Asset Purchase Agreement

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Continental Energy Systems LLC | New Mexico Gas Company, Inc | Public Service Company of New Mexico

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Title: Asset Purchase Agreement
Governing Law: New Mexico Date: 2/29/2008
Law Firm: Troutman Sanders;Cravath Swaine

Asset Purchase Agreement, Parties: continental energy systems llc , new mexico gas company inc , public service company of new mexico

EXHIBIT 2.0

EXECUTION COPY

Asset Purchase Agreement

by and among

Public Service Company of New Mexico,

Continental Energy Systems LLC

and

New Mexico Gas Company, Inc.

Dated: January 12, 2008

TABLE OF CONTENTS

Article I

DEFINITIONS

1.1	Definitions	1
1.2	Other Definitional and Interpretive Matters	14
1.3	Joint Negotiation and Preparation of Agreement	15

Article II

PURCHASE AND SALE

2.1	The Sale	15
2.2	Excluded Assets	18
2.3	Assumed Obligations	19
2.4	Excluded Liabilities	20

Article III

PURCHASE PRICE

3.1	Purchase Price	22
3.2	Determination of Purchase Price.	22
3.3	Allocation of Purchase Price	23
3.4	Proration.	24

Article IV

THE CLOSING

4.1	Time and Place of Closing	25
4.2	Payment of Closing Payment Amount	26
4.3	Deliveries by Seller	26
4.4	Deliveries by Buyer	27

Article V

REPRESENTATIONS AND WARRANTIES OF SELLER

5.1	Organization; Qualification	28
5.2	Authority Relative to this Agreement and the Ancillary Agreements	28
5.3	Consents and Approvals; No Violation	29
5.4	Financial Information	29
5.5	Title	30
5.6	Environmental	31
5.7	Labor Matters	32
5.8	ERISA; Benefit Plans.	32

5.9	Certain Contracts and Arrangements.	33
5.10	Legal Proceedings and Orders	36
5.11	Permits	36
5.12	Compliance with Laws	36
5.13	Insurance	36
5.14	Taxes	37
5.15	Fees and Commissions	37
5.16	Intellectual Property	37
5.17	Inspections	37
5.18	Sufficiency of Purchased Assets	38
5.19	Absence of Certain Changes or Events; Major Customers	38
5.20	Hedging	38
5.21	Regulatory Compliance	39

Article VI

REPRESENTATIONS AND WARRANTIES OF BUYER

6.1	Organization	39
6.2	Authority Relative to this Agreement and the Ancillary Agreements	39
6.3	Consents and Approvals; No Violation	40
6.4	Buyer’s Knowledge	40
6.5	Fees and Commissions	40
6.6	Financial Capability	41
6.7	Inspections	41

Article VII

COVENANTS OF THE PARTIES

7.1	Conduct of Business	42
7.2	Access to Information.	44
7.3	Expenses	48
7.4	Further Assurances; Procedures with Respect to Certain Agreements and other Assets	48
7.5	Public Statements	52
7.6	Consents and Approvals	52
7.7	Transfer Taxes	54
7.8	Supplements to Schedules	54
7.9	Employees and Employee Benefits	54
7.10	Eminent Domain; Casualty Loss	60
7.11	Transitional Use of Signage and Other Materials Incorporating Seller’s Name or other Logos	60
7.12	Litigation and Regulatory Support	61
7.13	Notification of Customers	61
7.14	Title Insurance, Surveys, Estoppel Certificates, and Non-Disturbance Agreements	61
7.15	Central or Shared Functions for Transition Period	62

7.16	Post-Closing Insurance	62
7.17	Financing.	62
7.18	Cooperation Regarding Tax Matters	63
7.19	Master Lease Agreement	64
7.20	Annual Hedge Strategy	64

Article VIII

CONDITIONS TO CLOSING

8.1	Conditions to Each Party’s Obligations to Effect the Closing	64
8.2	Conditions to Obligations of Buyer	65
8.3	Conditions to Obligations of Seller	66

Article IX

INDEMNIFICATION

9.1	Survival of Representations and Warranties	66
9.2	Indemnification.	67
9.3	Indemnification Procedures.	67
9.4	Limitations on Indemnification.	69
9.5	Applicability of Article IX	71
9.6	Tax Treatment of Indemnity Payments	71
9.7	No Consequential Damages	71
9.8	Exclusive Remedy	72

Article X

TERMINATION AND OTHER REMEDIES

10.1	Termination.	72
10.2	Procedure and Effect of Termination	74
10.3	Remedies upon Termination	74

Article XI

PARENT GUARANTEE

11.1	Guarantee	76
11.2	Nature of Guarantee	76
11.3	Representations and Warranties of Parent	76
11.4	Sole Obligation of Parent	77

iii

Article XII

MISCELLANEOUS PROVISIONS

12.1	Amendment and Modification	77
12.2	Waiver of Compliance; Consents	77
12.3	Notices	78
12.4	Assignment	79
12.5	Governing Law	79
12.6	Severability	80
12.7	Entire Agreement	80
12.8	Bulk Sales or Transfer Laws	80
12.9	Delivery	80
12.10	Waiver of Jury Trial	80

EXHIBITS AND SCHEDULES

Exhibit 1.1 -A	Form of Assignment and Assumption Agreement
Exhibit 1.1 -B	Form of Assignment of Easements
Exhibit 1.1 -C	Form of Bill of Sale
Exhibit 1.1 -D	Business Employees
Exhibit 1.1 -E	Central or Shared Functions
Exhibit 1.1 -F	Form of Special Warranty Deed
Exhibit 1.1 -G	Transition Services Agreement
Exhibit 1.1 -H	Capital Expenditure Budget
Exhibit 3.1	Determination of Adjustment Amount

Schedule 1.1 -A	Business Agreements
Schedule 1.1 -B	Buyer Required Regulatory Approvals
Schedule 1.1 -C	Permitted Encumbrances
Schedule 1.1 -D	Seller Required Regulatory Approvals
Schedule 1.1 -E	Seller’s Knowledge
Schedule 1.1 -F	Territory
Schedule 2.1(a)	Owned Real Property
Schedule 2.1(b)	Real Property Leases
Schedule 2.1(m)	SCADA Equipment and Software
Schedule 2.1(n)	Business Software
Schedule 2.1(p)	FCC Licenses
Schedule 2.1(r)	Regulatory Assets
Schedule 2.2(k)	Retained Agreements
Schedule 2.2(o)	Retained Assets
Schedule 2.3(i)	Regulatory Liabilities
Schedule 5.3	Seller’s Consents and Approvals
Schedule 5.4(a)	Financial Information
Schedule 5.4(b)	Undisclosed Liabilities
Schedule 5.5(a)	Title Ownership
Schedule 5.5(b)	Title Compliance
Schedule 5.6(a) -1	Sufficiency of Environmental Permits
Schedule 5.6(a) -2	Environmental Permits
Schedule 5.6(b)	Environmental Notices
Schedule 5.6(c)	Environmental Claims or Releases
Schedule 5.7	Labor Matters
Schedule 5.8(a)	Benefit Plans
Schedule 5.9(a)	Material Business Agreements
Schedule 5.9(b) (i)	Material Business Agreements -- Seller Obligations
Schedule 5.9(b) (ii)	Material Business Agreements -- Other Party Obligations
Schedule 5.9(c)	Franchises
Schedule 5.9(d)	Seller Security and Guarantees
Schedule 5.10	Legal Proceedings and Orders
Schedule 5.11	Permits
Schedule 5.13	Insurance
Schedule 5.14	Taxes

Schedule 5.19(a)	Certain Changes
Schedule 5.20	Annual Hedge Strategy
Schedule 5.21	Business Regulatory Proceedings and Filings
Schedule 6.3	Buyer’s Consents and Approvals
Schedule 7.1	Conduct of Business
Schedule 7.1(b)	Rate Filings
Schedule 7.2(h)	Disclosed Indebtedness
Schedule 7.4(e)	Shared Agreements
Schedule 7.9(a)	Unions
Schedule 7.9(f)	Seller’s VEBA
Schedule 7.19	Master Lease Agreement -- Sites and Terms
Schedule 11.3(c)	Parent’s Consents and Approvals

In accordance with Item 601(b)(2) of Regulation S-K, PNM Resources agrees to furnish supplementally a copy of any schedule to the Securities and Exchange Commission upon request.

ASSET PURCHASE AGREEMENT

Asset Purchase Agreement (“ Agreement ”), made as of January 12, 2008 by and among Public Service Company of New Mexico, a New Mexico corporation (“ Seller ”), Continental Energy Systems LLC, a Delaware limited liability company (“ Parent ”), and New Mexico Gas Company, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“ Buyer ”).

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

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

ARTICLE I

DEFINITIONS

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

“ 2006 Cost Allocation Manuals ” means the cost allocation manuals filed by Seller with the NMPRC on (a) March 31, 2005, effective for the period between January 1, 2006 and March 31, 2006, and (b) March 1, 2006, effective for the period between April 1, 2006 and December 31, 2006.

“ 2007 Cost Allocation Manuals ” means the cost allocation manuals filed by Seller with the NMPRC on (a) December 1, 2006, effective for the period between January 1, 2007 and April 31, 2007, and (b) April 2, 2007, effective for the period between May 1, 2007 and December 31, 2007.

“ Actionable Incident ” means an incident or occurrence, that (i) results in damages or other harm to a Person other than Buyer or Seller, or any of their respective Affiliates, or a Person’s property; and (ii) provides such Person with the legal basis to recover damages or other relief.

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

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

“ Alternate Arrangements ” means with respect to any Consent Asset, any arrangements entered into pursuant to Section 7.4(c) to provide Buyer with the benefits and obligations of such Consent Asset from and after the Effective Time.

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

“ Annual Hedge Strategy ” means (i) with respect to the period from and including October 1, 2007 to and including April 30, 2008, the annual gas hedge strategy attached hereto as Schedule 5.20 and (ii) for any period thereafter, Seller’s annual gas hedge strategy in effect at such time as approved by Seller’s Hedge Committee and Risk Management Committee and presented to the NMPRC.

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

“ Assignment of Easements ” means the Assignment of Easements to be executed, acknowledged and delivered by Seller and Buyer at Closing, substantially in the form of Exhibit 1.1 -B .

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

“ Business ” means the natural gas utility business conducted by Seller serving customers in the Territory including its natural gas transportation business. The “Business” does not include (a) Seller’s unregulated gas services business or (b) the manufactured gas business conducted by Seller or any of its predecessors.

“ Business Agreement ” means any Contract (other than the Easements, the Shared Easements, the Franchises, the Real Property Leases, the Retained Agreements and the Shared Agreements) to which Seller is a party or by which it is bound that (i) relates exclusively to the Business, including those agreements listed or described on Schedule 1.1 -A or Schedule 5.9(a) , (ii) does not relate exclusively to the Business but is otherwise listed or described on Schedule 1.1 -A or Schedule 5.9(a) , or (iii) relates exclusively to the Business and is entered into, renewed, extended, or otherwise amended after the date hereof in the ordinary course of business. Schedule 1.1 -A was prepared solely for the convenience of the Parties, and notwithstanding any provision in the Agreement to the contrary, Seller makes no representation or warranty that Schedule 1.1 -A is a complete or exhaustive list of the Business Agreements or other Contracts.

“ Business Day ” means any day other than Saturday, Sunday, any day which is a legal holiday or any day on which banking institutions in Albuquerque, New Mexico or New York, New York are authorized by Law to close.

“ Business Employees ” means the employees of Seller set forth on Exhibit 1.1 -D , together with all other persons who are hired by Seller to replace any such employees.

“ Buyer Designee ” means a direct wholly-owned subsidiary of Buyer named in the approvals by the NMPRC and the FERC as an entity that may acquire the Purchased Assets.

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

“ Capital Expenditure Budget ” means the budget for capital expenditures for the Business for each of calendar year 2007 and calendar year 2008 attached as Exhibit 1.1 -H .

“ Central or Shared Functions ” means the business functions provided by Seller or its Affiliates to the Business set forth on Exhibit 1.1 -E .

“ CERCLA ” means the Comprehensive Environmental Recovery, Compensation and Liability Act, as amended.

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

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

“ Confidentiality Agreement ” means the Confidentiality Agreement, dated August 21, 2007 among PNM Resources, Inc., Cap Rock Holding Corporation and SEMCO Energy, Inc.

“ Contract ” means any contract, lease, sublease, commitment, indenture, agreement, understanding, instrument or other legally binding agreement, whether oral or written.

“ Customer Gas Transportation Contracts ” means Contracts for the transportation of gas by Seller, as part of the Business, on behalf of customers.

“ Designated Employees ” shall have the meaning set forth in Section 5(b) of the Transition Services Agreement.

“ Disclosed Indebtedness ” of any Person shall mean without duplication: (a) all obligations of such Person for the deferred purchase price of property or services (other than (i) trade payables not overdue by more than 60 days incurred in the ordinary course of such Person’s business, (ii) obligations for the deferred purchase price of gas and (iii) obligations under deferred compensation plans), (b) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (c) all capitalized lease obligations of such Person (calculated in accordance with GAAP), (d) all guaranties, counterindemnities, reimbursement or similar obligations of such Person in respect of Disclosed Indebtedness of a primary obligor, (e) all obligations referred to in clauses (a) through (d) above secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Encumbrance on property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations and (f) all accrued interest, prepayment premiums, fees, expenses or penalties related to any of the foregoing.

“ Documents ” means all files, documents, books, reports, customer lists and information, operating data and plans, technical documentation, user documentation, marketing documentation, Transferred Employee Records, accounting and Tax documents and other similar materials related exclusively to the Business, the Purchased Assets, or the Assumed Obligations, in each case whether or not in electronic form; provided , that “Documents” does not include: (i) information which, if provided to Buyer, would violate any applicable Law or Order, (ii) bids, letters of intent, expressions of interest, or other proposals received from others in connection with the transactions contemplated by this Agreement or otherwise and information and analyses relating to such communications, (iii) any information, the disclosure of which would jeopardize any legal privilege or claim of attorney work product available to Seller or any of its Affiliates relating to such information or would cause Seller or any of its Affiliates to breach a confidentiality obligation by which it is bound; provided , that any such information shall not be excluded from the definition of “Documents” pursuant to this clause (iii) if Seller or one of its Affiliates actually provided or provides such information to Buyer or one of its Affiliates, (iv) any valuations or projections of or related to the Business, the Purchased Assets, or the Assumed Obligations prepared by Seller or any of its Affiliates; provided , that any such valuations or projections shall not be excluded from the definition of “Documents” pursuant to this clause (iv) if Seller or one of its Affiliates actually provided or provides such valuations or projections to Buyer or one of its Affiliates, (v) any information management systems of Seller not used exclusively in the Business, or (vi) any web pages or similar media tools for communication on Seller’s intranet service.

“ Electric Business ” means the electric utility business conducted by Seller in the State of New Mexico.

“ Encumbrances ” means any and all mortgages, pledges, liens, claims, charges, security interests, conditional and installment sale agreements, activity and use limitations, leases and other occupancy agreements, options, easements, covenants, encumbrances, obligations, limitations, title defects, deed restrictions, and all other restrictions of any kind.

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

“ Environmental Claims ” means any and all Claims (including any such Claims involving toxic torts or similar liabilities in tort, whether based on negligence or other fault, strict or absolute liability, or any other basis) relating in any way to any Environmental Laws or Environmental Permits, or arising from the presence, Release, or threatened Release (or alleged presence, Release, or threatened Release) of any Hazardous Materials, including any and all Claims by any Governmental Entity or by any Person for enforcement, cleanup, remediation, removal, response, remedial or other actions or damages, contribution, indemnification, cost recovery, compensation, injunctive relief, or property damage or personal or bodily injury (including death) or threat of injury to health, safety, cultural resources and historic properties, natural resources, or the Environment pursuant to any Environmental Law.

“ Environmental Permits ” means all permits, certifications, licenses, approvals, consents, waivers, or other authorizations of Governmental Entities issued under or with respect to applicable Environmental Laws and applicable to the Purchased Assets or the Business.

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

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

“ Excluded Indebtedness ” of any Person shall mean without duplication: (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments, (c) other than as provided under Section 7.4(f) , all obligations, contingent or otherwise, of such Person as an account party to reimburse any bank or other Person under acceptance, letter of credit or similar facilities, (d) all obligations of such Person in respect of interest rate, commodity

or currency hedge agreements but excluding all Financial Hedges, (e) all obligations of such Person to purchase, redeem, retire or otherwise acquire for value any capital stock of such Person or any warrants, rights or options to acquire such capital stock, (f) negative cash/overdraft, as calculated in accordance with GAAP, (g) all guaranties, counterindemnities, reimbursement or similar obligations of such Person in respect of Excluded Indebtedness of a primary obligor, (h) all obligations referred to in clauses (a) through (g) above secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Encumbrance on property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations and (i) all accrued interest, prepayment premiums, fees, expenses or penalties related to any of the foregoing. The Excluded Indebtedness of any Person shall include the Excluded Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Excluded Indebtedness expressly provide that such Person is not liable therefore.

“ FCC ” means the Federal Communications Commission.

“ FERC ” means the Federal Energy Regulatory Commission.

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

“ Financial Hedge ” means a Contract consisting of a futures contract, options contract or other derivatives transaction, in any case relating to a physical commodity (but not including contracts for physical delivery of such commodity), whether entered into in connection with the Annual Hedge Strategy, off-system sales or otherwise.

“ Financial Hedge Orders ” means (a) the Order Approving Levelized PGAC, NMPRC Case No. 2777, dated November 3, 1997 and (b) the Final Order in the Matter of the Petition of the Attorney General and PRC Staff Requesting the Commission to Investigate the Gas Purchase Hedging Practices of the Gas Services of New Mexico, NMPRC Case No. 3056, dated July 17, 2001.

“ GAAP ” means United States generally accepted accounting principles.

“ Gas Supply Contract ” means any Contract for the purchase of gas by Seller as part of the Business.

“ Gas Supply Plan ” means, at any time, the annual gas supply plan filed by Seller with the NMPRC pursuant to NMPRC Rule 640 and in effect at such time.

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

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

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

“ Gross Margin ” shall mean access fee plus distribution rate per therm and transmission rate per therm.

“ GSP Financial Hedge ” means any Financial Hedge entered into in connection with the Annual Hedge Strategy.

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

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

“ Independent Accounting Firm ” means KPMG LLP.

“ Inventories ” means materials, spare parts, consumable supplies, fuel supplies and chemical inventories exclusively relating to the Business.

“ Law ” means any constitution, statute, regulation, rule, charter, ordinance, code, protocol, proceeding or similar act or promulgation of any Governmental Entity.

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

“ Master Lease Agreement ” means the lease agreement to be entered into by and between the Parties at Closing pursuant to Sections 7.19 , 4.3(m) and 4.4(g) .

“ Material Adverse Effect ” means a material adverse effect on (a) the business, assets, properties, results of operations, or financial condition of the Business (taken as a whole) other than an effect (i) resulting from an Excluded Matter occurring after the date of this Agreement or (ii) cured (including by payment of money or application of insurance proceeds) before the Closing Date or (b) the ability of Seller to perform its obligations under this Agreement and the Ancillary Agreements. “ Excluded Matter ” means any one or more of the following: (A) any change in the international, national, regional, or local markets or industries in which the Business operates or of which the Business is a part that does not disproportionately affect the Business in any material respect as compared to similarly situated companies in the industry in which the Business operates, (B) any change after the date of this Agreement in any Law to the extent not disproportionately affecting the Business in any material respect (excluding from this clause (B) any change in any Law issued by, administered by or relating to the authority or responsibilities of the NMPRC), (C) any change in accounting standards, principles or interpretations, (D) announcement of this Agreement or the Ancillary Agreements or the transactions contemplated hereby or thereby (including disruption or loss of customers, suppliers or employee relationships to the extent related to any announcement with respect to this Agreement or the transactions contemplated hereby), (E) any general change in international, national, regional, or local economic, financial markets, or political conditions, including prevailing interest rates, that does not disproportionately affect the Business in any material respect as compared to similarly situated companies in the industry in which the Business operates, (F) weather conditions or related customer use patterns, (G) any change in the market price of commodities or publicly traded securities, (H) any change resulting from the actions of Buyer or its Affiliates after the date of this Agreement, (I) war or terrorism, (J) failure by Seller to meet revenue or earnings predictions related to the Business or otherwise of Seller or its Affiliates or of any equity analysts, or (K) any denial by the New Mexico Supreme Court, in whole or in part, of Seller’s appeal of its general gas rate case filed on July 27, 2007.

“ Material Business Agreement ” means any Contract (a) listed on Schedule 5.9(a) , (b) required to be listed on Schedule 5.9(a) or (c) that would be required to be listed on Schedule 5.9(a) if such Contract were in effect on the date of this Agreement.

“ NMPRC ” means the New Mexico Public Regulation Commission.

“ Off-System Net Payment Amount ” has the meaning specified in Exhibit 3.1 .

“ Off-System Purchases and Sales ” means purchases and sales of physical gas to non-jurisdictional customers as recognized by the NMPRC in transactions for which Seller is authorized by Orders of the NMPRC to retain 30% of the gains realized in connection with such purchases and sales.

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

“ Owner’s Certificate ” means a certificate, in connection with each Owned Real Property, conveyed to Buyer duly executed on behalf of Seller in form and content sufficient to enable Buyer’s title insurance company to omit the standard exception with respect to unrecorded leases and rights of occupancy in respect of such Owned Real Property.

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

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

“ Permitted Encumbrances ” means (i) those Encumbrances set forth in Schedule 1.1 -C ; (ii) statutory liens for Taxes and assessments not yet due and payable or liens for Taxes being contested in good faith and by appropriate proceedings (and as set forth in Schedule 1.1 -C ) for which adequate reserves (in the good faith and judgment of Seller) have been established; (iii) mechanics’, warehousemen’s, carriers’, mechanics’ workers’, repairers’, landlords’, and other similar liens arising or incurred in the ordinary course of business relating to the Assumed Obligations, and (A) which do not in the aggregate materially detract from the value of property or assets subject to such Encumbrance or materially impair the continued use thereof in the operation of the Business as currently conducted or (B) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to the Encumbrance, or liens (other than liens imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, trade contracts, leases, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money); (iv) zoning, entitlement, restriction, and other land use and environmental regulations by Governmental Entities and third party encroachment agreements which do not materially interfere with the continued use of any Purchased Asset as currently used in the conduct of the Business; (v) any Encumbrances set forth in any Franchise or governing ordinance under which any portion of the Business is conducted; (vi) all rights of condemnation, eminent domain, or other similar rights of any Person; and (vii) all Encumbrances of record with respect to the Owned Real Property other than (A) Encumbrances in favor of Seller or any of its Affiliates, excluding from this clause (A) all easements and rights-of-way in favor of the Electric Business and (B) Encumbrances that materially interfere with the continued use of any Owned Real Property as used in the conduct of the Business; provided , however , that an Encumbrance shall not be a Permitted Encumbrance if it secures Disclosed Indebtedness (unless such Encumbrance is set forth in Schedule 1.1 -C ) or if it secures Excluded Indebtedness.

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

“ PGAC ” means “purchased gas adjustment clause” as defined in NMPRC Rule 640.

“ Rate Rider 14 ” means the miscellaneous surcharge and crediting mechanism established for costs and credits approved by the NMPRC.

“ Regulatory Order ” means an Order issued by NMPRC or FERC that affects, is related to or governs the rates, services, activities or operations of the Business.

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

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

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

“ Seller Disclosure Schedule ” means, collectively, all Schedules other than Schedule 1.1 -B , Schedule 6.3 and Schedule 11.3(c) .

“ Seller Marks ” means all trade names, trademarks, service marks, and logos of Seller.

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

“ Seller’s Knowledge ,” or words to similar effect, means the actual knowledge of the persons set forth in Schedule 1.1 -E.

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

“ Sub-Lease Agreements ” means the sub-lease agreements to be entered into by and between the Parties at Closing on terms reasonably acceptable to both Parties pursuant to which Buyer or Seller, as the case may be, may sub-lease portions of real property leased by such Party to the other Party for a period of time following Closing.

“ Taxes ” means all taxes, charges, fees, levies, penalties, or other assessments imposed by any foreign or United States federal, state, tribal or local Taxing Authority, including income, excise, property, sales, use, gross receipts, windfall profits, environmental (including taxes under Code Section 59A), employment, severance, stamp, capital stock, unemployment, disability, registration, value added or add-on minimum, compensating, transfer, franchise, license, payroll, withholding, social security, estimated or other taxes (including any escheat or unclaimed property obligations), in each case including any interest, penalties, or additions attributable thereto, whether disputed or not, and including any obligations to indemnify or otherwise assume or succeed to the tax liability of any other Person.

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

“ Taxable Period ” means the calendar or fiscal year, or fractional part of a year, used by Seller to calculate Taxes with respect to the Business.

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

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

“ Transfer Date ” means (i) for a Business Employee who becomes a Transferred Employee, the Effective Time, and (ii) for a Designated Employee who becomes a Transferred Employee, the date on which such Designated Employee performs his or her first hour of service for Buyer.

“ Transferred Employee Equipment ” shall mean all desktop and personal mobile computing devices and peripheral equipment assigned to and used by a Transferred Employee in support of the Business at the time of his or her Transfer Date after re-imaging and re-loading of such equipment with data and information systems included as part of the Purchased Assets.

“ Transferred Employee Records ” means the following records relating to Transferred Employees for the two years prior to the Closing Date: (i) skill and development training records and resumes, (ii) seniority histories, (iii) salary and benefit information, (iv) Occupational, Safety and Health Administration medical reports, (v) active medical restriction forms, and (vi) job performance reviews and applications; provided , that such records will not be deemed to include any record which Seller is restricted by Law, Order, or agreement from providing to Buyer.

“ Transition Advisory Team ” means the transition team comprised of certain key personnel of Seller to be mutually agreed upon by Buyer and Seller prior to or within ten (10) days following the date of this Agreement, the sole purpose of such team to provide information to Buyer to assist with an orderly transition of the Business.

“ Transition Services Agreement ” means the Transition Services Agreement dated the date hereof by and between the Parties attached hereto as Exhibit 1.1 -G .

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

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

Location	Term of Term

2006 Allocated Cost Schedule	Section 5.4(a)
2006 Financial Statements	Section 5.4(a)
Adjustment Dispute Notice	Section 3.2(c)
Agreement	Preamble
Allocated Cost Schedules	Section 5.4(a)
Allocated Retiree Medical Assets	Section 7.9(f)(v)
Allocated Rights and Obligations	Section 7.4(e)
Allocation Schedule	Section 3.3
Assigned Intellectual Property	Section 2.1(v)
Assumed Environmental Liabilities	Section 2.3(g)
Assumed Obligations	Section 2.3
Base Price	Section 3.1
Benefit Continuation Period	Section 7.9(f)(ii)
Benefit Plan	Section 5.8(a)
Regulatory Entity	Section 7.4(e)
Business Regulatory Proceeding	Section 5.21
Buyer	Preamble
Buyer Indemnitee	Section 9.2(a)
Buyer’s VEBA	Section 7.9(f)(iv)
Closing	Section 4.1
Closing Date	Section 4.1
Closing Payment Amount	Section 3.2(a)
COBRA	Section 7.9(o)
Collective Bargaining Agreement	Section 5.7
Commitment Parties	Section 6.6(c)
Commitments	Section 6.6(c)
Confidential Business Information	Section 7.2(c)
Confidential Information	Section 7.2(b)
Consent Asset	Section 7.4(c)
Customer Notification	Section 7.13
Debt Commitment Letter	Section 6.6(c)
Direct Loss	Section 9.3(d)
Easements	Section 7.4(b)
Effective Time	Section 4.1
Electric Accounts	Section 7.1(c)(iii)(A)

Electric Bill	Section 7.1(c)(i)
Environmental Reports	Section 5.6(d)
Equity Commitment Letter	Section 6.6(b)
Excluded Assets	Section 2.2
Excluded Liabilities	Section 2.4
Financial Statements	Section 5.4(a)
Financing	Section 7.17(a)
Franchises	Section 5.9(c)
Funds	Section 6.6(b)
Gas Accounts	Section 7.1(c)(iii)(A)
Gas Bill	Section 7.1(c)(i)
Grandfathered Active Employee	Section 7.9(f)
Guaranteed Obligations	Section 11.1(a)
Indemnifiable Loss	Section 9.2(a)
Indemnifying Party	Section 9.3(a)
Indemnitee	Section 9.2(c)
Intellectual Property	Section 2.1(v)
Interim Allocated Cost Schedule	Section 5.4(a)
Interim Balance Sheet	Section 5.4(a)
Interim Financial Statements	Section 5.4(a)
Leased Real Property	Section 2.1(g)
Locals	Section 7.9(a)
Other Arrangements	Section 7.4(e)
Owned Real Property	Section 2.1(a)
Parent	Preamble
Parent Guarantee	Section 11.2
Post-Closing Adjustment Statement	Section 3.2(b)
Post-Retirement Welfare Benefits	Section 7.9(f)
Potential Financing Failure	Section 10.1(g)
Purchase Price	Section 3.1
Purchased Assets	Section 2.1
Real Property Leases	Section 2.1(b)
Regulatory Entity	Section 7.4(e)
Retained Agreements	Section 2.2(k)
SCADA	Section 2.1(m)
SEC	Section 7.2(c)
Seller	Preamble
Seller Common Surety Instruments	Section 7.4(g)
Seller Indemnitee	Section 9.2(b)
Seller Insurance Policies	Section 7.16
Seller Property Taxes	Section 3.4(b)
Seller’s VEBA	Section 7.9(f)(v)
Shared Agreements	Section 7.4(e)
Shared Easement Rights	Section 7.4(b)
Shared Easements	Section 7.4(b)
Shared Telecommunications Network Element Rights	Section 7.4(h)

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

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

(a) Calculation of Time Period . When calculating the period of time before which, within which, or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period will be excluded. If the last day of such period is a non-Business Day, the period in question will end on the next succeeding Business Day.

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

(c) “ Exclusively in the Business ”. With reference to assets owned by Seller, and liabilities of Seller, which are used by, in, or for, or relate to, the Business, the phrases “exclusively in the Business,” “exclusively to the Business,” and other statements of similar import will be construed to refer to assets or liabilities that are devoted exclusively to (or in the case of liabilities, are related exclusively to) the Business.

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

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

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

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

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

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

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

ARTICLE II

PURCHASE AND SALE

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

(a) those certain parcels of real property owned by Seller together with all buildings, structures, facilities, the improvements and fixtures thereon and appurtenances thereto described on Schedule 2.1(a) , and such additional parcels of real property acquired by Seller after the date hereof for use exclusively in the Business (the “ Owned Real Property ”);

(b) the real property leases under which Seller is a lessor or lessee listed on Schedule 2.1(b) (the “ Real Property Leases ”);

(d) subject to Section 7.1(c) , the accounts receivable (including all related checks in transit) and earned but unbilled revenues owned by Seller and exclusively related to the Business; for the purposes of this Agreement, “checks in transit” shall mean checks with respect to which a corresponding amount has not yet been debited from accounts receivable and credited to cash and cash equivalents in accordance with Seller’s customary accounting practices;

(e) all Inventories;

(f) the Documents;

(g) the machinery, equipment, vehicles, furniture, pipeline facilities, and other tangible personal property owned by Seller and used exclusively in the Business, including all computing and telecommunications infrastructure used exclusively in the Business, such as switches, routers, servers and desktop and mobile computing equipment located within each facility located at any Owned Real Property or at any facility at any property subject to any Real Property Lease (“ Leased Real Property ”) and all Transferred Employee Equipment ( provided , that such Transferred Employee Equipment shall constitute a Purchased Asset only upon the Transfer Date for such Transferred Employee) (the “ Tangible Personal Property ”);

(h) the Business Agreements and the Franchises;

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

(j) the Permits related exclusively to the Business, including the Permits listed on Schedule 5.11 , in each case to the extent the same are transferable (the “ Transferable Permits ”);

(k) the Environmental Permits related exclusively to the Business, including the Environmental Permits listed on Schedule 5.6(a) -2 , in each case to the extent the same are transferable (the “ Transferable Environmental Permits ”);

(l) Claims and defenses of Seller to the extent such Claims or defenses relate exclusively to the Purchased Assets or the Assumed Obligations, and all guaranties, warranties, indemnities and similar rights in favor of Seller exclusively related to any Purchased Asset or any Assumed Obligation;

(m) the Supervisory Control and Data Acquisition (“ SCADA ”) software set forth on Schedule 2.1(m) ;

(n) all software, software licenses, information systems, interfaces and management systems of Seller used exclusively in the Business (including internally-developed information systems), including those on Schedule 2.1(n) ;

(o) all credits, prepaid expenses, deferred charges, advance payments, security deposits and prepaid items that are related exclusively to the Business;

(p) the Telecommunications Network Elements and Shared Telecommunications Network Element Rights, including the FCC licenses listed on Schedule 2.1(p) ;

(q) all customer deposits, customer advances for construction and other similar items related exclusively to the Business;

(r) the regulatory related assets of Seller described on Schedule 2.1(r) ;

(s) assets transferred pursuant to Section 7.9 ;

(t) all petty cash and cash drawer held locally for the benefit of the Business;

(u) all Surety Instruments other than Seller Common Surety Instruments;

(v) all patents (including all reissues, divisions, continuations and extensions thereof), patent applications, patent rights, copyrights, copyright registrations, and all rights to any of the foregoing (“ Intellectual Property ”), owned by Seller that relate exclusively to the Business (such Intellectual Property being the “ Assigned Intellectual Property ”);

(w) all trade secrets, confidential information and know-how of Seller that relate exclusively to the Business (the “ Technology ”);

(x) all assets reflected on the Interim Balance Sheet, other than any such assets (A) disposed of to a third party since the date of the Interim Balance Sheet or (B) utilized or consumed by the Business, or converted to cash, in the ordinary course of business since the date of the Interim Balance Sheet or as otherwise permitted by the terms of this Agreement;

(y) all credits, benefits, emissions reductions, offsets and allowances with respect to any Environmental Laws purchased by or granted or issued to Seller exclusively for use by or exclusively with respect to the Business or the Purchased Assets;

(z) all goodwill generated by or associated with the Business; and

(aa) all other assets owned by or leased or licensed to Seller and used exclusively in, or arising exclusively out of, the Business.

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

(a) cash and cash equivalents (including checks on hand), in hand or in bank accounts, other than petty cash held locally for the benefit of the Business; for the purposes of this Agreement, “checks on hand” shall mean checks with respect to which a corresponding amount has been debited from accounts receivable and credited to cash and cash equivalents in accordance with Seller’s customary accounting practices;

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

(d) except to the extent specifically included in the Purchased Assets, including by virtue of Section 2.1(x) , all assets used in or for the conduct of the Electric Business or any other current or former business of Seller (other than the Business);

(e) all books, records (including stock record and minute books), or the like other than the Documents;

(f) any assets disposed of by Seller after the date of this Agreement to the extent such dispositions are not prohibited by this Agreement;

(g) except as expressly provided in Section 2.1(l) and for Claims described in Section 2.1(x) or 2.1(aa) , all the Claims or causes of action of Seller against any Person other than claims under insurance policies (which are the subject of Section 2.2(i) ) ;

(h) except to the extent specifically included in the Purchased Assets, including by virtue of Section 2.1(x) , assets used for the performance of the Central or Shared Functions, other than Transferred Employee Equipment;

(i) all insurance policies, and rights thereunder, including any such policies and rights in respect of the Purchased Assets, the Assumed Obligations or the Business, subject to the obligations of Seller to Buyer pursuant to Sections 7.10(b) , 7.16 and 9.3(e) ;

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

(k) (i) all Contracts other than the Real Property Leases, the Easements, the Shared Easements Rights, the Business Agreements, the Franchises and the other Contracts specifically included in the Purchased Assets, (ii) all Financial Hedges and all Contracts set forth on Schedule 2.2(k) (collectively, the “ Retained Agreements ”), (iii) all Shared Agreements, and (iv) any and all of Seller’s rights and interests in all accounts owing by and among Seller and any of its Affiliates;

(l) all software, software licenses, information systems, and management systems of Seller not used exclusively in the Business, as well as all hardware, software, software licenses and interfaces required for the applications not used exclusively in the Business, and any items set forth in or generally described in subparts (i) through (vi) of the definition of “Documents” in Section 1.1 other than the software set forth on Schedule 2.1(m) or 2.1(n) ;

(m) Seller Common Surety Instruments;

(n) all deferred tax assets or rights to refunds or credits of Taxes with respect to the Purchased Assets for Taxable Periods ending on or prior to the Closing Date, and with respect to a Taxable Period that includes but does not end on the Closing Date, the portion of such Tax refunds or credits attributable to the portion of such Taxable Period ending on the Closing Date (determined on a closing of the books basis for all income Taxes, and, for all other Taxes, in the manner described in the first sentence of Section 3.4(b) ); and

(o) the assets set forth on Schedule 2.2(o) .

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

(a) (i) all liabilities and obligations of Seller under the Business Agreements, the Real Property Leases, the Franchises, the Easements and Shared Easements, the Transferable Permits, the Transferable Environmental Permits and the Allocated Rights and Obligations transferred to Buyer pursuant to Section 7.4(e) , the Telecommunication Network Elements and any other agreements, obligations or contractual rights assigned to Buyer pursuant to the terms of this Agreement and (ii) all liabilities and obligations of Seller to third parties that Buyer agrees to assume pursuant to any Shared Easement Rights, Alternate Arrangements or Shared Telecommunication Network Element Rights;

(b) all liabilities and obligations of Seller for trade accounts payable (which shall be determined net of checks issued by Seller but not yet presented for payment) and other accrued and unpaid current expenses, in each case in respect of goods acquired and services incurred exclusively by or for the Business;

(c) all liabilities and obligations of Seller with respect to customer deposits, customer advances for construction and other similar items related exclusively to the Business or the Purchased Assets;

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

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

(f) all liabilities and obligations for which Buyer is expressly responsible pursuant to Section 7.9 , including the liabilities and obligations described in Section 7.9(f) relating to Post-Retirement Welfare Benefits;

(g) all liabilities, obligations, Environmental Claims, and demands arising under, in respect of, or relating to compliance or non-compliance by Seller or Buyer with past, present, and future Environmental Laws, existing, arising, or asserted exclusively with respect to the Business or the Purchased Assets, whether before, on, or after the Closing Date (the “ Assumed Environmental Liabilities ”);

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

(i) the regulatory related liabilities and obligations set forth on Schedule 2.3(i) .

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

(a) all liabilities or obligations of Seller and its Affiliates not related exclusively to the Purchased Assets or the Business;

(b) all liabilities or obligations of Seller related to any Excluded Asset or any current or former business of Seller other than the Business;

(c) all liabilities or obligations of Seller for any breach or default by Seller prior to the Effective Time, or any event prior to the Effective Time, which after the giving of notice or passage of time or both would constitute a default or breach by Seller, of or under any Business Agreement, Real Property Lease, Franchise, Permit, Environmental Permit or Order or any Law of the NMPRC, except to the extent that such liability or obligation is taken into account in determining the Adjustment Amount;

(d) all liabilities or obligations in respect of (i) Taxes with respect to the Purchased Assets for Taxable Periods ending on or prior to the Closing Date, (ii) Taxes of Seller or its Affiliates to the extent not included in clause (i) and (iii) in the case of Taxable Periods that include but do not end on the Closing Date, the Taxes attributable to the portion of such Taxable Period ending on the Closing Date (in the case of income Taxes determined on an interim closing of the books basis, and in the case of all other Taxes in the manner described in the first sentence of Section 3.4(b) ), except for Taxes for which Buyer is liable pursuant to Section 3.4 or Section 7.7 ;

(e) all obligations of Seller for wages, employment Taxes, or severance pay to the extent attributable to the period prior to the Effective Time (except as otherwise expressly provided in Section 7.9 );

(f) except for the Assumed Environmental Liabilities, (i) all liabilities or obligations arising from (A) any Claim (including any workers compensation claim) against Seller or any of its Affiliates to the extent arising prior to the Effective Time or (B) any breach by Seller of any Order to the extent occurring or arising prior to the Effective Time, (ii) all liabilities or obligations arising from any Claim (including any workers compensation claim) arising from an Actionable Incident to the extent occurring prior to the Effective Time, and (iii) all criminal fines or penalties imposed by a Governmental Entity resulting from (A) an investigation or proceeding before a Governmental Entity regarding acts to the extent occurring prior to the Effective Time, or (B) intentional fraud by Seller or its Affiliates prior to the Effective Time;

(g) except as otherwise expressly provided in Section 7.9 , all liabilities or obligations of Seller or an ERISA Affiliate of Seller under or in connection with any of the Benefit Plans, including under any deferred compensation arrangement or severance plan or any obligation to make any parachute or retention payment or any obligation under any retention or other benefit program of the type contemplated by Section 7.9(p) (other than as contemplated by Section 7.9(q) );

(h) all grievances arising out of or under any Collective Bargaining Agreement, or other collective bargaining agreement applicable to any of the Transferred Employees, filed or arising out of conduct occurring prior to the Effective Time, and except as expressly provided in Section 7.9 , all other liabilities or obligations of Seller and its Affiliates relating directly or indirectly to the employment or termination of employment, including discrimination, wrongful discharge, unfair labor practices, or constructive termination, by Seller or any of its Affiliates of any individual;

(i) all Excluded Indebtedness of Seller and its Affiliates, and all liabilities and obligations of Seller under any Contract or Encumbrance securing any Excluded Indebtedness;

(j) all liabilities of Seller with respect to checks issued by Seller but not yet presented;

(k) all liabilities or obligations arising out of the matter described in item II.A of Schedule 5.10 ;

(l) all liabilities or obligations arising from any Claim (including any workers compensation Claim) for personal injury (including any such Claims involving toxic torts or similar liabilities in tort, whether based on negligence or other fault, strict or absolute liability, or any other basis) arising out of the matter described in item 3 of Schedule 5.6(c) ; and

(m) all liabilities or obligations of Seller and its Affiliates arising under or in connection with this Agreement, or the Ancillary Agreements delivered in connection herewith, and any of the transactions contemplated hereby and thereby.

ARTICLE III

PURCHASE PRICE

3.1 Purchase Price . (a)The purchase price for the Purchased Assets (the “ Purchase Price ”) will be an amount equal to $620,000,000 (the “ Base Price ”), adjusted as follows: (i) the Base Price will be increased by the Adjustment Amount if the Adjustment Amount is a positive number; and (ii) the Base Price will be reduced by the Adjustment Amount if the Adjustment Amount is a negative number. The Adjustment Amount will be determined in accordance with the requirements set forth on Exhibit 3.1 .

(b) Within five Business Days of the settlement of any transaction involving any matched Off-System Purchases and Sales with a settlement date after the Closing Date, Buyer will for each such transaction pay Seller the Off-System Net Payment Amount calculated in accordance with Exhibit 3.1 . For purposes of this Section 3.1(b) , (i) “matched Off-System Purchases and Sales” means a transaction in which the Business purchased physical gas and simultaneously agreed to sell forward an equivalent volume of gas to a non-jurisdictional customer as part of Seller’s business of Off-System Purchases and Sales, (ii) the settlement of any such transaction shall be the later of (A) the date of delivery by the Business of the physical gas pursuant to such forward sale and (B) the date of payment by the non-jurisdictional customer and (iii) only Off-System Purchases and Sales pursuant to Business Agreements shall be taken into account.

3.2 Determination of Purchase Price .

(a) No later than five days prior to the Closing Date, Seller will prepare in good faith and deliver to Buyer a reasonably detailed estimate of the Purchase Price, based on Seller’s good faith estimate of the Adjustment Amount (such estimated Purchase Price being referred to herein as the “ Closing Payment Amount ”).

(b) Within 120 days after the Closing Date, Seller will prepare and deliver to Buyer a statement (the “ Post-Closing Adjustment Statement ”) that reflects Seller’s determination of (i) the Adjustment Amount, and (ii) the Purchase Price based on the Adjustment Amount. In addition, Seller will provide Buyer with supporting calculations, in reasonable detail, for such determinations at the time it delivers the Post-Closing Adjustment Statement. Buyer agrees to cooperate with Seller in connection with Seller’s preparation of the Post-Closing Adjustment Statement and related information, and will provide Seller with access to its books, records, information, and employees as Seller may reasonably request.

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

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

(e) Within five Business Days following the final determination of the Purchase Price pursuant to Sections 3.2(c) and 3.2(d) , (i) if the Purchase Price is greater than the Closing Payment Amount, Buyer will pay the difference (adjusted to reflect any payment pursuant to Section 3.2(d) (i) ) to Seller; or (ii) if the Purchase Price is less than the Closing Payment Amount, Seller will pay the difference (adjusted to reflect any payment pursuant to Section 3.2(d) (i) ) to Buyer. Any amount, together with interest thereon at a rate equal to JPMorgan’s prime rate from time to time in effect, from the Closing Date to the date of payment, to be paid under this Section 3.2(e) will be paid in cash by wire transfer of immediately available funds to the account specified by the Party receiving payment.

3.3 Allocation of Purchase Price . All amounts constituting consideration within the meaning of, and for the purposes of, Section 1060 of the Code and the regulations thereunder shall be allocated among the Purchased Assets in the manner required by Section 1060 of the Code and the regulations thereunder and all applicable Laws. Within 60 calendar days after the Closing Date, Seller shall provide Buyer with a proposed schedule (the “ Allocation Schedule ”) allocating all such amounts as provided herein. The Allocation Schedule shall become final and binding on the parties hereto 15 calendar days after Seller provides such schedule to Buyer, unless Buyer objects in writing to Seller, specifying the basis for its objection and preparing an alternative allocation. If Buyer does object, the Parties shall in good faith attempt to resolve the dispute within 15 calendar days of written notice to Seller of Buyer’s objection. Any such resolution shall be final and binding on the parties hereto. Any unresolved disputes shall be promptly submitted to the Independent Accounting Firm for determination, which shall be final and binding on the parties hereto. Buyer and Seller will each pay one-half of the fees and expenses of the Independent Accounting Firm. Buyer and Seller shall cooperate with each other and the Independent Accounting Firm in connection with the matters contemplated by this Section 3.3 , including, without limitation, by furnishing such information and access to books, records (including, without limitation, accountants work papers), personnel and properties as may be reasonably requested. Each of the parties hereto agrees to (a) prepare and timely file all Tax Returns, including IRS Form 8594 (and all supplements thereto) in a manner consistent with the Allocation Schedule as finalized and (b) act in accordance with the Allocation Schedule for all tax purposes. The Parties hereto will revise the Allocation Schedule to the extent necessary to reflect any post-Closing payment made pursuant to or in connection with this Agreement. In the case of any such payment, Seller shall propose a revised Allocation Schedule, and the parties hereto shall follow the procedures outlined above with respect to review, dispute and resolution in respect of such revision.

3.4 Proration .

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

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

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

(iii) rents under the Real Property Leases or any personal property leases included in the Purchased Assets.

(b) In connection with any real or personal property Tax prorations, including installments of special assessments, as between Buyer and Seller, Seller will be responsible for an amount equal to the amount of the current real or personal property Tax or installment of special assessments, as the case may be, multiplied by a fraction, in each instance (i) the numerator of which is the number of days from the first day of the Taxable Period or assessment period in which the Closing Date occurs to the Closing Date, and (ii) the denominator of which is the total number of days in the Taxable Period or assessment period in which the Closing Date occurs and Buyer will be responsible to reimburse Seller for the balance of such amount. In connection with any other prorations, in the event that actual amounts are not available at the Closing Date, the proration will be based upon the Taxes, assessments, charges, fees, or rents for the most recent period completed prior to the Closing Date for which actual Taxes, assessments, charges, fees, or rents are available. All prorations will be based upon the most recent available Tax rates, assessments, and valuations. Any prorations will be made so as to avoid duplication of any items, and will not include items which are otherwise taken into account in determining the Purchase Price, including the Adjustment Amount. Seller shall have the sole right to contest, compromise or request and obtain refunds with respect to all real and personal property Taxes allocable to periods ending on or prior to the Closing Date or that are the responsibility of Seller pursuant to this Section 3.4(b) (“ Seller Property Taxes ”).

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

ARTICLE IV

THE CLOSING

4.1 Time and Place of Closing . Upon the terms and subject to the satisfaction of the conditions contained in Article VIII , the closing of the purchase and sale of the Purchased Assets and assumption of the Assumed Obligations (the “ Closing ”) will take place at the offices of Seller in Albuquerque, New Mexico, beginning at 10:00 A.M. (Albuquerque, New Mexico time) on the second Business Day following the date which the conditions set forth in Article VIII (other than conditions to be satisfied by deliveries at the Closing) have been satisfied or waived, or at such other place or time as the Parties may agree. The date on which the Closing occurs is referred to herein as the “ Closing Date .” The purchase and sale of the Purchased Assets and assumption of the Assumed Obligations will be effective as of 12:01 A.M., Albuquerque, New Mexico time on the Closing Date (the “ Effective Time ”).

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

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

(a) the Bill of Sale, duly executed by Seller;

(b) one or more instruments of assignment and assumption substantially in the form of the Assignment and Assumption Agreement, duly executed and acknowledged by Seller;

(d) the certificate contemplated by Section 8.2(d) ;

(e) one or more deeds of conveyance of the parcels of Owned Real Property, substantially in the form of the Special Warranty Deed, duly executed and acknowledged by Seller and in recordable form;

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

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

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

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

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

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

(l) an affidavit that Seller is not a foreign person under Section 1445(b)(2) of the Code;

(m) the Master Lease Agreement duly executed by Seller;

(n) the Sub-Lease Agreements duly executed by Seller;

(o) to the extent not previously provided to Buyer, the evidence contemplated by Section 7.9(f)(vi) ;

(p) an Owner’s Certificate in connection with each Owned Real Property; and

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

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

(a) one or more instruments of assignment and assumption, substantially in the form of the Assignment and Assumption Agreement, duly executed and acknowledged by Buyer;

(b) the certificate contemplated by Section 8.3(c) ;

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

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

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

(g) the Master Lease Agreement duly executed by Buyer;

(h) the Sub-Lease Agreements duly executed by Buyer;

(i) to the extent not previously delivered to Seller, the evidence contemplated by Section 7.9(f)(iv) ; and

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

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in, or qualified by any matter set forth in, the Seller Disclosure Schedule ( provided , that any matter disclosed in a Section of the Seller Disclosure Schedule shall be deemed disclosed for all purposes and all Sections only to the extent that the relevance of any such disclosure to any other Section is reasonably apparent from the text of such disclosure) and subject to the limitations set forth in Sections 9.4(e) and 9.4(f) , Seller represents and warrants to Buyer, as of the date of this Agreement and as of the Effective Time, as set forth in this Article V .

5.1 Organization; Qualification . Seller is a corporation duly organized, validly existing, and in good standing under the laws of New Mexico and has all requisite corporate power and authority to own, lease, and operate the Purchased Assets and to carry on the Business as presently conducted. Seller is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of the Business, or the ownership or operation of any Purchased Assets, by Seller makes such qualification necessary, except where the failure to be so qualified has not had and would not reasonably be expected to have a Material Adverse Effect. Seller has heretofore made available to Buyer true, complete, and correct copies of Seller’s Governing Documents, as currently in effect.

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

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

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

(b) result in a default (including with notice, lapse of time, or both), or give rise to any right of termination, cancellation, acceleration, or loss of a material benefit under, or result in the creation of any Encumbrance upon any of the Purchased Assets, under any of the terms, conditions, or provisions of any note, bond, mortgage, indenture, agreement, lease, or other instrument or obligation to which Seller is a party or by which Seller or any of the Purchased Assets may be bound, except for such defaults (or rights of termination, cancellation, or acceleration) as to which requisite waivers or consents have been, or will prior to the Effective Time be, obtained or which if not obtained or made, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect;

(c) subject to obtaining the Seller Required Regulatory Approvals, conflict with or result in a violation of any Law or Order applicable to Seller or any of the Purchased Assets or the Business which, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect; or

(d) require any declaration, filing, or registration with, or notice to, or authorization, consent, or approval of any Governmental Entity, other than (i) the Seller Required Regulatory Approvals, (ii) such declarations, filings, registrations, notices, authorizations, consents, or approvals which, if not obtained or made, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect or (iii) any requirements which become applicable to Seller as a result of the specific regulatory status of Buyer (or any of its Affiliates) or as a result of any other facts that specifically relate to any business or activities in which Buyer (or any of its Affiliates) is or proposes to be engaged.

5.4 Financial Information . (a) Schedule 5.4(a) sets forth (i) the unaudited statement of income of the Business for the fiscal year ended December 31, 2006 (the “ 2006 Financial Statements ”), (ii) the unaudited balance sheet of the Business as of September 30, 2007 (the “ Interim Balance Sheet ”) and the unaudited statement of income of the Business for the nine-month period ended September 30, 2007 (together with the Interim Balance Sheet, the “ Interim Financial Statements ” and, such Interim Financial Statements together with the 2006 Financial Statements, the “ Financial Statements ”), (iii) the unaudited direct and allocated income statement for the nine-month period ending September 30, 2007 (the “ Interim Allocated Cost Schedule ”) and (iv) the unaudited direct and allocated income statement for the fiscal year ended December 31, 2006 (the “ 2006 Allocated Cost Schedule ” and, together with the Interim Allocated Cost Schedule, the “ Allocated Cost Schedules ”). Except as set forth in Schedule 5.4(a) , the Financial Statements have been prepared in accordance with GAAP, except in the case of the Interim Financial Statements for normal year-end adjustments and the omission of full footnotes. Except as set forth in Schedule 5.4(a) , the Interim Balance Sheet

presents fairly in all material respects the financial condition of the Business as of such date, the income statement included in the Interim Financial Statements presents fairly in all material respects the results of operations of the Business for the period covered thereby and does not reflect the operations of any entity or business not intended to constitute a part of the Business after the Closing Date. The Interim Allocated Cost Schedule has been prepared in accordance with the 2007 Cost Allocation Manuals, and the expenses included in the “Common Utility” and “Shared Services” columns of the Interim Allocated Cost Schedule have been allocated in accordance with the 2007 Cost Allocation Manuals. The 2006 Allocated Cost Schedule has been prepared in accordance with the 2006 Cost Allocation Manuals, and the expenses included in the “Common Utility” and “Shared Services” columns of the 2006 Allocated Cost Schedule have been allocated in accordance with the 2006 Cost Allocation Manuals. In each of the Allocated Cost Schedules, (1) the columns headed “Direct” present fairly in all material respects the total direct operating costs (including all salary, wages and, for the Interim Allocated Cost Schedule, benefits for the Business Employees) incurred by the Business and there are no direct costs incurred by the Business in the columns headed “Common Utility” or “Shared Services” and (2) the columns headed “Total” fairly present in all material respects the total costs of the Business, in both cases for the periods covered thereby.

(b) Except for matters reserved against in the Financial Statements or as set forth on Schedule 5.4(b) , neither Seller (in connection with the Business) nor the Business had at September 30, 2007, or has incurred during the period from September 30, 2007 to the date of this Agreement, any liabilities or obligations (whether absolute, accrued, contingent, fixed or otherwise, whether due or to become due) of any nature that would be required by GAAP to be reflected on a balance sheet of the Business (including the notes thereto), except liabilities or obligations which were incurred in the ordinary course of business consistent with past practice.

5.5 Title . (a) Except as set forth on Schedule 5.5(a) : Seller (i) owns, and has insurable, good and marketable fee simple title to, the Owned Real Property, (ii) owns, and has good and marketable rights and title to the Easements and the Shared Easements, (iii) to Seller’s Knowledge, has a valid and enforceable leasehold interest in the Leased Real Property and (iv) has good title to the other Purchased Assets, in each case, free and clear of all Encumbrances other than Permitted Encumbrances.

(b) Except as set forth on Schedule 5.5(b) or as has not had and would not reasonably be expected to have a Material Adverse Effect, (i) Seller has complied with the terms of all Real Property Leases, Easements and Shared Easements to which it is a party or under which it has a right of use or occupancy, (ii) all Real Property Leases, Easements and Shared Easements are in full force and effect and (iii) Seller enjoys peaceful and undisturbed possession and rights under all Real Property Leases, Easements and Shared Easements.

(c) Except as has not interfered and would not reasonably be expected to interfere with the conduct of the Business in any material respect, Seller has the necessary rights to construct, maintain and use its pipes, mains, service lines, tanks, compressors and other equipment and facilities on, under, and over property, whether or not pursuant to an Easement, used in the conduct of the Business, and there are no defects in the entitlement of Seller to construct, maintain or use such property that have prohibited or interfered with or that are reasonably likely to prohibit or interfere with the use thereof in any material respect in accordance with past practice or the requirements of applicable Law.

5.6 Environmental . The only representations and warranties given in respect to Environmental Laws, Environmental Permits, Environmental Claims or other environmental matters are those contained in Sections 5.3 , 5.4 and 5.13 and this Section 5.6 , and none of the other representations and warranties contained in this Agreement will be deemed to constitute, directly or indirectly, a representation and warranty with respect to Environmental Laws, Environmental Permits, Environmental Claims, or other environmental matters. All such matters are governed exclusively by Sections 5.3 , 5.4 and 5.13 , this Section 5.6 , and Article IX .

(a) Except as set forth on Schedule 5.6(a) -1 , (i) Seller possesses all Environmental Permits necessary to operate the Purchased Assets or the Business as currently being operated, (ii) to Seller’s Knowledge, the Purchased Assets and the Business are in compliance, in all material respects, with the requirements of all Environmental Permits and Environmental Laws, and (iii) to Seller’s Knowledge, Seller has not received any written notice or information that any applicable Governmental Entity intends to modify, suspend, revoke, or withdraw (in a manner that would reasonably be considered to have a material adverse impact on the ownership or operation of the Business or the Purchased Assets) any Environmental Permit. Schedule 5.6(a) -2 sets forth a list of all material Environmental Permits held by Seller for the operation of the Business as presently conducted.

(b) Except as set forth on Schedule 5.6(b) , Seller has not received within the last three years any written notice, report, or other information regarding any actual or alleged violation of Environmental Laws or Environmental Permits, or any liabilities or potential liabilities, including any investigatory, remedial, or corrective obligations, relating to the Business or the Purchased Assets arising under Environmental Laws.

(c) Except as set forth on Schedule 5.6(c) , (i) to Seller’s Knowledge, exclusively in connection with the operation of the Business or otherwise exclusively relating to the Business or the use, ownership or operation of the Purchased Assets, there is and has been no Release or threatened Release (as that term is used or interpreted under or pursuant to CERCLA) from, in, on, or beneath the Purchased Assets, the Owned Real Property, the Leased Real Property or any other real property, that could form a basis for an Environmental Claim against Seller or Buyer, and (ii) there are no Environmental Claims related to the Purchased Assets or the Business, which are pending or, to Seller’s Knowledge, threatened against Seller.

(d) Seller has made available to Buyer all material correspondence from any Governmental Entity, studies, audits, reviews, investigations, analyses, and reports on material environmental matters relating to the Purchased Assets or the Business that are in the possession or reasonable control of Seller (the “ Environmental Reports ”).

5.7 Labor Matters . Schedule 5.7 lists each collective bargaining agreement covering any of the Business Employees or any Designated Employees to which Seller is a party or is subject (each, a “ Collective Bargaining Agreement ”). Except to the extent set forth in Schedule 5.7 , and except as has not had and would not reasonably be expected to have a Material Adverse Effect, (i) Seller is in compliance with all Laws applicable to the Business Employees respecting employment and employment practices, terms and conditions of employment, and wages and hours; (ii) Seller has not received written notice of any unfair labor practice complaint against Seller pending before the National Labor Relations Board with respect to any of the Business Employees; (iii) Seller has not received notice that any representation petition respecting the Business Employees has been filed with the National Labor Relations Board; (iv) no grievance or arbitration proceeding arising out of or under the Collective Bargaining Agreements is pending against Seller; and (v) there is no labor strike, slowdown, work stoppage, or lockout actually pending or, to Seller’s Knowledge, threatened against Seller in respect of the Purchased Assets or the Business. Seller has made available to Buyer a true, correct, and complete copy of each Collective Bargaining Agreement.

5.8 ERISA; Benefit Plans .

(a) Schedule 5.8(a) lists each employee benefit plan (as such term is defined in Section 3(3) of ERISA) and each other plan, program, or arrangement providing compensation or benefits to current or former employees that (i) is maintained by, contributed to, or required to be contributed to by Seller (or any ERISA Affiliate of Seller) or with respect to which Seller (or any ERISA Affiliate of Seller) has any actual or contingent liability and (ii) covers any current Business Employees and/or Designated Employees (each, a “ Benefit Plan ”). Copies of such plans and all amendments, if any, have been made available to Buyer.

(b) Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code has received a determination from the Internal Revenue Service that such Benefit Plan is so qualified, and each trust that is intended to be exempt under Section 501(a) of the Code has received a determination letter that such trust is so exempt. Nothing has occurred since the date of such most recent determination letter that would materially adversely affect the qualified or exempt status of such Benefit Plan or trust, nor will the consummation of the transactions provided for by this Agreement have any such effect. Each Benefit Plan with respect to which any assets or liabilities are transferred to Buyer (or any ERISA Affiliate of Buyer) or to any Benefit Plan maintained by Buyer (or any ERISA Affiliate of Buyer) has been administered and operated in all material respects in accordance with its terms and in compliance in all material respects with the applicable provisions of ERISA.

(c) Each Benefit Plan that utilizes a funding vehicle described in Section 501(c)(9) of the Code has received notification from the Internal Revenue Service that such funding vehicle qualifies for tax-exempt status under Section 501(c)(9) of the Code. Nothing has occurred since the date of such tax-exempt notification that would materially adversely affect the exempt status of such funding vehicle.

(d) Seller has provided Buyer with copies of the annual report (Form 5500) and the actuarial reports for the most recent three plan years for which such reports are available with respect to any Benefit Plan that provides Post-Retirement Welfare Benefits to any Grandfathered Active Employee.

(e) Neither Seller nor any ERISA Affiliate of Seller has contributed in the past five years to a “multiemployer plan” within the meaning of Section 3(37) of ERISA.

(f) There is no “accumulated funding deficiency” within the meaning of Section 412 of the Code with respect to any Benefit Plan that is subject to Section 412 and all contributions, premium payments and other payments due from Seller to or under the Benefit Plans have been paid in a timely manner.

(g) No event or liability or lien on assets as described in Section 4069 of ERISA has occurred or exists in connection with any Benefit Plan.

(h) Except as provided in Section 7.9 , the transactions contemplated by this Agreement will not result in any increase in liability of Buyer with respect to any Benefit Plan (including under any employment, retention, severance, change in control or similar agreement or plan).

5.9 Certain Contracts and Arrangements .

(a) Except for Business Agreements listed on Schedule 5.9(a) , as of the date of this Agreement there is not any Business Agreement that is:

(i) a written employment agreement or employment contract that has an aggregate future liability in excess of $250,000 and is not terminable by Seller by notice of not more than 60 days for a cost of less than $250,000;

(ii) a collective bargaining agreement or other Contract with any labor organization, union or association;

(iii) a covenant not to compete (other than pursuant to any radius restriction contained in any lease, reciprocal easement or development, construction, operating or similar agreement) that materially limits the conduct of the Business as presently conducted or that purports to bind Affiliates of the owner of the Business;

(iv)