Asset Purchase Agreement

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AQUILA INC | WPS Michigan Utilities, Inc.

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Title: Asset Purchase Agreement
Governing Law: Michigan Date: 9/27/2005
Industry: Electric Utilities Law Firm: Blackwell Sanders Peper Martin LLP; Foley & Lardner LLP Sector: Utilities

Asset Purchase Agreement, Parties: aquila inc , wps michigan utilities inc.

MICHIGAN GAS

Exhibit 10.2

Asset Purchase Agreement

by and between

Aquila, Inc.

and

WPS Michigan Utilities, Inc.

Dated: September 21, 2005

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TABLE OF CONTENTS

Article I DEFINITIONS				7
	1.1	Definitions		7
	1.2	Other Definitional and Interpretive Matters	17
	1.3	Joint Negotiation and Preparation of Agreement	18
Article II PURCHASE AND SALE			18
	2.1	The Sale	18
	2.2	Excluded Assets	20
	2.3	Assumed Obligations	20
	2.4	Excluded Liabilities	22
	2.5	Delivery of Guaranty	23
Article III PURCHASE PRICE			23
	3.1	Purchase Price	23
	3.2	Determination of Purchase Price.	23
	3.3	Allocation of Purchase Price	25
	3.4	Proration	25
Article IV THE CLOSING			26
	4.1	Time and Place of Closing	26
	4.2	Payment of Closing Payment Amount	26
	4.3	Deliveries by Seller	26
	4.4	Deliveries by Buyer	28
Article V REPRESENTATIONS AND WARRANTIES OF SELLER			28
	5.1	Organization; Qualification	28
	5.2	Authority Relative to this Agreement	29
	5.3	Consents and Approvals; No Violation	29
	5.4	Governmental Filings	29
	5.5	Financial Information	30
	5.6	No Material Adverse Effect	30
	5.7	Operation in the Ordinary Course	30
	5.8	Title and Related Matters	30
	5.9	Leases	31
	5.10	Environmental	31
	5.11	Labor Matters	32
	5.12	ERISA; Benefit Plans	32
	5.13	Certain Contracts and Arrangements	34
	5.14	Legal Proceedings and Orders	35
	5.15	Permits	35
	5.16	Compliance with Laws	35
	5.17	Insurance	35
	5.18	Taxes	35
	5.19	Regulation as a Utility	36
	5.20	Fees and Commissions	36
	5.21	Sufficiency of Assets	36
	5.22	Related-Party Agreements.	36
	5.23	Financial Hedges	37

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Article VI REPRESENTATIONS AND WARRANTIES OF BUYER			37
	6.1	Organization	37
	6.2	Authority Relative to this Agreement	37
	6.3	Consents and Approvals; No Violation	37
	6.4	Regulation as a Utility	38
	6.5	Buyer’s Knowledge	38
	6.6	Fees and Commissions	38
	6.7	Financial Capability	38
Article VII COVENANTS OF THE PARTIES			38
	7.1	Conduct of Business	38
	7.2	Access to Information	40
	7.3	Expenses	43
	7.4	Further Assurances; Procedures with Respect to Certain Agreements
		and other Assets	43
	7.5	Public Statements	46
	7.6	Consents and Approvals	46
	7.7	Tax Matters	47
	7.8	Supplements to Schedules	48
	7.9	Employees and Employee Benefits	48
	7.10	Eminent Domain; Casualty Loss	54
	7.11	Transitional Use of Signage and Other Materials Incorporating Seller’s
		Name or other Logos	55
	7.12	Litigation and Regulatory Support	55
	7.13	Notification of Customers	56
	7.14	Document Delivery	56
	7.15	Title Insurance, Surveys, Estoppel Certificates, and Non-Disturbance
		Agreements	56
	7.16	Central or Shared Functions for Transition Period	56
	7.17	Post-Closing Insurance.	57
Article VIII CONDITIONS TO CLOSING			58
	8.1	Conditions to Each Party’s Obligations to Effect the Closing	58
	8.2	Conditions to Obligations of Buyer	58
	8.3	Conditions to Obligations of Seller	59
Article IX INDEMNIFICATION			60
	9.1	Survival of Representations and Warranties	60
	9.2	Indemnification	60
	9.3	Indemnification Procedures	61
	9.4	Limitations on Indemnification	63
	9.5	Applicability of Article IX	64
	9.6	Tax Treatment of Indemnity Payments	65
	9.7	No Consequential Damages	65
	9.8	Exclusive Remedy	65
Article X TERMINATION AND OTHER REMEDIES			65
	10.1	Termination	65
	10.2	Procedure and Effect of Termination	66
	10.3	Remedies upon Termination	66

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	10.4	Specific Performance	67
Article XI MISCELLANEOUS PROVISIONS			67
	11.1	Amendment and Modification	67
	11.2	Waiver of Compliance; Consents	67
	11.3	Notices	67
	11.4	Assignment	68
	11.5	Governing Law	68
	11.6	Severability	69
	11.7	Entire Agreement	69
	11.8	Bulk Sales or Transfer Laws	69
	11.9	Delivery	69
	11.10	Waiver Of Jury Trial.	69

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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	Form of Guaranty
Exhibit 1.1-E	Form of Special Warranty Deed
Exhibit 1.1-F	Form of Transitional Services Agreement
Exhibit 3.1	Determination of Purchase Price
Exhibit 3.1.A	Example of Michigan Gas Closing Payment Amount
Exhibit 3.1.B	Example of Michigan Gas Post-Closing Adjustment Statement
Exhibit 3.1.C	Sample Calculation of Michigan Gas Purchase Price
Exhibit 7.9(d)(ii)(C)	Pension Matters

Schedule 1.1-A

Business Activities

Schedule 1.1-B

Business Employees

Schedule 1.1-C

Buyer Required Regulatory Approvals

Schedule 1.1-D

Central or Shared Functions

Schedule 1.1-E

Permitted Encumbrances

Schedule 1.1-F

Seller Required Regulatory Approvals

Schedule 1.1-G

Seller’s Knowledge

Schedule 1.1-H

Territory

Schedule 2.1(a)

Real Property

Schedule 2.1(d)

Tangible Personal Property

Schedule 2.1(l)

SCADA Equipment and Software

Schedule 2.1(m)

Other Assets

Schedule 2.2(k)

Retained Agreements

Schedule 2.2(m)

Excluded Assets

Schedule 2.3(h)

Additional Assumed Obligations

Schedule 5.3

Seller’s Consents and Approvals

Schedule 5.5(a)

Selected Balance Sheet Information

Schedule 5.5(b)

Division Income Statement Information

Schedule 5.6

Material Adverse Effect

Schedule 5.7

Transactions Outside the Ordinary Course of Business

Schedule 5.8

Title and Related Matters

Schedule 5.9

Real Property Leases

Schedule 5.10(a)-1

Sufficiency of Environmental Permits

Schedule 5.10(a)-2

Environmental Permits

Schedule 5.10(b)

Environmental Notices

Schedule 5.10(c)

Environmental Claims or Releases

Schedule 5.10(e)

MGP Insurance Settlements

Schedule 5.11

Labor Matters

Schedule 5.12(a)

Employee Benefit Plans

Schedule 5.12(d)

Administrator or Fiduciary Non-Compliance

Schedule 5.12(g)

Retiree Health and Welfare Benefits

Schedule 5.13(a)

Certain Contracts and Arrangements

Schedule 5.13(b)

Franchises

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Schedule 5.14

Legal Proceedings and Orders

Schedule 5.15

Permits

Schedule 5.17

Insurance

Schedule 5.18

Taxes

Schedule 5.21

Sufficiency of Assets

Schedule 5.22

Related-Party Agreements

Schedule 6.3

Buyer’s Consents and Approvals

Schedule 7.1

Conduct of Business

Schedule 7.4(e)

Shared Agreements

Schedule 7.9(a)

Unions

Schedule 7.9(b)

Severance Compensation Agreements

Schedule 7.9(d)(ii)-A

Other Plan Participants

Schedule 7.9(d)(ii)(D)(1)

Grandfathered Individuals

Schedule 7.9(d)(ii)(D)(2)

Seller’s VEBAs

Schedule 7.9(d)(ix)

Nonqualified Deferred Compensation Obligations

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ASSET PURCHASE AGREEMENT

Asset Purchase Agreement (“ Agreement ”), made as of September 21 , 2005 by and between Aquila, Inc., a Delaware corporation (“ Seller ”), and WPS Michigan Utilities, Inc., a Delaware corporation (“ 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; and

WHEREAS, Buyer is a direct subsidiary of Parent, and Parent will guarantee the obligations of Buyer under this Agreement and the Ancillary Agreements pursuant to the Guaranty;

NOW THEREFORE, in consideration of the Parties’ respective covenants, representations, warranties, and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties 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(a):

“ 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; and (ii) provides such Person with the legal basis to recover damages or other relief without any further event or fact being required for such recovery.

“ 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.

“ Affiliated Group ” means any affiliated group within the meaning of Code section 1504(a) or any similar group defined under a similar provision of Law.

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

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

“ Assignment of Easements ” means the form of Assignment of Easements set forth on Exhibit 1.1-B .

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

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“ Business ” means, collectively, (i) the Natural Gas Distribution Business, and (ii) the activities described on Schedule 1.1-A .

“ Business Agreements ” means any contract, agreement, real or personal property lease, commitment, understanding, or instrument (other than the Retained Agreements and the Shared Agreements) to which Seller is a party or by which it is bound that either (i) is listed or described on Schedule 5.9 , Schedule 5.13(a) , or Schedule 7.9(b) , or (ii) relates principally to the Business or the Purchased Assets and (A) has been entered into, renewed, extended, or otherwise amended in the ordinary course of business and does not involve annual obligations in excess of $100,000 (and is not otherwise material to the Business or the Purchased Assets), or (B) is entered into, renewed, extended, or otherwise amended after the date hereof consistent with the terms of this Agreement.

“ Business Day ” means any day other than Saturday, Sunday, and any day which is a legal holiday or a day on which banking institutions in Kansas City, Missouri are authorized by Law to close.

“ Business Employees ” means the employees of Seller set forth on Schedule 1.1-B , together with any persons who are hired by Seller for the Business after the date hereof in accordance with Section 7.1, other than persons hired to perform Central or Shared Functions.

“ Buyer Pension Plan ” means one or more defined benefit plans within the meaning of section 3(35) of ERISA that are (i) maintained or to be established or maintained by Buyer, and (ii) qualified plans under section 401(a) of the Code.

“ 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-C .

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

“ Central or Shared Functions ” means any of the business functions set forth on Schedule 1.1-D .

“ 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.

“ COBRA ” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

“ COBRA Continuation Coverage ” means the continuation of medical coverage required under sections 601 through 608 of ERISA, and section 4980B of the Code.

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

“ Confidentiality Agreement ” means the Confidentiality Agreement, dated April 29, 2005 between Seller and WPS Resources Corporation.

“ Documents ” means all files, documents, instruments, papers, books, reports, tapes, microfilms, photographs, letters, ledgers, journals, title commitments and policies, title abstracts, surveys, customer lists and information, regulatory filings, operating data and plans, technical documentation (such as design specifications, functional requirements, and operating

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instructions), user documentation (such as installation guides, user manuals, and training materials), marketing documentation (such as sales brochures, flyers, and pamphlets), Transferred Employee Records, and other similar materials related principally 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 or the Governing Documents of Seller or any of its Affiliates, (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 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 in the case of any items that would be Documents but for a confidentiality obligation, Seller will use commercially reasonable efforts at Buyer’s request to obtain a waiver of such obligation), (iv) any valuations or projections of or related to the Business, the Purchased Assets, or the Assumed Obligations (other than any such valuations and projections prepared in conjunction with any past, present, or future regulatory filings, whether or not the same was actually filed with the regulatory authority, and customary studies, reports, and similar items prepared by or on behalf of Seller for the purposes of completing, performing, or executing 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 principally to the Business and the Purchased Assets), (v) any information management systems of Seller which are Excluded Assets, or (vi) any web pages or similar media tools for communication on the Internet.

“ Encumbrances ” means any mortgages, pledges, liens, claims, charges, security interests, conditional and installment sale agreements, Preferential Purchase Rights, activity and use limitations, easements, covenants, encumbrances, obligations, limitations, title defects, deed restrictions, and any other restrictions of any kind, including restrictions on use, transfer, receipt of income, or exercise of any other attribute of ownership.

“ 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) into the Environment 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, or injunctive relief pursuant to any Environmental Law or for any property damage or personal or bodily injury (including death) or threat of injury to health, safety, natural resources, or the Environment.

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“ Environmental Laws ” means all Laws relating to pollution or the protection of human health, safety, the Environment, or damage to natural resources, including Laws relating to Releases and threatened Releases or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of Hazardous Materials. Environmental Laws include the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. § 6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Oil Pollution Act, 33 U.S.C. § 2701 et seq.; the Endangered Species Act, 16 U.S.C. § 1531 et seq.; the National Environmental Policy Act, 42 U.S.C. § 4321, et seq.; the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq. (to the extent relating in any way to Hazardous Material or environmental matters); the Safe Drinking Water Act, 42 U.S.C. § 300f et seq.; Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq.; Atomic Energy Act, 42 U.S.C. § 2014 et seq.; Nuclear Waste Policy Act, 42 U.S.C. § 10101 et seq.; and their state and local counterparts or equivalents, all as amended from time to time, and regulations issued pursuant to any of those statutes.

“ Environmental Permits ” means all permits, certifications, licenses, franchises, approvals, consents, waivers, or other authorizations of Governmental Entities issued under or with respect to applicable Environmental Laws and used or held by Seller for the operation of the Business.

“ EPA ” means the United States Environmental Protection Agency.

“ 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.

“ 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.

“ 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 Natural Gas Distribution Business is to be conducted at a reasonable cost in a manner consistent with Laws and Orders applicable to the Natural Gas Distribution 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 Party means the articles or certificate of incorporation and bylaws, or comparable governing documents, of such Party.

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

“ Guaranty ” means the Guaranty to be executed and delivered by Parent to Seller on the date hereof, in the form of Exhibit 1.1-D .

“ 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.

“ Holding Company Act ” means the Public Utility Holding Company Act of 1935, as amended.

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

“ Income Tax ” means any Tax based upon, measured by, or calculated with respect to (i) net income, profits, or receipts (including capital gains Taxes and minimum Taxes) or (ii) multiple bases (including corporate franchise and business license Taxes) if one or more of the bases on which such Tax may be based, measured by, or calculated with respect to is described in clause (i), in each case together with any interest, penalties, or additions to such Tax.

“ Independent Accounting Firm ” means Ernst & Young LLP.

“ Law ” means any statutes, regulations, rules, ordinances, codes, and similar acts or promulgations of any Governmental Entity.

“ Loss ” or “ 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).

“ Material Adverse Effect ” means a material adverse effect on the business, assets, properties, results of operations, or financial condition of the Business and the Purchased Assets (taken as a whole) other than an effect (i) resulting from an Excluded Matter, or (ii) cured (including by payment of money or credit to the Purchase Price) before the Closing Date. “ 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, (B) any Law or Order (other than a Law adopted or an Order issued specifically with respect to the Business, the Purchased Assets, or the transactions contemplated by this Agreement), (C) any change of general application in GAAP, FERC Accounting Rules, or the PSC accounting rules, (D) this Agreement or the transactions contemplated hereby (including any announcement with respect to this Agreement or the transactions contemplated hereby or the performance by the Parties of their obligations hereunder), (E) any change in

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international, national, regional, or local economic, regulatory, or political conditions, including prevailing interest rates, (F) weather conditions or customer use patterns, (G) any matter disclosed in this Agreement, any Schedule or Exhibit hereto, or any Ancillary Agreement, (H) any change in the market price of commodities or publicly traded securities, or (I) any action permitted under this Agreement.

“ Natural Gas Distribution Business ” means the natural gas utility business conducted by Seller serving customers in the Territory.

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

“ Parent ” means WPS Resources Corporation, a Wisconsin corporation and the direct parent of Buyer.

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

“ Permits ” means all permits, certifications, licenses, franchises, 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, operation, or maintenance of the Purchased Assets, other than Environmental Permits.

“ Permitted Encumbrances ” means (i) those Encumbrances set forth in Schedule 1.1-E ; (ii) Encumbrances securing or created by or in respect of any of the Assumed Obligations; (iii) statutory liens for current Taxes or assessments not yet due or delinquent or the validity or amount of which is being contested in good faith by appropriate proceedings, none of which contested matters is material, and provided such contested matters have been disclosed in writing to Buyer; (iv) mechanics’, carriers’, workers’, repairers’, landlords’, and other similar liens arising or incurred in the ordinary course of business relating to obligations as to which there is no default on the part of Seller or the validity or amount of which is being contested in good faith by appropriate proceedings, none of which contested matters is material, and provided such contested matters have been disclosed in writing to Buyer, or pledges, deposits, or other liens securing the performance of bids, trade contracts, leases, or statutory obligations (including workers’ compensation, unemployment insurance, or other social security legislation) as to which there is no default on the part of Seller; (v) zoning, entitlement, restriction, and other land use and environmental regulations by Governmental Entities which do not materially interfere with the present use of the Purchased Assets and as to which there is no default on the part of Seller; (vi) any Encumbrances set forth in any state, local, or municipal franchise or governing ordinance under which any portion of the Business is conducted and as to which there is no default on the part of Seller; (vii) all rights of condemnation, eminent domain, or other similar rights of any Person; and (viii) such other Encumbrances (including requirements for consent or notice in respect of assignment of any rights) which do not materially interfere with Seller’s use of the Purchased Assets for the Business, and do not secure indebtedness or the payment of the deferred purchase price of property (except for Assumed Obligations).

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

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“ Preferential Purchase Rights ” means rights of any Person (other than rights of condemnation, eminent domain, or other similar rights of any Person) to purchase or acquire any interest in any of the Purchased Assets, including any rights that are conditional upon a sale of any Purchased Assets or any other event or condition.

“ Prime Rate ” means, for any day, the per annum rate of interest quoted as the “Bank Prime Rate” rate for the most recent weekday for which such rate is quoted in the statistical release designated as H.15(519), or any successor publication, published from time to time by the Board of Governors of the Federal Reserve System.

“ PSC ” means the Michigan Public Service Commission.

“ Regulatory Order ” means an Order issued by the PSC or FERC that affects or governs the rates, services, or other utility operations of the Business.

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

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

“ SEC ” means the Securities and Exchange Commission.

“ Seller Disclosure Schedule ” means, collectively, all Schedules other than Schedule 1.1-C and Schedule 6.3 .

“ Seller Marks ” means the names “Aquila,” “Aquila Networks,” “Energy One,” “Peoples Natural Gas,” “PNG,” “Service Guard,” “UtiliCorp,” and any derivative of any of the foregoing, and any related, similar, and other trade names, trademarks, service marks, and logos of Seller, except for those specifically included as Purchased Assets in Schedule 2.1(m) .

“ Seller Pension Plan ” means the Aquila, Inc. Retirement Income Plan, as amended from time to time.

“ 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-F .

“ Seller’s Knowledge ,” or words to similar effect, means the actual knowledge of the persons set forth in Schedule 1.1-G , after due inquiry by them of those employees of Seller whom they reasonably believe, in good faith, to be the persons generally responsible for the subject matters to which the knowledge is pertinent.

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

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

“ Subsidiary ,” when used in reference to a Person, means any Person of which outstanding securities or other equity interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions of such Person are owned directly or indirectly by such first Person.

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“ Tax ” and “ Taxes ” means all taxes, charges, fees, levies, penalties, or other assessments imposed by any foreign or United States federal, state, or local Taxing Authority, including income, excise, property, sales, transfer, franchise, license, payroll, withholding, social security, or other taxes (including any escheat or unclaimed property obligations), including any interest, penalties, or additions attributable thereto.

“ Tax Affiliate ” of a Person means a member of that Person’s Affiliated Group and any other Subsidiary of that Person which is a partnership or is disregarded as an entity separate from that Person for Tax purposes.

“ 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.

“ 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-H .

“ Transferred Employee Records ” means the following records relating to Transferred Employees: (i) skill and development training records and resumes, (ii) seniority histories, (iii) salary and benefit information (including all historical compensation and service information to the extent necessary to calculate or verify a Transferred Employee’s accrued benefit under the Seller Pension Plan), (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.

“ Transitional Services Agreement ” means the Transitional Services Agreement to be executed and delivered by the Parties at the Closing, in the form of Exhibit 1.1-F .

“ 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:

	Term	Reference
	Accounting Principles	Exhibit 3.1
	Accounts Payable	Section 2.4(c)
	Accrued Liability	Exhibit 7.9(d)(ii)(C)
	Adjustment Dispute Notice	Section 3.2(c)
	Allocated Rights and Obligations	Section 7.4(e)
	Allocated VEBA Amount	Section 7.9(d)(ii)(D)(2)
	Assumed Environmental Liabilities	Section 2.3(f)
	Assumed Obligations	Section 2.3
	Base Net Plant Amount	Exhibit 3.1
	Base Price	Section 3.1
	Benefit Continuation Period	Section 7.9(d)(ii)(D)(1)
	Benefit Plan	Section 5.12(a)
	Book Value	Exhibit 3.1
	Buyer Pension Plan Trust	Exhibit 7.9(d)(ii)(C)

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	Buyer’s VEBA	Section 7.9(d)(ii)(D)(2)
	Closing	Section 4.1
	Closing Date	Section 4.1
	Closing Payment Amount	Section 3.2(a)
	Collective Bargaining Agreement	Section 5.11
	Confidential Information	Section 7.2(c)
	Contingent Purchased Assets	Section 7.4(g)(ii)
	Current Retirees	Section 7.9(d)(ii)(D)(1)
	Customer Notification	Section 7.13
	Direct Loss	Section 9.3(d)
	Division Income Statement Information	Section 5.5(b)
	Easements	Section 7.4(b)
	Effective Time	Section 4.1
	Estimated Closing Payment Amount	Section 3.2(a)
	Excluded Assets	Section 2.2
	Excluded Liabilities	Section 2.4
	Extraordinary Expenditures	Exhibit 3.1
	Extraordinary Expenditures Adjustment	Exhibit 3.1
	Extraordinary Expenditures Reference Amount	Exhibit 3.1
	FERC Accounting Rules	Exhibit 3.1
	FERC Accounts	Exhibit 3.1
	Financial Hedge	Section 7.4(c)(ii)
	Franchises	Section 5.13(b)
	GAAP	Exhibit 3.1
	Grandfathered Active Employees	Section 7.9(d)(ii)(D)(1)
	Grandfathered Individuals	Section 7.9(d)(ii)(D)(1)
	Historical Insurance Policies	Section 7.17(a)
	Indemnifiable Loss	Section 9.2(a)
	Indemnifying Party	Section 9.3(a)
	Indemnitee	Section 9.2(c)
	Initial Transfer Amount	Exhibit 7.9(d)(ii)(C)
	Initial Transfer Date	Exhibit 7.9(d)(ii)(C)
	Interim Period	Section 7.4(g)(ii)
	Lease Buy-Out Amount	Exhibit 3.1
	Locals	Section 7.9(a)
	MGU	Section 7.17(a)
	Net Insurance Settlement Amount	Exhibit 3.1
	Net Plant	Exhibit 3.1
	Net Plant Adjustment	Exhibit 3.1
	Net Plant at Closing	Exhibit 3.1
	New CBA	Section 7.9(a)
	New Pension Plan	Exhibit 7.9(d)(ii)(C)
	New Plan Section 4044 Amount	Exhibit 7.9(d)(ii)(C)
	Observers	Section 7.2(b)
	Other Arrangements	Section 7.4(e)
	Other Plan Participants	Exhibit 7.9(d)(ii)(C)
	Post-Closing Adjustment Statement	Section 3.2(b)
	Post-Retirement Welfare Benefits	Section 7.9(d)(ii)(D)(1)

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	Purchase Price	Section 3.1
	Purchased Assets	Section 2.1
	Qualifying Offer	Section 7.9(b)
	Real Property	Section 2.1(a)
	Reduction Amount	Exhibit 7.9(d)(ii)(C)
	Retained Agreements	Section 2.2(k)
	Savings Plan	Section 7.9(d)(ii)(E)
	SCADA	Section 2.1(l)
	Section 4044 Amount	Exhibit 7.9(d)(ii)(C)
	Selected Balance Sheet Information	Section 5.5(a)
	Seller Insurance Policies	Section 7.17(c)
	Seller Pension Plan Trust	Exhibit 7.9(d)(ii)(C)
	Seller’s VEBAs	Section 7.9(d)(ii)(D)(2)
	SFAS 132 Assumptions	Exhibit 7.9(d)(ii)(C)
	Shared Agreements	Section 7.4(e)
	Shared Easement Rights	Section 7.4(b)
	Shared Easements	Section 7.4(b)
	Spin-Off Date	Exhibit 7.9(d)(ii)(C)
	Substitute Arrangements	Section 7.4(e)
	Termination Date	Section 10.1(b)
	Third Party Claim	Section 9.3(a)
	Transferable Environmental Permits	Section 2.1(h)
	Transferable Permits	Section 2.1(g)
	Transferred Employee	Section 7.9(b)
	Transition Committee	Section 7.1(b)
	True-Up Amount	Exhibit 7.9(d)(ii)(C)
	True-Up Date	Exhibit 7.9(d)(ii)(C)

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) 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, including as any such Schedule may be supplemented or amended in accordance with Section 7.8. 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.

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(d) 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.

(e) 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.

(f) “ 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.

(g) “ 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.

(h) “ 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 would remain liable for any failure to perform such obligations prior to the Effective Time.

(i) “ Principally 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 “principally in the Business,” “principally for the Business,” and other statements of similar import will be construed to refer to assets or liabilities that are: (A) specifically listed in a Schedule setting forth Purchased Assets or Assumed Obligations; or (B) otherwise are devoted principally to (or in the case of liabilities, are related principally to) the Business other than Excluded Assets and Excluded Liabilities.

1.3 Joint Negotiation and Preparation of Agreement . The Parties 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 hereto and no presumption or burden of proof favoring or disfavoring any Party will exist or arise by virtue of the authorship of any provision of this Agreement.

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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 real and personal property, tangible or intangible, described below, as the same exists at the Effective Time (and, as applicable and as permitted or contemplated hereby, with such additions and deletions as will occur from the date hereof through the Effective Time), except to the extent that such assets are Excluded Assets (collectively, the “ Purchased Assets ”):

(a) the real property and real property interests described on Schedule 2.1(a) , including buildings, structures, other improvements, and fixtures located thereon, the leasehold and subleasehold interests under the leases described on Schedule 5.9 (to the extent such leasehold and subleasehold interests are assignable), and the Easements and Shared Easement Rights to be conveyed at the Closing pursuant to Section 7.4(b) (to the extent such Easements and Shared Easement Rights are assignable) (collectively, the “ Real Property ”);

(b) the accounts receivable and inventories owned by Seller and principally related to the Business, and other similar or related items principally related to the Business, all as reflected in the applicable FERC Accounts set forth on Exhibit 3.1 ;

(c)

the Documents;

(d) the machinery, equipment, vehicles, furniture, pipeline system, and other tangible personal property owned by Seller and used principally in the Business, including the vehicles and equipment listed on Schedule 2.1(d) , and all warranties against manufacturers or vendors relating thereto, to the extent that such warranties are freely transferable;

(e) the Business Agreements and the Franchises, in each case, to the extent the same are assignable;

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

(g) the Permits listed on Schedule 5.15 , in each case to the extent the same are assignable (the “ Transferable Permits ”);

(h) the Environmental Permits listed on Schedule 5.10(a)-2 , in each case to the extent the same are assignable (the “ Transferable Environmental Permits ”);

(i) Claims and defenses of Seller to the extent such Claims or defenses arise with respect to the Purchased Assets or the Assumed Obligations, provided that any such Claims and defenses will be assigned to Buyer without warranty or recourse;

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(j) any assets acquired by Seller pursuant to Section 7.4(d) for inclusion in the Purchased Assets;

(k)

assets transferred pursuant to Section 7.9;

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

	(m)	the assets set forth on Schedule 2.1(m) ; and
	(n)	any other assets owned by Seller and used principally in 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, cash equivalents, and bank deposits;

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

(c)

the Seller Marks;

(d) subject to Section 3.4 hereof, any refund or credit (i) related to Taxes paid by or on behalf of Seller, whether such refund is received as a payment or as a credit against future Taxes payable, or (ii) relating to a period before the Closing Date;

(e)

all books, records, or the like other than the Documents;

(f) any assets that have been disposed of in the ordinary course of business or otherwise in compliance with this Agreement prior to Closing;

(g) except as expressly provided in Section 2.1(d) and Section 2.1(i), all of the Claims or causes of action of Seller against any Person;

(h)

assets used for performance of the Central or Shared Functions;

(i) except as otherwise expressly provided herein, all insurance policies, and rights thereunder, including any such policies and rights in respect of the Purchased Assets or the Business;

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

(k) all (i) agreements and contracts set forth on Schedule 2.2(k) (the “ Retained Agreements ”), (ii) Shared Agreements (except to the extent provided by Section 7.4(e)), and (iii) other agreements and contracts not specifically included in the Business Agreements and Franchises;

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(l) all software, software licenses, information systems, management systems, and any items set forth in or generally described in subparts (i) through (vi) of the definition of “Documents” in Section 1.1(a) other than the software set forth on Schedule 2.1(l) and Schedule 2.1(m) ; and

(m)

the assets and other rights set forth on Schedule 2.2(m) .

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, to the extent related to the Purchased Assets or the Business, other than Excluded Liabilities (the “ Assumed Obligations ”), in accordance with the respective terms and subject to the respective conditions thereof, including the following liabilities and obligations:

(a) all liabilities and obligations of Seller under the Business Agreements, the Franchises, the Transferable Permits, the Transferable Environmental Permits, and the Allocated Rights and Obligations transferred to Buyer pursuant to Section 7.4(e), and any other agreements or contractual rights assigned to Buyer pursuant to the terms of this Agreement, except as provided in Section 2.4(b);

(b) all liabilities and obligations of Seller with respect to customer deposits, customer advances for construction and other similar items reflected in the applicable FERC Accounts set forth on Exhibit 3.1 ;

(c) 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 principally to the Business and outstanding on or arising after the Effective Time;

(d) 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;

(e) all liabilities and obligations for which Buyer is responsible pursuant to Section 7.9;

(f) all liabilities, obligations, Environmental Claims, and demands arising under, in respect of, or relating to compliance or non-compliance by Seller with past, present, and future Environmental Laws, existing, arising, or asserted with respect to the Business or the Purchased Assets, whether before, on, or after the Closing Date (the “ Assumed Environmental Liabilities ”). For avoidance of doubt, the Assumed Environmental Liabilities include all liabilities and obligations (including liabilities and obligations based upon the presence, Release, or threatened Release of Hazardous Materials at any location whatsoever) of Seller directly or indirectly relating to, caused by, or arising in connection with the operation, ownership, use, or other control of or activity at or relating to any installation, facility, plant (including any manufactured gas

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plant), or site (including any manufactured gas plant site) that at the Closing is, or at any time prior to the Closing was, (i) operated, owned, leased, or otherwise under the control of or attributed to any of Seller, the Business, or any predecessor in interest of Seller or the Business, and (ii) located in the Territory or any areas previously served by the Business or any predecessor of the Business;

(g) all liabilities and obligations of Seller or Buyer arising on or after the Effective Time 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

(h)

the liabilities and obligations set forth on Schedule 2.3(h) .

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) any liabilities or obligations of Seller to the extent related to any Excluded Assets;

(b) any 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 the Business Agreements, Franchises, the Transferable Permits, or the Transferable Environmental Permits, except to the extent that such liability or obligation is taken into account in determining the Adjustment Amount;

(c) all trade accounts payable and other accrued and unpaid current expenses in respect of goods and services incurred by or for the Business in the ordinary course of business to the extent attributable to the period prior to the Effective Time (the “ Accounts Payable ”);

(d) any liabilities or obligations of Seller in respect of indebtedness for borrowed money;

(e) any liabilities or obligations in respect of Taxes of Seller or any Tax Affiliate of Seller, or any liability of Seller for unpaid Taxes of any Person under Treasury Regulation section 1.1502-6 (or similar provision of state, local, or foreign law) as a transferee or successor, by contract or otherwise, except for Taxes for which Buyer is liable pursuant to Section 3.4 or Section 7.7;

(f) any obligations of Seller for wages, employment Taxes, or severance pay to the extent attributable to the period prior to the Effective Time (except, with respect to vacation days and severance pay, as otherwise provided in Section 7.9);

(g) except for the Assumed Environmental Liabilities, (i) any liabilities or obligations arising from any lawsuit (including any workers compensation claim) against Seller involving the Business filed prior to the Effective Time, (ii) any liabilities or obligations arising from any lawsuit (including any workers compensation claim) arising

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from an Actionable Incident related to the Purchased Assets or the Business which occurred prior to the Effective Time, or (iii) any criminal fines or penalties imposed by a Governmental Entity resulting from (A) an investigation or proceeding before a Governmental Entity regarding acts which occurred prior to the Effective Time, or (B) intentional fraud by Seller or its Affiliates prior to the Effective Time;

(h) except as otherwise provided in Section 7.9, any liability or obligation 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 policy or any obligation to make any parachute or retention payment;

(i) any grievance arising out of or under any Collective Bargaining Agreement, or other collective bargaining agreement applicable to any of the Business Employees, prior to the Effective Time, and except as provided in Section 7.9, any other liabilities or obligations of Seller relating to the employment or termination of employment, including discrimination, wrongful discharge, unfair labor practices, or constructive termination, by Seller of any individual, to the extent the circumstances giving rise to the liability or obligation occurred prior to the Effective Time;

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

(k) the amount of any disallowance (whether reflected in a required rate adjustment or a denial of a requested rate adjustment or otherwise affecting Buyer) in any gas cost recovery proceeding, to the extent the disallowance results from a finding by the PSC of an imprudent gas decision made by Seller prior to the Effective Time.

2.5 Delivery of Guaranty . Contemporaneously with the execution and delivery of this Agreement, Parent will duly execute and deliver the Guaranty to Seller.

ARTICLE III

PURCHASE PRICE

3.1 Purchase Price . The purchase price for the Purchased Assets (the “ Purchase Price ”) will be an amount equal to $269,500,000.00 (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 .

3.2

Determination of Purchase Price .

(a) No later than 15 days prior to the Closing Date, Seller will prepare and deliver to Buyer a good faith estimate of the Purchase Price, based on Seller’s good faith estimates of the Adjustment Amount (such estimated Purchase Price being referred to herein as the “ Estimated Closing Payment Amount ”), together with supporting assumptions and calculations, in reasonable detail, for such estimates of the Purchase Price and the Adjustment Amount. Within five Business Days following receipt by

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Buyer of the Estimated Closing Payment Amount, Buyer may object in good faith and in writing to Seller’s estimate of the Adjustment Amount included in the Estimated Closing Payment Amount. If Buyer objects to Seller’s estimate of the Adjustment Amount, the Parties shall attempt to reconcile their differences in good faith by negotiation. If the Parties are unable to do so within five Business Days following receipt by Seller of Buyer’s written objection (or if Buyer does not object to Seller’s estimate of the Adjustment Amount), the Base Price shall be adjusted for purposes of the Closing by the amount of the estimated Adjustment Amount not in dispute (as adjusted, the “ Closing Payment Amount ”). The disputed portion of Seller’s estimate of the Adjustment Amount shall be paid when and as required under Section 3.2(e).

(b) Within 90 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 assumptions and 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 (together with interest thereon for the period commencing on the Closing Date through the date of payment calculated at the Prime Rate in effect on the Closing Date) 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

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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 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 paid under this Section 3.2(e) will be paid with interest for the period commencing on the Closing Date through the date of payment, calculated at the Prime Rate in effect on the Closing Date, in cash by wire transfer of immediately available funds to the account specified by the Party receiving payment.

3.3 Allocation of Purchase Price . The sum of the Purchase Price and the Assumed Obligations will be allocated among the Purchased Assets on a basis consistent with section 1060 of the Code and the Treasury Regulations thereunder. Within 60 days following the final determination of the Purchase Price, the Parties will work together in good faith to agree upon such allocation; provided that in the event that such agreement has not been reached within such 60-day period, the allocation will be determined by the Independent Accounting Firm based solely on presentations of Buyer and Seller (and not independent review), and such determination will be binding on the Parties. Each Party will pay one-half of the fees and expenses of the Independent Accounting Firm in connection with such determination. Each Party will report the transactions contemplated by the Agreement for federal Income Tax and all other Tax purposes in a manner consistent with such allocation, and shall not voluntarily take any action inconsistent therewith upon examination of any Tax Return, in any refund claim, in any litigation or otherwise with respect to such Tax Returns. Each Party will provide the other promptly with any other information required to complete Form 8594 under the Code. Each Party will notify the other, and will provide the other with reasonably requested cooperation, in the event of an examination, audit, or other proceeding regarding the allocations provided for in this Section 3.3.

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 prior to the Effective Time, and Buyer liable to the extent such items relate to any period from and after the Effective Time. Such items to be prorated will include:

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

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

(iii)

rents under any leases of real or personal property.

(b) In connection with any real property Tax prorations, including installments of special assessments, Buyer will be credited with an amount equal to the amount of the current real property Tax or installment of special assessments, as the case may be, multiplied by a fraction, (i) the numerator of which is the number of days from the date of the immediately preceding installment to the day before the Closing Date, and (ii) the denominator of which is the total number of days in the assessment period in which the Closing Date occurs. 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.

(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 of this Agreement, 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 Blackwell Sanders Peper Martin LLP in Kansas City, Missouri, beginning at 10:00 A.M. (Kansas City, Missouri time) on the first Business Day of the calendar month following the calendar month during 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; provided, however, that in no event shall such Closing occur prior to February 8, 2006, and provided that in no event shall the Closing occur sooner than seven Business Days after the receipt of the last Final Regulatory Order. 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., Monroe, Michigan time on the Closing Date (the “ Effective Time ”).

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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)	the Assignment and Assumption Agreement, duly executed by Seller;
	(c)	the Transitional Services Agreement, duly executed by Seller;

(d) all consents, waivers or approvals obtained by Seller from third parties in connection with this Agreement;

(e)

the certificate contemplated by Section 8.2(d);

(f) one or more deeds of conveyance of the parcels of Real Property with respect to which Seller holds fee interests, substantially in the form of the Special Warranty Deed, duly executed and acknowledged by Seller and in recordable form;

(g) 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);

(h) 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;

(i) a receipt or certificate from the Michigan Department of Treasury confirming that all Michigan Taxes have been paid in full as of the Closing Date;

(j) 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;

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

(l) a long-form certificate of good standing with respect to Seller, to the extent applicable (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;

(m) a copy, certified by an authorized officer of Seller, of resolutions authorizing the execution and delivery of this Agreement and the Ancillary Agreements and instruments attached as exhibits hereto and thereto, and the consummation of the transactions contemplated hereby and thereby, together with a certificate by the Secretary

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of Seller as to the incumbency of those officers authorized to execute and deliver this Agreement and the Ancillary Agreements;

(n) an affidavit that Seller is not a foreign person under section 1445(b)(2) of the Code; and

(o) 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)	the Assignment and Assumption Agreement, duly executed by Buyer;
	(b)	the Transitional Services Agreement, duly executed by Buyer;
	(c)	the certificate contemplated by Section 8.3(c);

(d) all consents, waivers, or approvals obtained by Buyer from third parties in connection with this Agreement;

(e) a long-form certificate of good standing with respect to Buyer, to the extent applicable (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;

(f) a copy, certified by an authorized officer of Buyer, of resolutions authorizing the execution and delivery of this Agreement and the Ancillary Agreements and instruments attached as exhibits hereto and thereto, 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;

(g) 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; and

(h) 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

As an inducement to Buyer to enter into this Agreement and to consummate the transactions contemplated hereby, except as set forth in, or qualified by any matter set forth in, the Seller Disclosure Schedule (as the same may be supplemented or amended pursuant to

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Section 7.8), Seller represents and warrants to Buyer as set forth in this Article V. For convenience of reference, selected Sections of Article V refer to specific, numbered Schedules.

5.1 Organization; Qualification . Seller is a corporation duly organized, validly existing, and in good standing under the laws of Delaware 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. Seller has heretofore delivered to Buyer true, complete, and correct copies of Seller’s Governing Documents, as currently in effect.

5.2 Authority Relative to this Agreement . 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.

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, or acceleration, under any of the terms, conditions, or provisions of any note, bond, mortgage, indenture, agreement, lease, or other instrument or obligation to which Seller or any of its Affiliates is a party or by which Seller or any of its Affiliates 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 would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated by this Agreement or the Ancillary Agreements;

(d) require any declaration, filing, or registration with, or notice to, or authorization, consent, or approval of any Governmental Entity, including the FERC as to

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gas storage facilities, and including state utility commissions, other than (i) the Seller Required Regulatory Approvals, (ii) such declarations, filings, registrations, notices, authorizations, consents, or approvals which, if not obtained or made, would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated by this Agreement, or (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 Governmental Filings . Since January 1, 2004, Seller has filed or caused to be filed with the PSC and FERC all material forms, statements, reports, and documents (including all exhibits, amendments, and supplements thereto) required by Law or Order to be filed by Seller with the PSC or FERC with respect to the Natural Gas Distribution Business and the Purchased Assets. As of the respective dates on which such forms, statements, reports, and documents were filed, each (to the extent prepared by Seller and excluding information prepared or provided by third parties) complied in all material respects with all requirements of any Law or Order applicable to such form, statement, report, or document in effect on such date.

5.5

Financial Information .

(a) Schedule 5.5(a) sets forth the Book Values, as of December 31, 2004, and June 30, 2005, respectively, of selected balance sheet information with respect to certain Purchased Assets and certain Assumed Obligations. The information set forth in Schedule 5.5(a) is referred to herein as the “ Selected Balance Sheet Information .”

(b) Schedule 5.5(b) sets forth the division income statements for the Business for the 12-month period ended December 31, 2004, and the six-month period ended June 30, 2005. The information set forth in Schedule 5.5(b) is referred to herein as the “ Division Income Statement Information .”

(c) The Selected Balance Sheet Information and the Division Income Statement Information fairly present as of the dates thereof or for the periods covered thereby, in all material respects, the items reflected therein, all in accordance with FERC Accounting Rules and any applicable PSC accounting rules applied on a consistent basis in accordance with the Seller’s normal accounting practices. The individual accounts in the Selected Balance Sheet Information are recorded in accordance with GAAP, with the exception of the following items that reflect pro forma adjustments: (i) Cash Value of Leased Vehicles, (ii) Other Post-Retirement Benefits (presented at the accumulated post-retirement benefit obligation liability with an offsetting Other Post Employment Benefits regulatory asset), and (iii) the items described in Note 1 on Exhibit 3.1.C , which are currently reflected on Seller’s corporate books and records and that, beginning January 1, 2006, will be reflected on the Business’s books and records.

5.6 No Material Adverse Effect . Except as set forth in Schedule 5.6 , since June 30, 2005, no change or event has occurred which, either individually or in the aggregate, has resulted in or is reasonably likely to have a Material Adverse Effect.

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5.7 Operation in the Ordinary Course . Except as otherwise disclosed herein or set forth in Schedule 5.7 , or otherwise specifically contemplated or permitted pursuant to the terms hereof, since June 30, 2005, the Business has been operated in the ordinary course of business consistent with past practice.

5.8 Title and Related Matters . Except as set forth on Schedule 5.8 : (i) Seller owns, and has good, valid, and marketable title to, the Purchased Assets, free and clear of all Encumbrances other than Permitted Encumbrances; and (ii) the Purchased Assets are not subject to Preferential Purchase Rights. The Purchased Assets have been maintained consistent with Good Utility Practice, except to the extent that the failure to so maintain the Purchased Assets does not create a Material Adverse Effect.

5.9 Leases . Schedule 5.9 lists all real property leases under which Seller is a lessee or lessor that (i) relate principally to the Business or the Purchased Assets, and (ii) provide for annual payments of more than $100,000 or are otherwise material to the Business or the Purchased Assets. To the extent available to Seller, true and complete copies of all such leases have been made available to Buyer.

5.10 Environmental . The only representations and warranties given in respect to Environmental Laws, Environmental Permits, or Environmental Claims are those contained in this Section 5.10, 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, or Environmental Claims, or matters incident to or arising out of or in connection with any of the foregoing. All such matters are governed exclusively by this Section 5.10 and by Article IX.

(a) Except as set forth on Schedule 5.10(a)-1 , (i) to Seller’s Knowledge, Seller presently possesses all Environmental Permits necessary to own, maintain, and operate the Purchased Assets as they are currently being owned, maintained and operated, and to conduct the Business as it is currently being conducted, (ii) to Seller’s Knowledge, with respect to the Purchased Assets and the Business, Seller is in compliance, in all material respects, with the requirements of such Environmental Permits and Environmental Laws, and (iii) Seller has received no written notice or information of an intent by an applicable Governmental Entity to suspend, revoke, or withdraw any such Environmental Permits. Schedule 5.10(a)-2 sets forth a list of all material Environmental Permits held by Seller for the operation of the Business.

(b) Except as set forth on Schedule 5.10(b) , neither Seller nor any Affiliate of Seller has received within the last three years any written notice, report, or other information regarding any actual or alleged violation of Environmental Laws, Environmental Permits, or any liabilities or potential liabilities, including any investigatory, remedial, or corrective obligations, relating to the operation of the Business or the Purchased Assets arising under Environmental Laws.

(c) Except as set forth on Schedule 5.10(c) , (i) to Seller’s Knowledge, there is and has been no Release from, in, on, or beneath the Real Property that could form a basis for an Environmental Claim, and (ii) there are no Environmental Claims related to

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the Purchased Assets or the Business, which are pending or, to Seller’s Knowledge, threatened against Seller.

(d) Seller has made available to Buyer, prior to the date hereof, all material correspondence, studies, audits, reviews, investigations, analyses, and reports on environmental matters relating to the Purchased Assets, the Assumed Environmental Liabilities, or the Business (including estimates of costs developed in accordance with the “Statement of Position 96-1: Environmental Remediation Liabilities,”

prepared by the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (October 10, 1996)) that were conducted by, or on behalf of, or which are in the possession or reasonable control of Seller.

(e) Except as set forth on Schedule 5.10(e) , Seller has not entered into any settlements with any of its insurance carriers in connection with the clean-up of any of the manufactured gas plant sites related to the Purchased Assets or Assumed Obligations.

5.11 Labor Matters . Schedule 5.11 lists each collective bargaining agreement covering any of the Business Employees to which Seller is a party or is subject (each, a “ Collective Bargaining Agreement ”). Except to the extent set forth in Schedule 5.11 , (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) Seller is in compliance with the terms of and its obligations under the Collective Bargaining Agreements, and has administered each Collective Bargaining Agreement in a manner consistent in all material respects with the terms and conditions of such Collective Bargaining Agreement; (v) no grievance or arbitration proceeding arising out of or under the Collective Bargaining Agreements is pending against Seller; and (vi) 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. Except for obligations to be assumed or undertaken by Buyer pursuant to Section 7.9, there are no employment, severance, or change in control agreements or contracts between Seller and any Business Employee under which Buyer would have any liability. Seller has made available to Buyer a true, correct, and complete copy of each Collective Bargaining Agreement. Prior to the Closing Date, Seller has not engaged in any act in violation of the WARN Act, or in any act that requires notice or any other action on the part of Seller under the WARN Act, with respect to the Business.

5.12

ERISA; Benefit Plans .

(a) Schedule 5.12(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 benefits to employees that is maintained by, contributed to, or required to be contributed to by Seller (or any ERISA Affiliate of Seller) as of the date hereof on account of current or former Business Employees, including persons who have retired or may retire from the Business (each, a “ Benefit Plan ”). Copies of such plans and all amendments thereto,

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together with the most recent annual report and actuarial report with respect thereto, 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 is qualified in all material respects and 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. Seller has furnished to Buyer true and complete copies of all such determination letters. Nothing has occurred since the date of such determination 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.

(c) Each Benefit Plan has been maintained, funded, and administered in material compliance with its terms, the terms of any applicable Collective Bargaining Agreements, and all applicable Laws, including ERISA and the Code. There is no “accumulated funding deficiency” within the meaning of section 412 of the Code with respect to any Benefit Plan which is an “employee pension benefit plan” as defined in section 3(2) of ERISA. No reportable event (within the meaning of section 4043 of ERISA) has occurred or exists in connection with any Benefit Plan other than events which would not, individually or in the aggregate, have an adverse effect on the Purchased Assets or Business. No event or liability or lien on assets described in sections 4041, 4042, 4062, 4063, 4064, 4068, or 4069 of ERISA has occurred or exists in connection with any Benefit Plan. Seller has accounted for the Seller Pension Plan in accordance with GAAP, and the contributions to the Seller Pension Plan have been made in accordance with applicable Law. No proceeding has been initiated to terminate the Seller Pension Plan, nor, to Seller’s Knowledge, has the Pension Benefit Guaranty Corporation threatened or otherwise expressed its intention to terminate the Seller Pension Plan. Neither Seller nor any ERISA Affiliate has any obligation to contribute to or any other liability under or with respect to any multiemployer plan (as such term is defined in section 3(37) of ERISA). No liability under Title IV or section 302 of ERISA has been incurred by Seller or any ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to Seller or any ERISA Affiliate of incurring any such liability, other than liability for premiums due to the Pension Benefit Guaranty Corporation. No Person has provided or is required to provide security to the Seller Pension Plan under section 401(a)(29) of the Code due to a plan amendment that results in an increase in current liability.

(d) Except as set forth on Schedule 5.12(d) , the administrator and the fiduciaries of each Benefit Plan have in all material respects complied with the applicable requirements of ERISA, the Code, and any other requirements of applicable Laws, including the fiduciary responsibilities imposed by Part 4 of Title I, Subtitle B of ERISA. Except as set forth on Schedule 5.12(d) , there have been no non-exempt “prohibited transactions” as described in section 4975 of the Code or Title I, Part 4 of ERISA involving any Benefit Plan, and to Seller’s Knowledge there are no facts or circumstances which could give rise to any tax or penalty imposed by section 4975 of the Code or section 502 of ERISA with respect to any Benefit Plan.

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(e) All contributions (including all employer matching and other contributions and all employee salary reduction contributions) for all periods ending prior to the Effective Time (including periods from the first day of the current plan year to the Effective Time) have been paid to the Benefit Plans within the time required by Law or will be paid to the Benefit Plans prior to or as of the Closing, notwithstanding any provision of any Benefit Plan to the contrary. All returns, reports, and disclosure statements required to be made under ERISA and the Code with respect to the Benefit Plans have been timely filed or delivered. No amount of income or any assets of Seller’s VEBAs is subject to tax as a result of the failure to satisfy the applicable requirements for exemption or as unrelated business taxable income.

(f) Each Benefit Plan that is a group health plan (within the meaning of Code section 5000(b)(1)) in all material respects complies with and has been maintained and operated in material compliance with each of the health care continuation requirements of section 4980B of the Code and Part 6 of Title I, Subtitle B of ERISA (or the applicable requirements of state insurance continuation law) and the requirements of the Health Insurance Portability and Accountability Act of 1996.

(g) Schedule 5.12(g) sets forth the medical and life insurance benefits currently provided by Seller to any currently retired or former employees of the Business other than pursuant to Part 6 of Subtitle B of Title I of ERISA, section 4980B of the Code, or similar provisions of state law. Except for (i) any obligation to provide medical and/or life insurance benefits under and for the duration of any applicable Collective Bargaining Agreement or any prior collective bargaining agreement to which Seller or any of Seller’s predecessors was a party with respect to the Business, (ii) retiree group codes RAYBZC1, RAYBZC2, and RABABB, or (iii) any obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985 or other applicable Law, Seller may amend, modify, or terminate post-retirement and post-employment medical and life benefits or coverage, or adjust retirement premiums or cost-sharing provisions, at any time without further liability.

(h) Except as provided in Section 7.9, no provision of any Benefit Plan would require the payment by Buyer of any money or other property, or the provision by Buyer of any other rights or benefits, to any employee or former employee of Seller as a result of the transactions contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of section 280G of the Code.

5.13

Certain Contracts and Arrangements .

(a) Except for contracts, agreements, leases, commitments, understandings, or instruments which (i) are listed on Schedule 5.9 , Schedule 5.11 , or Schedule 5.13(a) , or (ii) have been entered into in the ordinary course of business and do not individually involve annual payment obligations in excess of $100,000, Seller is not a party to any contract, agreement, lease, commitment, understanding, or instrument which is principally related to the Business or the Purchased Assets other than the Retained Agreements, the Shared Agreements, and any other contracts, agreements, personal property leases, commitments, understandings, or instruments which are Excluded Assets. Except as disclosed in Schedule 5.13(a) , each material Business Agreement

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constitutes a valid and binding obligation of Seller and, to Seller’s Knowledge, constitutes a valid and binding obligation of the other parties thereto and is in full force and effect. Seller is not in breach or default (nor has any event occurred which, with notice or the passage of time, or both, would constitute such a breach or default) under, and has not received written notice that it is in breach or default under, any material Business Agreement, except for such breaches or defaults as to which requisite waivers or consents have been obtained. Except as set forth in Schedule 5.13(a) , to Seller’s Knowledge, no other party to any material Business Agreement is in breach or default (nor has any event occurred which, with notice or the passage of time, or both, would constitute such a breach or default) under any material Business Agreement. Except as set forth in Schedule 5.13(a) , Seller has not received written notice of cancellation or termination of any material Business Agreement. To the extent available to Seller, true and complete copies of each Business Agreement listed in Schedule 5.13(a) , together with all amendments and supplements thereto, have been made available to Seller.

(b) Schedule 5.13(b) sets forth a list of each municipal or county franchise agreement relating to the Business to which Seller is a party (the “ Franchises ”). Except as disclosed on Schedule 5.13(b) , Seller is not in default under such agreements, and, to Seller’s Knowledge, each such agreement is in full force and effect.

5.14 Legal Proceedings and Orders . Except as set forth in Schedule 5.14 , there are no material Claims relating to the Purchased Assets or the Business, which are pending or, to Seller’s Knowledge, threatened against Seller. Except for any Regulatory Orders, or as set forth in Schedule 5.14 , Seller is not subject to any outstanding Orders that would reasonably be expected to apply to the Purchased Assets or the Business following Closing.

5.15 Permits . Seller has all Permits required by Law for the operation of the Business as presently conducted and for the ownership, operation, and maintenance of the Purchased Assets as presently owned, operated, and maintained. Schedule 5.15 sets forth a list of all material Permits held by Seller and required for the operation of the Business as presently conducted and for the ownership, operation, and maintenance of the Purchased Assets as presently owned, operated, and maintained. Except as set forth in Schedule 5.15 , (i) Seller has not received any written notification that it is in violation of any such Permits, and (ii) Seller is in compliance in all material respects with all such Permits.

5.16 Compliance with Laws . Seller is in material compliance with all Laws, Orders, and Regulatory Orders applicable to the Purchased Assets or the Business.

5.17 Insurance . Schedule 5.17 contains a complete list of the current insurance policies held by Seller in respect of the Business and the Purchased Assets. Except as set forth on Schedule 5.17 , since June 30, 2005, the Purchased Assets have been continuously insured with financially sound insurers in such amounts and against such risks and losses as are customary in the gas utility industry, and Seller has not received any written notice of cancellation or termination with respect to any material insurance policy of Seller providing coverage in respect of the Purchased Assets. All insurance policies of Seller covering the Purchased Assets are in full force and effect.

5.18

Taxes .

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Except as set forth in Schedule 5.18 :

(a) All Tax Returns relating to the Business or the Purchased Assets, including all property, activities, income, employees, sales, purchases, capital or gross receipts of Seller relating thereto, required to be filed by or on behalf of Seller have been or will be filed in a timely manner, and all Taxes required to be shown on such Tax Returns have been or will be timely paid in full, except to the extent being contested in good faith by appropriate proceedings. All such Tax Returns were or will be correct and complete in all material respects, and were or will be prepared in compliance with all applicable Laws and regulations. None of the Purchased Assets is (i) an asset or property that is or will be required to be treated as described in section 168(f)(8) of the Internal Revenue Code of 1954 as in effect immediately before the enactment of the Tax Reform Act of 1986, or (ii) tax-exempt use property within the meaning of section 168(h)(1) of the Code. No property Taxes paid by Seller will be subject to refund to the customers of the Business.

(b) Seller has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee or independent contractor, service provider, creditor, member, stockholder or other third party in connection with the Business or the Purchased Assets, and all forms W-2 and 1099 required with respect thereto have been properly completed and timely filed.

(c) To Seller’s Knowledge, there are no additional state or local Taxes due and no state or local deficiencies for any period for which state or local Tax Returns have been filed by or on behalf of Seller, and there are no pending, active or threatened audits or proposed deficiencies or other claims for unpaid state or local Taxes of Seller or of the Affiliated Group that are attributable to Seller, in each case with respect to the Business or the Purchased Assets.

(d) Seller is not a party (directly or indirectly) to any Tax allocation or sharing agreement relating to the Business or the Purchased Assets.

(e) None of the Assumed Obligations is an obligation to make a payment that is not or will not be deductible under section 280G of the Code.

(f) The transactions contemplated by this Agreement will be a taxable event as to Seller, and all of Seller’s accumulated deferred Taxes related to Seller’s Natural Gas Distribution Business will be extinguished.

5.19 Regulation as a Utility . Neither Seller nor any of its Affiliates is a “Holding Company,” a “Subsidiary Company,” or an “Affiliate” of a “Holding Company” within the meaning of the Holding Company Act. The Natural Gas Distribution Business is regulated as a public utility only in the state of Michigan.

5.20 Fees and Commissions . No broker, finder, or other Person is entitled to any brokerage fees, commissions, or finder’s fees for which Buyer could become liable or obligated in connection with the transactions contemplated hereby by reason of any action taken by Seller.

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5.21 Sufficiency of Assets . Except as set forth on Schedule 5.21 , the Purchased Assets, together with the assets identified in Sections 2.2(h), (k), (l), and (m), constitute all assets necessary for Buyer to conduct the Business in substantially the same manner as Seller conducted the Business prior to the Effective Time.

5.22 Related-Party Agreements . Except as set forth in Schedule 5.22 , Seller is not a party to any agreement, contract, commitment, transaction, or proposed transaction with any of its Affiliates related to the Business. Except as set forth in Schedule 5.22 , no contract, agreement, or commitment included in the Purchased Assets has, as a counterparty thereto, an Affiliate of Seller.

5.23 Financial Hedges . Seller has no financial hedges, futures contracts, options contracts, or other derivatives transactions in respect of the gas supply portfolio for the Natural Gas Distribution Business.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF BUYER

As an inducement to Seller to enter this Agreement and to consummate the transactions contemplated hereby, Buyer represents and warrants to Seller as follows:

6.1 Organization . Buyer is a corporation duly organized, validly existing, and in good standing under the laws of Delaware and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as is now being conducted.

6.2 Authority Relative to this Agreement . Buyer has all corporate power and authority necessary to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the board of directors of Buyer and no other corporate proceedings on the part of Buyer are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Buyer, and constitutes a valid and binding agreement of Buyer, enforceable against Buyer 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.

6.3 Consents and Approvals; No Violation . Except as set forth in Schedule 6.3 , the execution and delivery of this Agreement and the Ancillary Agreements by Buyer, and the consummation by Buyer of the transactions contemplated hereby and thereby, do not:

(a)

conflict with or result in any breach of Buyer’s Governing Documents;

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except for such defaults (or rights of termination, cancellation, or acceleration) as to which requisite waivers or consents have been, or will prior to the Effective Time be, obtained or which if not obtained or made would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated by this Agreement or the Ancillary Agreements;

(d) require any declaration, filing, or registration with, or notice to, or authorization, consent, or approval of any Governmental Entity, including the FERC as to gas storage facilities, and including state utility commissions, other than (i) the Buyer Required Regulatory Approvals, or (ii) such declarations, filings, registrations, notices, authorizations, consents, or approvals which, if not obtained or made, would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated by this Agreement.

6.4 Regulation as a Utility . Buyer is a subsidiary of a “Holding Company” within the meaning of the Holding Company Act, which Holding Company is exempt from the Holding Company Act’s registration requirements.

6.5 Buyer’s Knowledge . Buyer represents that it is a sophisticated party, and has conducted a full due diligence investigation of the Business, the Purchased Assets, and the Assumed Obligations. Buyer understands and agrees that any financial forecasts or projections relating to the Business prepared by or on behalf of Seller have been provided to Buyer with the understanding and agreement that Seller is making no representation or warranty with respect to such forecasts or projections.

6.6 Fees and Commissions . No broker, finder, or other Person is entitled to any brokerage fees, commissions, or finder’s fees for which Seller could become liable or obligated in connection with the transactions contemplated hereby by reason of any action taken by Buyer.

6.7 Financial Capability . Buyer (i) at the Closing will have sufficient funds available to pay the Purchase Price and any expenses incurred by Buyer in connection with the transactions contemplated by this Agreement, (ii) at the Closing will have the resources and capabilities (financial or otherwise) to perform its obligations hereunder, and (iii) has not incurred any obligation, commitment, restriction, or liability of any kind, which would impair or adversely affect such resources and capabilities.

ARTICLE VII

COVENANTS OF THE PARTIES

7.1

Conduct of Business .

(a) Except as specifically contemplated in this Agreement, specifically required by any Business Agreement, Law, or Order, or otherwise specifically described in Schedule 7.1 , during the period from the date of this Agreement to the Closing Date, Seller will operate the Purchased Assets and the Business in the ordinary course consistent with Good Utility Practice and will use commercially reasonable efforts to

STLD01-1185616-10

MICHIGAN GAS

preserve intact the Business, and to preserve the goodwill and relationships with customers, suppliers, Governmental Entities, and others having business dealings with the Business. Without limiting the generality of the foregoing, except as specifically contemplated in this Agreement, specifically required by any Business Agreement, Law, or Order, or otherwise specifically described in Schedule 7.1 , prior to the Closing Date, without the prior written consent of Buyer, which will not be unreasonably withheld, delayed or conditioned, Seller will not:

(i) create, incur, assume, or suffer to exist any Encumbrance (other than Permitted Encumbrances) upon the Purchased Assets;

(ii) make any material change in the level of inventories customarily maintained by Seller with respect to the Business, other than in the ordinary course of business or consistent with Good Utility Practice;

(iii) other than any such sales, leases, transfers, or dispositions involving any Purchased Assets involving less than $25,000 on an individual basis, or $100,000 in the aggregate, sell, lease (as lessor), transfer, or otherwise dispose of any of the Purchased Assets, other than (A) in the ordinary course of business and (B) consistent with Good Utility Practice;

(iv) other than in the ordinary course of business or consistent with Good Utility Practice, (A) enter into, terminate, extend, renew, or otherwise amend any material Business Agreement, or (B) waive any material default by, or release, settle, or compromise any material claim against, any other Person who is a party thereto;

(v) grant severance or termination pay to any present or former employee of the Business that would be the responsibility of Buyer;

(vi) enter into any collective bargaining agreement in which the terms and conditions to be applicable to Transferred Employees of a specific job classification or seniority materially differ from those currently applicable to Business Employees of such specific job classification or seniority;

(vii) amend in any material respect or cancel (or suffer the cancellation of) any property, liability, casualty, or other insurance policies related to the Purchased Assets, or fail to maintain by self insurance, or with financially responsible insurance companies, insurance in such amounts and against such risks and losses as are consistent with Good Utility Practice and customary for such Purchased Assets and the Business;

(viii) enter into, amend, make any waivers under, or otherwise modify any property Tax agreement, treaty, or settlement;

(ix) with respect to the Business, change, in any material respect, its accounting methods or practices, credit practices, collection policies, or investment, financial reporting, or invent

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