Document:

EQUITY CONTRIBUTION AGREEMENT

 

        This Equity Contribution Agreement
(this "Agreement") dated as of October 25, 2000, is made and entered
into by and among WPS Northern Nevada, LLC, a Nevada limited liability company
("WPS Nevada"), WPS Resources Corporation, a Wisconsin corporation
("WPSR"), WPS Power Development, Inc., a Wisconsin corporation
("PDI") and an indirect wholly-owned subsidiary of WPSR, and Sierra
Pacific Power Company, a Nevada corporation ("Seller"). WPS Nevada,
PDI, WPSR and Seller may be referred to herein individually as a
"Party," and collectively as the "Parties".

R E C I T A L S:

        WHEREAS, WPS Nevada has been
formed by PDI to acquire certain assets and assume certain liabilities of Seller
pursuant to that certain Asset Sale Agreement for the Tracy/Pinon Asset Bundle
of even date herewith between Seller and WPS Nevada ("Asset Sale
Agreement");

        WHEREAS, PDI owns
100 percent of the membership interests in WPS Nevada as may be reflected
in a limited liability company operating agreement or other agreements related
thereto to be entered into in connection therewith (the "LLC
Documents"), and PDI shall contribute to the capital and expenses of WPS
Nevada on the terms and conditions set forth below; and

        WHEREAS, in connection with
the negotiation and execution of the Asset Sale Agreement, Seller has requested
that this Agreement be executed and delivered by WPSR and PDI. Capitalized terms
used herein but not defined shall have the meanings assigned to such terms in
the Asset Sale Agreement.

        NOW, THEREFORE, in
consideration of the execution and delivery of the Asset Sale Agreement by the
Parties thereto and of the mutual promises herein contained, the Parties hereto
agree as follows:

 

        1. Equity Contribution
Agreement. Notwithstanding any other provision to the contrary contained in
the LLC Documents, as the sole member of WPS Nevada, PDI shall contribute (and
WPSR agrees that it shall cause PDI to contribute) from time to time, in
immediately available funds, such capital and other funds as are necessary to
permit WPS Nevada to fulfill when due its financial and other obligations which
are contained in the Asset Sale Agreement from and after the date thereof to and
including the Closing, including without limitation the payment of the Purchase
Price pursuant to Section 4.2 of the Asset Sale Agreement (the "Pre-Closing
Obligations") or amounts payable in connection with any breach of the
Pre-Closing Obligations ("Breach Obligations"); and provided, further,
that PDI shall contribute (and WPSR shall cause PDI to contribute), such
additional capital to WPS Nevada after the Closing as may be necessary to permit
WPS Nevada to pay any adjustments to the Purchase Price due from WPS Nevada
under the terms and conditions of Section 3.2 of the Asset Sale Agreement (the
"Post-Closing Obligations"). It is agreed and understood that the
maximum financial exposure under this Agreement of PDI (together with WPSR) is
an amount equal to (i) the Purchase Price less the TPPA Amount plus (ii) the
Post-Closing Obligations, if any, plus (iii) all transaction expenses incurred
by WPS Nevada. It is also agreed and understood that Seller is direct
third-party beneficiary of the provisions of this paragraph 1.

        2. Performance Guarantee.
WPSR agrees with WPS Nevada and with Seller that it shall unconditionally and
irrevocably guarantee the performance by WPS Nevada of all of its obligations
under the Asset Sale Agreement due to be performed by WPS Nevada at or prior to
the Closing and with respect to any Post-Closing Obligations thereafter.

        3. Termination. Except as
specifically provided in paragraph 1 with respect to the Post-Closing
Obligations and the Breach Obligations above, all obligations of PDI and WPSR
under this Agreement shall terminate and have no further force or effect upon
the earlier of (i) consummation of the Closing, and (ii) termination of the
Asset Sale Agreement in accordance with the terms thereof. It is expressly
understood that this Agreement does not constitute a continuing guarantee of the
performance or financial obligations of WPS Nevada (including, without
limitation, with respect to the Assumed Liabilities, the Ancillary Agreements,
or under Article IX ("Indemnification") of the Asset Sale Agreement)
by any of PDI or WPSR or any of their Affiliates (other than WPS Nevada) from
and after the Closing Date, except as specifically provided in paragraph 1
above.

        4. Representations and
Warranties of PDI, WPSR and WPS Nevada. PDI, WPSR and WPS Nevada each hereby
represents and warrants, with respect to itself and WPS Nevada, to Seller as
follows, which representations and warranties shall survive the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby:

            4.1. Organization.
Each of PDI and WPSR is a corporation duly organized, validly existing and in
active status under the laws of the State of Wisconsin and each has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted. WPS Nevada is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Nevada and has all requisite limited liability
company power and authority to own, lease, and operate its properties and to
carry on its business as it is now being conducted. Each of PDI, WPSR and WPS
Nevada is qualified to do business and is in good standing or active status
under the laws of each jurisdiction in which its business as it is now being
conducted requires it to be so qualified, except where the failure to be so
qualified would not have a material adverse effect on the financial condition of
such Party.

            4.2. Authority.
Each of PDI and WPSR has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
WPS Nevada has full limited liability company power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by PDI and WPSR and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action required on the part of each such
Party. The execution and delivery of this Agreement by WPS Nevada and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary limited liability company action required on the
part of WPS Nevada. This Agreement has been duly and validly executed and
delivered by each of PDI, WPSR and WPS Nevada and this Agreement constitutes the
legal, valid and binding obligation of each of PDI, WPSR and WPS Nevada,
enforceable against each such Party in accordance with its terms, except that
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity).

            4.3. Consents
and Approvals; No Violation. Neither the execution and delivery of this
Agreement by each of PDI, WPSR and WPS Nevada nor the consummation by each of
PDI, WPSR and WPS Nevada of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the Certificate or
Articles of Incorporation or Bylaws (or other similar governing documents) of
such Parties; (ii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, material agreement or other
instrument or obligation to which any such Party or any of their Affiliates is a
party or by which any of their respective assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained or which would not,
individually or in the aggregate, have a material adverse effect on the
financial condition of any such Party; or (iii) constitute violations of any
law, regulation, order, judgment or decree applicable to PDI, WPSR or WPS
Nevada, which violations, individually or in the aggregate, would have a
material adverse effect on the financial condition of any such Party. No consent
of any other Person or any Governmental Authority is required to authorize, or
is required in connection with, the execution, delivery and performance of this
Agreement or the taking of any action by PDI, WPS Capital or WPS Nevada herein
contemplated.

            4.4. Legal
Proceedings. There are no actions or proceedings pending or, to the
Knowledge of PDI, WPSR or WPS Nevada, threatened against PDI, WPSR or WPS Nevada
before any court, arbitrator or Governmental Authority, which could,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the financial condition of any of such Party or that question
the validity of this Agreement, the Asset Sale Agreement or the Ancillary
Agreements or of any action taken or to be taken pursuant to or in connection
with the provisions of this Agreement, the Asset Sale Agreement or the Ancillary
Agreements. None of PDI, WPSR or WPS Nevada is subject to any outstanding
judgments, rules, orders, writs, injunctions or decrees of any court, arbitrator
or Governmental Authority which would, individually or in the aggregate, have a
material adverse effect on the financial condition of any of such Parties.

            4.5. No
Pledge. As of the date of this Agreement, neither PDI's ownership interest
in WPS Nevada, nor WPSR's ownership interest in PDI, is subject to a pledge to
any other Person.

            4.6. Ownership
Interest. As of the date of this Agreement, PDI owns 100 percent of the
membership interests in WPS Nevada and no other Person owns any interest in WPS
Nevada.

        5.  Covenants

            5.1. Obligations.
The obligations of each of PDI and WPSR to perform its respective obligations
pursuant to paragraphs 1 and 2 hereof shall not be affected by the failure of
any member in WPS Nevada to make the equity contributions or any failure to
fulfill its respective obligations hereunder. The obligations of each of PDI and
WPSR pursuant to paragraphs 1 and 2 hereof are absolute and unconditional
subject to the specific terms and conditions hereof irrespective of the
validity, regularity or enforceability of, or any change in or amendment to, the
Asset Sale Agreement or any other agreement, the institution or absence of any
action to enforce the same, any waiver or consent by Seller, the obtaining of
any judgment against any Party or any action to enforce the same, the inability
to recover from WPS Nevada because of any statute of limitations, laches or
otherwise or any other circumstance which might otherwise constitute a legal or
equitable discharge of or a defense to its obligation hereunder and shall not be
affected by (i) any default by WPS Nevada or any member of WPS Nevada or any
other Person in the performance or observance of any of its agreements or
covenants hereunder or under the Asset Sale Agreement and the transactions
contemplated thereby, (ii) the bankruptcy or insolvency of WPS Nevada, any
member of WPS Nevada or any other Person or (iii) the execution, delivery or
performance by WPS Nevada or any member of WPS Nevada of, or the exercise of any
remedies of Seller under, the Asset Sale Agreement and the Ancillary Agreements
or any other agreement. Subject to the specific terms and conditions of this
Agreement, the obligations of each of PDI and WPSR under paragraphs 1 and 2
hereof shall not be subject to any abatement, reduction, limitation, impairment,
termination, setoff, defense, counterclaim or recoupment whatsoever or any right
to any thereof, and shall not be released, discharged or in any way affected by
any reorganization, arrangement, compromise, settlement, release, modification,
amendment (whether material or otherwise), waiver or termination of any or all
of the obligations, conditions, covenants or agreements of any Person in respect
of the Asset Sale Agreement or by the occurrence of any breach or default or the
omission of any action, under or referred to in any of the Asset Sale Agreement
or the Ancillary Agreements, or any modification of, or lack of priority or
perfection of, or exercise of remedies with respect to any security for the
obligation, or by any lack of validity or enforceability of any of such
agreements, whether or not PDI or WPSR shall have notice or knowledge of any of
the foregoing, or to the fullest extent permitted by applicable law, or by any
other circumstance whatsoever which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor.

            5.2. Maintenance
of Ownership Interest. Prior to the fulfillment of all obligations
hereunder, each of PDI and WPSR agrees that it shall not assign, sell or
transfer, or permit the assignment, sale or transfer of, directly or indirectly,
any of its ownership interest in WPS Nevada (or PDI, in the case of WPSR),
except as permitted in paragraph 5.3 below.

            5.3. No
Pledge of Ownership Interests. Prior to the fulfillment of all obligations
hereunder, each of PDI and WPSR agrees that it shall not, without the prior
written consent of Seller, which consent shall not be unreasonably withheld,
sell, assign, dispose of in any way, pledge, or caused to be pledged, any of its
ownership interests in WPS Nevada (or PDI, in the case of WPSR) to any Person,
or agree to any of the foregoing, except that PDI may pledge its interests in
WPS Nevada on or after the Closing Date in connection with obtaining third-party
financing for the acquisition of the Purchased Assets by WPS Nevada.

            5.4. Changes
in WPSR Credit Rating. WPSR will notify Seller as soon as practicable of (i)
any decrease in its credit rating by any "nationally recognized statistical
rating organization" (as defined for the purposes of Rule 436(g) under the
Securities Act of 1933, as amended) or (ii) any notice given of any intended or
potential decrease in any such rating or of a possible change in any such rating
that does not indicate the direction of the possible change.

            5.5. Further
Assurances. The Parties hereto hereby agree to execute and deliver all such
instruments and take all such action as may be necessary to effectuate fully the
purposes of this Agreement.

        6. Miscellaneous.

            6.1. Amendment
and Modification. This Agreement may not be amended, modified or
supplemented and no provision may be waived except by written agreement of
Seller, WPS Nevada, PDI and WPSR.

            6.2. Governing
Law. This Agreement shall be governed by and construed in accordance with
the law of the State of Nevada (without giving effect to conflict of law
principles) as to all matters, including but not limited to matters of validity,
construction, effect, performance and remedies.

            6.3. Interpretation.
The article and section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the Parties and shall not
in any way affect the meaning or interpretation of this Agreement.

            6.4. Enforcement
Action. Each of PDI and WPSR hereby agrees that, pursuant to the exercise of
remedies, Seller or its designee or transferee has the rights, powers,
privileges, interests and remedies of WPS Nevada with respect to the obligations
of PDI and WPSR hereunder, whether such rights, powers, privileges interests and
remedies arise under this Agreement or by statute or in law or in equity or
otherwise and Seller shall have the right to enforce directly the provisions
hereof against each of the Parties hereto. In addition to, and not in derogation
of, the foregoing, Seller may, in addition to proceeding in their respective
names, or otherwise, proceed to protect and enforce the rights of WPS Nevada
under this Agreement by suit in equity, action at law or other appropriate
proceedings, whether for the specific performance of any covenant or agreement
contained in this Agreement or otherwise, and whether or not PDI, WPSR or WPS
Nevada shall have complied with any of the provisions hereof or proceeded to
take any action authorized or permitted under applicable law. Each and every
right and remedy of Seller shall, to the extent permitted by law, be cumulative
and shall be in addition to any other remedy given hereunder or under the Asset
Sale Agreement or any other agreement now or hereafter existing at law or in
equity or by statute.

            6.5. Entire
Agreement. This Agreement, including the schedules hereto, embodies the
entire agreement and understanding of the Parties hereto in respect of the
matters set forth herein, and there have been and are no agreements,
representations or warranties between or among the Parties other than those set
forth or provided for herein.

            6.6. Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. Facsimile signatures shall be deemed original.

 

 

[Signature page follows]

 

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

  
    
      
        WPS NORTHERN NEVADA, LLC

        By: WPS POWER DEVELOPMENT, INC.

        (Its Sole Member)

        By: _________________________

        Name:  Gerald L. Mroczkowski

        Title:  Vice President

         

        WPS RESOURCES CORPORATION

         

        By: _________________________

        Name:  Ralph G. Baeten

        Title:  Treasurer

         

        WPS POWER DEVELOPMENT, INC.

         

        By: _________________________

        Name:   Gerald L. Mroczkowski

        Title:  Vice President

      

               

      
        SIERRA PACIFIC POWER COMPANY

         

        By: _________________________

        Name:  William E. Peterson

        Title:  Senior Vice President, General Counsel & Corporate
        SecretaryGUARANTY

 

        This Guaranty is entered into as of October 25, 2000, by WPS Resources
Corporation, a Wisconsin corporation ("Guarantor"), on behalf
of WPS Northern Nevada, LLC, a Nevada limited liability company ("Supplier"),
in favor of and for the benefit of Sierra Pacific Power Company, a Nevada
corporation ("SPPC"). SPPC is sometimes referred to herein as "Beneficiary".

        WHEREAS, Supplier and SPPC are entering into a Transitional Power Purchase
Agreement dated as of October 25, 2000 (the "TPPA") by which Supplier
has agreed to sell and SPPC has agreed to buy Energy and Ancillary Services (as
defined in the TPPA) produced by the Tracy/Pinon generating station being sold
by SPPC; and

        WHEREAS, it is a condition to the obligation of SPPC to enter into the TPPA
for Guarantor to guaranty the Supplier's obligations under the TPPA on and after
the Effective Date (as defined in the TPPA), subject to the limitations herein
(the "Guarantied Obligations").

          1. Guaranty. Subject to the terms and conditions herein, Guarantor
irrevocably and unconditionally guaranties, as primary obligor and not merely as
surety, the due and punctual payment in full of all Guarantied Obligations
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
Section 362(a)).

        Subject to the other provisions of this Section 1, upon failure of Supplier
to pay any of the Guarantied Obligations when and as the same shall become due,
Guarantor will upon demand pay, or cause to be paid, in cash, to SPPC, an amount
equal to the lesser of: (i) the aggregate of the unpaid Guarantied Obligations
and (ii) the Credit Amount (as defined in the TPPA) as of the date of such
failure of Supplier to pay such Guarantied Obligations. In the event Guarantor
fails to pay the Guarantied Obligations, each and every default in the payment
shall give rise to a separate cause of action and separate causes of action may
be brought hereunder as each such cause of action arises. In no event shall
Guarantor's aggregate liability hereunder exceed the Credit Amount on the
Effective Date of the TPPA.

        In the event that all or any portion of the Guarantied Obligations is paid by
Supplier, the obligations of Guarantor hereunder shall continue and remain in
full force and effect or be reinstated, as the case may be, in the event that
all or any part of such payment(s) is rescinded or recovered directly or
indirectly from the Beneficiary as a preference, fraudulent transfer or
otherwise, and any such payments that are so rescinded or recovered shall
constitute Guarantied Obligations, subject to the terms and conditions herein.

        2. Expenses. The Guarantor agrees to reimburse SPPC for all reasonable costs
and expenses (including, without limitation, the reasonable fees and expenses of
legal counsel) in connection with (i) any default by Guarantor hereunder and any
enforcement or collection proceeding resulting therefrom, including, without
limitation, all manner of participation in or other involvement with bankruptcy,
insolvency, receivership, foreclosure, winding up or liquidation proceedings of
or involving the Guarantor, judicial or regulatory proceedings of or involving
the Guarantor and workout, restructuring or other negotiations or proceedings of
or involving the Guarantor (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 2.

        3. Guaranty Absolute; Continuing Guaranty. The obligations of Guarantor
hereunder are irrevocable, absolute, independent and unconditional and shall not
be affected by any circumstance which constitutes a legal or equitable discharge
of a guarantor or surety other than payment in full of the Guarantied
Obligations. In furtherance of the foregoing and without limiting the generality
thereof, Guarantor agrees that: (a) this Guaranty is a guaranty of payment
when due and not of collectibility; (b) the obligations of Guarantor hereunder
are independent of the obligations of Supplier under the TPPA and a separate
action or actions may be brought and prosecuted against Guarantor whether or not
any action is brought against the Supplier and whether or not the Supplier is
joined in any such action or actions; and (c) Guarantor's payment of a portion,
but not all, of the Guarantied Obligations shall in no way limit, affect, modify
or abridge Guarantor's liability for any portion of the Guarantied Obligations
that has not been paid. This Guaranty is a continuing guaranty and shall be
binding upon Guarantor and its successors and assigns.

        4. Actions by Beneficiary. The Beneficiary may from time to time, without
notice or demand and without affecting the validity or enforceability of this
Guaranty or giving rise to any limitation, impairment or discharge of
Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise
change the time, place, manner or terms of payment of the Guarantied
Obligations, (b) settle, compromise, release or discharge, or accept or
refuse any offer of performance with respect to, or substitutions for, the
Guarantied Obligations or any agreement relating thereto and/or subordinate the
payment of the same to the payment of any other obligations, (c) request
and accept other guaranties of the Guarantied Obligations and take and hold
security for the payment of this Guaranty or the Guarantied Obligations,
(d) release, exchange, compromise, subordinate or modify, with or without
consideration, any security for payment of the Guarantied Obligations, any other
guaranties of the Guarantied Obligations, or any other obligation of any Person
with respect to the Guarantied Obligations, (e) enforce and apply any
security hereafter held by or for the benefit of the Beneficiary in respect of
this Guaranty or the Guarantied Obligations and direct the order or manner of
sale thereof, or exercise any other right or remedy that the Beneficiary may
have against any such security, and (f) exercise any other rights available
to SPPC under the TPPA.

        5. No Discharge. This Guaranty and the obligations of Guarantor hereunder
shall be valid and enforceable and shall not be subject to any limitation,
impairment or discharge for any reason (other than payment in full of the
Guarantied Obligations), including without limitation the occurrence of any of
the following, whether or not Guarantor shall have had notice or knowledge of
any of them: (a) any failure to assert or enforce or agreement not to
assert or enforce, or the stay or enjoining, by order of court, by operation of
law or otherwise, of the exercise or enforcement of, any claim or demand or any
right, power or remedy with respect to the Guarantied Obligations or any
agreement relating thereto, or with respect to any other guaranty of or security
for the payment of the Guarantied Obligations, (b) any waiver or
modification of, or any consent to departure from, any of the terms or
provisions of any other guaranty or security for the Guarantied Obligations,
(c) the Guarantied Obligations, or any agreement relating thereto, at any
time being found to be illegal, invalid or unenforceable in any respect,
(d) the application of payments received from any source to the payment of
indebtedness other than the Guarantied Obligations, even if the Beneficiary
might have elected to apply such payment to any part or all of the Guarantied
Obligations, (e) any failure to perfect or continue perfection of a
security interest in any collateral which secures any of the Guarantied
Obligations, (f) any defenses, set-offs or counterclaims which the Supplier
may assert against the Beneficiary in respect of the Guarantied Obligations,
including but not limited to failure of consideration, breach of warranty,
payment, statute of frauds, statute of limitations, accord and satisfaction, and
(g) any other act or thing or omission, or delay to do any other act or
thing, which may or might in any manner or to any extent vary the risk of
Guarantor as an obligor in respect of the Guarantied Obligations.

        6. Waivers for the Benefit of Beneficiary. Guarantor waives, for the benefit
of Beneficiary: (a) any right to require the Beneficiary, as a condition of
payment or performance by Guarantor, to (i) proceed against the Supplier,
any other guarantor of the Guarantied Obligations or any other Person,
(ii) proceed against or exhaust any security held from the Supplier, any
other guarantor of the Guarantied Obligations or any other Person, or
(iii) pursue any other remedy in the power of the Beneficiary; (b) any
defense arising by reason of the incapacity, lack of authority or any disability
or other defense of the Supplier including, without limitation, any defense
based on or arising out of the lack of validity or the unenforceability of the
Guarantied Obligations or any agreement or instrument relating thereto or by
reason of the cessation of the liability of the Supplier from any cause other
than payment in full of the Guarantied Obligations; (c) any defense based
upon any statute or rule of law which provides that the obligation of a surety
must be neither larger in amount nor in other respects more burdensome than that
of the principal; (d) (i) any principles or provisions of law,
statutory or otherwise, that are or might be in conflict with the terms of this
Guaranty and any legal or equitable discharge of Guarantor's obligations
hereunder, (ii) the benefit of any statute of limitations affecting
Guarantor's liability hereunder or the enforcement hereof, (iii) any rights
to set-offs, recoupments and counterclaims, and (iv) promptness, diligence
and any requirement that the Beneficiary protect, secure, perfect or insure any
lien on any property subject thereto; (e) notices, demands, presentments,
protests, notices of protest, notices of dishonor and notices of any action or
inaction, including acceptance of this Guaranty; and (f) to the fullest
extent permitted by law, any defenses or benefits that may be derived from or
afforded by law which limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms of this Guaranty.

        7. Waiver of Rights Against Supplier. Guarantor waives any claim, right or
remedy, direct or indirect, that Guarantor now has or may hereafter have against
the Supplier or any of its assets in connection with this Guaranty or the
performance by Guarantor of its obligations hereunder, in each case whether such
claim, right or remedy arises in equity, under contract, by statute, under
common law or otherwise and including without limitation (a) any right of
subrogation, reimbursement or indemnification that Guarantor now has or may
hereafter have against the Supplier, (b) any right to enforce, or to
participate in, any claim, right or remedy that the Beneficiary now has or may
hereafter have against the Supplier, and (c) any benefit of, and any right
to participate in, any collateral or security hereafter held by the Beneficiary.
Guarantor further agrees that, to the extent the waiver or agreement to withhold
the exercise of its rights of subrogation, reimbursement and indemnification as
set forth herein is found by a court of competent jurisdiction to be void or
voidable for any reason, any rights of subrogation, reimbursement or
indemnification Guarantor may have against the Supplier or against any
collateral or security shall be junior and subordinate to any rights the
Beneficiary may have against Supplier, to all right, title and interest the
Beneficiary may have in any such collateral or security, and to any right the
Beneficiary may have against such other guarantor.

        8. Representations and Warranties of Guarantor. Guarantor represents and
warrants to SPPC as follows:

        (a) Guarantor is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation. Guarantor has the
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.

        (b) Guarantor has the corporate power and authority to execute and deliver
this Guaranty and to consummate the transactions contemplated hereby. The
execution and delivery of this Guaranty and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Guarantor, and no other corporate proceedings on the part of
Guarantor, including the approval of its shareholders, are necessary to
authorize this Guaranty or to consummate the transactions so contemplated. This
Guaranty has been duly and validly executed and delivered by Guarantor and
constitutes a valid and binding agreement of Guarantor, enforceable against
Guarantor in accordance with its terms.

        (c) There are no legal or arbitral proceedings by or before any governmental
or regulatory authority or agency, now pending or (to Guarantor's knowledge)
threatened against Guarantor or its subsidiaries that could reasonably be
expected to have a material adverse effect on the consolidated financial
condition, operations or business taken as a whole of it and its subsidiaries.

        (d) The representations and warranties made herein will remain true until
Guarantor has fulfilled all obligations to pay in full the Guarantied
Obligations.

        9. Set Off. In addition to any other rights the Beneficiary may have under
law or in equity, if any amount shall at any time be due and owing by Guarantor
to the Beneficiary under this Guaranty, the Beneficiary is authorized at any
time or from time to time, without notice (any such notice being expressly
waived), to set off and to appropriate and to apply any indebtedness of the
Beneficiary owing to Guarantor and any other property of Guarantor held by the
Beneficiary to or for the credit or the account of Guarantor against and on
account of the Guarantied Obligations and liabilities of Guarantor to the
Beneficiary under this Guaranty.

        10. Disputes. Any action, claim or dispute arising out of or relating to this
Guaranty (any such action, claim or dispute, a "Dispute") shall be
submitted in writing to the other Party. In the event Guarantor and SPPC are
unable to resolve the Dispute satisfactorily within thirty (30) days from the
receipt of notice of the Dispute, either Guarantor or SPPC may initiate
arbitration through the serving and filing of a demand for arbitration.
Guarantor and SPPC expressly agree that such arbitration shall be the exclusive
means to further resolve any Dispute and hereby irrevocably waive their right to
a jury trial with respect to any Dispute, provided that at any time a request
made for provisional remedies requesting preservation of respective rights and
obligations under the Guaranty may be resolved by a court of law located in the
County of the principal place of business of SPPC. Arbitration shall be
conducted in accordance with Sections 13.4, 13.5, 13.6, 13.7, and 13.8 of the
TPPA.

        11. Amendments and Waivers. No amendment, modification, termination or waiver
of any provision of this Guaranty, and no consent to any departure by Guarantor
therefrom, shall in any event be effective without the written concurrence of
SPPC and, in the case of any such amendment or modification, Guarantor. Any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given.

        12. Miscellaneous. It is not necessary for Beneficiary to inquire into the
capacity or powers of Guarantor or Supplier or the officers, directors or any
agents acting or purporting to act on behalf of any of them.

        The rights, powers and remedies given to Beneficiary by this Guaranty are
cumulative and shall be in addition to and independent of all rights, powers and
remedies given to Beneficiary by virtue of any statute or rule of law or in the
TPPA. Any forbearance or failure to exercise, and any delay by Beneficiary in
exercising, any right, power or remedy hereunder shall not impair any such
right, power or remedy or be construed to be a waiver thereof, nor shall it
preclude the further exercise of any such right, power or remedy.

        In case any provision in or obligation under this Guaranty shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.

        This Guaranty shall inure to the benefit of Beneficiary and its respective
successors and assigns.

         13. Notices. All notices, requests, demands, waivers, consents and other
communications hereunder shall be in writing, shall be delivered either in
person, by telegraphic, facsimile or other electronic means, by overnight air
courier or by mail, and shall be deemed to have been duly given and to have
become effective (a) upon receipt if delivered in person or by telegraphic,
facsimile or other electronic means, (b) one (1) business day after having been
delivered to an air courier for overnight delivery or (c) three (3) business
days after having been deposited in the U.S. mails as certified or registered mail, return receipt
requested, all fees prepaid, directed to the parties at the following addresses:

  
    	If to Guarantor, addressed to: 	  Ralph G. Baeten

          WPS Resources Corporation

          700 North Adams Street

          Green Bay, WI 54307

          Facsimile: (920) 433-7653
		
	If to SPPC, addressed to:	  William E. Peterson

          Sierra Pacific Power Company

          6100 Neil Road

          Reno, Nevada 89511

          Facsimile: (775) 834-5959

  

 

 

        IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed
and delivered by its officers thereunto duly authorized as of the date first
written above.

                  
                    
                      
                        
                          
                            By: __________________________

                            Ralph G. Baeten

                            Title: Treasurer

                            Address: WPS Resources Corporation

                            700 North Adams Street

                            Green Bay, WI 54307

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