Document:

Employment Agreement - Colin Hendrick

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT, dated as of 1st July 2004 and effective as of the Effective Date (as defined below), by and between SmartMetric Inc., a Nevada corporation (the “Company”), and Colin Hendrick (“Executive”).

 

W I T N E S E T H:

 

WHEREAS, Executive is currently serving as Chief Executive Officer and President of the Company, and the Company wishes to assure itself of the services of Executive for the period provided in this Agreement (“Agreement”); and

 

WHEREAS, Executive is willing to serve in the employ of the Company on the terms and conditions hereinafter set forth.

 

NOW THEREFORE, in consideration of the promises and the mutual covenants herein contained, the Company and Executive, intending to be legally bound, hereby agree as follows:

 

	Section 1.	Employment.

 

(a)    Agreement to Employ. Upon the terms and subject to the conditions of this Agreement, the Company hereby employs Executive, and Executive hereby accepts employment by the Company.

 

(b)    Employment Period. For the purposes of this Agreement, the Effective Date shall mean July 1, 2004. The term of Executive’s employment shall initially be for a period of one (1) year (the “Initial Term”) commencing on the Effective Date; provided that such term may be renewed by the mutual written agreement of Executive and the Company for additional consecutive one (1) year terms (each, a “Renewal Term”), unless, in either case, this Agreement shall have been earlier terminated in accordance with Section 5 (the “Employment Period”).

 

	Section 2.	Position and Duties.

 

During the Employment Period, Executive agrees to serve as Chairman of the Board of Directors, President and Chief Executive Officer of the Company. Executive shall render administrative and management services to the Company such as are customarily performed by persons situated in a similar executive capacity and shall perform such other duties not inconsistent with his title and office as may be assigned to him by or under the authority of the Board of Directors of the Company (“Board of Directors”). Executive shall also perform the duties of Chief Software Engineer and Electronic Engineer. During the Employment Period, Executive shall devote a majority of his business time, skill and efforts to the business of the Company. Notwithstanding the foregoing, Executive may (i) except as provided in Section 6(a) hereof, (x) make and manage personal business investments of his choice, (y) serve in any capacity with any civic, educational or charitable organization, or any trade association, and (z) be involved in the management and serve on the Board of Directors of any other company that does not conflict with the business interests of SmartMetric, Inc., only upon obtaining approval by the Board of Directors. Executive shall not be relocated from New York City without Executive’s consent. If in the event the Executive is relocated to a place other than New York for a period longer then one month and not exceeding three (3) years then the company will pay all expenses for relocation including rent/or mortgage payments for the duration of the relocation. Executive shall have such authority as is necessary or appropriate to carry out his assigned duties. 

 

	Section 3.	Compensation.

 

 

The Company shall pay Executive an annual salary of $170,000 commencing January 1, 2005. Such salary shall be paid upon the Company’s achieving a minimum of $1,000,000 in gross revenues. Prior to the Company’s achieving a minimum of $1,000,000 in gross revenues, Executive shall accrue said salary, and may receive as salary a maximum of 25% of any offering proceeds received by the Company, which amount shall not exceed $170,000 in any given 12 month period. In additionExecutive’s salary shall be paid on a semi-monthly basis, except for accrued salaries, which may be paid in a lump sum. In addition, the Executive may earn bonus amounts payable in cash, to be paid to the Executive within sixty (60) days following the year-end audit, based upon the satisfaction of performance criteria that will be established by a committee of the Board of Directors (the “Compensation Committee”) in its discretion, and subject to the approval of the Board of Directors (or, if the Compensation Committee is not yet established, by the Board of Directors). The Compensation Committee shall be comprised of a minimum of three (3) directors, a majority of whom areshall be independent. Such performance criteria will include corporate performance goals consistent with the Company’s business plan. The final determination as to the actual corporate and individual performance against the pre-established goals and objectives, and the bonus amounts payable in relationship to such performance, shall be made by the Compensation Committee in its sole discretion. If this Agreement is renewed in accordance with Section 1(b), the Compensation Committee shall review Executive’s salary in light of the performance of Executive and the Company, and may, in its discretion, increase (but not decrease) such salary by an amount it determines to be appropriate. Executive’s annual salary payable hereunder, is referred to herein as “Salary”. 

 

 

	Section 4.	Benefits.

 

(a)    Vacations. Executive shall be entitled to up to three (3) weeks’ paid vacation and up to 21 days paid religious holidays (in addition to the holidays the Company extends, as a matter of policy, to its employees) during each year of the Employment Period which, with regard to vacation time shall be scheduled in Executive’s discretion, subject to and taking into account the business exigencies of the Company, and with regard to religious holidays will be taken at the appointed times. Unused vacation (but not religious holidays) may be accrued from year to year in accordance with the Company’s policy as in effect from time to time with regard to executive employees.

 

(b)    Business Expenses. The Company shall pay or reimburse Executive for all documented reasonable business expenses incurred by Executive in the performance of Executive’s duties hereunder, in accordance with the Company’s policies.

 

(c)    Other Benefits. During the Employment Period, Executive shall receive such other life insurance, pension, disability insurance, health insurance and sick pay benefits and other benefits which the Company extends, as a matter of policy, to its executive employees and, except as otherwise provided herein, shall be entitled to participate in all deferred compensation and other incentive plans of the Company on the same basis as other like employees of the Company.

 

(d)    Indemnification. The Company shall, to the maximum extent permitted by applicable law and the Company’s certificate of incorporation or its bylaws, indemnify Executive and hold Executive harmless from and against any claim, loss or cause of action arising from or out of Executive’s performance as an officer, director or employee of the Company provided that Executive acted in good faith, was not negligent and did not breach any duty owed to the Company. If any claim is asserted hereunder for which Executive reasonably believes in good faith he is entitled to be indemnified, the Company shall pay Executive’s reasonable legal expenses (or cause such expenses to be paid), as may be required but no less frequently than on a quarterly basis, provided that Executive shall reimburse the Company for such amounts, plus simple interest thereon at the 90-day United States Treasury Bill rate as in effect from time to time, compounded annually, if Executive shall be found by a final, non-appealable order of a court of competent jurisdiction not to be entitled to indemnification. 

 

(e)    Key-Person Life Insurance. The company may purchase “key-person” life insurance policies on the Executive’s life in such amounts and of such types as is determined by the Board of Directors. Executive shall cooperate fully with the Company in obtaining such insurance and shall submit to such physical examinations and provide such information as is reasonably required to obtain and maintain such policies. Neither Executive nor his successor-in-interest or estate shall have any interest in any such key-person policies so obtained.

 

	Section 5.	Termination of Employment.

 

(a)    Early Termination of the Employment Period. Executive’s employment under this Agreement may be terminated in any of the following manners:

 

Executive may, upon written notice to the Company, terminate employment with the Company at any time for “Good Reason” (as defined in Section 5(e)) it being agreed that any such termination, although effected by Executive shall not constitute a Voluntary Termination;

 

Executive’s employment may, upon written notice to Executive, be terminated by the Company at any time for “Cause” (as defined in Section 5(d));

 

This Agreement shall terminate automatically upon Executive’s death;

 

The Company may, upon written notice to Executive, terminate this Agreement upon Executive’s Disability. As used herein, the term “Disability” shall mean a determination that Executive suffers from illness or other physical or mental impairment that prevents Executive from substantially performing his duties for a period of 60 days during any six (6) month period during the Employment Period or for 90 days during any twelve (12) month period during the Employment Period. The determination of whether (and, if appropriate, when) a Disability has occurred shall be made by a majority of the Board of Directors of the Company.

 

Any termination pursuant to this Section 5(a) shall be communicated to the non-terminating party by a “Notices” in accordance with Section 10.

 

(b)    Benefits Payable Upon Termination.

 

	 	(i)	Following the end of the Employment Period pursuant to any manner described in Section 5(a) or for any other reason, the Company shall pay to Executive (or, in the event of his death, his surviving spouse, if any, or his estate): (A) any Salary earned, but unpaid, for services rendered to the Company on or prior to the date on which the Employment Period ended, and (B) amounts which are vested or which Executive is otherwise entitled to receive under the terms of or in accordance with any plan, policy, practice or program of, or any contract or agreement with, the Company at the date the Employment Period ends. In addition, the Executive shall be eligible for insurance coverage’s mandated under COBRA and for any benefits for which Executive, as a former employee, is eligible under the terms of the welfare plans, programs and arrangements of the Company. The Corporation shall pay the first twelve (12) months of COBRA premiums for Executive’s coverage under the Company’s group medical insurance plan.

 

	 	(ii)	Vested benefits referred to in Section 5(b)(i) shall be payable in accordance with the terms of the plan, policy, practice, program, contract or agreement under which such benefits have accrued.

 

(c)    Continuing Obligations. After receipt of written notice of termination, but prior to the effective date of such termination, Executive shall continue to perform his duties under this Agreement unless specifically instructed to discontinue such performance. In the event of termination, Executive and the Company shall remain liable for their respective obligations accrued under this Agreement prior to the effective date of termination.

 

(d)    Definition of Cause. For purposes of this Agreement, “Cause” means Executive’s:

 

	 	(i)	persistent and repeated refusal, failure or neglect to perform the material duties of his employment under this Agreement (other than by reason of Executive’s physical or mental illness or impairment), provided that such Cause shall be deemed to occur only after the Corporation gave written notice thereof to Executive specifying in reasonable detail the conduct constituting Cause, and Executive failed to cure and correct his conduct within thirty (30) days after such notice;

 

	 	(ii)	committing any act of fraud or embezzlement, provided that such Cause shall be deemed to occur only after the Corporation gave written notice thereof to Executive specifying in reasonable detail the instances of such conduct, and Executive had the opportunity to be heard at a meeting of the Board of Directors;

 

	 	(iii)	breach of clauses (a), (b) or (c) of Section 6 hereof that results in a material detriment to the Company;

 

	 	(iv)	conviction of a felony (including pleading guilty to a felony); or

 

	 	(v)	habitual abuse of alcohol or drugs.

 

(e)    Definition of Good Reason. For purposes of this Agreement, “Good Reason” means:

 

	 	(i)	any material reduction in Executive’s authority, duties or responsibilities;

 

	 	(ii)	any material change in Executive’s reporting lines or removal of the Executive from his principal positions as of the beginning of the Employment Period (other than a promotion); or

 

	 	(iii)	any material failure by the Company to pay or provide the compensation and benefits under this Agreement; provided that, in each such event, the Executive shall give the Company notice thereof which shall specify in reasonable detail the circumstances constituting Good Reason, and there shall be no Good Reason with respect to any such circumstances cured by the Corporation within thirty (30) days after such notice.

 

	Section 6.	Noncompetition and Confidentiality.

 

(a)    Noncompetition. During the Employment Period and for three years thereafter, Executive shall not, without the consent of the Company, assist or become associated with any person or entity, whether as a principal, partner, employee, consultant or shareholder (other than as a holder of not in excess of 5% of the outstanding voting shares of any publicly traded company purchased in open market transactions) that is actively engaged in the business of applying Smartcard technology to Internet access and internet e-commerce solutions. 

 

(b)    Confidentiality and Company Property. Executive agrees that he will not at any time during the Employment Period and for five (5) years thereafter for any reason, in any fashion, form, or manner, either directly or indirectly, divulge, disclose or communicate to any person, firm, corporation or other business entity, in any manner whatsoever, any confidential information or trade secrets concerning the business of the Company, including, without limiting the generality of the foregoing, the techniques, methods or systems of its operation or management, any information regarding its financial matters, research and development data and materials, and intellectual property rights, including, without limitation, patents, patent applications, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, copyrights, copyright applications, databases, algorithms, computer programs and other software, know-how, trade secrets, proprietary processes and formulae, inventions, trade dress, logos and designs or any other material information concerning the business of the Company (including customer lists), its manner of operation, its plans or other material data (the “Confidential Information”). The provisions of this Section 6 shall not apply to (i) information disclosed in the performance of Executive’s duties to the Company based on his reasonable good faith belief that such a disclosure is in the best interests of Company (ii) information that is, at the time of the disclosure, public knowledge; (iii) information disseminated by the Company to third parties in the ordinary course of business; (iv) information lawfully received by Executive from a third party who, based upon inquiry by Executive, is not bound by a confidential relationship to the Company; or (v) information disclosed under a requirement of law or as directed by applicable legal authority having jurisdiction over Executive and (vi) information, ideas or inventions developed by Executive prior to his employment by the Company.

 

During and after the term of employment hereunder, the Executive agrees not to remove from the Company’s premises any documents, records, files, notebooks, correspondence, computer printouts, computer programs, computer software, price lists, microfilm, or other similar documents containing confidential information, including copies thereof, whether prepared by him or others, except as his duties shall require, and in such cases, will promptly return such items to the Company. Upon termination of the Executive’s employment with the Company, all such items including summaries or copies thereof, then in his possession, shall be returned to the Company immediately. The Executive agrees to the return of such items, which shall be a requirement in order for him to receive, at the time of such termination, or any time thereafter, any compensation due him pursuant to any paragraphs hereunder or otherwise;

 

(c)    Patents and Inventions. Executive owns all of the rights, title and interest in and to all inventions, ideas, disclosures and improvements, whether patented or unpatented, and copyrightable material, made or conceived by Executive, solely or jointly, or in whole or in part, during the Employment Term. The foregoing includes all adoptions and improvements to the patent and the underlying technology (the “Patent”) that are the subject of that certain license agreement between Executive and the Company dated and revised as of December 22, 2004 (the “License Agreement”) pursuant to which Executive has granted the Company an exclusive royalty license to distribute, sell develop and otherwise utilize the Patent which consists of a business system concept involving the use of a Smartcard to facilitate interconnectivity to the Internet, storage of personal information and form filling and transaction and identity verification functions. In the event the License Agreement terminates, the Patent reverts to the Executive in accordance with the terms and conditions of the License Agreement.

 

Executive hereby grants to the Company during the Employment Term a right of first refusal to be the licensee of or to purchase on terms to be mutually agreed upon all of the rights, title and interest of Executive in and to all inventions, ideas, disclosures and improvements, whether patented or unpatented, and copyrightable material, made or conceived by Executive, in whole or in part, during the Employment Term which (i) relate to methods, apparatus, designs, products, processes or devices sold, leased, used or under construction or development by the Company or (ii) otherwise relate to or pertain to the business, functions or operations of the Company. However, under no circumstances shall Executive utilized, sell, transfer, license or otherwise hypothecate any such patents, inventions, ideas, disclosures, improvements and/or copyrightable materials so as to compete with the business or products of the Company.

 

(d)    Non-Solicitation of Employees. During the Employment Period and for five years thereafter, Executive will not directly or indirectly induce any employee of the Company or any of its subsidiaries or affiliates to terminate employment with such entity, and will not directly or indirectly, either individually or as owner, agent, employee, consultant or otherwise, employ or offer employment to any person who is or was employed by the Company or a subsidiary thereof, unless such person shall have ceased to be employed by such entity for a period of at least six months.

 

(e)    Injunctive Relief with Respect to Covenants. Executive acknowledges and agrees that the covenants and obligations of Executive with respect to Noncompetition, inventions, confidentiality and Company property contained in this Section 6 relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants and obligations will cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, Executive agrees that the Company shall be entitled to an injunction, restraining order or such other equitable relief as a court of competent jurisdiction may deem necessary or appropriate to restrain Executive from committing any violation of the covenants and obligations contained in this Section 6. These injunctive remedies are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity.

 

	Section 7.	No Conflict With Prior Agreements: Due Authorization.

 

Executive represents to the Company that neither Executive’s execution of this Agreement or commencement of employment hereunder nor the performance of Executive’s duties hereunder conflicts with any contractual commitment on Executive’s part to any third party. The Company represents to Executive that it is fully authorized and empowered by action of the Company’s Board of Directors to enter into this Agreement and that performance of its obligations under this Agreement will not violate any agreement between it and any other person, firm or other entity. Executive agrees that by execution of this Agreement any other employment agreements between Executive and the Company and any of its subsidiaries, are hereby terminated and neither party shall have any further rights or obligations thereunder.

 

Nothing herein shall be construed to require Executive to use or disclose any information that he is prohibited from using or disclosing as a result of legal or contractual obligations.

 

	Section 8.	Post-Termination Obligations.

 

(a)    Notwithstanding anything else provided in this Agreement, all payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with clause (b) of this Section 8 during the term of this Agreement and for one full year after the expiration or termination hereof.

 

(b)    Executive shall, upon reasonable notice, furnish such information and assistance to the Company as may reasonably be required by the Company in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided that the Company shall be required to reimburse Executive for the reasonable value of his time in connection therewith and for any out-of-pocket costs attributable thereto.

 

	Section 9.	Source of Payments.

 

All payments provided in this Agreement shall be timely paid in cash or check by the Company.

 

	Section 10.	Miscellaneous.

 

(a)    Survival. Sections 4(d), 5, 6, 7 and 8 shall survive the termination hereof.

 

(b)    Binding Effect. This Agreement shall be binding on the Company and any person or entity which succeeds to the interest of the Company (regardless of whether such succession occurs by operation of law) by reason of the sale of all or a portion the Company’s stock, a merger, consolidation, or reorganization involving the Company or a sale of the assets of the business of the Company (or portion thereof) in which Executive performs a majority of his services. This Agreement shall also inure to the benefit of Executive’s heirs, executors, administrators and legal representatives.

 

(c)    Assignment. Neither this Agreement nor any of the rights or obligations hereunder shall be assigned or delegated by any party hereto without the prior written consent of the other party, except that the Company may delegate to any of its direct or indirect wholly owned subsidiaries its obligations to provide compensation and benefits hereunder, provided no such delegation shall relieve the Company of its obligations hereunder.

 

(d)    Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters referred to herein, and supersedes any other employment agreement Executive may have with the Company or any subsidiary of the Company and no other agreement, oral or otherwise, shall be binding between the parties unless it is in writing and signed by the party against whom enforcement is sought. There are no promises, representations, inducements or statements between the parties other than those that are expressly contained herein. Executive acknowledges that he is entering into this Agreement of his own free will and accord, and with no duress, that he has been represented and fully advised by competent counsel in entering into this Agreement, that he has read it and that he understands it and its legal consequences. No parol or other evidence may be admitted to alter, modify or construe this Agreement, which may be altered, modified or amended only by a writing signed by the parties hereto.

 

(e)    Severability; Reformation. In the event that one or more of the provisions of this Agreement shall become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. In the event that any of Sections 6(a), (b) or (c) is not enforceable in accordance with its terms, Executive and the Company agree that such Section shall be reformed to make such Section enforceable in a manner which provides the Company the maximum rights permitted at law.

 

(f)    Waiver. Waiver by any party hereto of any breach or default by the other party of any of the terms of this Agreement shall not operate as a waiver of any other breach or default, whether similar to or different from the breach or default waived. No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or from any failure by either party hereto to assert its or his rights hereunder on any occasion or series of occasions.

 

(g)    Notices. Any notice required or desired to be delivered under this Agreement shall be in writing and shall be delivered personally against receipt, by courier service or by registered mail, return receipt requested, and shall be effective upon actual receipt by the party to which such notice shall be directed, and shall be addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

 

	 	(i)	If to the Company, to:

 

 

SmartMetric Inc.

 

67 Wall Street, 22nd Floor

 

New York, New York 10005

 

	 	(ii)	If to Executive, to:

 

 

Colin Hendrick

 

314 Brooklyn Avenue

 

Brooklyn, New York 11213

 

(h)    Excise Tax Limit. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by the Company or any other person or entity to or for the benefit of Executive is a “parachute payment” (within the meaning of Section 280G of the Internal Revenue Code, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a “Payment”) in connection with, or arising out of, his employment with the Company or a change in ownership or effective control of the Company (within the meaning of Section 280G of the Internal Revenue Code, and would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code) (the “Excise Tax”), the Payments shall be reduced to the extent necessary so that such remaining Payment would not be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code.

 

(i)    Headings. Headings to paragraphs in this Agreement are for the convenience of the parties only and are not intended to be part of or to affect the meaning or interpretation hereof.

 

(j)    Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

(k)    Withholding. Any payments provided for herein shall be reduced by any amounts required to be withheld by the Company from time to time under applicable Federal, State or local income or employment tax laws or similar statutes or other provisions of law then in effect.

 

(l)    Arbitration; Legal Fees. Except as provided in this Agreement any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in New York, New York in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The Company shall reimburse Executive for all reasonable legal fees and costs and other fees and expenses which Executive may incur in respect of any dispute or controversy arising under or in connection with this Agreement; provided, however, that the Company shall not reimburse any such fees, costs and expenses if the fact finder determines that the action brought by Executive was frivolous or in the event judgment is entered against Executive.

 

(m)    GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.

	
 

	 	 	 
	

	

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and Executive has hereunto set his hand as of the day and year first above written.

	 	
SMARTMETRIC, INC.

	 	 
	 	
By: /s/ Colin Hendrick

	 	
Name: Colin Hendrick

	 	
Title: President and CEO

	 	 
	 	
EXECUTIVE

	 	 
	 	
/s/ Colin Hendrick

	 	
Colin Hendrick<PAGE>
                                                                   EXHIBIT 10(c)

                                                                 EXECUTIION COPY

================================================================================

                                MASTER AGREEMENT

                                 BY AND BETWEEN

                         RAINY RIVER ENERGY CORPORATION

                                       AND

                  CONSTELLATION ENERGY COMMODITIES GROUP, INC.

                          DATED AS OF DECEMBER 28, 2004

================================================================================

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I     DEFINITIONS......................................................3
     Section 1.01     Defined Terms............................................3
     Section 1.02     Interpretation...........................................8
ARTICLE II    CLOSING..........................................................8
     Section 2.01     Closing..................................................8
     Section 2.02     Assignment...............................................8
     Section 2.03     Assumption...............................................9
     Section 2.04     Consideration............................................9
     Section 2.05     Conditions Precedent to Closing Obligation of Parties....9
     Section 2.06     Deliveries at Closing...................................11
     Section 2.07     Further Assurances......................................13
ARTICLE III   REPRESENTATIONS AND WARRANTIES OF EACH OF THE PARTIES...........13
     Section 3.01     Authority...............................................13
     Section 3.02     No Impediments..........................................13
     Section 3.03     Litigation..............................................14
     Section 3.04     Brokerage Arrangements..................................14
ARTICLE IV    REPRESENTATIONS AND WARRANTIES OF RAINY RIVER...................14
     Section 4.01     Existing Agreements.....................................14
     Section 4.02     Good and Valid Title....................................14
     Section 4.03     No Defaults; No Litigation..............................15
     Section 4.04     Solvency................................................15
     Section 4.05     Provision of Information................................15
     Section 4.06     Validity and Enforceability of Existing Agreements......16
ARTICLE V     COVENANTS AND OTHER AGREEMENTS OF THE PARTIES...................16
     Section 5.01     Amendments to Existing Agreements.......................16
     Section 5.02     FERC Approval...........................................16
     Section 5.03     Confidentiality.........................................16
     Section 5.04     Notifications...........................................16
     Section 5.05     Representations and Warranties..........................17
     Section 5.06     Public Announcements....................................17

                                       i

<PAGE>

     Section 5.07     Cooperation.............................................17
ARTICLE VI    INDEMNIFICATION.................................................17
     Section 6.01     Indemnification by Rainy River..........................17
     Section 6.02     Indemnification by Assignee.............................17
     Section 6.03     Limitations on Indemnification..........................18
     Section 6.04     Notice of Indemnified Claims............................18
     Section 6.05     Assumption of Defense...................................18
     Section 6.06     Settlement..............................................19
     Section 6.07     Direct Claims...........................................19
ARTICLE VII   MISCELLANEOUS...................................................20
     Section 7.01     Termination.............................................20
     Section 7.02     Effect of Termination...................................20
     Section 7.03     Survival................................................21
     Section 7.04     Headings................................................21
     Section 7.05     Notices.................................................21
     Section 7.06     Assignment..............................................22
     Section 7.07     Governing Law; Jurisdiction.............................22
     Section 7.08     Waiver of Jury Trial....................................22
     Section 7.09     Expenses................................................23
     Section 7.10     Severability............................................23
     Section 7.11     Entire Agreement; Amendment.............................23
     Section 7.12     Limitation of Liability.................................23
     Section 7.13     Counterparts............................................23

                                       ii

<PAGE>

APPENDICES (EXISTING AGREEMENTS)
     APPENDIX A Kendall Purchase Agreement
     APPENDIX B Kendall Guaranty Agreement
     APPENDIX C MGE Purchase Agreement
     APPENDIX D MGE Guaranty Agreement
     APPENDIX E WPPI Purchase Agreement
     APPENDIX F WPPI Guaranty Agreement
     APPENDIX G Fuel Supply Agreement

EXHIBITS (TRANSACTION DOCUMENTS)
     EXHIBIT A Kendall Consent
     EXHIBIT B Bank Consent
     EXHIBIT C Kendall Assignment and Novation Agreement
     EXHIBIT D Kendall Guaranty Termination and Release
     EXHIBIT E Bank Termination and Release
     EXHIBIT F New Kendall Guaranty Agreement
     EXHIBIT G First Kendall Consent to Pledge
     EXHIBIT H Second Kendall Consent to Pledge
     EXHIBIT I MGE Assignment and Novation Agreement
     EXHIBIT J WPPI Assignment and Novation Agreement
     EXHIBIT K MGE Amendment to Guaranty
     EXHIBIT L WPPI Amendment to Guaranty
     EXHIBIT M New MGE Guaranty Agreement
     EXHIBIT N New WPPI Guaranty Agreement
     EXHIBIT O Indemnification Agreement
     EXHIBIT P TMV Assignment and Novation Agreement
     EXHIBIT Q [intentionally omitted]
     EXHIBIT R MGE Consent
     EXHIBIT S WPPI Consent

                                      iii

<PAGE>

                                MASTER AGREEMENT
                                ----------------

     MASTER AGREEMENT, dated as of this 28th day of December, 2004 (this
"AGREEMENT"), by and among RAINY RIVER ENERGY CORPORATION, a Minnesota
corporation and a wholly owned subsidiary of ALLETE, Inc. ("RAINY RIVER"), and
CONSTELLATION ENERGY COMMODITIES GROUP, INC., a Delaware corporation
("ASSIGNEE") and a wholly owned subsidiary of Constellation Energy Group, Inc.
("PARENT"). Each of Rainy River and Assignee is sometimes referred to herein as
a "PARTY" or collectively as the "PARTIES."

                                    RECITALS

     WHEREAS, Rainy River and LSP-Kendall Energy, LLC, a Delaware limited
liability company ("KENDALL"), have entered into a Third Amended and Restated
Power Purchase Agreement dated as of August 8, 2003, a confidential copy of
which is attached hereto as APPENDIX A (the "KENDALL PURCHASE AGREEMENT"),
pursuant to which Rainy River has agreed to purchase from Kendall and Kendall
has agreed to sell to Rainy River electrical capacity and energy from facilities
owned and operated by Kendall upon the terms and conditions set forth in the
Kendall Purchase Agreement; and

     WHEREAS, the obligations of Rainy River under the Kendall Purchase
Agreement have been guaranteed by Minnesota Power, Inc., a Minnesota corporation
("ALLETE"), pursuant to a Guaranty Agreement, dated as of February 24, 1999, by
ALLETE in favor and for the benefit of Kendall, a copy of which is attached
hereto as APPENDIX B (the "KENDALL GUARANTY AGREEMENT"); and

     WHEREAS, Rainy River and Madison Gas and Electric Company, a Wisconsin
corporation ("MGE"), have entered into a Long-Term Capacity and Energy Purchase
Contract dated as of November 30, 2001 (as amended by Amendment No. 1 thereto
dated December 28, 2004), a copy of which is attached hereto as APPENDIX C (the
"MGE PURCHASE AGREEMENT"), pursuant to which MGE has agreed to purchase from
Rainy River a certain percentage of the electrical capacity and energy provided
to Rainy River under the Kendall Purchase Agreement upon the terms and
conditions set forth in the MGE Purchase Agreement; and

     WHEREAS,  the  obligations of Rainy River under the MGE Purchase  Agreement
     have been guaranteed by Minnesota Power Enterprises, Inc., a Minnesota
corporation ("MP ENTERPRISES"), pursuant to a Guaranty Agreement, dated as of
November 30, 2001, by MP Enterprises in favor and for the benefit of MGE, a copy
of which is attached hereto as APPENDIX D (the "MGE GUARANTY AGREEMENT"); and

     WHEREAS, Rainy River and Wisconsin Public Power Inc., a Wisconsin
corporation ("WPPI"), have entered into a Long-Term Capacity and Energy Purchase
Contract dated as of December 13, 2000 (as amended by Amendment No. 1 thereto
dated February 2003 and by Amendment No. 2 thereto dated December 28, 2004), a
copy of which is attached hereto as APPENDIX E (the "WPPI PURCHASE AGREEMENT"),
pursuant to which WPPI has contracted to purchase from Rainy River a certain
percentage of the electrical capacity and energy provided to

                                       1

<PAGE>

     Rainy River under the Kendall Purchase Agreement upon the terms and
conditions set forth in the WPPI Purchase Agreement; and

     WHEREAS, the obligations of Rainy River under the WPPI Purchase Agreement
have been guaranteed by ALLETE pursuant to a Guaranty Agreement, dated as of
January 19, 2001, by ALLETE in favor and for the benefit of WPPI, a copy of
which is attached hereto as APPENDIX F (the "WPPI GUARANTY AGREEMENT"); and

     WHEREAS, Rainy River, Tenaska Marketing Ventures, ("TMV") and the other
parties listed therein, as applicable, have entered into the Fuel Supply
Agreement, a copy of which is attached as APPENDIX G; and

     WHEREAS, Rainy River desires to assign and transfer to Assignee, and
Assignee desires to assume and accept from Rainy River, all of Rainy River's
rights and obligations from and after the Closing under each of the Kendall
Purchase Agreement, the MGE Purchase Agreement, the WPPI Purchase Agreement and
the Fuel Supply Agreement upon the terms and conditions set forth herein; and

     WHEREAS, ALLETE desires to terminate the Kendall Guaranty from and after
the Closing; and

     WHEREAS, ALLETE and MP Enterprises desire to amend each of the MGE Guaranty
Agreement and WPPI Guaranty Agreement from and after Closing; and

     WHEREAS, upon termination of the Kendall Guaranty Agreement and amendment
of each of the MGE Guaranty Agreement and WPPI Guaranty Agreement from and after
the Closing, Assignee desires to cause Parent to enter into new guaranty
agreements with each of Kendall, MGE and WPPI; and

     WHEREAS, upon execution of this Agreement, Rainy River delivered to
Assignee a duly executed written consent of MGE to (i) the MGE Assignment and
Novation Agreement as required by Section 21.2.1 of the MGE Purchase Agreement,
(ii) the MGE Amendment to Guaranty as required by Section 7.2 of the MGE
Guaranty Agreement, (iii) the New MGE Guaranty Agreement as required by Section
7.2 of the MGE Guaranty Agreement and (iv) the TMV Assignment and Novation
Agreement as required by the Fuel Supply Agreement substantially in the form
attached as EXHIBIT R (the "MGE CONSENT"); and

     WHEREAS, upon execution of this Agreement, Rainy River delivered to
Assignee a duly executed written consent of WPPI to (i) the WPPI Assignment and
Novation Agreement as required by Section 21.2.1 of the WPPI Purchase Agreement,
(ii) the WPPI Amendment to Guaranty as required by Section 7.2 of the WPPI
Guaranty Agreement, (iii) the New WPPI Guaranty Agreement as required by Section
7.2 of the WPPI Guaranty Agreement and (iv) the TMV Assignment and Novation
Agreement as required by the Fuel Supply Agreement substantially in the form
attached as EXHIBIT S (the "WPPI CONSENT").

     NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the parties hereby covenant and agree as follows:

                                       2

<PAGE>

                                    ARTICLE I
                                   DEFINITIONS

     Section 1.01     DEFINED TERMS.  As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:

              "ACTION OR PROCEEDING" means any action, suit, proceeding,
arbitration or Governmental Entity investigation or audit.

              "AFFILIATE" means, with respect to any Person, a Person that
controls, is controlled by, or is under common control with such Person (it
being understood that a Person shall be deemed to "control" another Person, for
purposes of this definition, if such Person directly or indirectly has the power
to direct or cause the direction of the management and policies of such other
Person, whether through holding beneficial ownership interests in such other
Person, by contract or otherwise).

              "ALLETE" has the meaning ascribed to it in the recitals of this
Agreement.

              "ASSIGNEE" has the meaning ascribed to it in the preamble of this
Agreement.

              "ASSIGNEE INDEMNIFIED PERSONS" means Assignee and its Affiliates
and each of their respective directors, partners, officers, agents and
employees.

              "ASSIGNMENT TRANSACTIONS" has the meaning ascribed to it in
Section 2.05(g) hereof.

              "ASSUMPTION" has the meaning ascribed to it in Section 4.04.

              "BANK CONSENT" has the meaning ascribed to it in Section 2.05(b)
hereof.

              "BANK TERMINATION AND RELEASE" has the meaning ascribed to it
in Section 2.06(b).

              "BANKRUPTCY CODE" has the meaning ascribed to it in Section
4.04.

              "BUSINESS DAY" means any day which is not a Saturday, a Sunday
or any other day on which banks in the State of New York are authorized or
required by Law to close.

              "CLOSING" has the meaning ascribed to it in Section 2.01.

              "COLLATERAL AGENT" means Societe Generale, as collateral agent
(together with its successors in such capacity) for the secured parties pursuant
to that certain Collateral Agency Agreement, dated as of November 12, 1999 (as
amended, restated, modified or otherwise supplemented from time to time), among
Kendall, Societe Generale and the administrative agent named therein.

              "CONSENT" means any approval, consent, ratification, waiver or
other authorization.

                                       3

<PAGE>

              "CONTRACT" means any agreement, contract, lease, consensual
obligation, promise or undertaking (whether written or oral and whether express
or implied), whether or not legally binding.

              "DEBT" means any obligations in respect of (i) borrowed money,
(ii) capitalized lease obligations, (iii) interest rate agreements and currency
agreements, (iv) guarantees of any obligation of any third Person, (v) letters
of credit and (vi) indemnities or performance bonds.

              "ENCUMBRANCE" means any charge, claim, community or other
marital property interest, condition, equitable interest, lien, option, pledge,
security interest, mortgage, right of way, easement, encroachment, servitude,
right of first option, right of first refusal or similar restriction, including
any restriction on use, voting (in the case of any security or equity interest),
transfer, receipt of income or exercise of any other attribute of ownership.

              "EXISTING AGREEMENT(S)" means each of (i) the Kendall Purchase
Agreement, (ii) the Kendall Guaranty Agreement, (iii) the MGE Purchase
Agreement, (iv) the MGE Guaranty Agreement, (v) the WPPI Purchase Agreement,
(vi) the WPPI Guaranty Agreement, and (vii) the Fuel Supply Agreement, each as
attached as an appendix hereto.

              "FERC" means the Federal Energy Regulatory Commission.

              "FIRST BANK AGREEMENT" means that certain Consent and Agreement,
dated as of November 12, 1999, by and among ALLETE, Kendall and the Collateral
Agent.

              "FIRST KENDALL CONSENT TO PLEDGE" has the meaning ascribed to it
in Section 2.06(c).

              "FUEL SUPPLY AGREEMENT" means the First Amended and Restated
Agreement for Fuel Supply & Fuel Management Services, dated as of December 23,
2004, by and among TMV, WPPI, MGE and Rainy River.

              "GOVERNMENTAL ENTITY" means any foreign, federal, state or local
government or subdivision thereof, or governmental, judicial, legislative,
executive, administrative or regulatory authority, agency, commission, court,
tribunal or body.

              "GROSSED-UP BASIS" means, when used to describe the basis on which
the payment of a specified sum is to be made, a basis such that the amount of
such payment, after being reduced by the amount of all Taxes imposed on the
recipient of such payment as a result of the receipt or accrual of such payment,
will equal the specified sum. For this purpose, Taxes are to be calculated at
the maximum statutory rate applicable to the recipient of such payment for the
relevant year after taking into account, for example, the effect of deductions
available for interest paid or accrued and Taxes such as state and local income
taxes, which effect similarly would be calculated on the basis of the maximum
statutory rate of the Tax for which such deduction was available.

              "INDEMNIFICATION AGREEMENT" has the meaning ascribed to it in
Section 2.06(i) hereof.

                                       4

<PAGE>

              "INDEMNIFIED CLAIM" has the meaning ascribed to it in Section 6.04
hereof.

              "INDEMNIFYING PERSON" means the Person or Persons obligated to
provide indemnification under Article VI.

              "INDEMNIFIED PERSONS" means the Person or Persons entitled to
indemnification under Article VI.

              "KENDALL" has the meaning ascribed to it in the recitals of this
Agreement.

              "KENDALL ASSIGNMENT AND NOVATION AGREEMENT" has the meaning
ascribed to it in Section 2.06(a) hereof.

              "KENDALL CONSENT" has the meaning ascribed to it in Section
2.05(a) hereof.

              "KENDALL GUARANTY AGREEMENT" has the meaning ascribed to it in the
recitals of this Agreement.

              "KENDALL GUARANTY TERMINATION AND RELEASE" has the meaning
ascribed to it in Section 2.06(b) hereof.

              "KENDALL PURCHASE AGREEMENT" has the meaning ascribed to it in the
recitals of this Agreement.

              "LAW" means any statute, law, constitutional provision, code,
regulation, ordinance, rule, ruling, judgment, decision, order, writ,
injunction, decree, permit, concession, grant, franchise, license, agreement,
directive, binding guideline or policy or rule of common law, requirement of, or
other governmental restriction of or determination by any Governmental Entity or
any interpretation of any of the foregoing by any Governmental Entity.

              "LIABILITIES" means all Debt, obligations and other liabilities of
a Person of any kind, character or description, whether absolute or contingent,
known or unknown, accrued or unaccrued, disputed or undisputed, liquidated or
unliquidated, secured or unsecured, joint or several, vested or unvested,
executory, determined, determinable or otherwise, and whether or not the same is
required to be accrued on the financial statements of such Person.

              "LOSS" or "LOSSES" means any and all losses, costs, claims,
damages, penalties, interest and expenses (including reasonable attorneys' fees
and expenses and reasonable costs of investigation and litigation). In the event
any of the foregoing are indemnifiable hereunder, the terms "Loss" and "Losses"
shall include any and all reasonable attorneys' fees and expenses and reasonable
costs of investigation and litigation incurred by the Indemnified Person in
enforcing such indemnity.

              "MGE" has the meaning ascribed to it in the recitals of this
Agreement.

              "MGE AMENDMENT TO GUARANTY" has the meaning ascribed to it in
Section 2.06(e) hereof.

                                       5

<PAGE>

              "MGE ASSIGNMENT AND NOVATION AGREEMENT" has the meaning ascribed
to it in Section 2.06(d) hereof.

              "MGE GUARANTY AGREEMENT" has the meaning ascribed to it in the
recitals of this Agreement.

              "MGE CONSENT" has the meaning ascribed to it in the recitals of
this Agreement.

              "MGE PURCHASE AGREEMENT" has the meaning ascribed to it in the
recitals of this Agreement.

              "MP ENTERPRISES" has the meaning ascribed to it in the recitals of
this Agreement.

              "NEW KENDALL GUARANTY AGREEMENT" has the meaning ascribed to it in
Section 2.06(c) hereof.

              "NEW MGE GUARANTY AGREEMENT" has the meaning ascribed to it in
Section 2.06(g) hereof.

              "NEW WPPI GUARANTY AGREEMENT" has the meaning ascribed to it in
Section 2.06(h) hereof.

              "NON-DISCLOSURE AGREEMENT" has the meaning ascribed to it in
Section 5.03 hereof.

              "ORDER" means any writ, judgment, decree, injunction or similar
order of any Governmental Entity (in each such case whether preliminary or
final).

              "PARENT" has the meaning ascribed to it in the preamble of this
Agreement.

              "PARTY" or "PARTIES" has the meaning ascribed to it in the
preamble of this Agreement.

              "PAYMENT" has the meaning ascribed to it in Section 4.04.

              "PERSON" means an individual, corporation, partnership, trust,
limited liability company, a branch of any legal entity, unincorporated
organization, joint stock company, joint venture, association, other entity or
Governmental Entity.

              "PROVIDED MATERIAL" has the meaning ascribed to it in Section
4.05.

              "RAINY RIVER" has the meaning ascribed to it in the preamble of
this Agreement.

              "RAINY RIVER INDEMNIFIED PERSONS" means Rainy River and its
Affiliates, and each of their respective directors, partners, officers, agents
and employees.

              "RETAINED LIABILITIES" means any Liabilities of Rainy River
(whether known or unknown, accrued, absolute, contingent or otherwise), except
obligations of Rainy River under the Kendall Purchase Agreement, the MGE
Purchase Agreement, the WPPI Purchase Agreement

                                       6

<PAGE>

and the Fuel Supply Agreement arising out of facts, events or circumstances that
occur from and after the Closing.

              "SECOND BANK AGREEMENT" means that certain Consent and Agreement,
dated as of November 12, 1999, by and among Rainy River, Kendall and the
Collateral Agent.

              "SECOND KENDALL CONSENT TO PLEDGE" has the meaning ascribed to it
in Section 2.06(c).

              "TAX" or "TAXES" means (i) all taxes, however denominated,
including any interest, penalties or additions to tax that may become payable in
respect thereof, imposed by any federal, state, local or foreign government or
any agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all net or gross
income taxes (including, but not limited to, United States federal income taxes
and state income taxes), payroll and employee withholding taxes, unemployment
insurance, social security, sales and use taxes, excise taxes, environmental
taxes, franchise taxes, net proceeds taxes, AD VALOREM taxes, value added taxes,
bank shares taxes, alternative or add-on minimum taxes, deed taxes, profits
taxes, windfall profits taxes, transaction taxes, license taxes, lease taxes,
service taxes, service use taxes, severance taxes, energy taxes, capital taxes,
premium taxes, gross receipts taxes, occupation taxes, real and personal
property taxes, stamp taxes, transfer taxes, withholding taxes, workers'
compensation taxes, and other obligations, assessments, duties, customs, fees,
levies or charges of the same or of a similar nature, and (ii) any obligations
under any agreement or arrangement with respect to any tax described in clause
(i) above.

              "THIRD BANK AGREEMENT" means that certain Reaffirmation and
Amendment of Consent and Agreement, dated as of August 8, 2003, by and among
Rainy River, Kendall and the Collateral Agent.

              "THIRD PARTY CLAIM" has the meaning ascribed to it in Section 6.05
hereof.

              "TRANSACTION DOCUMENT(S)" means each of (i) the Kendall Assignment
and Novation Agreement, (ii) the Kendall Guaranty Termination and Release, (iii)
the New Kendall Guaranty Agreement, (iv) the First Kendall Consent to Pledge,
(v) the Second Kendall Consent to Pledge, (vi) the MGE Assignment and Novation
Agreement, (vii) the MGE Amendment to Guaranty, (viii) the New MGE Guaranty
Agreement, (ix) the WPPI Assignment and Novation Agreement, (x) the WPPI
Amendment to Guaranty, (xi) the New WPPI Guaranty Agreement, (xii) the TMV
Assignment and Novation Agreement, (xiii) the MGE Consent and (xiv) the WPPI
Consent.

              "WPPI" has the meaning ascribed to it in the recitals of this
Agreement.

              "WPPI AMENDMENT TO GUARANTY" has the meaning ascribed to it in
Section 2.06(f) hereof.

              "WPPI ASSIGNMENT AND NOVATION AGREEMENT" has the meaning ascribed
to it in Section 2.06(d) hereof.

              "WPPI CONSENT" has the meaning ascribed to it in the recitals of
this Agreement.

                                       7

<PAGE>

              "WPPI GUARANTY AGREEMENT" has the meaning ascribed to it in the
recitals of this Agreement.

              "WPPI PURCHASE AGREEMENT" has the meaning ascribed to it in the
recitals of this Agreement.

     Section 1.02     INTERPRETATION. Whenever used in this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, any noun
or pronoun shall be deemed to include the plural as well as the singular and to
cover all genders. Whenever used in this Agreement, unless otherwise specified,
the terms "hereof," "herein," "hereunder" and similar terms refer to this
Agreement as a whole, and references herein to Sections refer to sections of
this Agreement. Whenever used in this Agreement, the term "including" shall be
deemed to mean "including, without limitation."

                                   ARTICLE II
                                     CLOSING

     Section 2.01     CLOSING. The closing (the "CLOSING") of the transactions
contemplated hereby will take place at the offices of Morgan, Lewis & Bockius
LLP, New York, New York, or at such other place as the Parties mutually agree,
at 10:00 a.m. local time, on the date which: (i) occurs on the first day of a
month, (ii) is at least seven (7) days after the satisfaction of all the
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby as set forth in Section 2.05, and (iii) in no event is
earlier than April 1, 2005, or such other date as the Parties may mutually
determine.

     Section 2.02     ASSIGNMENT. At the Closing,

              (a)     on the terms and conditions set forth in the Kendall
Assignment and Novation Agreement, Rainy River shall convey, assign and transfer
to Assignee, its successors and assigns for its use, benefit and behalf, free
and clear of all Encumbrances of any kind, all of Rainy River's right, title and
interest in and to the Kendall Purchase Agreement;

              (b)     on the terms and conditions set forth in the MGE
Assignment and Novation Agreement, Rainy River shall convey, assign and transfer
to Assignee, its successors and assigns for its use, benefit and behalf, free
and clear of all Encumbrances of any kind, all of Rainy River's right, title and
interest in and to the MGE Purchase Agreement; and

              (c)     on the terms and conditions set forth in the WPPI
Assignment and Novation Agreement, Rainy River shall convey, assign and transfer
to Assignee, its successors and assigns for its use, benefit and behalf, free
and clear of all Encumbrances of any kind, all of Rainy River's right, title and
interest in and to the WPPI Purchase Agreement; and

              (d)     on the terms and conditions set forth in the TMV
Assignment and Novation Agreement, Rainy River shall convey, assign and transfer
to Assignee, its successors and assigns for its use, benefit and behalf, free
and clear of all Encumbrances of any kind, all of Rainy River's right, title and
interest in and to the Fuel Supply Agreement.

                                       8

<PAGE>

     Section 2.03     ASSUMPTION. At the Closing,

              (a)     on the terms and conditions set forth in the Kendall
Assignment and Novation Agreement, Assignee shall assume and agree to perform
all of Rainy River's obligations under the Kendall Purchase Agreement to be
performed from and after the Closing, but Assignee shall not assume any Retained
Liabilities;

              (b)     on the terms and conditions set forth in the MGE
Assignment and Novation Agreement, Assignee shall assume and agree to perform
all of Rainy River's obligations under the MGE Purchase Agreement to be
performed from and after the Closing, but Assignee shall not assume any Retained
Liabilities;

              (c)     on the terms and conditions set forth in the WPPI
Assignment and Novation Agreement, Assignee shall assume and agree to perform
all of Rainy River's obligations under the WPPI Purchase Agreement to be
performed from and after the Closing, but Assignee shall not assume any Retained
Liabilities; and

              (d)     on the terms and conditions set forth in the TMV
Assignment and Novation Agreement, Assignee shall assume and agree to perform
all of Rainy River's obligations under the Fuel Supply Agreement to be performed
from and after the Closing, but Assignee shall not assume any Retained
Liabilities.

     Section 2.04     CONSIDERATION. As consideration for the assumption by
Assignee of the obligations under the Kendall Purchase Agreement, the MGE
Purchase Agreement and the WPPI Purchase Agreement, Rainy River shall pay to
Assignee at Closing, by wire transfer of immediately available funds to such
account as Assignee may direct, the sum of Seventy-Three Million Dollars
($73,000,000), free and clear of all withholdings.

     Section 2.05     CONDITIONS PRECEDENT TO CLOSING OBLIGATION OF PARTIES. The
obligation of the Parties to consummate transactions contemplated hereby, is
subject to the satisfaction prior to the Closing of each of the following
conditions:

              (a)     A duly executed written consent of Kendall, substantially
in the form attached hereto as EXHIBIT A (the "KENDALL CONSENT"), to (x) the
Kendall Assignment and Novation Agreement as required by Section 21.2 of the
Kendall Purchase Agreement, (y) the Kendall Guaranty Termination and Release as
required by Section 7.2 of the Kendall Guaranty Agreement and (z) the New
Kendall Guaranty Agreement as required by Section 7.2 of the Kendall Guaranty
Agreement;

              (b)     A duly executed written consent of the Collateral Agent,
substantially in the form attached hereto as EXHIBIT B (the "BANK CONSENT"), to
(x) the Kendall Guaranty Termination and Release, (y) the New Kendall Guaranty
Agreement and (z) the Kendall Assignment and Novation Agreement, as required by
Section 1.3 of the First Bank Agreement, Section 1.4 of the Second Bank
Agreement and the Third Bank Agreement;

              (c)     No Action or Proceeding by any Governmental Entity shall
have been instituted or threatened which enjoins or prohibits, or would be
reasonably expected to enjoin or prohibit, the consummation of the transactions
contemplated hereby, and no Action or

                                       9

<PAGE>

Proceeding by any other Person shall have been instituted that has resulted in
any order or injunction that prohibits or enjoins the consummation of the
transactions contemplated hereby;

              (d)     (i) Each of the representations and warranties of Rainy
River contained in this Agreement that is qualified by materiality shall have
been true and correct in all respects as of the Closing and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects as of the Closing, with the same force and
effect as if made as of the date of the Closing (other than such representations
and warranties as are made as of another date, which shall be true and correct
as of such date), (ii) the covenants and agreements contained in this Agreement
to be complied with by Rainy River on or before the Closing shall have been
complied with in all material respects and (iii) Assignee shall have received a
certificate of Rainy River as to the matters set forth in clauses (i) and (ii)
above signed by a duly authorized officer of Rainy River;

              (e)     (i) Each of the representations and warranties of Assignee
contained in this Agreement that is qualified by materiality shall have been
true and correct in all respects as of the Closing and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects as of the Closing, with the same force and
effect as if made as of the date of the Closing (other than such representations
and warranties as are made as of another date, which shall be true and correct
as of such date), (ii) the covenants and agreements contained in this Agreement
to be complied with by Assignee on or before the Closing shall have been
complied with in all material respects and (iii) Rainy River shall have received
a certificate of Assignee as to the matters set forth in clauses (i) and (ii)
above signed by a duly authorized officer of Assignee;

              (f)     No Law shall be in effect that prohibits or declares
illegal the transactions contemplated hereby; and

              (g)     the Consent of FERC, the receipt of which is required for
the consummation of the transactions contemplated by the MGE Assignment and
Novation Agreement and the WPPI Assignment and Novation Agreement (the
"ASSIGNMENT TRANSACTIONS"), shall have been obtained and all waiting periods
specified by FERC, if any, the passing of which is necessary for such
consummation, shall have passed.

     Section 2.06     DELIVERIES AT CLOSING. At the Closing,

              (a)     Rainy River shall deliver to Assignee and Assignee shall
deliver to Rainy River: (i) a duly executed instrument of assignment and
novation with respect to the Kendall Purchase Agreement, substantially in the
form attached hereto as EXHIBIT C (the "KENDALL ASSIGNMENT AND NOVATION
AGREEMENT");

              (b)     Rainy River shall deliver to Assignee (i) a duly executed
instrument of termination and release with respect to the Kendall Guaranty
Agreement, substantially in the form attached hereto as EXHIBIT D (the "KENDALL
GUARANTY TERMINATION AND RELEASE"), pursuant to which ALLETE and Kendall shall
terminate the Kendall Guaranty Agreement and ALLETE is released of any and all
obligations as "Guarantor" under the Kendall Guaranty Agreement and (ii) a duly
executed instrument of termination and release with respect to the First Bank

                                       10

<PAGE>

Agreement, the Second Bank Agreement and the Third Bank Agreement, substantially
in the form attached hereto as EXHIBIT E (the "BANK TERMINATION AND RELEASE");

              (c)     Assignee shall cause Parent to deliver to Rainy River (i)
a duly executed instrument of guaranty with respect to the Kendall Purchase
Agreement, substantially in the form attached hereto as EXHIBIT F (the "NEW
KENDALL GUARANTY AGREEMENT"), pursuant to which Parent shall agree to guaranty
the obligations of Assignee under the Kendall Purchase Agreement in favor and
for the benefit of Kendall, (ii) a duly executed Consent and Agreement with
respect to the pledge of the New Kendall Guaranty Agreement to the Collateral
Agent, substantially in the form attached hereto as EXHIBIT G (provided that the
opinion of counsel referenced therein may be delivered by one or more counsel
and may contain customary assumptions and qualifications) (the "FIRST KENDALL
CONSENT TO PLEDGE") and (iii) a duly executed Consent and Agreement with respect
to the pledge of the Kendall Purchase Agreement to the Collateral Agent,
substantially in the form attached hereto as EXHIBIT H (provided that the
opinion of counsel referenced therein may be delivered by one or more counsel
and may contain customary assumptions and qualifications) (the "SECOND KENDALL
CONSENT TO PLEDGE");

              (d)     Rainy River shall deliver to the Assignee and the Assignee
shall deliver to Rainy River: (i) a duly executed instrument of assignment and
novation with respect to the MGE Purchase Agreement, substantially in the form
attached hereto as EXHIBIT I (the "MGE ASSIGNMENT AND NOVATION AGREEMENT"), and
(ii) a duly executed instrument of assignment and novation with respect to the
WPPI Purchase Agreement, substantially in the form attached hereto as EXHIBIT J
(the "WPPI ASSIGNMENT AND NOVATION AGREEMENT");

              (e)     Rainy River shall deliver to Assignee a duly executed
instrument of amendment with respect to the MGE Guaranty Agreement,
substantially in the form attached hereto as EXHIBIT K (the "MGE AMENDMENT TO
GUARANTY"), pursuant to which the guaranteed obligations under the MGE Guaranty
Agreement shall be limited to those obligations arising on or before the
Closing, and the MGE Guaranty Agreement shall have no application to, and ALLETE
shall have no guaranty obligations with respect to, any fact, event or
occurrence from or after the Closing;

              (f)     Rainy River shall deliver to Assignee a duly executed
instrument of amendment with respect to the WPPI Guaranty Agreement,
substantially in the form attached hereto as EXHIBIT L (the "WPPI AMENDMENT TO
GUARANTY"), pursuant to which the guaranteed obligations under the WPPI Guaranty
Agreement shall be limited to those obligations arising on or before the
Closing, and the WPPI Guaranty Agreement shall have no application to, and MP
Enterprises shall have no guaranty obligations with respect to, any fact, event
or occurrence from or after the Closing;

              (g)     Assignee shall cause Parent to deliver to Rainy River a
duly executed instrument of guaranty with respect to the MGE Purchase Agreement,
substantially in the form attached hereto as EXHIBIT M (the "NEW MGE GUARANTY
AGREEMENT"), pursuant to which Parent shall agree to guaranty the obligations of
Assignee under the MGE Purchase Agreement in favor and for the benefit of MGE
from and after the Closing;

                                       11

<PAGE>

              (h)     Assignee shall cause Parent to deliver to Rainy River a
duly executed instrument of guaranty with respect to the WPPI Purchase
Agreement, substantially in the form attached hereto as EXHIBIT N (the "NEW WPPI
GUARANTY AGREEMENT"), pursuant to which Parent shall agree to guaranty the
obligations of Assignee under the WPPI Purchase Agreement in favor and for the
benefit of WPPI from and after the Closing;

              (i)     Rainy River shall cause its parent company to deliver to
Assignee a duly executed indemnification agreement, substantially in the form of
EXHIBIT O (the "INDEMNIFICATION AGREEMENT"), pursuant to which Rainy River's
parent company agrees to indemnify the Assignee Indemnified Person for Rainy
River's obligations under this Agreement;

              (j)     Rainy River shall deliver to Assignee and Assignee shall
deliver to Rainy River a duly executed instrument of assignment and novation
with respect to the Fuel Supply Agreement, substantially in the form attached
hereto as EXHIBIT P (the "TMV ASSIGNMENT AND NOVATION AGREEMENT"); and

              (k)     Rainy River shall deliver to Assignee a duly executed copy
of the Consent issued by FERC to the Assignment Transactions.

     Section 2.07     FURTHER ASSURANCES. At any time or from time to time after
the Closing, at Assignee's request and without further consideration, Rainy
River shall execute and deliver to Assignee such other instruments of sale,
transfer, conveyance, assignment and confirmation, provide such materials and
information and take such other actions as Assignee may reasonably deem
necessary or desirable in order more effectively to transfer, convey and assign
to Assignee, and to confirm Assignee's title to and rights in the Kendall
Purchase Agreement, MGE Purchase Agreement, the WPPI Purchase Agreement and the
Fuel Supply Agreement, and, to the fullest extent permitted by Law, to assist
Assignee in exercising all rights with respect thereto, and otherwise to cause
Rainy River to fulfill its obligations under this Agreement.

                                  ARTICLE III
              REPRESENTATIONS AND WARRANTIES OF EACH OF THE PARTIES

              Assignee hereby represents and warrants with respect to itself and
Affiliates of Assignee that are parties to any of the Transaction Documents and
Rainy River hereby represents and warrants with respect to itself and Affiliates
of Rainy River which are parties to any of the Transaction Documents as follows:

     Section 3.01     AUTHORITY. (a) Each Party and each Affiliate of such Party
has all requisite power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by such Party or its
Affiliate, as applicable and constitutes a valid and binding obligation of such
Party or its Affiliate, as applicable, enforceable against it in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws in effect from time to
time relating to or affecting the enforcement of creditors' rights generally and
by general principles of equity (regardless of whether enforcement is sought in
a proceeding in equity or at Law).

                                       12

<PAGE>

              (b)     Each Party and each Affiliate of such Party which is a
party to a Transaction Document has all requisite power and authority to
execute, deliver and perform its obligations under such Transaction Document and
to consummate the transactions contemplated thereby. Each Transaction Document
will, when duly executed and delivered by such Party or its Affiliate, as
applicable, constitute a valid and binding obligation of such Party or its
Affiliate, as applicable, enforceable against it in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws in effect from time to time relating
to or affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at Law).

     Section 3.02     NO IMPEDIMENTS. Except for Consents that have already been
obtained or Consents set forth under the applicable party's name on SCHEDULE
3.02 hereto, the execution, delivery and performance of its obligations under
this Agreement and each Transaction Document to which it is a party will not:

              (a)     violate any provision of any Law or Order applicable to
such Party hereto, the violation of which could reasonably be expected to have a
material adverse effect on the ability of such Party hereto to perform its
obligations under this Agreement and each relevant Transaction Document;

              (b)     result in a breach or constitute a default under any
provision of its articles or incorporation or bylaws (or comparable
organizational documents);

              (c)     result in a breach or constitute a default under any
Contract relating to the management or affairs of such Party hereto or any Debt,
indenture or loan or credit agreement or any other Contract to which it is a
party or by which such Party hereto or its properties or assets may be bound,
the breach or default of which could reasonably be expected to have a material
adverse effect on the ability of such Party hereto to perform its obligations
under this Agreement and each relevant Transaction Document; or

              (d)     result in, or require, the creation of any Encumbrance
upon or with respect to any of the assets or properties of such Party hereto,
the creation or imposition of which could reasonably be expected to have a
material adverse effect on the ability of such Party hereto to perform its
obligations under this Agreement and each relevant Transaction Document.

     Section 3.03     LITIGATION. There is no Action or Proceeding pending or,
to the knowledge of such Party hereto, threatened against, relating to or
affecting such Party hereto which could reasonably be expected to result in the
issuance of any Order of any Governmental Entity (in each such case whether
preliminary or final) restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Transaction Documents.

     Section 3.04     BROKERAGE ARRANGEMENTS. Except as set forth on SCHEDULE
3.04, neither Party nor any of its Affiliates has entered (directly or
indirectly) into any agreement with any Person that would obligate such Party or
any of its Affiliates to pay any commission, brokerage, or "finder's fee" in
connection with the transactions contemplated herein.

                                       13

<PAGE>

                                   ARTICLE IV
                  REPRESENTATIONS AND WARRANTIES OF RAINY RIVER

              Rainy River hereby represents and warrants to Assignee as follows:

     Section 4.01     EXISTING AGREEMENTS. Attached hereto as Appendices A
through G are true and complete copies of the Existing Agreements, as amended to
date, none of which have been rescinded and all of which are in full force and
effect.

     Section 4.02     GOOD AND VALID TITLE. Rainy River holds good and valid
title to all of its contractual rights in the Kendall Purchase Agreement, the
MGE Purchase Agreement, the WPPI Purchase Agreement and the Fuel Supply
Agreement, in each case free and clear of any and all Encumbrances. Upon
execution and delivery of the Transaction Documents by the Parties hereto, the
Kendall Assignment and Novation Agreement, the MGE Assignment and Novation
Agreement, the WPPI Assignment and Novation Agreement and the TMV Assignment and
Novation Agreement will validly convey all of such contractual rights to
Assignee, in each case free and clear of any and all Encumbrances.

     Section 4.03     NO DEFAULTS; NO LITIGATION. There does not exist under the
Kendall Purchase Agreement, the MGE Purchase Agreement, the WPPI Purchase
Agreement or the Fuel Supply Agreement any violation, breach or event of
default, or event or condition that, after notice or lapse of time or both,
would constitute a material violation, breach or event of default thereunder on
the part of Rainy River or, to Rainy River's actual knowledge, any other Person.
Rainy River has not received any notice and has no actual knowledge of any claim
alleging any such violation, breach or default. There are no suits, actions,
claims, complaints, litigation, investigations or legal or administrative or
arbitration proceedings pending or, to the actual knowledge of Rainy River,
threatened, whether at law or in equity, before or by any federal, foreign,
state, local or other Governmental Entity which would reasonably be likely to
materially affect this Agreement or the Existing Agreements or any other
agreements, documents and instruments to be executed in connection herewith.
There are no material judgments, decrees, injunctions, rulings, awards or orders
of any Governmental Entity against Rainy River or any of its Affiliates, or
relating to or affecting this Agreement, the Existing Agreements, or any other
agreements, documents and instruments to be executed in connection herewith.

     Section 4.04     SOLVENCY. Immediately after the assignment and novation of
the Kendall Purchase Agreement, the MGE Purchase Agreement, the WPPI Purchase
Agreement and the Fuel Supply Agreement pursuant to Section 2.03 (the
"ASSUMPTION"), the payment of the cash consideration pursuant to Section 2.04
(the "PAYMENT") and the other transactions contemplated hereby, Rainy River (and
any successor company), will have a positive net worth (calculated in accordance
with generally accepted accounting principles, consistently applied), will not
be insolvent (as defined under the U.S. Bankruptcy Code (the "BANKRUPTCY CODE"),
other applicable law or in equity), and the fair saleable value of Rainy River's
assets will be greater than the amount required to pay its total indebtedness
(contingent or otherwise). Rainy River further represents that the Assumption
and the Payment are being made without intent to hinder, delay or defraud
present or future creditors of Rainy River (or any successor company), and will
not have the effect of hindering, delaying or defrauding any present or future
creditors of Rainy River (or any successor company). Rainy River further
represents that (A) upon consummation

                                       14

<PAGE>

of the Assumption and the Payment, Rainy River (and any successor company) (i)
will have adequate capitalization, (ii) will not have an unreasonably small
capital with respect to the business or transactions engaged in or to be engaged
in by Rainy River and any successor company, (iii) will have the ability to pay
its debts and liabilities as such debts and liabilities mature, and (iv) does
not intend to incur, or believe that it will incur, debts that would be beyond
the ability of Rainy River or any successor company's ability to pay as such
debts mature, and (B) the Assumption is reasonably equivalent value in exchange
for the Payment.

     Section 4.05     PROVISION OF INFORMATION. To Rainy River's actual
knowledge after reasonable inquiry, Rainy River has provided to Assignee copies
of all written agreements that are currently in effect and all material
correspondence of Rainy River and its Affiliates relating to the Existing
Agreements (such provided material being defined herein as the "PROVIDED
MATERIAL"). To Rainy River's actual knowledge, the Provided Material accurately
presents and reflects in all material respects all of the transactions and
actions therein described. There have been no material violations of any
Applicable Laws by Rainy River or any of its Affiliates with respect to or
affecting the Existing Agreements. There is no materially adverse fact relating
to the Existing Agreements or the transactions or agreements contemplated by
this Agreement known to Rainy River or any of its Affiliates that Rainy River
has not disclosed or caused to be disclosed to Assignee.

     Section 4.06     VALIDITY AND ENFORCEABILITY OF EXISTING AGREEMENTS. Each
of the Existing Agreements is a valid and binding agreement of Rainy River,
enforceable against it in accordance with its terms and, to Rainy River's actual
knowledge, is a valid and binding agreement of each other party thereto,
enforceable against such party in accordance with its terms, except in each case
where enforceability may be limited or otherwise impacted by bankruptcy,
insolvency, or other similar laws affecting creditors' rights generally and
except where enforceability is subject to the application of equitable
principles or remedies.

                                   ARTICLE V
                  COVENANTS AND OTHER AGREEMENTS OF THE PARTIES

     Section 5.01     AMENDMENTS TO EXISTING AGREEMENTS. Between the date of
this Agreement and the Closing, Rainy River shall not modify, amend or terminate
any of the Existing Agreements to which it is a party or waive, release, cancel
or assign any material rights or claims thereunder, without obtaining the prior
written consent of Assignee. Except as provided herein, Rainy River shall
administer the Existing Agreements in the ordinary course of business and
consistent with past practice.

     Section 5.02     FERC APPROVAL. Prior to the Closing, the Parties will take
all reasonable steps and proceed diligently and in good faith and use their best
efforts to obtain, as promptly as practicable, all Consents required to
consummate the Assignment Transactions. On or before January 15, 2005, the
Parties hereto agree to make all filings with or give all notices to FERC, as
required to consummate the Assignment Transactions and to contact Kendall and
the Collateral Agent, either in writing or orally, in order to obtain the
Kendall Consent and the Bank Consent. Rainy River will provide prompt
notification to Assignee when any such Consent, action, filing or notice
referred to in the prior sentence is obtained, taken, made or given, as
applicable, and

                                       15

<PAGE>

will advise Assignee of any communications (and, unless precluded by Law,
provide copies of any such communications that are in writing) with FERC
regarding the Assignment Transactions.

     Section 5.03     CONFIDENTIALITY. Each of the Parties hereto hereby agrees
to maintain the confidentiality of the information obtained by such Party
relating to the transactions contemplated by this Agreement, in accordance with
the terms of the Non-Disclosure Agreement, dated July 2, 2004 (the "NON-
DISCLOSURE AGREEMENT") between Rainy River and Assignee, it being understood by
the Parties that the general terms, rights and obligations the Non-Disclosure
Agreement shall now apply equally to the Parties. Notwithstanding the provisions
of this Section 5.03, each Party may communicate the terms of the transaction
contemplated herein to one or more credit rating agencies, provided that such
credit rating agencies are obligated in writing to maintain the confidentiality
of such terms.

     Section 5.04     NOTIFICATIONS. Until the Closing, each Party hereto shall
promptly notify the other Parties in writing of any fact, change, condition,
circumstance or occurrence or nonoccurrence of any event of which it is aware
that will or is reasonably likely to result in any of the conditions set forth
in Section 2.05 becoming incapable of being satisfied.

     Section 5.05     REPRESENTATIONS AND WARRANTIES. The Parties hereby agree
not to take any action between the date hereof and the Closing which action
would have the effect of causing a representation or warranty of such Party
hereto made herein to become untrue or inaccurate.

     SECTION 5.06     PUBLIC ANNOUNCEMENTS. Except as required by Law, any
public announcement, press release or similar publicity with respect to this
Agreement or transactions contemplated hereby will be issued, if at all, at such
time, in such manner and with such content as the Parties mutually agree.

     Section 5.07     COOPERATION. Each of Rainy River and Assignee will use,
and cause their respective Affiliates to use, commercially reasonable efforts to
take, or cause to be taken, all other actions necessary, proper or advisable in
order for them to fulfill their obligations in respect of this Agreement and the
transactions contemplated hereby. Each of Rainy River and Assignee will, and
will cause each of their respective Affiliates to, coordinate and cooperate with
each other in exchanging such information and supplying such reasonable
assistance as may be reasonably requested by such Party hereto in connection
with the filings and other actions contemplated by Section 5.02. Notwithstanding
anything to the contrary herein, Assignee and Rainy River shall each use
commercially reasonable efforts to work diligently with Kendall and Collateral
Agent in order to obtain each of Kendall's and Collateral Agent's Consents
pursuant to Sections 2.05(a) and (b), respectively.

                                   ARTICLE VI
                                 INDEMNIFICATION

     Section 6.01     INDEMNIFICATION BY RAINY RIVER. Subject to the provisions
of Section 6.03 hereof, Rainy River hereby agrees to indemnify each of the
Assignee Indemnified Persons against, and agrees to hold each of them harmless
from, on a Grossed-Up Basis, any and all

                                       16

<PAGE>

Losses incurred or suffered by them to the extent such Losses relate to or arise
out of or in connection with (i) any breach by Rainy River of the Kendall
Purchase Agreement, the MGE Purchase Agreement, the WPPI Purchase Agreement or
the Fuel Supply Agreement prior to the Closing, (ii) the Retained Liabilities,
(iii) any breach or inaccuracy in any representation or warranty made by Rainy
River in this Agreement or (iv) any failure of Rainy River to perform its
obligations under this Agreement.

     Section 6.02     INDEMNIFICATION BY ASSIGNEE. Subject to the provisions of
Section 6.03 hereof, Assignee hereby agrees to indemnify each of the Rainy River
Indemnified Persons against, and agrees to hold each of them harmless from, on a
Grossed-Up Basis, any and all Losses incurred or suffered by them to the extent
such Losses relate to or arise out of or in connection with (i) any breach by
Assignee of any of the Kendall Purchase Agreement, the MGE Purchase Agreement,
the WPPI Purchase Agreement or the Fuel Supply Agreement after the Closing, (ii)
any breach or inaccuracy in any representation or warranty made by Assignee in
this Agreement or (iii) any failure of Assignee to perform its obligations under
this Agreement or of Parent to perform its obligations under those Transaction
Documents to which it is a party.

     Section 6.03     LIMITATIONS ON INDEMNIFICATION. The amount of any Losses
incurred or suffered by any Indemnified Person shall be calculated after giving
effect to (a) any insurance proceeds received by the Indemnified Person with
respect to such Losses and (b) any recoveries obtained by the Indemnified Person
from any third Persons with respect to such Losses; PROVIDED that the obligation
of any Indemnifying Person to make any payment to an Indemnified Person shall
not be stayed or delayed pending any determination as to whether an insurance
carrier will make any payment with respect to all or part of any Losses or
whether the Indemnified Person will recover from any third Person with respect
to all or part of any Losses. If any such proceeds or recoveries are received by
an Indemnified Person with respect to any Losses after an Indemnifying Person
has made a payment to the Indemnified Person with respect thereto, the
Indemnified Person shall pay to the Indemnifying Person the amount of such
proceeds or recoveries (up to the amount of the Indemnifying Person's payment).

     Section 6.04     NOTICE OF INDEMNIFIED CLAIMS. As soon as is reasonably
practicable after becoming aware of claim for indemnification under this
Agreement (each an "INDEMNIFIED CLAIM"), the Indemnified Person shall promptly
give notice to the Indemnifying Person of such Indemnified Claim and the amount
(to the extent then determinable) that, subject to Section 6.05, the Indemnified
Person will be entitled to receive hereunder from the Indemnifying Person.

     Section 6.05     ASSUMPTION OF DEFENSE. The Indemnifying Person shall be
entitled to participate in the defense of any Indemnified Claim arising from any
claim, action, suit or proceeding by a third party (a "THIRD PARTY CLAIM") and,
if they so choose, to assume and control the defense thereof with counsel
selected by the Indemnifying Person, which counsel must be reasonably
satisfactory to the Indemnified Persons; provided however, that the Indemnifying
Person shall acknowledge to the Indemnified Person its liability under this
Agreement with respect to such Third Party Claim prior to assuming the defense
thereof. Should the Indemnifying Person so elect to assume the defense of a
Third Party Claim, the Indemnifying Person shall not be liable to the
Indemnified Persons for legal expenses subsequently incurred by the Indemnified
Persons in connection with the defense thereof, but shall continue to pay for
any expenses of investigation or any Loss suffered. If the Indemnifying Person
assumes such

                                       17

<PAGE>

defense, the Indemnified Persons shall have the right to participate in (but not
control) the defense thereof and to employ counsel, at their own expense,
separate from the counsel employed by the Indemnifying Person. If (a) the
Indemnifying Person shall not assume the defense of a Third Party Claim with
counsel reasonably satisfactory to the Indemnified Persons within thirty (30)
calendar days of the notice of the Third Party Claim, (b) legal counsel for the
Indemnified Persons notifies the Indemnifying Person that there are or may be
legal defenses available to the Indemnified Persons which are different from or
additional to those available to the Indemnifying Person, which, if the
Indemnified Persons and the Indemnifying Person were to be represented by the
same counsel, would constitute a conflict of interest for such counsel or
prejudice prosecution of the defenses available to such Indemnified Persons, or
(c) the Indemnifying Person shall assume the defense of a Third Party Claim and
fail to diligently prosecute such defense, then in each such case the
Indemnified Person, by notice to the Indemnifying Person, may employ their own
counsel and control the defense of the Third Party Claim and the Indemnifying
Person shall be liable for the reasonable fees, charges and disbursements of one
counsel employed by the Indemnified Persons, and the Indemnified Persons shall
be promptly reimbursed for any such fees, charges and disbursements, as and when
incurred. Whether the Indemnifying Person or the Indemnified Persons controls
the defense of any Third Party Claim, the Parties hereto shall cooperate in the
defense thereof. Such cooperation shall include the retention and provision to
the counsel of the controlling party of records and information which are
reasonably relevant to such Third Party Claim, and making employees available on
a mutually convenient basis to provide additional information and explanation of
any material provided hereunder.

     Section 6.06     SETTLEMENT. (a) Any settlement or compromise made or
caused to be made by the Indemnified Person or the Indemnifying Person, as the
case may be, of any Third Party Claim shall also be binding upon the
Indemnifying Person or the Indemnified Person, as the case may be, in the same
manner as if a final judgment or decree had been entered by a court of competent
jurisdiction in the amount of such settlement or compromise. If the defense of
the Third Party Claim is not assumed by the Indemnifying Person and the
Indemnifying Person has acknowledged to the Indemnified Person its liability
under this Agreement with respect to such Third Party Claim, the Indemnifying
Person will not be subject to any liability for any settlement or compromise
made without its Consent, but such Consent may not be unreasonably withheld;
PROVIDED that it shall not be unreasonable for an Indemnifying Person to
withhold its Consent to any settlement or compromise involving the imposition of
equitable remedies or involving the imposition of any material obligations on
the Indemnifying Person other than monetary obligations for which the
Indemnified Person will be indemnified hereunder. If the Indemnifying Person
assumes the defense of such Third Party Claim, the Indemnifying Person shall
have the right to enter into a settlement or compromise of such Third Party
Claim without the Consent of the Indemnified Person; PROVIDED that the
Indemnifying Person shall be required to obtain such Consent if the settlement
or compromise involves the imposition of equitable remedies or involves the
imposition of any material obligations on the Indemnified Person other than
monetary obligations for which the Indemnified Person will be indemnified
hereunder.

              (b)     The Indemnified Person shall give the Indemnifying Person
at least thirty (30) calendar days' notice of any proposed settlement or
compromise of any Indemnified Claim it is defending, during which time the
Indemnifying Person may reject such proposed settlement or compromise; PROVIDED
that from and after such rejection, the Indemnifying Person shall be

                                       18

<PAGE>

obligated to assume the defense of and full and complete liability and
responsibility for such Indemnified Claim, in accordance with the provisions of
this Article VI.

     Section 6.07     DIRECT CLAIMS. If an Indemnified Person should have a
claim against an Indemnifying Person hereunder which does not involve a Third
Party Claim, the Indemnified Party shall transmit a written indemnity notice to
the Indemnifying Party describing in detail the nature of the claim and the
basis of the Indemnified Party's request for indemnification under this
Agreement and including all supporting documentation. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute such claim, the
Indemnifying Party shall pay the Indemnified Party the amount of such claim
within thirty (30) days of such notice. If the Indemnifying Party disputes such
claim, the Indemnifying Party shall notify the Indemnified Party and such
dispute shall be resolved by litigation in an appropriate court of competent
jurisdiction.

                                   ARTICLE VII
                                  MISCELLANEOUS

     Section 7.01     TERMINATION. This Agreement may be terminated:

              (a)     by mutual written agreement of Rainy River and Assignee
prior to the date of the Closing;

              (b)     by either Party hereto if the conditions set forth in
Sections 2.05(a), (b) and (g) shall not have been satisfied by March 23, 2005
and all other conditions set forth in Section 2.05 have been satisfied, provided
such Party is not then in breach of this Agreement; or

              (c)     prior to the Closing by either Party hereto, if (i) any
representation or warranty made by the other Party hereto or any of its
Affiliates under this Agreement or any of the Transaction Documents is untrue as
of the date made hereunder, and such breach of a representation or warranty is
or would reasonably be expected, in the case of a breach by Assignee or its
Affiliate, to be materially adverse to the business or results of operations of
Rainy River or its Affiliates or, in the case of a breach by Rainy River or its
Affiliate, is or would reasonably be expected to have a material adverse effect
on the value or condition of the Existing Agreements to Assignee or its
Affiliates; provided that, to the extent the underlying condition which resulted
in the representation or warranty being untrue may be cured such that there
would be no such materially adverse consequence to Rainy River or Assignee or
their respective Affiliates, as applicable, as of the date of such cure, the
other Party hereto (or its Affiliate, as applicable) shall have failed to so
cure such condition by the earlier of: (a) sixty (60) days from receipt of
notice of the related breach of representation or warranty from the other Party
hereto or (b) March 23, 2005, or (ii) the other Party hereto or any of its
Affiliates breaches any covenant or other obligation under this Agreement or
under any other agreement executed in connection herewith, and such breach is or
would reasonably be expected, in the case of a breach by Assignee or its
Affiliate, to be materially adverse to the business or results of operations of
Rainy River or, in the case of a breach by Rainy River or its Affiliate, is or
would reasonably be expected to have a material adverse effect on the value or
condition of the Existing Agreements to Assignee or its Affiliates; PROVIDED
that the breaching Party hereto (or its Affiliate, as

                                       19

<PAGE>

applicable) shall have failed to cure such breach by the earlier of: (a) sixty
(60) days from receipt of notice thereof from the non-breaching Party hereto or
(b) March 23, 2005; PROVIDED, FURTHER, that the breach of covenant or obligation
shall not be due to any failure of the non-breaching Party hereto to perform any
of its obligations under this Agreement or under any Transaction Document.

     Section 7.02     EFFECT OF TERMINATION. (a) If this Agreement is validly
terminated pursuant to Section 7.01, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of Rainy
River or Assignee or their respective Affiliates (or any of their respective
officers, directors, employees, agents or other representatives), except Section
5.03, Section 7.02(b), Section 7.03 and Section 7.08 will continue to apply
following any such termination.

              (b)     If this Agreement is terminated by either Party hereto
pursuant to Section 7.01(b), or by Assignee pursuant to Section 7.01(c), then,
within ten (10) Business Days after receipt of notice of such termination, Rainy
River shall pay to Assignee the amount of $1.0 Million by wire transfer in
immediately available funds to an account designated by Assignee.

     Section 7.03     SURVIVAL. The representations and warranties of the
Parties contained in Articles III and IV of this Agreement shall survive until
the date which is one year following the Closing and the covenants,
indemnification and other agreements of the Parties contained in this Agreement
shall survive until sixty days after the expiration of the applicable statue of
limitations. Notwithstanding the foregoing, any claim for fraud or criminal
misconduct by any Party hereto may be commenced at any time.

     Section 7.04     HEADINGS. The section headings herein are for convenience
of reference only, do not constitute part of this Agreement and will not be
deemed to limit or otherwise affect any of the provisions hereof.

     Section 7.05     NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made (i) as of the date and time delivered or sent by facsimile if
delivered personally or by facsimile (and if by facsimile, confirmation of
receipt is obtained), and (ii) on the fifth Business Day after deposit in the
U.S. mail, if mailed by registered or certified mail (postage prepaid, return
receipt requested), in each case to the Parties at the following addresses (or
at such other address for a Party hereto as shall be specified by like notice,
except that notices of changes of address shall be effective upon receipt):

                      If to Rainy River:

                      Rainy River Energy Corporation
                      30 West Superior Street
                      Duluth, Minnesota 55802
                      Attention:  Vice President and General Counsel
                      Facsimile No.:  (218) 723-3955

                      With a copy to:

                                       20

<PAGE>

                      Rainy River Energy Corporation
                      30 West Superior Street
                      Duluth, MN  55802
                      Attention:  Vice President - Strategic Initiatives
                      Facsimile No.:  (218) 723-3915

                      If to Assignee:

                      Constellation Energy Commodities Group, Inc.
                      111 Market Place, Suite 500
                      Baltimore, MD  21202
                      Attention:  Head of Operations
                      Facsimile No.:  410-468-3490

                      With a copy to:

                      Constellation Energy Commodities Group, Inc.
                      111 Market Place, Suite 500
                      Baltimore, MD 21202
                      Attention:  General Counsel
                      Facsimile No.:  410-468-3499

              Any Party hereto may by notice to the other change its address for
notice and will so change its address for notice whenever its existing address
for notice ceases to be adequate for delivery both by hand and by facsimile.

     Section 7.06     ASSIGNMENT. (a) The rights and obligations under this
Agreement may be transferred only with the written Consent of the other Party
hereto.

              (b)     This Agreement shall be binding upon and shall inure to
the benefit of the Parties hereto, and their respective successors and permitted
assigns.

              (c)     This Agreement shall not confer any rights or remedies
upon any Person other than the Parties hereto and their respective successors
and permitted assigns.

              (d)     Any purported assignment of this Agreement without the
written Consent of the other Party hereto shall be null and void.

     Section 7.07     GOVERNING LAW; JURISDICTION.

              (a)     This Agreement shall be governed by, and construed in
accordance with, the Laws of the State of Illinois applicable to Contracts
executed in and to be performed entirely within that State without regard to
principles of conflicts of Laws therein.

              (b)     To the fullest extent permitted by applicable Law, each
Party hereto (i) agrees that any claim, Action or Proceeding by such Party
seeking any relief whatsoever arising out of, or in connection with, this
Agreement or the transactions contemplated hereby shall be brought only in the
jurisdiction of any United States District Court within the State of Illinois
and

                                       21

<PAGE>

not in any other State or Federal court in the United States of America or any
court in any other country, (ii) agrees to submit to the exclusive jurisdiction
of such courts located in the State of Illinois for purposes of all Actions or
Proceedings arising out of, or in connection with, this Agreement or the
transactions contemplated hereby, (iii) waives and agrees not to assert any
objection that it may now or hereafter have to the laying of the venue of any
such Action or Proceeding brought in such a court or any claim that any such
Action or Proceeding brought in such a court has been brought in an inconvenient
forum and (iv) agrees that a final judgment in any such Action or Proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by applicable Law.

     Section 7.08     WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.

     Section 7.09     EXPENSES. Except as otherwise provided herein, all fees,
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Party incurring such fees,
costs and expenses.

     Section 7.10     SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
Parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the Parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are fulfilled
to the maximum extent possible.

     Section 7.11     ENTIRE AGREEMENT; AMENDMENT. (a) This Agreement, the
Transaction Documents and the Non-Disclosure Agreement set forth the entire
understanding and agreement of the Parties and their Affiliates with respect to
the transactions contemplated hereby and supersede and replace any prior
understanding, agreement or statement of intent, in each case written or oral,
of any kind and every nature with respect hereto. Any provision of this
Agreement may be amended, modified or waived in whole or in part at any time by
an agreement in writing between the Parties executed in the same manner as this
Agreement.

              (b)     The waiver by any Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a further or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. Except as otherwise expressly provided herein, no failure on the part of
any Party hereto to exercise, and no delay in exercising, any right, power or
remedy hereunder, or otherwise available in respect hereof at Law or in equity,
shall operate as a waiver thereof, nor shall any single or partial exercise of
such right, power or remedy by such Party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.

                                       22

<PAGE>

     Section 7.12     LIMITATION OF LIABILITY. No Party hereto shall be entitled
to lost profits or consequential damages, except for either of the foregoing
constituting or resulting from a Third Party Claim.

     Section 7.13     COUNTERPARTS. This Agreement may be executed in any number
of separate counterparts each of which when so executed shall be deemed to be an
original and all of which together shall constitute one and the same agreement.

                            [Signature Page Follows]

                                       23

<PAGE>

              IN WITNESS WHEREOF, each of the Parties has caused this Agreement
to be duly executed on its behalf as of the day and year first above written.

                                        RAINY RIVER ENERGY CORPORATION

                                        By:   /s/ Eric R. Norgerg
                                           -------------------------------------
                                           Name:  Eric Norberg
                                           Title: Vice President

                                        CONSTELLATION ENERGY COMMODITIES
                                        GROUP, INC.
LEGAL REVIEW
INT DFH   DATE 12/27/04                 By:   /s/ Thomas V. Brooks
                                           -------------------------------------
                                           Name:  Thomas V. Brooks
                                           Title: President

                                       24

<PAGE>

                                  SCHEDULE 3.02
                                    CONSENTS

--------------------------------------------------------------------------------
CONSENT:                                 APPLICABLE PARTY:
--------------------------------------------------------------------------------
FERC Approval of the Assignment          Rainy River and Assignee
Transactions
--------------------------------------------------------------------------------
Collateral Agent                         Rainy River and Assignee
--------------------------------------------------------------------------------
Kendall                                  Rainy River and Assignee
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

                                       25

<PAGE>

                                  SCHEDULE 3.04
                             BROKERAGE ARRANGEMENTS

MCC Energy Advisors, Inc. (Rainy River)

                                       26

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