joint Aircraft Ownership & Management Agreement dated as of
                  ,
2004, and subject to the terms and conditions thereof, ALLETE will transfer and
assign to ADESA joint ownership interests in two aircraft (the “Transfer”);


 


WHEREAS, as set forth in the
Master Separation Agreement dated as of
                     ,
2004 (the “Master Separation Agreement”), and subject to the terms and
conditions thereof, ALLETE and ADESA currently contemplate that ADESA will make
an initial public offering (the “IPO”) of ADESA common stock that will reduce ALLETE’s
ownership of ADESA on a fully diluted basis to not less than eighty and
one-tenth percent (80.1%);


 


WHEREAS, as set forth in the
Master Separation Agreement, and subject to the terms and conditions thereof,
prior to the Distribution, ALLETE intends to cause ALLETE Automotive Services,
Inc. (“AAS Inc.”), a Minnesota corporation, to be converted to a limited
liability company organized under the laws of Minnesota (such limited liability
company being referred to as “AAS LLC” and such conversion being referred to as
the “AAS Conversion”);


 


WHEREAS, as set forth in the
Master Separation Agreement, and subject to the terms and conditions thereof,
ALLETE intends, sometime after the IPO, that AAS LLC will distribute its ADESA
Common Stock to ALLETE (such distribution being referred to as the
“Intercompany Distribution”);


 


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WHEREAS, as set forth in the
Master Separation Agreement, and subject to the terms and conditions thereof,
following the Intercompany Distribution, ALLETE intends to distribute its ADESA
Common Stock to the then existing shareholders of ALLETE, (“Distribution”).


 


WHEREAS, the Transfer and the
Distribution are intended to qualify as a tax-free reorganization and
distribution under sections 368(a)(1)(D) and 355 of the Internal Revenue Code
of 1986, as amended (the “Code”); and,


 


WHEREAS, in contemplation of
the Distribution pursuant to which ADESA and its direct and indirect domestic
subsidiaries will cease to be members of the ALLETE Group (as defined below),
the parties hereto have determined to enter into this Agreement, setting forth
their agreement with respect to certain tax matters.


 


AGREEMENT


 


NOW,
THEREFORE, in consideration of the mutual covenants and agreements contained
herein, ALLETE, for itself and on behalf of the ALLETE Affiliates, as defined
below, and its future subsidiaries (other than ADESA and its subsidiaries), and
ADESA, for itself and on behalf of the ADESA Affiliates, as defined below,
hereby agree as follows:


 


Section 1.              Definitions.


 


As used in
this Agreement, capitalized terms shall have the following meanings (such
meanings to be equally applicable to both the singular and the plural forms of
the terms defined):


 


“AAS Conversion” has
the meaning set forth in the Recitals.


 


“ADESA Auction Business”
means  the assets comprising the
vehicle auctions, vehicle redistribution and other related services


 


“ADESA Affiliate”
means any entity with respect to which ADESA possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies of
such entity, whether through ownership of voting securities or other interests,
by contract or otherwise.


 


“ADESA Business “
means the business of providing wholesale vehicle auctions and related vehicle
redistribution services for the automotive industry in North America as well as
short-term inventory financing for used vehicle dealers, as more completely
described in the IPO Registration.


 


“ADESA Employee”
means an employee of ADESA or any ADESA Affiliate immediately


 


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after the Distribution, or a retiree or other former employee of ADESA
or any ADESA Affiliate who is not an ALLETE Employee, provided that any ALLETE
Employee who becomes an ADESA Employee shall be considered an ADESA Employee.


 


“ADESA Group” means
the Affiliated Group, or similar group of entities as defined under
corresponding provisions of the laws of other jurisdictions, of which ADESA
will be the common parent corporation immediately after the Distribution, and
any corporation or other entity which may become a member of such group from
time to time.


 


“ADESA Subsidiary Conversions”
has the meaning set forth in the Recitals.


 


“ADESA Tax Services”
has the meaning set forth in Section 2.06(b).


 


“Affiliated Group”
means an affiliated group of corporations within the meaning of section
1504(a)(1) of the Code.


 


“After Tax Amount”
means any additional amount necessary to reflect the hypothetical Tax
consequences of the receipt or accrual of any payment required to be made under
this Agreement (including the receipt or payment of an additional amount or
amounts hereunder and the effect of the deductions available for interest paid
or accrued and for Taxes such as state and local income Taxes), determined by
using the highest marginal corporate Tax rate (or rates, in the case of an item
that affects more than one Tax) for the relevant taxable period (or portion
thereof).


 


“ALLETE Affiliate” means
any entity with respect to which ALLETE possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
entity, whether through ownership of voting securities or other interests, by
contract or otherwise, but excluding ADESA or any ADESA Affiliate.


 


“ALLETE Employee”
means an employee of ALLETE or any ALLETE Affiliate immediately after the
Distribution, or a retiree or other former employee of ALLETE or any ALLETE
Affiliate who is not an ADESA Employee, provided that any ADESA Employee who
becomes an ALLETE Employee shall be considered an ALLETE Employee.


 


“ALLETE Group” means
the Affiliated Group, or similar group of entities as defined under
corresponding provisions of the laws of other jurisdictions, of which ALLETE is
the common parent corporation, and any corporation or other entity which may
be, may have been or may become a member of such group from time to time, but
excluding any member of the ADESA Group.


 


“ALLETE Tax Services”
has the meaning set forth in Section 2.06(a).


 


“Audit” includes any
audit, assessment of Taxes, other examination by any Taxing Authority,


 


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proceeding, or appeal of such a proceeding relating to Taxes, whether
administrative or judicial, including proceedings relating to competent
authority determinations.


 


“Code” has the
meaning set forth in the Recitals.


 


“Combined Return”
means any Tax Return with respect to Income Taxes, other than United States
federal Income Taxes, filed on a consolidated, combined (including nexus
combination, worldwide combination, domestic combination, line of business
combination or any other form of combination) or unitary basis wherein ADESA or
one or more ADESA Affiliates join in the filing of such Tax Return (for any
taxable period or portion thereof) with ALLETE or one or more ALLETE
Affiliates.


 


“Consolidated Return”
means any Tax Return with respect to United States federal Income Taxes filed
on a consolidated basis wherein ADESA or one or more ADESA Affiliates join in
the filing of such Tax Return (for any taxable period or portion thereof) with
ALLETE or one or more ALLETE Affiliates.


 


“Distribution” has
the meaning set forth in the Recitals.


 


“Distribution Date”
means the close of business on the date which the Distribution is effected.


 


“Distribution Taxes”
means any Taxes imposed on ALLETE or any ALLETE Affiliate resulting from, or
arising in connection with: (i) the failure of the Distribution to be tax-free
to such party under the Code (including, without limitation, any Tax resulting
from the failure of the Distribution to qualify under section 355 and section
368(a)(1)(D) of the Code or the application of section 355(d) or section 355(e)
of the Code to the Distribution) or corresponding provisions of the laws of any
other jurisdictions; and (ii) the Restructuring.  Each Tax referred to in the immediately preceding sentence shall
be determined using the highest marginal corporate rate applicable to such tax
for the relevant taxable period (or portion thereof).


 


“Estimated Tax Installment Date”
means the estimated Income Tax installment due dates prescribed in section
6655(c) of the Code and any other date on which an installment of Income Taxes
is required to be made.


 


“Filing Party” has
the meaning set forth in Section 8.01.


 


“Final Determination”
shall mean the final resolution of liability for any Tax for any taxable
period, by or as a result of:  (i) a
final and unappealable decision, judgment, decree or other order by any court
of competent jurisdiction; (ii)  a final
settlement with the IRS, a closing agreement or accepted offer in compromise
under Code sections 7121 or 7122, or a comparable agreement under the laws of


 


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other jurisdictions, which resolves the entire Tax liability for any
taxable period; (iii) any allowance of a refund or credit in respect of an
overpayment of Tax, but only after the expiration of all periods during which
such refund may be recovered by the jurisdiction imposing the Tax; or (iv) any
other final disposition, including by reason of the expiration of the
applicable statute of limitations.


 


“Income Taxes” shall
mean all federal, state, local or foreign Taxes determined by reference to
income, net worth, gross receipts or capital, or any such Taxes imposed in lieu
of such Taxes.


 


“Income Tax Return”
shall mean all Tax Returns with respect to Income Taxes.


 


“Independent Firm”
means a recognized law or accounting firm, provided  however, that
such term shall not include any accounting firm that performs or has preformed
audit services with respect to ALLETE or ADESA.


 


“Intercompany Distribution”
has the meaning set forth in the Recitals.


 


“IPO” has the
meaning set forth in the Recitals.


 


“IPO Registration Statement”
means the registration statement filed March 11, 2004  on Form S-1 pursuant to the Securities Act of 1933, as
amended.


 


“IRS” means the
United States Internal Revenue Service or any successor thereto, including, but
not limited to its agents, representatives, and attorneys.


 


“Master Separation Agreement”
has the meaning set forth in the recitals to this Agreement.


 


“Minnesota Power Business” means
the assets comprising the regulated business of Minnesota Power.


 


“Officer’s Certificate” means
the letter executed by officers of ALLETE 
and ADESA provided to Skadden, Arps, Slate, Meagher and Flom, LLP, in
connection with the Tax Opinion.


 


“Option” means an
option to acquire common stock, or other equity-based incentives the economic
value of which is designed to mirror that of an option, including non-qualified
stock options, discounted non-qualified stock options, cliff options to the
extent stock is issued or issuable (as opposed to cash compensation), and
tandem stock options to the extent stock is issued or issuable (as opposed to
cash compensation).


 


“Owed Party” has the
meaning set forth in Section 7.04.


 


“Owing Party” has
the meaning set forth in Section 7.04.


 


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“Payment Period” has
the meaning set forth in Section 7.04(e).


 


“Post-Distribution Period”  means a taxable period beginning after the
Distribution Date.


 


“Pre-Distribution Period”
means a taxable period beginning before the Distribution.


 


“Restructuring”
means, collectively, the AAS Conversion, the Transfer,  the Intercompany Distribution, the ADESA
Subsidiary Conversions and the IPO.


 


“Separate Tax Liability”
means an amount equal to the Tax liability that ADESA and each ADESA Affiliate
would be required to pay under the Tax Agreement and the State Tax Agreement,
determined in accordance with past practice, and such amount shall be computed
by ALLETE using the highest marginal corporate rate applicable to such tax (or
rates, in the case of an item that affects more than one Tax) for the relevant
taxable period (or portion thereof).


 


“Sole Responsibility Item”
means any Tax Item for which the non-Filing Party has the entire economic
liability under this Agreement.


 


“State Tax Agreement”
means the Agreement titled “State Tax Agreement” dated October 5, 1993, between
and among Minnesota Power & Light Company and each of its subsidiary
corporations executing a signature page attached thereto.


 


“Tax Agreement”
means the Agreement titled “Tax Agreement” dated October 5, 1993, between and
among Minnesota Power & Light Company and each of its subsidiary corporations
executing a signature page attached thereto.


 


“Tax Asset” means
any Tax Item that has accrued for Tax purposes, but has not been used during a
taxable period, and that could reduce a Tax in another taxable period,
including, but not limited to, a net operating loss, net capital loss,
investment tax credit, foreign tax credit, research and experimentation credit,
charitable deduction or credit related to alternative minimum tax or any other
Tax credit.


 


“Tax Benefit” means
a reduction in the Tax liability of a taxpayer (or of the Affiliated Group of
which it is a member) for any taxable period. 
Except as otherwise provided in this Agreement, a Tax Benefit shall be
deemed to have been realized or received from a Tax Item in a taxable period
only if and to the extent that the Tax liability of the taxpayer (or of the
Affiliated Group of which it is a member) for such period, after taking into
account the effect of the Tax Item on the Tax liability of such taxpayer in the
current period and all prior periods, is less than it would have been if such
Tax liability were determined without regard to such Tax Item.


 


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“Tax Detriment”
means an increase in the Tax liability of a taxpayer (or of the Affiliated
Group of which it is a member) for any taxable period.  Except as otherwise provided in this
Agreement, a Tax Detriment shall be deemed to have been realized or received
from a Tax Item in a taxable period only if and to the extent that the Tax
liability of the taxpayer (or of the Affiliated Group of which it is a member)
for such period, after taking into account the effect of the Tax Item on the
Tax liability of such taxpayer in the current period and all prior periods, is
more than it would have been if such Tax liability were determined without
regard to such Tax Item.


 


“Tax Item” means any
item of income, gain, loss, deduction or credit, or other attribute that may
have the effect of increasing or decreasing any Tax.


 


“Tax Opinion” means
the opinion letter to be issued by Skadden, Arps, Slate, Meagher & Flom
LLP, addressing certain U.S. federal Income Tax consequences of the
Distribution under Sections 368 and 355 of the Code.


 


“Tax Return” means
any return, report, certificate, form or similar statement or document
(including any related or supporting information or schedule attached thereto
and any information return, amended tax return, claim for refund or declaration
of estimated tax) required to be supplied to, or filed with, a Taxing Authority
in connection with the determination, assessment or collection of any Tax or
the administration of any laws, regulations or administrative requirements
relating to any Tax.


 


“Taxes” includes all
taxes, charges, fees, duties, levies, imposts, rates or other assessments
imposed by any federal, state, local or foreign Taxing Authority, including,
but not limited to, income, gross receipts, excise, property, sales, use,
license, capital stock, transfer, franchise, payroll, withholding, social
security, value added or other taxes, and any interest, penalties or additions
attributable thereto.  “Tax”shall mean any one of the
foregoing Taxes.


 


“Taxing Authority”
means any governmental authority or any subdivision, agency, commission or
authority thereof or any quasi-governmental or private body having jurisdiction
over the assessment, determination, collection or imposition of any Tax
(including the IRS).


 


“Transfer” has the
meaning set forth in the Recitals.


 


Section 2.              Preparation
and Filing of Tax Returns.


 


2.01.  ALLETE’s
Responsibility.  ALLETE shall have
sole and exclusive responsibility for:


 


(a)  the preparation and filing of all
Consolidated Returns and all Combined Returns;


 


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(b)  the preparation and filing of all Tax
Returns (other than Consolidated Returns and Combined Returns) with respect to
ALLETE and any ALLETE Affiliate; and


 


(c)  the preparation of all Income Tax Returns
with respect to ADESA and any ADESA Affiliate for any Pre-Distribution Period; provided,
however, that ADESA will be responsible for the preparation and filing
of all foreign Income Tax Returns for ADESA and any ADESA Affiliate.


 


2.02.  ADESA’s Responsibility.  ADESA shall have sole and exclusive
responsibility for:


 


(a)   the preparation and filing of all Tax
Returns with respect to ADESA and any ADESA Affiliate for Post-Distribution
Periods; and


 


(b)  the filing of all Income Tax Returns
described in Section 2.01(c) for Pre-Distribution Periods and the preparation
and filing of any Tax Return other than Income Tax Returns described in Section
2.01(c) with respect to ADESA and any ADESA Affiliate.


 


2.03.  Agent.  Subject to the other applicable provisions
of this Agreement, ADESA hereby irrevocably designates, and agrees to cause
each ADESA Affiliate to so designate, ALLETE as its sole and exclusive agent
and attorney-in-fact to take such action (including execution of documents) as
ALLETE, in its sole discretion, may deem appropriate in any and all matters
(including Audits) relating to any Tax Return described in Section 2.01 of this
Agreement; provided, however, that in the event such action would
result in a Tax Detriment to ADESA or an ADESA Affiliate, ALLETE shall consult
with ADESA and ADESA shall be provided an opportunity to reasonably object to
such action.


 


2.04   Notice.  Within ten (10) days after receipt of a
written notice from a Taxing Authority regarding the commencement of an Audit
or other inquiry with respect to any Tax Return for a Pre-Distribution Period
the party receiving such notice shall notify the other party of such Audit or
other inquiry.


 


2.05.  Manner of Tax Return Preparation.


 


(a)  Unless otherwise required by a Taxing
Authority, the parties hereby agree: (i) to prepare and file all
Pre-Distribution Tax Returns in a manner consistent with past practice
regarding such preparation and filing and (ii) to prepare and file all Tax
Returns and to take all other actions, in a manner consistent with (1) this
Agreement, (2) the Officer’s Certificate, and (3) the Tax Opinion.  All Tax Returns shall be filed on a timely
basis (taking into account applicable extensions) by the party responsible for
filing such returns under this Agreement.


 


(b)  ALLETE shall have the right, with respect to
any Tax Return described in Section 2.01  of
this Agreement (without regard to which party is responsible for preparing and
filing such Tax Return) to determine (1) the manner in which such Tax Return
shall be prepared and filed, including the


 


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elections, method of accounting, positions, conventions and principles
of taxation to be used and the manner in which any Tax Item shall be reported,
(2) whether any extensions may be requested, (3) the elections that will be
made by ALLETE, any ALLETE Affiliate, ADESA, or any ADESA Affiliate on such Tax
Return, (4) whether any amended Tax Returns shall be filed, (5) whether any
claims for refund shall be made, (6) whether any refunds shall be paid by way
of refund or credited against any liability for the related Tax, and (7)
whether to retain outside firms to prepare or review such Tax Returns; provided,
however, that in the event such action would result in a Tax Detriment
to ADESA or an ADESA Affiliate, ALLETE shall consult with ADESA and ADESA shall
be provided an opportunity to reasonably object to such action.  ALLETE shall provide ADESA with copies of
all Tax Returns described in Section 2.01 within thirty (30) days after filing
any such Tax Returns.


 


(c)  Within ninety (90) days after filing the
final Consolidated Return, ALLETE shall notify ADESA of the Tax Assets
associated with ADESA and each ADESA Affiliate, and the Income Tax basis of any
asset or liability transferred to ADESA in connection with the Transfer.  At ADESA’s request, ALLETE will use its best
efforts to provide ADESA with preliminary estimates of such information as soon
as is practicable.


 


2.06.  Tax Services Agreement.


 


(a)  ALLETE Tax Services.  If requested by ADESA, ALLETE shall perform
the duties and obligations ascribed to ADESA as may reasonably be requested by
ADESA (the “ALLETE Tax Services”) for a period not to exceed twenty-four (24)
months following the Distribution Date. 
In consideration for the ALLETE Tax Services, ADESA shall pay to ALLETE
an amount as negotiated by the parties in good faith for the ALLETE Tax
Services performed.  Except as set forth
in Section 2.06(c), payment with respect to ALLETE Tax Services performed in a
particular month shall be made within thirty (30) days of the receipt by ADESA
of an invoice for such services and such payment shall be made in immediately
available funds as instructed by ALLETE.


 


(b)  ADESA Tax Services.  If requested by ALLETE, ADESA shall provide
such assistance and other tax related services to ALLETE, as may reasonably be
requested by ALLETE (the “ADESA Tax Services”) for a period not to exceed
twenty-four (24) months following the Distribution Date.  In consideration for the ADESA Tax Services,
ALLETE shall pay to ADESA an amount as negotiated by the parties in good faith
for the ADESA Tax Services performed. 
Except as set forth in Section 2.06(c), payment with respect to ADESA
Tax Services performed in a particular month shall be made within thirty (30)
days of the receipt by ALLETE of an invoice for such services and such payment
shall be made in immediately available funds as instructed by ADESA.  A


 


(c)  Netting of Payments.  In any month where there are both ALLETE Tax
Services and ADESA Tax Services performed, to the extent possible the payments
by ADESA in Section 2.06(a) and by ALLETE in Section 2.06(b) shall be netted
against each other, and the resulting amount due shall be paid to ALLETE or
ADESA, as the case may be.


 


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(d)  Right to Review. The party performing
Tax Services under either Section 2.06(a) or 2.06(b) shall provide the other
party with any Tax Return to be filed by such party at least ten (10) days
prior to the due date, as extended, of such Tax Return.


 


(e)  Information.  ADESA shall timely provide, in a manner
consistent with past practice, all information necessary for ALLETE to prepare
all Tax Returns and compute all estimated Income Tax payments (for purposes of
Section 7.01 of this Agreement).  ALLETE
shall provide ADESA with copies of all notices or communications from any
Taxing Authority relating to any Tax or Tax Return of ADESA or any ADESA
Affiliate covered by the Tax Services.


 


Section 3.              Liability
for Taxes.


 


3.01.  ADESA’s Liability for Section
2.01(a) Taxes.  With respect to
all Tax Returns described in Section 2.01(a) of this Agreement, ADESA shall be
liable for the Separate Tax Liability of ADESA and all ADESA Affiliates, and
shall be entitled to receive and retain all refunds or credits of Taxes
previously paid by ADESA with respect to any such Separate Tax Liability.


 


3.02.  ALLETE’s Liability for Sections
2.01(a) and (b) Taxes.  With
respect to all Tax Returns described in Section 2.01(a) of this Agreement,
ALLETE shall be liable for the difference between the Separate Tax Liability
and all Income Taxes shown as due on such Tax Returns, and shall be entitled to
receive and retain all refunds or credits of Income Taxes attributable to such
difference.  With respect to all Tax
Returns described in Section 2.01(b) of this Agreement, ALLETE shall be liable
for all Taxes due with respect thereto, and shall be entitled to receive and
retain all refunds or credits of Taxes previously paid by ALLETE with respect
to such Taxes.


 


3.03.  ADESA’s Liability for Sections
2.01(c) and 2.02 Taxes.  With
respect to all Tax Returns described in Sections 2.01(c) and 2.02 of this
Agreement, ADESA shall be liable for all Taxes due with respect thereto, and
shall be entitled to receive and retain all refunds or credits of Taxes
previously paid by ADESA with respect to such Taxes.


 


3.04.  Payment of Tax Liability.  If one party is liable for Taxes, under
Sections 3.01 through 3.03 of this Agreement, with respect to Tax Returns for
which another party is responsible for filing, then the liable party shall pay
the Taxes to the other party pursuant to Section 7.04 of this Agreement.


 


3.05.  Computation.  At least ten (10) days prior to the due date
of any Tax Return for which ADESA incurs a separate Tax Liability, ALLETE shall
provide ADESA with a written calculation in reasonable detail setting forth the
amount of such Separate Tax Liability or estimated Separate Tax Liability (for
purposes of Section 7.01 of this Agreement). 
ADESA shall have the right to review and comment on such
calculation.  Any dispute with respect
to such calculation shall be resolved pursuant to Section 9.03 of this
Agreement.


 


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Section 4.              Distribution
Taxes and Deconsolidation.


 


4.01.  Distribution Taxes.


 


(a)  ALLETE’s Liability for Distribution Taxes.  Notwithstanding Sections 3.01 through 3.03
of this Agreement, ALLETE and each ALLETE Affiliate shall be liable for one
hundred percent (100%) of any Distribution Taxes that result from one or more
of the following:


 


(i)  any act, failure to act or omission of or by
ALLETE (or any ALLETE Affiliate) inconsistent with any material, information,
covenant or representation in the Officer’s Certificate or the Tax Opinion;


 


(ii)  any act, failure to act or omission of or by
ALLETE (or any ALLETE Affiliate) after the date of the Distribution, including,
without limitation, a cessation, transfer to affiliates, or disposition of its
active trades or businesses, or an issuance of stock, stock buyback or payment
of an extraordinary dividend by ALLETE (or any ALLETE Affiliate) following the
Distribution;


 


(iii)  any acquisition of any stock or assets of
ALLETE (or any ALLETE Affiliate) by one or more other persons prior to or
following the Distribution; or


 


(iv)  any issuance of stock by ALLETE (or any ALLETE
Affiliate), or change in ownership of stock in ALLETE (or any ALLETE
Affiliate), that causes section 355(d) or section 355(e) of the Code to apply
to the Distribution.


 


(b)  ADESA’s Liability for Distribution Taxes.   Notwithstanding Sections 3.01 through 3.03
of this Agreement, ADESA and each ADESA Affiliate shall be liable for one
hundred percent (100%) of any Distribution Taxes that result from one or more
of the following:


 


(i)  any act, failure to act or omission of or by
ADESA (or any ADESA Affiliate) inconsistent with any material, information,
covenant or representation related to ADESA or any ADESA Affiliate in the
Officer’s Certificate or the Tax Opinion;


 


(ii)  any act, failure to act or omission of or by
ADESA (or any ADESA Affiliate) after the date of the Distribution, including
without limitation, a cessation, transfer to affiliates or disposition of its
active trades or businesses, or an issuance of stock, stock buyback or payment
of an extraordinary dividend by ADESA (or any ADESA Affiliate) following the
Distribution;


 


(iii)  any acquisition of any stock or assets of
ADESA (or any ADESA Affiliate) by one or more other persons prior to or
following the Distribution; or


 


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(iv)  any issuance of stock by ADESA (or any ADESA
Affiliate), or change in ownership of stock in ADESA (or any ADESA Affiliate),
that causes section 355(d) or section 355(e) of the Code to apply to the
Distribution.


 


(c)  Joint Liability for Remaining
Distribution Taxes.  The liability
for any Distribution Taxes not allocated by Sections 4.01(a) or (b) of this
Agreement shall be borne fifty percent (50%) by ALLETE and  fifty percent (50%) by ADESA.


 


4.02.  Carrybacks.


 


(a)  In General.  ALLETE agrees to pay to ADESA the United States federal income
Tax Benefit from the use in any Pre-Distribution Period (the “Carryback
Period”) of a carryback of any Tax Asset of the ADESA Group from a
Post-Distribution Period.  If subsequent
to the payment by ALLETE to ADESA of the United States federal income Tax
Benefit of a carryback of a Tax Asset of the ADESA Group, there shall be a
Final Determination which results in a (1) change to the amount of the Tax
Asset so carried back or (2) change to the amount of such United States federal
income Tax Benefit, ADESA shall repay to ALLETE, or ALLETE shall repay to
ADESA, as the case may be, any amount which would not have been payable to such
other party pursuant to this Section 4.02(a) had the amount of the benefit been
determined in light of these events. 
Nothing in this Section 4.02(a) shall require ALLETE to file an amended
Tax Return or claim for refund or credit of Taxes; provided, however,
that ALLETE shall use its reasonable best efforts to use any carryback of a Tax
Asset of the ADESA Group that is otherwise carried back under this Section
4.02(a).


 


(b)  Net Operating Losses.  Notwithstanding any other provision of this
Agreement, ADESA hereby expressly agrees to elect (under section 172(b)(3) of
the Code and, to the extent feasible, any similar provision of any state, local
or foreign Tax law) to relinquish any right to carryback net operating losses
for any tax year with respect to which such net operating loss could otherwise
be carried back into a Consolidated Return or a Combined Return (in which event
no payment shall be due from ALLETE to ADESA in respect of such net operating
losses).


 


4.03.  Allocation of Tax Items.  All Tax computations for (1) any
Pre-Distribution Periods ending on the Distribution Date and (2) the
immediately following taxable period of ADESA or any ADESA Affiliate, shall be
made pursuant to the principles of section 1.1502-76(b) of the Treasury
Regulations or of a corresponding provision under the laws of other
jurisdictions, as determined by ALLETE after consultation with ADESA and
subject to ADESA’s right to reasonably object thereto; provided, however,
that an election to ratably allocate items under section (b)(2) of the
aforementioned Treasury Regulations shall not be made without the express
written consent of ADESA, which consent shall not be unreasonably withheld.


 


12

















 


4.04.  Continuing Covenants.


 


(a)  In General.  Each of ALLETE (for itself and each ALLETE Affiliate) and ADESA
(for itself and each ADESA Affiliate) agrees (1) not to take any action
reasonably expected to result in an increased Tax liability to the other, a
reduction in a Tax Asset of the other or an increased liability to the other
under this Agreement, (2) not to take any action, fail to take any action, or
commit any omission that would result in Distribution Taxes and (3) to take any
action reasonably requested by the other that would reasonably be expected to
result in a Tax Benefit or avoid a Tax Detriment to the other, provided that such
action does not result in any additional direct or indirect cost not fully
compensated for by the requesting party. 
The parties hereby acknowledge that the preceding sentence is a
statement of general principle and is not intended to limit, and therefore
shall not apply to, the rights of the parties with respect to matters otherwise
covered by this Agreement.


 


(b)  Consistency.  Each of ALLETE (for itself and each ALLETE
Affiliate) and ADESA (for itself and each ADESA Affiliate) agrees that it will
not take or fail to take any action where such action or failure to act would
be inconsistent with any material, information, covenant or representation
contained in the Officer’s Certificate or the Tax Opinion.  For this purpose an action is considered
inconsistent with a representation if the representation states that there is
no plan or intention to take such action. 
Each of ALLETE (for itself and each ALLETE Affiliate) and ADESA (for
itself and each ADESA Affiliate) agrees that it will not take any position on a
Tax Return that is inconsistent with the treatment of (i) the Transfer as a
tax-free reorganization under section 368(a)(1)(D) of the Code, and (ii) the
Distribution as tax free under sections 355 and 368(a)(1)(D) of the Code.


 


 (c)  Certain
ALLETE Actions Following the Distribution. ALLETE agrees that during the
two (2) year period following the Distribution, without first obtaining a tax
opinion from an Independent Firm that such action will not result in
Distribution Taxes: (1) ALLETE  shall
not sell or transfer all or substantially all of the assets comprising the
Minnesota Power Business, except (i) to a corporation which files a
Consolidated Return with ALLETE and which is wholly-owned, directly or
indirectly, by ALLETE, or (ii) in a reorganization within the meaning of
Section 368(a)(1)(C) or (D) of the Code where the shareholders of ALLETE
receive more than 50 percent of the stock of the acquiring company (for this
purpose any shares of ALLETE acquired by any person after the Distribution shall
not be considered to be held by a shareholder of ALLETE);  (2) ALLETE shall not merge with another
entity, without regard to which party is the surviving entity, except in a
reorganization within the meaning of Section 368(a)(1)(A), (C) or (D), or an
exchange under Section 351, of the Code where the shareholders of ALLETE own
more than 50 percent of the stock of the surviving entity (for this purpose any
shares of ALLETE acquired by any person after the Distribution shall not be
considered to be held by a shareholder of ALLETE); and (3) ALLETE shall not
issue stock of ALLETE (or any instrument that is convertible or exchangeable
into any such stock) in an acquisition or public or private offering (excluding
any issuance pursuant to the exercise of employee stock options or other
employment related arrangements having customary terms and conditions and that
satisfy the requirements of temporary Treasury Regulations section
1.355-7T(e)(3)(ii)), unless following such issuance of stock, the shareholders
of ALLETE continue to own more than 50 percent of the stock of ALLETE (for this
purpose any shares of ALLETE acquired by any person after the Distribution
shall


 


13

















 


not be considered to beheld by a shareholder of ALLETE).


 


(d)  Certain ADESA Actions Following the
Distribution. During the two-year period following the Distribution,
without first obtaining a tax opinion from an Independent Firm that such action
will not result in Distribution Taxes: 
(1) ADESA shall not sell or transfer all or substantially all of the
assets comprising the ADESA Auction Business or any interest in an entity that
conducts the ADESA Auction Business, except in a reorganization within the
meaning of Section 368(a)(1)(C) or (D) of the Code where the shareholders of
ADESA receive more than 50 percent of the stock of the acquiring company (for
this purpose any shares of ADESA acquired by any person in the IPO or after the
Distribution shall not be considered to beheld by a shareholder of ADESA); (2)  ADESA shall not, and shall not permit any
ADESA subsidiary which conducts the ADESA Auction Business to, merge with
another entity, without regard to which party is the surviving entity, except
in a reorganization within the meaning of Section 368(a)(1)(A), (C) or (D), or
an exchange under Section 351, of the Code where the shareholders of ADESA own
more than 50 percent of the stock of the surviving entity (for this purpose any
shares of ADESA acquired by any person in the IPO or after the Distribution
shall not be considered to beheld by a shareholder of ADESA); and (3)  ADESA 
shall not issue or cause to be issued stock of any ADESA affiliate (or
any instrument that is convertible or exchangeable into any such stock) in an
acquisition or public or private offering, and shall not issue stock of ADESA
(or any instrument that is convertible or exchangeable into any such stock) in
an acquisition or public or private offering (excluding any issuance pursuant
to the exercise of employee stock options or other employment related
arrangements having customary terms and conditions and that satisfy the
requirements of temporary Treasury Regulations section 1.355-7T(e)(3)(ii)),
unless following such issuance of stock, the shareholders of ADESA continue to
own more than 50 percent of the stock of ADESA (for this purpose any shares of
ADESA acquired by any person in the IPO or after the Distribution shall not be
considered to beheld by a shareholder of ADESA).


 


(e)  Notice of Specified Transactions.  Not later than twenty (20) days prior to
entering into any oral or written contract or agreement, and not later than
five (5) days after it first becomes aware of any negotiations, plan or
intention (regardless of whether it is a party to such negotiations, plan or intention),
regarding any of the transactions described in paragraph (c) or (d), ALLETE or
ADESA, as the case may be, shall provide written notice of its intent to
consummate such transaction or the negotiations, plan or intention of which it
becomes aware, to the other party.


 


4.05.  Allocation of Tax Assets.


 


(a)  In General.  In connection with the Distribution, ALLETE and ADESA shall
cooperate in determining the allocation of any Tax Assets among ALLETE, each
ALLETE Affiliate, ADESA, and each ADESA Affiliate.  The parties hereby agree that in the absence of controlling legal
authority or unless otherwise provided under this Agreement, Tax Assets shall
be allocated to the legal entity to which the cost or burden associated with
the creation of such Tax Asset (other than with


 


14

















 


respect to any Tax Asset created by reason of a contribution to the
capital of ADESA by ALLETE on or before the Distribution Date, in which case
ADESA shall be permitted to retain such Tax Asset) has been charged.


 


(b)  Earnings and Profits.  ALLETE will advise ADESA in writing of the
decrease in ALLETE earnings and profits attributable to the Distribution under
section 312(h) of the Code on or before the first anniversary of the Distribution;
provided, however, that ALLETE shall provide ADESA with estimates
of such amounts (determined in accordance with past practice) prior to such
anniversary as reasonably requested by ADESA.


 


Section 5.              Stock
Options.


 


5.01.  Deduction,
Withholding, Reporting.


 


(a)  To the extent permitted by law, ALLETE (or
the appropriate member of the ALLETE Group) shall claim all Tax deductions
arising by reason of exercises of Options to acquire ALLETE stock held by
ALLETE Employees.  To the extent
permitted by law, ADESA (or the appropriate member of the ADESA Group) shall
claim all Tax deductions arising by reason of exercises of Options to acquire
ADESA stock held by ADESA Employees.


 


(b)  ALLETE shall, to the extent required by law,
withhold applicable Taxes and satisfy applicable Tax reporting obligations with
respect to exercises of Options to acquire ALLETE stock held by ALLETE
Employees.  ADESA shall, to the extent
required by law, withhold applicable Taxes and satisfy applicable Tax reporting
obligations with respect to exercises of Options to acquire ADESA stock held by
ADESA Employees.


 


Section 6.              Indemnification


 


6.01.  Generally.  The ALLETE Group shall jointly and severally
indemnify ADESA, each ADESA Affiliate, and their respective directors, officers
and employees, and hold them harmless from and against any and all Taxes for
which ALLETE or any ALLETE Affiliate is liable under this Agreement and any
loss, cost, fine, penalty, damage or other expense of any kind, including
reasonable attorneys’ fees and costs, but excluding any consequential, special,
punitive or exemplary damages, that is attributable to, or results from the
failure of ALLETE, any ALLETE Affiliate or any of their respective directors,
officers or employees to make any payment required to be made under this
Agreement.  The ADESA Group shall
jointly and severally indemnify ALLETE, each ALLETE Affiliate, and their
respective directors, officers and employees, and hold them harmless from and
against any and all Taxes for which ADESA or any ADESA Affiliate is liable
under this Agreement and any loss, cost, fine, penalty, damage or other
expense, including reasonable attorneys’ fees and costs, but excluding any
consequential, special, punitive or exemplary damages, that is attributable to,
or results from, the


 


15

















 


failure of ADESA, any ADESA Affiliate or any of their respective
directors, officers or employees to make any payment required to be made under
this Agreement.


 


6.02.  Inaccurate or Incomplete Information.  The ALLETE Group shall jointly and severally
indemnify ADESA, each ADESA Affiliate, and their respective directors, officers
and employees, and hold them harmless from and against any loss, cost, fine,
penalty, damage or other expense of any kind, excluding any consequential,
special, punitive or exemplary damages, that is attributable to the negligence
of ALLETE or any ALLETE Affiliate in supplying ADESA or any ADESA Affiliate
with inaccurate or incomplete information, in connection with the preparation
of any Income Tax Return (other than with respect to any foreign ADESA
Affiliate).  The ADESA Group shall
jointly and severally indemnify ALLETE, each ALLETE Affiliate, and their
respective directors, officers and employees, and hold them harmless from and
against any loss, cost, fine, penalty, damage or other expense, excluding any
consequential, special, punitive or exemplary damages, that is attributable to
the negligence of ADESA or any ADESA Affiliate in supplying ALLETE or any ALLETE
Affiliate with inaccurate or incomplete information, in connection with the
preparation of any Income Tax Return.


 


6.03.  No
Guarantee for Tax Items. 
Nothing in this Agreement shall be construed as a guarantee of the
existence or amount of any loss, credit, carryforward, basis or other Tax Item,
whether past, present or future, of ALLETE, any ALLETE Affiliate, ADESA or any
ADESA Affiliate.


 


Section 7.              Payments.


 


7.01.  Estimated
Tax Payments.  As
requested by ALLETE, ADESA shall promptly, but not later than the date
immediately preceding each Estimated Tax Installment Date with respect to a
taxable period for which a Consolidated Return or a Combined Return will be
filed, pay to ALLETE on behalf of the ADESA Group an amount equal to the amount
of any estimated Separate Tax Liability that ADESA would have otherwise been
required to pay to a Taxing Authority on such Estimated Tax Installment Date.


 


7.02.  True-Up
Payments.  Not later than 15
days following the provision of the Separate Tax Liability computation to ADESA
as provided in Section 3.05, ADESA shall pay to ALLETE, or ALLETE shall pay to
ADESA or apply as a credit against future Tax liability, as appropriate, an
amount equal to the difference, if any, between the ADESA Separate Tax
Liability and the aggregate amount paid by ADESA with respect to such period
under Section 7.01 of this Agreement.


 


7.03.  Redetermination Amounts.  In the event of a redetermination of any Tax
Item reflected on any Tax Return described in Section 2.01(a) of this Agreement
(other than Tax Items relating to Distribution Taxes), as a result of a refund
of Taxes paid, a Final Determination or any settlement or compromise with any
Taxing Authority which may affect ADESA’s Separate Tax Liability, ALLETE shall
prepare a revised pro forma Tax Return for the relevant taxable period
reflecting the redetermination of such Tax Item as a result of such refund,
Final Determination, settlement or


 


16

















 


compromise.  ADESA shall pay to
ALLETE, or ALLETE shall pay to ADESA, as appropriate, an amount equal to the
difference, if any, between the Separate Tax Liability based on such revised
pro forma Tax Return and the Separate Tax Liability for such period as
originally computed pursuant to this Agreement.


 


7.04.  Payments Under This Agreement.  In the event that one party (the “Owing
Party”) is required to make a payment to another party (the “Owed Party”)
pursuant to this Agreement, then such payments shall be made according to this
Section 7.04.


 


(a)  In General.  All payments shall be made to the Owed Party or to the
appropriate Taxing Authority as specified by the Owed Party within the time
prescribed for payment in this Agreement, or if no period is prescribed, within
twenty (20) days after delivery of written notice of payment owing together
with a computation of the amounts due.


 


(b)  Treatment of Payments.  Unless otherwise required by any Final
Determination, the parties agree that any payments made by one party to another
party (other than payments of interest pursuant to Section 7.04(e) of this
Agreement, payments with respect to Tax Services pursuant to Section 2.06 of
this Agreement, and payments of After Tax Amounts pursuant to Section 7.04(d)
of this Agreement) pursuant to this Agreement shall be treated for all Tax and
financial accounting purposes as nontaxable payments (dividend distributions or
capital contributions, as the case may be) made immediately prior to the
Distribution and, accordingly, as not includible in the taxable income of the
recipient or as deductible by the payor.


 


(c)  Prompt Performance.  All actions required to be taken by any
party under this Agreement shall be performed within the time prescribed for
performance in this Agreement, or if no period is prescribed, such actions
shall be performed promptly or, with respect to the Tax Services, on a timely
basis.


 


(d)  After Tax Amounts.  If pursuant to a Final Determination it is
determined that the receipt or accrual of any payment made under this Agreement
(other than payments of interest pursuant to Section 7.04(e) of this Agreement)
is subject to any Tax, the party making such payment shall be liable for (a)
the After Tax Amount with respect to such payment and (b) interest at the rate
described in Section 7.04(e) of this Agreement on the amount of such After Tax
Amount from the date such After Tax Amount is due under this Agreement through
the date of payment of such After Tax Amount. 
A party making a demand for a payment pursuant to this Agreement and for
a payment of an After Tax Amount with respect to such payment shall separately
specify and compute such After Tax Amount. 
However, a party may choose not to specify an After Tax Amount in a
demand for payment pursuant to this Agreement without thereby being deemed to
have waived its right subsequently to demand an After Tax Amount with respect
to such payment.


 


(e) Tax
Benefit.  Any payments made by one
party to another party under this


 


17

















 


Agreement shall be adjusted as necessary to reflect any deduction or
other Tax Benefit realized by the party receiving such payment arising from any
payment or other Tax Item giving rise to such payment under this Agreement.


 


(f) Interest.  Payments pursuant to this Agreement that are
not made within the period prescribed in this Agreement (the “Payment Period”)
and were not otherwise setoff against amounts owed by one party to the other
party as provided in Sections 2.06(c) and 9.16 of this Agreement shall bear
interest for the period from and including the date immediately following the
last date of the Payment Period through and including the date of payment at  a per annum rate equal to the applicable
rate for large corporate underpayments set forth in Section 6621(c) of the
Code.  Such interest will be payable at
the same time as the payment to which it relates and shall be calculated  on the basis of a year of 365 days and the
actual number of days for which due.


 


Section 8.              Tax
Proceedings.


 


8.01.  In
General.  Except as otherwise
provided in this Agreement, the party responsible for filing a Tax Return
pursuant to Section 2 of this Agreement (the “Filing Party”) shall have the
exclusive right, in its sole discretion, to control, contest, and represent the
interests of ALLETE, any ALLETE Affiliate, ADESA, and any ADESA Affiliate in
any Audit relating to such Tax Return and to resolve, settle or agree to any
deficiency, claim or adjustment proposed, asserted or assessed in connection
with or as a result of any such Audit. 
The Filing Party’s rights shall extend to any matter pertaining to the
management and control of an Audit, including execution of waivers, choice of
forum, scheduling of conferences and the resolution of any Tax Item.  Any costs incurred in handling, settling, or
contesting an Audit shall be borne by the Filing Party.


 


8.02.  Participation of non-Filing Party.  Except as otherwise provided in this
Agreement, the non-Filing Party shall have the right to assume control over
decisions to resolve, settle or otherwise agree to any deficiency, claim or
adjustment:  (i) with respect to any
Sole Responsibility Item for which the non-Filing Party’s responsibility under
this Agreement could exceed ten thousand dollars ($10,000); provided, that the
non-Filing Party acknowledges in writing that it has sole liability for such
deficiency, claim or adjustment.  The
Filing Party shall not settle any Audit they control concerning a Tax Item of a
Pre-Distribution Period on a basis that would materially adversely affect the
non-Filing Party without obtaining such non-Filing Party’s consent, which
consent shall not be unreasonably withheld if failure to consent would
adversely affect the Filing Party.


 


8.03.  Notice.  Within ten (10) days after a party receives
a written notice from a Taxing Authority of a proposed adjustment to a Tax Item
(irrespective of whether such proposed adjustment would reasonably be expected
to give rise to an indemnification obligation or other liability (including a
liability for Tax) under this Agreement), such party shall notify the other
party of such proposed adjustment, and thereafter shall promptly forward to the
other party copies of notices and material


 


18

















 


communications with any Taxing Authority relating to such proposed
adjustment; provided, however, that the failure to provide such
notice shall not release the indemnifying party from any of its obligations
under this Agreement except to the extent that such indemnifying party is
materially prejudiced by such failure.


 


8.04.  Control of Distribution Tax
Proceedings.


 


(a)  ALLETE and ADESA shall jointly control, and
shall each have the right to participate in all activities and strategic
decisions with respect to, any Tax proceedings relating to Distribution
Taxes.  ALLETE may assume sole control
of the Distribution Tax proceedings if it acknowledges in writing that it has
sole liability for any Distribution Taxes that might arise in such proceeding.


 


Section 9.              Miscellaneous
Provisions.


 


9.01.  Effectiveness.  This Agreement shall be effective as of the
Distribution Date.


 


9.02.  Cooperation and Exchange of
Information.


 


(a)  Cooperation.  ADESA and ALLETE shall each cooperate fully
(and each shall cause its respective affiliates to cooperate fully) with all
reasonable requests from another party in connection with the preparation and
filing of Tax Returns, claims for refund, and Audits concerning issues or other
matters covered by this Agreement.  Such
cooperation shall include, without limitation:


 


(i)  the retention until the expiration of the
applicable statute of limitations, and extensions, if any, thereof, and the
provision upon request, of Tax Returns, books, records (including information
regarding ownership and Income Tax basis of property), documentation and other
information relating to the Tax Returns, including accompanying schedules,
related work papers, and documents relating to rulings or other determinations
by Taxing Authorities;


 


(ii)  the execution of any document that may be
necessary or reasonably helpful in connection with any Audit, or the filing of
a Tax Return or refund claim by a member of the ALLETE Group or the ADESA
Group, including certification, to the best of a party’s knowledge, of the
accuracy and completeness of the information it has supplied; and


 


(iii)  the use of the party’s best efforts to
obtain any documentation that may be necessary or reasonably helpful in
connection with any of the foregoing. 
Each party shall make its employees and facilities available on a reasonable
and mutually convenient basis in connection with the foregoing matters.


 


19

















 


(b)  Failure to Perform.  If a party fails to comply with any of its
obligations set forth in Section 9.02(a) of this Agreement upon reasonable
request and notice by the other party, and such failure results in the
imposition of additional Taxes, the nonperforming party shall be liable in full
for such additional Taxes.


 


(c)  Retention of Records.  A party intending to dispose of
documentation of ALLETE (or any ALLETE Affiliate) or ADESA (or any ADESA
Affiliate), including without limitation, books, records, Tax Returns and all
supporting schedules and information relating thereto (after the expiration of
the applicable statute of limitations) prior to the expiration of the statute
of limitations (including any waivers or extensions thereof) of the taxable
year or years to which such documentation relates, shall provide written notice
to the other party describing the documentation to be destroyed or disposed of
sixty (60) business days prior to taking such action.  The other party may arrange to take delivery of the documentation
described in the notice at its expense during the succeeding sixty (60) day
period.


 


9.03.  Dispute Resolution.  In the event that ALLETE and ADESA disagree as to the amount or
calculation of any payment to be made under this Agreement, or the
interpretation or application of any provision under this Agreement, the
parties shall attempt in good faith to resolve such dispute.  If such dispute is not resolved within sixty
(60) business days following the commencement of the dispute, ALLETE and ADESA
shall jointly retain an Independent Firm, reasonably acceptable to both
parties, to resolve the dispute; provided, however, that in order
to pursue any such dispute resolution under this Section 9.03, the Owing Party
must either (i) first pay to the Owed Party, or place in an escrow reasonably
satisfactory to the Owed Party pending resolution of such dispute, an amount
equal to the payment which is the subject of such dispute, or (ii) deliver to
the Owed Party a written opinion of an independent  law or accounting firm reasonably acceptable to both parties,
substantially to the effect that with respect to such dispute the Owing Party
is more likely than not to prevail in its entirety in the dispute resolution
proceeding.  The Independent Firm shall
act as an arbitrator to resolve all points of disagreement and its decision
shall be final and binding upon all parties involved.  Following the decision of the Independent Firm, ALLETE and ADESA
shall each take or cause to be taken any action necessary to implement the
decision of the Independent Firm.  The
fees and expenses relating to the Independent Firm shall be borne by the party
that does not prevail in the dispute resolution proceeding.  Notwithstanding anything in this Agreement
to the contrary, the dispute resolution provisions set forth in this Section
9.03 shall not be applicable to any disagreement between ALLETE and ADESA
relating to Distribution Taxes or Distribution Tax proceedings.


 


9.04.  Notices.  Any notice, request, instruction or other
document to be given or delivered under this Agreement by any party to another
party shall be in writing and shall be deemed to have been duly given or
delivered when (1) delivered in person or sent by telecopy to the facsimile
number indicated below with a required confirmation copy sent in accordance
with clause (2) below, (2) deposited in the United States mail, postage prepaid
and sent certified mail, return receipt requested or (3) delivered to Federal
Express or similar service for overnight delivery to the address of the party
set forth below:


 


20

















 


If to ALLETE
or any ALLETE Affiliate to:


 


ALLETE, Inc.


30 W. Superior
Street


Duluth, MN
55802


Attention:
General Counsel


Facsimile:
218-723-3960


 


with a copy
to:


 


ALLETE, Inc.


30 W. Superior
Street


Duluth, MN
55802


Attention:
Manager of Tax


Facsimile:
218-720-2515


 


If to ADESA or
any ADESA Affiliate to:


 


ADESA Inc.


13085 Hamilton
Crossing Blvd., Suite 500


Carmel, IN
46032


Attention:
General Counsel or Chief Financial Officer


Facsimile:
317-249-4603


 


with a copy
to:


 


ADESA Inc.


13085 Hamilton
Crossing Blvd., Suite 500


Carmel, IN
46032


Attention:
Director of Tax


Facsimile:
317-249-4603


 


Either party may, by written
notice to the other parties, change the address or the party to which any
notice, request, instruction or other document is to be delivered.


 


9.05.  Changes
in Law.


 


(a)  Any reference to a provision of the Code or
a law of another jurisdiction shall include a reference to any applicable
successor provision or law.


 


(b)  If, due to any change in applicable law or
regulations or their interpretation by any


 


21

















 


court of law or other governing body having jurisdiction subsequent to
the date of this Agreement, performance of any provision of this Agreement or
any transaction contemplated thereby shall become impracticable or impossible,
the parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such provision.


 


9.06.  Confidentiality.  Each party shall hold and cause its
directors, officers, employees, advisors and consultants to hold in strict
confidence, unless compelled to disclose by judicial or administrative process
or, in the opinion of its counsel, by other requirements of law, all information
(other than any such information relating solely to the business or affairs of
such party) concerning the other parties hereto furnished it by such other
party or its representatives pursuant to this Agreement (except to the extent
that such information can be shown to have been (1) in the public domain
through no fault of such party, (2) later lawfully acquired from other sources
not known to be under a duty of confidentiality by the party to which it was
furnished, or (3) independently developed), and each party shall not release or
disclose such information to any other person, except its directors, officers,
employees, auditors, attorneys, financial advisors, bankers and other
consultants who shall be advised of and agree to be bound by the provisions of
this Section 9.06.  Each party shall be
deemed to have satisfied its obligation to hold confidential information
concerning or supplied by the other party if it exercises the same care as it
takes to preserve confidentiality for its own similar information.


 


9.07.  Successors.  This Agreement shall be binding on and inure
to the benefit and detriment of any successor, by merger, acquisition of assets
or otherwise, to any of the parties hereto, to the same extent as if such
successor had been an original party.


 


9.08.  Affiliates.  ALLETE shall cause to be performed, and
hereby guarantees the performance of, all actions, agreements and obligations
set forth herein to be performed by any ALLETE Affiliate, and ADESA shall cause
to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any ADESA
Affiliate; provided, however, that (1) if it is contemplated that
an ADESA Affiliate may cease to be an ADESA Affiliate as a result of a transfer
of its stock or other ownership interests to a third party in exchange for
consideration in an amount approximately equal to the fair market value of the
stock or other ownership interests transferred and such consideration is not
distributed outside of the ADESA Group to the shareholders of ADESA then ADESA
may request in writing no later than thirty (30) days prior to such cessation
that ALLETE execute a release of such ADESA Affiliate from its obligations
under this Agreement effective as of such transfer and ALLETE shall promptly
execute and deliver such release to ADESA provided that ADESA shall have
confirmed in writing its obligations and the obligations of its remaining ADESA
Affiliates with respect to their own obligations and those of the departing
ADESA Affiliate and that such departing ADESA Affiliate shall have executed a
release of any rights it may have against ALLETE or any ALLETE Affiliate by
reason of this Agreement, and (2) if it is contemplated that an ALLETE
Affiliate may cease to be an ALLETE Affiliate as a result of a transfer of its
stock or other ownership interests to a third party in exchange for
consideration in an amount approximately


 


22

















 


equal to the fair market value of the stock or other ownership
interests transferred and such consideration is not distributed outside of the
ALLETE Group to the shareholders of ALLETE then ALLETE may request in writing
no later than thirty (30) days prior to such cessation that ADESA execute a
release of such ALLETE Affiliate from its obligations under this Agreement
effective as of such transfer and ADESA shall promptly execute and deliver such
release to ALLETE provided that ALLETE shall have confirmed in writing its
obligations and the obligations of its remaining ALLETE Affiliates with respect
to their own obligations and the obligations of the departing ALLETE Affiliate
and that such departing ALLETE Affiliate shall have executed a release of any
rights it may have against ADESA or any ADESA Affiliate by reason of this
Agreement.  The requested party
hereunder shall not unreasonably withhold the provision of any such
release.  This Section 9.08 shall be
effective through the second anniversary of the Distribution Date.


 


9.09.  Authorization,
Etc.  Each of ALLETE and ADESA
hereby represents and warrants that it has the power and authority to execute,
deliver and perform this Agreement, that this Agreement has been duly
authorized by all necessary corporate action on the part of such party, that
this Agreement constitutes a legal, valid and binding obligation of each such
party and that the execution, delivery and performance of this Agreement by
such party does not contravene or conflict with any provision of law or of its
charter or bylaws or any agreement, instrument or order binding on such party.


 


9.10.  Entire
Agreement.  This
Agreement contains the entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes any prior tax sharing agreements
between ALLETE (or any ALLETE Affiliate) and ADESA (or any ADESA Affiliate) and
such prior tax sharing agreements shall have no further force and effect.


 


9.11.  Applicable Law; Jurisdiction.  This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
without giving effect to laws and principles relating to conflicts of law.


 


9.12.  Counterparts
..  This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same Agreement.


 


9.13.  Severability
..  If any term, provision, covenant, or
restriction of this Agreement is held by a court of competent jurisdiction (or
an arbitrator or arbitration panel) to be invalid, void, or unenforceable, the
remainder of the terms, provisions, covenants, and restrictions set forth
herein shall remain in full force and effect, and shall in no way be affected,
impaired, or invalidated.  In the event
that any such term, provision, covenant or restriction is held to be invalid,
void or unenforceable, the parties hereto shall use their best efforts to find
and employ an alternate means to achieve the same or substantially the same
result as that contemplated by such terms, provisions, covenant, or
restriction.


 


9.14.  No Third Party Beneficiaries .  This Agreement is solely for the benefit of
ALLETE, the


 


23

















 


ALLETE Affiliates, ADESA and the ADESA Affiliates.  This Agreement should not be deemed to
confer upon third parties any remedy, claim, liability, reimbursement, cause of
action or other rights in excess of those existing without this Agreement.


 


9.15.  Waivers,
Etc.  No failure or delay on the
part of the parties in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power.  No modification
or waiver of any provision of this Agreement nor consent to any departure by
the parties therefrom shall in any event be effective unless the same shall be
in writing, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.


 


9.16.  Setoff.  All payments to be made by any party under
this Agreement may be netted against payments due to such party under this
Agreement, but otherwise shall be made without setoff, counterclaim or
withholding, all of which are hereby expressly waived.


 


9.17.  Other
Remedies.


 


(a)  ALLETE recognizes that (1) any act, failure
to act, or omission specified in Section 4.01(a)(i)-(ii) of this Agreement of
or by ALLETE or any ALLETE Affiliate or (2) the occurrence of any event
specified in Section 4.01(a)(iii)-(iv) of this Agreement, may result in
Distribution Taxes which could cause irreparable harm to ADESA, ADESA
Affiliates and their stockholders, and that such persons may be inadequately
compensated by monetary damages for such act, failure to act, omission, or
event.  Accordingly, neither ALLETE nor
any ALLETE Affiliate shall permit (1) any act, failure to act, or omission
specified in Section 4.01(a)(i)-(ii) of this Agreement or (2) the occurrence of
any event specified in Section 4.01(a)(iii)-(iv) of this Agreement, that could
be reasonably foreseeable to result in any Distribution Taxes, and ADESA and
each ADESA Affiliate shall be entitled to injunctive relief, in addition to all
other remedies, in order to prevent any such act, failure to act, omission, or
occurrence.


 


(b) ADESA
recognizes that (1) any act, failure to act, or omission specified in Section
4.01(b)(i)-(ii) of this Agreement of or by ADESA or any ADESA Affiliate or (2)
the occurrence of any event specified in Section 4.01(b)(iii)-(iv) of this
Agreement, may result in Distribution Taxes which could cause irreparable harm
to ALLETE, ALLETE Affiliates and their stockholders, and that such persons may
be inadequately compensated by monetary damages for such act, failure to act,
omission, or event.  Accordingly,
neither ADESA nor any ADESA Affiliate shall permit (1) any act, failure to act,
or omission specified in Section 4.01(b)(i)-(ii) of this Agreement or (2) the
occurrence of any event specified in Section 4.01(b)(iii)-(iv) of this
Agreement, that could be reasonably foreseeable to result in any Distribution
Taxes, and ALLETE and each ALLETE Affiliate shall be entitled to injunctive
relief, in addition to all other remedies, in order to prevent any such act,
failure to act, omission, or occurrence.


 


24

















 


IN WITNESS
WHEREOF, each of the parties hereto has caused this Agreement to be executed by
a duly authorized officer on
                   ,
2004.


 


	
   

  	
  ALLETE, INC.

  
	
   

  	
  on behalf of
  itself and the ALLETE Affiliates

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADESA, Inc.

  
	
   

  	
  on behalf of
  itself and the ADESA Affiliates

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


25

















 


TABLE OF CONTENTS


 


	
  Section 1.

  	
  Definitions.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.

  	
  Preparation and Filing of Tax Returns.

  	
   

  
	
   

  	
  2.01. 
  ALLETE’s Responsibility

  	
   

  
	
   

  	
  2.02.  ADESA’s Responsibility

  	
   

  
	
   

  	
  2.03. 
  Agent

  	
   

  
	
   

  	
  2.04. 
  Notice

  	
   

  
	
   

  	
  2.05. 
  Manner of Tax Return Preparation

  	
   

  
	
   

  	
  2.06.  Tax Services Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.

  	
  Liability for Taxes

  	
   

  
	
   

  	
  3.01. 
  ADESA’s Liability for Section 2.01(a) Taxes

  	
   

  
	
   

  	
  3.02. 
  ALLETE’s Liability for Section 2.01 Taxes

  	
   

  
	
   

  	
  3.03. 
  ADESA’s Liability for Section 2.02 Taxes

  	
   

  
	
   

  	
  3.04.  Payment of Tax
  Liability

  	
   

  
	
   

  	
  3.05.  Computation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.

  	
  Distribution Taxes and Deconsolidation

  	
   

  
	
   

  	
  4.01.  Distribution Taxes

  	
   

  
	
   

  	
  4.02.  Carrybacks

  	
   

  
	
   

  	
  4.03.  Allocation of Tax Items

  	
   

  
	
   

  	
  4.04.  Continuing Covenants

  	
   

  
	
   

  	
  4.05.  Allocation of Tax
  Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.

  	
  Stock Options.

  	
   

  
	
   

  	
  5.01. 
  Deduction, Withholding, Reporting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6. 

  	
  Indemnification

  	
   

  
	
   

  	
  6.01. 
  Generally

  	
   

  
	
   

  	
  6.02.  Inaccurate or
  Incomplete Information

  	
   

  
	
   

  	
  6.03.  No Guarantee for Tax Items

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.

  	
  Payments.

  	
   

  
	
   

  	
  7.01.  Estimated Tax Payments

  	
   

  
	
   

  	
  7.02.  True-Up Payments

  	
   

  



 


i

















 


	
   

  	
  7.03.  Redetermination Amounts

  	
   

  
	
   

  	
  7.04.  Payments Under This
  Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.

  	
  Tax Proceedings.

  	
   

  
	
   

  	
  8.01. 
  In General

  	
   

  
	
   

  	
  8.02.  Participation of
  non-Filing Party

  	
   

  
	
   

  	
  8.03. 
  Notice

  	
   

  
	
   

  	
  8.04. 
  Control of Distribution Tax Proceedings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9

  	
  Miscellaneous Provisions.

  	
   

  
	
   

  	
  9.01.  Effectiveness

  	
   

  
	
   

  	
  9.02.  Cooperation and
  Exchange of Information

  	
   

  
	
   

  	
  9.03.  Dispute Resolution

  	
   

  
	
   

  	
  9.04. 
  Notices

  	
   

  
	
   

  	
  9.05.  Changes in Law

  	
   

  
	
   

  	
  9.06.  Confidentiality

  	
   

  
	
   

  	
  9.07.  Successors

  	
   

  
	
   

  	
  9.08.  Affiliates

  	
   

  
	
   

  	
  9.09.  Authorization, Etc

  	
   

  
	
   

  	
  9.10.  Entire Agreement

  	
   

  
	
   

  	
  9.11.  Applicable Law;
  Jurisdiction

  	
   

  
	
   

  	
  9.12.  Counterparts

  	
   

  
	
   

  	
  9.13.  Severability

  	
   

  
	
   

  	
  9.14.  No Third Party
  Beneficiaries

  	
   

  
	
   

  	
  9.15. 
  Waivers, Etc

  	
   

  
	
   

  	
  9.16. 
  Setoff

  	
   

  
	
   

  	
  9.17.  Other Remedies

  	
   

  



 


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