Exhibit 10.1
Execution Copy
 
STOCK PURCHASE AGREEMENT
by and between
PPL Corporation

and

UGI Utilities, Inc.
Dated as of March 5, 2008
 

 

 

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

 

Table of Contents

              Page  
 
        ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION

 
       
SECTION 1.1. Definitions
    1  
 
        ARTICLE II
PURCHASE AND SALE

 
       
SECTION 2.1. Purchase and Sale of the PPL Gas Utilities Shares and Purchase
Price
    1  
SECTION 2.2. Aggregate Net Working Capital
    1  
SECTION 2.3. Closing
    3  
SECTION 2.4. Transactions to be Effected at the Closing
    3  
SECTION 2.5. Settlement of Intercompany Accounts
    3  
 
        ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO SELLER

 
       
SECTION 3.1. Organization and Existence
    4  
SECTION 3.2. Authorization
    4  
SECTION 3.3. Consents
    4  
SECTION 3.4. Legal Proceedings
    4  
SECTION 3.5. Noncontravention
    5  
SECTION 3.6. Title
    5  
SECTION 3.7. Brokers
    5  
 
        ARTICLE IV
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANIES

 
       
SECTION 4.1. Organization and Existence
    5  
SECTION 4.2. Subsidiaries
    6  
SECTION 4.3. Financial Statements
    6  
SECTION 4.4. Absence of Certain Changes or Events
    6  
SECTION 4.5. Legal Proceedings
    7  
SECTION 4.6. Compliance with Laws; Sufficiency of Permits and Assets
    7  
SECTION 4.7. Material Contracts
    7  
SECTION 4.8. Properties; No Liens
    8  
SECTION 4.9. Employee Matters
    8  
SECTION 4.10. Environmental Matters
    9  
SECTION 4.11. Insurance
    9  
SECTION 4.12. Taxes
    9  
SECTION 4.13. Regulatory Filings
    10  
SECTION 4.14. Intellectual Property
    10  
SECTION 4.15. Personal Property
    11  
SECTION 4.16. Absence of Undisclosed Liabilities
    11  
SECTION 4.17. Exclusive Representations and Warranties
    11  

 

-i- 

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

 

              Page  
 
        ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER

 
       
SECTION 5.1. Organization and Existence
    11  
SECTION 5.2. Authorization
    11  
SECTION 5.3. Consents and Filings
    12  
SECTION 5.4. Noncontravention
    12  
SECTION 5.5. Legal Proceedings
    12  
SECTION 5.6. Compliance with Laws
    12  
SECTION 5.7. Brokers
    12  
SECTION 5.8. Investment Intent
    13  
SECTION 5.9. Available Funds
    13  
SECTION 5.10. Investigation
    13  
SECTION 5.11. Disclaimer Regarding Projections
    13  
SECTION 5.12. No Other Representations or Warranties
    13  
 
        ARTICLE VI
COVENANTS

 
       
SECTION 6.1. Access to Information
    14  
SECTION 6.2. Conduct of Business Pending the Closing
    14  
SECTION 6.3. Support Obligations
    16  
SECTION 6.4. Confidentiality; Publicity
    18  
SECTION 6.5. Expenses
    18  
SECTION 6.6. Governmental Filings
    18  
SECTION 6.7. Meter Reading
    20  
SECTION 6.8. Seller Marks
    20  
SECTION 6.9. Risk of Loss
    21  
SECTION 6.10. Insurance
    21  
SECTION 6.11. Termination of Certain Services and Contracts; Transition Services
    21  
SECTION 6.12. Distributions
    22  
SECTION 6.13. Transfer Taxes
    22  
SECTION 6.14. Employee, Labor and Benefits Matters
    22  
SECTION 6.15. Tax Matters
    28  
SECTION 6.16. Further Actions
    30  
SECTION 6.17. Preparation of Audited Financial Statements
    31  
 
        ARTICLE VII
SPECIFIED CONDITIONS

 
       
SECTION 7.1. Buyer’s Condition Precedents
    32  
SECTION 7.2. Seller’s Condition Precedents
    33  
 
        ARTICLE VIII
SURVIVAL; INDEMNIFICATION AND RELEASE

 
       
SECTION 8.1. Survival
    34  
SECTION 8.2. Indemnification by Seller
    34  
SECTION 8.3. Indemnification by Buyer
    35  
SECTION 8.4. Indemnification Procedures
    36  

 

ii 

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

 

              Page  
 
       
SECTION 8.5. General
    37  
SECTION 8.6. “As Is” Sale; Release
    37  
SECTION 8.7. Right to Specific Performance; Certain Limitations
    38  
 
        ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER

 
       
SECTION 9.1. Grounds for Termination
    39  
SECTION 9.2. Effect of Termination
    40  
 
        ARTICLE X
MISCELLANEOUS

 
       
SECTION 10.1. Notices
    40  
SECTION 10.2. Severability
    41  
SECTION 10.3. Counterparts
    41  
SECTION 10.4. Entire Agreement; No Third Party Beneficiaries
    41  
SECTION 10.5. Governing Law
    41  
SECTION 10.6. Consent to Jurisdiction; Waiver of Jury Trial
    42  
SECTION 10.7. Assignment
    42  
SECTION 10.8. Headings
    42  
SECTION 10.9. Construction
    42  
SECTION 10.10. Amendments and Waivers
    43  
SECTION 10.11. Schedules and Exhibits
    43  

 

iii 

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

 

Appendices
Appendix A

     
Exhibits
 
Exhibits A
  Stock Transfer Form  
Schedules
   

 
Schedule 1.1
  Aggregate Net Working Capital
Schedule 2(a)
  Seller’s Knowledge
Schedule 2(b)
  Buyer’s Knowledge
Schedule 3.3
  Seller’s Consents
Schedule 3.4
  Seller’s Legal Proceedings
Schedule 3.6
  Seller’s Title
Schedule 4.2(a)
  Companies’ Subsidiaries
Schedule 4.2(b)
  Companies’ Liens on Subsidiaries Ownership
Schedule 4.4
  Companies’ Absence of Certain Changes or Events
Schedule 4.5
  Companies’ Legal Proceedings
Schedule 4.7(c)
  Companies’ Material Contracts
Schedule 4.8
  Companies’ Properties; No Liens
Schedule 4.9(a)
  Companies’ Employee Benefit Plans
Schedule 4.9(e)
  Companies’ Collective Bargaining Agreements, Strikes, Lockouts and Employment
Investigations
Schedule 4.10
  Companies’ Environmental Matters
Schedule 4.11
  Companies’ Insurance
Schedule 4.12
  Companies’ Taxes
Schedule 4.14
  Companies’ Intellectual Property
Schedule 4.16
  Companies’ Absence of Undisclosed Liabilities
Schedule 5.3
  Buyer’s Consents and Filings
Schedule 6.2(a)
  Conduct of Business Pending the Closing
Schedule 6.2(a)(xii)
  Cumulative Capital Expenditures
Schedule 6.3(a)
  Support Obligations
Schedule 6.11(a)
  Termination of Certain Services and Contracts
Schedule 6.11(b)
  Transition Services
Schedule 6.14(b)(i)
  Continuity of Employment at Closing
Schedule 6.14(d)(i)
  Buyer’s Plans
Schedule 6.14(d)(ii)
  Post-Closing Compensation and Benefits
Schedule 6.14(e)
  Severance
Schedule 6.14(e)(i)
  Certain Changes
Schedule 6.15(a)
  Tax Returns

 

iv 

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

 

This STOCK PURCHASE AGREEMENT (this “Agreement”) is dated as of March 5, 2008
and is by and between PPL Corporation, a Pennsylvania corporation (“Seller”),
and UGI Utilities, Inc., a Pennsylvania corporation (“Buyer”).
RECITALS
WHEREAS, Seller owns 100% of the issued and outstanding equity of PPL Gas
Utilities Corporation, a Pennsylvania corporation (“PPL Gas Utilities”);
WHEREAS, in accordance with this Agreement, Buyer desires to purchase, and
Seller desires to sell to Buyer, 100% of the issued and outstanding shares of
capital stock of PPL Gas Utilities (the “PPL Gas Utilities Shares”).
NOW THEREFORE, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1. Definitions. Capitalized terms used in this Agreement have the
meanings ascribed to them by definition in this Agreement or in Appendix A
hereto.
ARTICLE II
PURCHASE AND SALE
SECTION 2.1. Purchase and Sale of the PPL Gas Utilities Shares and Purchase
Price. (a) In accordance with the terms and subject to this Agreement, Buyer
agrees to purchase the PPL Gas Utilities Shares and Seller agrees to sell to
Buyer the PPL Gas Utilities Shares free and clear of any Liens other than any
arising out of this Agreement.
(b) The aggregate purchase price (the “Purchase Price”) for the PPL Gas
Utilities Shares shall be an amount equal to Two Hundred Sixty Seven Million Six
Hundred Thousand U.S. Dollars ($267,600,000.00) (the “Base Purchase Price”),
plus the Aggregate Net Working Capital (whether a positive or a negative
amount). At the Closing, Buyer shall pay to Seller the Base Purchase Price plus
the Estimated Aggregate Net Working Capital in accordance with Section 2.2(a),
without deduction or withholding of any kind, by wire transfer of immediately
available funds in U.S. Dollars to such account or accounts specified by Seller
to Buyer in writing at least one Business Day prior to the Closing.
SECTION 2.2. Aggregate Net Working Capital. (a) At least three Business Days
prior to the Closing Date, Seller will deliver to Buyer a worksheet setting
forth Seller’s good faith reasonable estimate of the Aggregate Net Working
Capital as of the Closing Date (the “Estimated Aggregate Net Working Capital”),
as well as a computation thereof. If the Estimated Aggregate Net Working Capital
is a positive number, the Base Purchase Price payable at Closing will be
increased by an amount equal to such Estimated Aggregate Net Working Capital. If
the Estimated Aggregate Net Working Capital is a negative number, the Base
Purchase Price payable at the Closing will be decreased by an amount equal to
the absolute value of such Estimated Aggregate Net Working Capital.

 

 

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

 

(b) Within 90 days after the Closing, Seller will prepare and deliver to Buyer a
computation of the actual Aggregate Net Working Capital as of the Closing Date
(the “Actual Aggregate Net Working Capital”) and of the Closing Capital
Expenditure Amount (if any). If within 45 days following delivery of such
computation Buyer does not object in writing thereto to Seller, then the Actual
Aggregate Net Working Capital and the Closing Capital Expenditure Amount shall
be as reflected on the computation provided by Seller pursuant to the
immediately preceding sentence. If within such 45 days Buyer objects to Seller
in writing to such computation, then Buyer and Seller shall negotiate in good
faith and attempt to resolve their disagreement. Should such negotiations not
result in an agreement within 20 days after receipt by Seller of such written
objection from Buyer, then the matter shall be submitted to the Independent
Accounting Firm. The Independent Accounting Firm will deliver to Buyer and
Seller a written determination of the Actual Aggregate Net Working Capital
and/or Closing Capital Expenditure Amount (such determination to include a
worksheet setting forth all material calculations used in arriving at such
determination and to be based solely on information provided to the Independent
Accounting Firm by Buyer and Seller) within 30 days of the submission of the
dispute to the Independent Accounting Firm, which determination will be final,
binding and conclusive on the Parties. In resolving any disagreement, the
Independent Accounting Firm may not assign any value to a disputed item greater
than the greatest value claimed for such disputed item by any Party or lesser
than the lowest value claimed for such disputed item by any Party. All fees and
expenses relating to the work, if any, to be performed by the Independent
Accounting Firm pursuant to this Section 2.2(b) will be allocated between Seller
and Buyer in inverse proportion as each shall prevail in respect of the dollar
amount of disputed items so submitted (as finally determined by the Independent
Accounting Firm). If, following the determination of the Actual Aggregate Net
Working Capital and the Closing Capital Expenditure Amount (as agreed between
the Parties or as determined by the Independent Accounting Firm), the amount of
the Estimated Aggregate Net Working Capital, minus the sum of (i) the Actual
Aggregate Net Working Capital, less (ii) the Closing Capital Expenditure Amount
(if any), is a positive number, then Seller shall be obligated to pay Buyer a
cash payment equal to such positive number. If the amount of the Estimated
Aggregate Net Working Capital, minus the sum of (x) the Actual Aggregate Net
Working Capital, less (ii) the Closing Capital Expenditure Amount (if any), is a
negative number, then Buyer shall be obligated to pay Seller a cash payment
equal to the absolute value of such negative number. Any such payment, together
with interest thereon at the rate of five percent (5%) per annum from the
Closing Date through the date of payment, will be due and payable within three
Business Days after the Actual Aggregate Net Working Capital is finally
determined as provided in this Section 2.2(b) and will be payable by wire
transfer of immediately available funds to such account or accounts as shall be
specified by Buyer or Seller, as applicable. For the avoidance of doubt, after
taking into account the payment of the Estimated Aggregate Net Working Capital
and the mechanics of this Section 2.2, the aggregate payment made by Buyer to
Seller with respect to Aggregate Net Working Capital and the Closing Capital
Expenditure Amount shall be an amount equal to the Actual Aggregate Net Working
Capital less the Closing Capital Expenditure Amount (if any).
(c) Following the Closing, Seller and Buyer shall cooperate and provide each
other and, if applicable, the Independent Accounting Firm, with reasonable
access to such books, records and employees as are reasonably requested in
connection with the matters addressed in Section 2.2(b).

 

2

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

 

SECTION 2.3. Closing. The closing of the purchase and sale of the PPL Gas
Utilities Shares (the “Closing”) shall take place at 10:00 a.m., local time, at
the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York,
New York on the fourth Business Day following the satisfaction or waiver of the
conditions set forth in Article VII (other than those conditions that by their
nature are to be satisfied at the Closing), or at such other time, date and
place as may be mutually agreed upon in writing by the Parties (the date on
which the Closing actually occurs being referred to as the “Closing Date”). The
Closing shall be deemed effective as of 12:01 a.m. (Eastern Time) on the Closing
Date.
SECTION 2.4. Transactions to be Effected at the Closing. At the Closing, the
following events shall occur, each event being deemed to have occurred
simultaneously with the other events:
(a) Except as otherwise required in accordance with applicable Law, Seller shall
deliver (or cause to be delivered) to Buyer an instrument of transfer in respect
of the PPL Gas Utilities Shares substantially in the form attached as Exhibit A,
attaching thereto the stock certificates representing the PPL Gas Utilities
Shares.
(b) Seller shall deliver to Buyer a letter of resignation as a director for each
of board members of each of the Companies;
(c) Seller shall deliver to Buyer a certification of its non-foreign status as
set forth in Section 1445 of the Code and the Treasury regulations promulgated
thereunder;
(d) Buyer and Seller shall deliver any other documents required for such Closing
under applicable Law or that may be reasonably requested by the other Party,
including the delivery by Seller to the Companies of the minute books and other
corporate records of each of the Companies; and
(e) Buyer shall pay the Base Purchase Price plus the Estimated Aggregate Net
Working Capital (whether a positive or a negative amount) in accordance with
Section 2.2(a).
SECTION 2.5. Settlement of Intercompany Accounts and Indebtedness. Immediately
prior to the Closing Date, Seller shall cause all intercompany payables,
receivables and loans between any of the Companies, on the one hand, and Seller
and its Affiliates (other than the Companies), on the other hand (“Intercompany
Accounts”), to be settled or cancelled. On or before the Closing Date, Seller
shall cause the payment in full of all Indebtedness of the Companies, including
the payment of any premiums, prepayment penalties and/or make-whole payments
required to be made to satisfy such Indebtedness.

 

3

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

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO SELLER
Except as disclosed in the Schedules (with any disclosure in a Schedule
delivered by Seller being deemed and understood to be a disclosure in each other
Schedule delivered by Seller to which the applicability of the disclosure is
apparent on its face, notwithstanding reference to a specific section or
paragraph), Seller hereby represents and warrants to Buyer as of the date hereof
as follows:
SECTION 3.1. Organization and Existence. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, with all requisite power and authority required to
enter into this Agreement and consummate the transactions contemplated hereby.
Seller is duly qualified or licensed to do business in each other jurisdiction
where the actions required to be performed by it hereunder makes such
qualification or licensing necessary, except in those jurisdictions where the
failure to be so qualified or licensed would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
SECTION 3.2. Authorization. The execution, delivery and performance by Seller of
this Agreement and the consummation by Seller of the transactions contemplated
hereby are within Seller’s powers and have been duly authorized by all necessary
action on the part of Seller. This Agreement constitutes (assuming the due
execution and delivery by the other Party hereto) a valid and legally binding
obligation of Seller enforceable against Seller in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws relating to or affecting creditors’
rights generally and general equitable principles (whether considered in a
proceeding in equity or at law).
SECTION 3.3. Consents. Except as set forth on Schedule 3.3, no consent,
approval, license, permit, order or authorization (each, a “Consent”) of, or
registration, declaration or filing (each, a “Filing”) with, any Governmental
Entity or third party which has not been obtained or made by Seller or the
Companies is required for or in connection with the execution and delivery of
this Agreement by Seller, and the consummation by Seller of the transactions
contemplated hereby, other than such Consents and Filings the failure of which
to obtain or make would not reasonably be expected to have a Material Adverse
Effect.
SECTION 3.4. Legal Proceedings. Except as set forth on Schedule 3.4, there are
no Claims pending or, to Seller’s Knowledge, threatened, against or otherwise
relating to Seller before any Governmental Entity or any arbitrator, that would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Seller is not subject to any judgment, decree, injunction, rule
or order of any Governmental Entity or any arbitrator that prohibits the
consummation of the transactions contemplated by this Agreement or would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

4

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

 

SECTION 3.5. Noncontravention. The execution, delivery and performance of this
Agreement by Seller does not, and the consummation by Seller of the transactions
contemplated hereby will not (i) contravene or violate any provision of the
organizational documents of Seller or the Companies, or (ii) subject to
obtaining the Consents or making the Filings listed in Schedule 3.3, contravene
or violate any provision of, or result in the termination or acceleration of, or
entitle any party to accelerate any obligation or indebtedness under, any
mortgage, lease, franchise, license, permit, agreement, instrument, law, order,
arbitration award, judgment or decree to which Seller or the Companies are a
party or by which Seller or any of the Companies are bound, except, with respect
to the foregoing clause (ii) only, for any such violations or defaults (or
rights of termination, cancellation or acceleration) which would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.6. Title. Except as set forth on Schedule 3.6, Seller is directly the
legal and beneficial owner of, and has good and marketable title to, the PPL Gas
Utilities Shares, free and clear of all Liens other than those arising pursuant
to this Agreement, and the PPL Gas Utilities Shares are fully paid and
non-assessable. There are no outstanding options, warrants or other rights of
any kind including any restrictions on transfers, relating to the sale, or
voting of such PPL Gas Utilities Shares, the subscription of additional shares
in the capital of the Companies or any securities convertible into or evidencing
the right to purchase additional shares in the capital of the Companies. Upon
Closing, Buyer shall have good and marketable title to such PPL Gas Utilities
Shares, free and clear of any Liens, restrictions on transfer and voting or
preemptive rights, other than those arising pursuant to this Agreement.
SECTION 3.7. Brokers. Neither Seller nor any of its Affiliates (including, for
these purposes, the Companies) have any liability or obligation to pay fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which Buyer or its Affiliates (including, for
these purposes, the Companies) could become liable or obliged.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANIES
Except as disclosed in the Schedules (with any disclosure in a Schedule
delivered by Seller being deemed and understood to be a disclosure in each other
Schedule delivered by Seller to which the applicability of the disclosure is
apparent on its face, notwithstanding reference to a specific section or
paragraph), Seller hereby represents and warrants to Buyer as of the date hereof
as follows:
SECTION 4.1. Organization and Existence. The Companies are each duly
incorporated or organized, validly existing and in good standing under the laws
of their place of organization. The Companies are duly qualified or licensed to
transact business in each jurisdiction in which the properties owned, leased or
operated by the Companies or the nature of the business conducted by the
Companies makes such qualification necessary, except as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

5

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

 

SECTION 4.2. Subsidiaries. (a) The legal name, place of organization and
respective ownership interest of each of the Companies is set forth on
Schedule 4.2 hereto. Except for PPL Gas Utilities’ ownership of Penn Fuel and
Gas-Oil Products, the Companies do not own any direct or indirect equity
ownership, participation or voting right or interest in any other Person
(including any Contract in the nature of a voting trust or similar agreement or
understanding or indebtedness having general voting rights) or any options,
warrants, convertible securities, exchangeable securities, subscription rights,
conversion rights, exchange rights, stock appreciation rights, phantom stock,
profit participation or other similar rights or Contracts in or issued by any
other Person.
(b) PPL Gas Utilities is directly the legal and beneficial owner of, and has
good and marketable title to, 100% of the membership interests of Penn Fuel (the
“Penn Fuel Interests”) and 100% of the issued and outstanding shares of capital
stock of Gas-Oil Products (the “Gas-Oil Shares”), free and clear of all Liens
other than arising pursuant to this Agreement or as set forth on
Schedule 4.2(b), and the Penn Fuel Interests and the Gas-Oil Shares are fully
paid and non-assessable. There are no outstanding options, warrants or other
rights of any kind, including any restrictions on transfers, in favor of any
Person other than PPL Gas Utilities relating to such Penn Fuel Interests or
Gas-Oil Shares.
SECTION 4.3. Financial Statements. (a) Seller has previously furnished or made
available to Buyer copies of the unaudited financial statements of PPL Gas
Utilities and Penn Fuel as of and for the years ended December 31, 2005,
December 31, 2006 and December 31, 2007 (the “Financial Statements”); and the
Financial Statements fairly present, in all material respects, in conformity
with GAAP, the financial position, the results of operations and cash flows of
PPL Gas Utilities and Penn Fuel as of the dates and for the periods indicated,
subject in the case of any unaudited Financial Statements to normal year-end
adjustments and the absence of footnotes.
(b) Seller and the Companies maintain a system of internal accounting controls
with respect to the business conducted by the Companies sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for inventory is compared
with existing inventory at reasonable intervals and appropriate action is taken
with respect to any differences.
(c) Seller and the Companies have established, maintain and evaluate controls
and procedures with respect to the business conducted by the Companies that are
reasonably designed to ensure that material information relating to such
business is made known to Seller’s Chief Executive Officer and its Chief
Financial Officer by others at the Companies, and such controls and procedures
are reasonably effective to perform the functions for which they were
established.
SECTION 4.4. Absence of Certain Changes or Events. Except (a) as set forth on
Schedule 4.4, and (b) for any action taken by the Companies that would be
permitted without Buyer’s consent under Section 6.2(a), since September 30,
2007, (i) the Companies’ business has been conducted in accordance with the
ordinary course of business consistent with past practices, except in connection
with any process relating to a sale of the Companies, including entering into
this Agreement. Since September 30, 2007, there has not been any change, event
or effect that, individually or in the aggregate with other changes, events or
effects, has resulted in, or, to the Seller’s Knowledge, is reasonably expected
to result in, a Material Adverse Effect.

 

6

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

 

SECTION 4.5. Legal Proceedings. Except as set forth on Schedule 4.5, there are
no Claims pending or, to Seller’s Knowledge, threatened, against or otherwise
relating to the Companies before any Governmental Entity or any arbitrator which
involve a claim of $500,000 or more. None of such Claims, would, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect.
Except as disclosed on Schedule 4.5, the Companies are not subject to any
judgment, decree, injunction, rule or order of any Governmental Entity or any
arbitrator that would, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect.
SECTION 4.6. Compliance with Laws; Sufficiency of Permits and Assets. Except for
such noncompliance that would not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect, each of the Companies is in
compliance in all respects with any Law applicable to it or its business or
properties. All permits, certificates, licenses and other authorizations of all
Governmental Entities, and all equipment, inventory, intellectual property, real
property and other assets, that the Companies require in order to own, lease,
maintain, operate and conduct its business as currently conducted, are held by
the Companies, except such permits, certificates, licenses, authorizations,
equipment, inventory and other property and assets, the failure to have would
not, individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect. The Companies are in compliance with the terms of all permits,
licenses, franchises, orders and other authorizations, consents and approvals
from Governmental Entities, except for such noncompliance that would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. To Seller’s Knowledge, neither Seller nor any of the Companies
has received written notice of any material violation of Law which remains
outstanding with respect to the Companies or their business or properties during
the last five (5) years. This Section 4.6 does not relate to (i) Employee
Matters, which matters are the subject of Section 4.9, (ii) environmental
matters, which matters are the subject of Section 4.10, or (iii) matters related
to Taxes, which matters are the subject of Section 4.12.
SECTION 4.7. Material Contracts. (a) The Companies have provided Buyer with, or
access to, true and complete copies of all Material Contracts as of the date
hereof.
(b) Each Material Contract constitutes the valid and binding obligation, in full
force and effect, of the Companies and, to the Seller’s Knowledge, the other
parties thereto.
(c) Except as set forth on Schedule 4.7(c), the Companies are not in default,
and, to the Seller’s Knowledge, no other party is in default in the performance
or observance of any term or provision of, and no event has occurred which, with
lapse of time or action by a third party, would result in such a default under
any Material Contract to which the Companies are a party or by which any of them
is bound or to which any of its assets and property are subject, other than such
defaults or events as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

 

7

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

 

(d) Except for the Note Purchase Agreement referenced on Schedule 4.8, the
execution, delivery and performance of this Agreement by Seller does not, and
the consummation by Seller of the transactions contemplated hereby will not,
contravene or violate any provision of, or result in the termination or
acceleration of, or entitle any party to accelerate any obligation or
indebtedness under, any Material Contract.
SECTION 4.8. Properties; No Liens. Except as set forth in Schedule 4.8, the
Companies have sufficient title to, or valid leasehold interests in, all real
property owned or leased by them to permit the operation of their business as a
whole substantially as such business has been operated heretofore without a
Material Adverse Effect. None of such properties or any other assets of the
Companies (whether real or personal) is subject to any Lien, except for (i)
Liens set forth on Schedule 4.8 and (ii) Permitted Liens.
SECTION 4.9. Employee Matters. (a) Schedule 4.9(a) sets forth a list of each
material “employee benefit plan” (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), and each
material severance, change in control, vacation, bonus, and equity incentive
plan, program, policy, arrangement or agreement and any other plan, program,
policy or arrangement, in each case that is sponsored, contributed to or
maintained by the Seller or the Companies and in which present or former
employees of any of the Companies participate or in which the Companies have any
outstanding present or future obligations to contribute or make payments
(collectively, the “Benefit Plans”). Copies of all such Benefits Plans have been
delivered or made available to Buyer.
(b) Except as would not, individually or in the aggregate, be reasonably likely
to have a Material Adverse Effect: (x) the Benefit Plans are in compliance with
all applicable requirements of ERISA, the Code, and other applicable laws and
have been administered in accordance with their terms and such laws; and
(y) each Benefit Plan that is intended to be qualified within the meaning of
Section 401 of the Code has received a favorable determination letter as to its
qualification, and nothing has occurred that could reasonably be expected to
result in the revocation of such letter.
(c) There are no pending or, to Seller’s Knowledge, threatened claims and no
pending or, to the Seller’s Knowledge, threatened litigation with respect to any
of the Benefit Plans, other than ordinary and usual claims for benefits by
participants and beneficiaries, in either case which, if determined or resolved
adversely, would, not individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect.
(d) Except as set forth on Schedule 4.9(d), or as would not, individually or in
the aggregate, be reasonably likely to have a Material Adverse Effect:
(i) no current employees of any of the Companies are represented by a union or
other collective bargaining representative;
(ii) there are no pending, nor, to Seller’s Knowledge, threatened, labor
strikes, requests for representation, work stoppages or lockouts involving
employees of any of the Companies;

 

8

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

 

(iii) Seller has not received written notice of any pending charges before any
governmental authority responsible for the prevention of unlawful employment
practices; and
(iv) Seller has not received written notice of any pending investigation by a
governmental authority relating to employees or employment practices.
SECTION 4.10. Environmental Matters. Except as disclosed on Schedule 4.10:
(a) the Companies are in material compliance with all, and except for violations
which have been resolved, have not violated in any material respect any,
applicable Environmental Laws; (b) there are no suits, demands, claims,
hearings, investigations or proceedings (in each case, in writing) pending or,
to Seller’s Knowledge, threatened against the Companies or with respect to their
material assets relating to any material violation, or alleged material
violation, of, or material liability or alleged material liability under or
relating to, any Environmental Law; (c) the Companies have not disposed of or
released or transported, or arranged for the disposal or release or
transportation, of any Hazardous Substance in material violation of any
applicable Environmental Law, or in a manner or to a location that would
reasonably be expected to give rise to any material liability to the Companies
under or relating to any Environmental Law; (d) to the Seller’s Knowledge, no
Hazardous Substance is otherwise present at or about any real property or
facility currently or formerly owned or operated by the Companies, in amount or
condition that would reasonably be expected to result in material liability to
the Companies under or relating to any Environmental Law, and (e) other than in
the ordinary course of business, including the leasing of any Real Property, to
the Seller’s Knowledge, the Companies have not agreed in writing to provide
indemnity against any material liability under or relating to any Environmental
Law. This Section 4.10 contains the sole and exclusive representations and
warranties of Seller relating to Environmental Laws, Hazardous Substances or
other environmental matters.
SECTION 4.11. Insurance. The Companies and their businesses and/or properties
are insured to the extent specified under the insurance policies listed on
Schedule 4.11 (the “Policies”). All premiums payable under such Policies have
been paid in a timely manner and Seller and the Companies have complied in all
material respects with the terms and conditions of all such Policies. All
material Policies are in full force and effect. Neither Seller nor any of the
Companies is in material default under any provisions of the Policies, and there
is no claim by Seller or any of the Companies or any other Person pending under
any of the Policies as to which coverage has been questioned, denied or disputed
by the underwriters or issuers of such Policies. No written notice of
cancellation or termination has been received by Seller or any of the Companies
with respect to any such policies that have not been replaced on substantially
similar terms prior to the date of such cancellation or termination.
SECTION 4.12. Taxes. Except as set forth on Schedule 4.12: (i) all U.S. federal
income and other material Tax Returns required to be filed by the Companies or
by Seller with respect to the Companies have been or will be filed when due in
accordance with all applicable Laws and the Companies or Seller have paid in
full all material Taxes when due in accordance with all applicable Laws;
(ii) there are no Tax Liens on any of the stock or assets of the Companies
(including the PPL Gas Utilities Shares), other than with respect to Taxes not
yet due and payable; (iii) there is no action, suit, proceeding, investigation,
audit or

 

9

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

 

Claim pending, or, to Seller’s Knowledge, threatened in writing, relating to any
Tax matters of or related to the Companies; (iv) neither Seller (with respect to
the Companies) nor the Companies has granted any waiver or extension of the
statutory period of limitation applicable to any claim for, or the period for
the collection or assessment of, any material Taxes; (v) the Companies have
timely and properly collected, withheld and remitted to the Taxing Authority to
whom such payment is due all amounts required to be collected or withheld by the
Companies for the payment of material Taxes; (vi) none of the Companies is a
party to any tax sharing agreement or similar contract or arrangement or any
agreement that obligates it to make any payment computed by reference to the
Taxes, taxable income or taxable losses of any other Person; (vii) none of the
Companies has any liability for Taxes of any person arising from the application
of Treasury Regulation Section 1.1502-6 or any analogous provision of state,
local or foreign law, or as a transferee or successor, by contract, or
otherwise; and (viii) neither Seller, with respect to the Companies, nor any of
the Companies has engaged in any activity or accounting practice that is a
“listed transaction” as defined in Treasury Regulation Section 1.6011-4(b)(2).
SECTION 4.13. Regulatory Filings. (a) The Companies have filed all forms,
reports and documents required to be filed by it under applicable law, including
all filings with the Federal Energy Regulatory Commission and applicable state
public utility commissions, since January 1, 1999 through the date of this
Agreement (collectively, the “Company Reports”), except where such failure would
not reasonably be expected to have a Material Adverse Effect. The Company
Reports (i) were prepared in accordance with applicable Law, and (ii) did not at
the time they were filed contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading, except for matters which would not reasonably be
expected to have a Material Adverse Effect.
(b) To Seller’s Knowledge, PPL Gas Utilities has authorization under
certificates of public convenience from the Pennsylvania Public Utility
Commission and the Maryland Public Service Commission or is otherwise legally
entitled in all material respects to provide service in all areas (i) where it
currently provides service to its customers or (ii) as identified on its
tariffs, except with respect to any potential overlap or other conflict between
the areas currently served by, or identified on tariffs of, PPL Gas Utilities
(on the one hand) and Buyer (on the other hand).
SECTION 4.14. Intellectual Property. Except as set forth on Schedule 4.14, the
Companies possess or have adequate rights to use all trademarks, trade names,
patents, service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of the Companies’
business in the manner in which it is currently being conducted by the
Companies, except for the failure to possess or have adequate rights to use such
properties that would not have a Material Adverse Effect. Except as set forth on
Schedule 4.14, Seller has no Knowledge of (a) any infringement or claimed
infringement by the Companies of any patent, trademark, service mark or
copyright of others or (b) any infringement of any patent, trademark, service
mark or copyright owned by or under license to the Companies except for any such
infringements of the type described in clause (a) or (b) that are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect.

 

10

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

 

SECTION 4.15. Personal Property. Except for such exceptions as are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect, the machinery and equipment included among the Assets are in normal
operating condition and in a state of reasonable maintenance and repair and are
suitable in all material respects for the purposes for which they are now being
used in the conduct of the business of the Companies
SECTION 4.16. Absence of Undisclosed Liabilities. Except as disclosed on
Schedule 4.16, the Companies do not have any indebtedness or liability, absolute
or contingent, of a nature required by GAAP to be reflected in a consolidated
corporate balance sheet relating to the Companies, except liabilities,
obligations or contingencies that (a) are accrued or reserved against in the
Financial Statements, (b) were incurred or accrued in the ordinary course of
business (including liens of current taxes and assessments not in default) since
September 30, 2007, or (c) to Seller’s Knowledge, would not reasonably be
expected, individually or in the aggregate, to have an adverse financial effect
on the Companies of more than $500,000.
SECTION 4.17. Exclusive Representations and Warranties. It is the explicit
intent of each Party hereto that Seller is not making any representation or
warranty whatsoever, express or implied, except those representations and
warranties expressly set forth in Article III and this Article IV.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as disclosed in the Schedules (with any disclosure in a Schedule
delivered by Buyer being deemed and understood to be a disclosure in each other
Schedule delivered by Buyer to which the applicability of the disclosure is
apparent on its face, notwithstanding reference to a specific section or
paragraph), Buyer hereby represents and warrants to Seller as of the date hereof
as follows:
SECTION 5.1. Organization and Existence. Buyer is a corporation duly
incorporated, validly subsisting and in good standing under the laws of the
Commonwealth of Pennsylvania, with all requisite power and authority required to
enter into this Agreement and consummate the transactions contemplated hereby.
Buyer is, or will be prior to Closing, duly qualified or licensed to do business
in each other jurisdiction where the actions required to be performed by it
hereunder makes such qualification or licensing necessary, except in those
jurisdictions where the failure to be so qualified or licensed would not
reasonably be expected to result in a material adverse effect on Buyer’s ability
to perform its obligations hereunder.
SECTION 5.2. Authorization. The execution, delivery and performance by Buyer of
this Agreement and the consummation by Buyer of the transactions contemplated
hereby are within Buyer’s powers and have been duly authorized by all necessary
action on the part of Buyer. This Agreement constitutes (assuming the due
execution and delivery by the other Party hereto) a valid and legally binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally and general equitable principles (whether considered
in a proceeding in equity or at law).

 

11

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

 

SECTION 5.3. Consents and Filings. Except for those Consents and Filings listed
in Schedule 5.3, no Consent of, or Filing with, any Governmental Entity which
has not been obtained or made by Buyer is required for or in connection with the
execution and delivery of this Agreement by Buyer, and the consummation by Buyer
of the transactions contemplated hereby, other than such Consents and Filings
the failure of which to obtain or make would not materially impair or delay the
ability of Buyer to effect the Closing. Other than matters within the discretion
of regulatory authorities, Buyer has no Knowledge of any facts or circumstances
relating to Buyer or its Affiliates that reasonably would be likely to preclude
or materially impair or delay either (i) the receipt of such required consents
or (ii) consummation of the transactions contemplated by this Agreement in
accordance with its terms.
SECTION 5.4. Noncontravention. The execution, delivery and performance of this
Agreement by Buyer does not, and the consummation by Buyer of the transactions
contemplated hereby will not (i) contravene or violate any provision of the
organizational or constitutional documents of Buyer, or (ii) subject to
obtaining the Consents or making the Filings listed in Schedule 5.3, contravene
or violate any provision of, or result in the termination or acceleration of, or
entitle any party to accelerate any obligation or indebtedness under, any
mortgage, lease, franchise, license, permit, agreement, instrument, law, order,
arbitration award, judgment or decree to which Buyer is a party or by which
Buyer is bound, except to the extent that any such events would not materially
impair or delay the ability of Buyer to effect the Closing.
SECTION 5.5. Legal Proceedings. There are no Claims pending or, to Buyer’s
Knowledge, threatened, against or otherwise relating to Buyer before any
Governmental Entity or any arbitrator that would, individually or in the
aggregate, reasonably be expected to have a material adverse effect on Buyer’s
ability to perform its obligations hereunder. Buyer is not subject to any
judgment, decree, injunction, rule or order of any Governmental Entity or any
arbitrator that prohibits the consummation of the transactions contemplated by
this Agreement or would, individually or in the aggregate, reasonably be
expected to have a material adverse effect on Buyer’s ability to perform its
obligations hereunder.
SECTION 5.6. Compliance with Laws. Buyer is not in violation of any Law, except
for violations that would not, individually or in the aggregate, reasonably be
expected to result in a material adverse effect on Buyer’s ability to perform
its obligations hereunder.
SECTION 5.7. Brokers. Neither Buyer nor any of its Affiliates has any liability
or obligation to pay fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which Seller or
its Affiliates could become liable or obliged.

 

12

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

 

SECTION 5.8. Investment Intent. Buyer is acquiring the PPL Gas Utilities Shares
for its own account for investment and not with a view to, or for sale or other
disposition in connection with, any distribution of all or any part thereof in
violation of federal or state securities law. In acquiring the PPL Gas Utilities
Shares, Buyer is not offering or selling, and will not offer or sell, for Seller
in connection with any distribution of the PPL Gas Utilities Shares, and Buyer
will not participate in any such undertaking or in any underwriting of such an
undertaking except in compliance with applicable federal and state securities
laws. Buyer acknowledges that it is able to fend for itself, can bear the
economic risk of its investment in the PPL Gas Utilities Shares, and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the PPL Gas Utilities
Shares. Buyer is an “accredited investor” as such term is defined in
Regulation D under the U.S. Securities Act of 1933, as amended (together with
the rules and regulations promulgated thereunder, the “Securities Act”). Buyer
understands that the PPL Gas Utilities Shares have not been registered pursuant
to the Securities Act or any applicable state securities laws, that the PPL Gas
Utilities Shares will be characterized as “restricted securities” under federal
securities laws and that under such laws and applicable regulations the PPL Gas
Utilities Shares cannot be sold or otherwise disposed of without registration
under the Securities Act or an exemption therefrom.
SECTION 5.9. Available Funds. Buyer at the Closing will have all funds necessary
for its payment of the Base Purchase Price plus the Estimated Aggregate Net
Working Capital in accordance with Section 2.2(a) and for all other actions
necessary for Buyer to consummate the transactions contemplated in this
Agreement.
SECTION 5.10. Investigation. Buyer is a sophisticated entity, is knowledgeable
about the industry in which the Companies operate, experienced in investments in
such businesses and able to bear the economic risk associated with the purchase
of the PPL Gas Utilities Shares. Buyer has such knowledge and experience as to
be aware of the risks and uncertainties inherent in the purchase of shares of
the type contemplated in this Agreement, as well as the knowledge of the
industries in which the Companies operate, and has independently, based on such
information made its own analysis and decision to enter into this Agreement.
SECTION 5.11. Disclaimer Regarding Projections. Buyer may be in possession of
certain projections and other forecasts regarding the Companies, including but
not limited to projected financial statements, cash flow items and other data of
the Companies and certain business plan information of the Companies. Buyer
acknowledges that there are substantial uncertainties inherent in attempting to
make such projections and other forecasts and plans and accordingly is not
relying on them, that Buyer is familiar with such uncertainties, that Buyer is
taking full responsibility for making its own evaluation of the adequacy and
accuracy of all projections and other forecasts and plans so furnished to it,
and that Buyer shall have no claim against anyone with respect thereto.
Accordingly, Buyer acknowledges that, without limiting the generality of
Section 5.11, neither Seller nor any of its Affiliates has made any
representation or warranty with respect to such projections and other forecasts
and plans.
SECTION 5.12. No Other Representations or Warranties. It is the explicit intent
of each Party hereto that Buyer is not making any representation or warranty
whatsoever, express or implied, except those representations and warranties
expressly set forth in this Article V.

 

13

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

 

ARTICLE VI
COVENANTS
SECTION 6.1. Access to Information. (a) During the Interim Period, Seller shall
cause the Companies to provide Buyer and its Representatives with information as
to the Companies and their material operations, as reasonably requested by Buyer
and to the extent such information is readily available or could be obtained
without any material interference with the business or operations of the
Companies. Notwithstanding the foregoing, Seller shall not be required to
provide any information which Seller reasonably believes it or the Companies are
prohibited from providing to Buyer by reason of applicable Law, which
constitutes or allows access to information protected by attorney/client
privilege. Buyer shall not be permitted during the Interim Period to contact any
of the Companies’ vendors, customers or suppliers, or any Governmental Entities
(except in connection with applications for governmental approvals in connection
with this Agreement and obtaining publicly available information) regarding the
operations or legal status of the Companies without receiving prior written
authorization from Seller.
(b) After the Closing, Buyer will, and will cause its Representatives to, afford
to Seller, including its Representatives, reasonable access, upon reasonable
prior notice and during normal business hours, to all books, records, files and
documents to the extent they are related to the Companies in order to permit
Seller to prepare and file its Tax Returns and to prepare for and participate in
any investigation with respect thereto, to prepare for and participate in any
other investigation and defend any Proceedings relating to or involving Seller,
to discharge its obligations under this Agreement, to comply with financial
reporting requirements, and for other reasonable purposes, and will afford
Seller reasonable assistance in connection therewith. Except as otherwise
provided in Section 6.15(f), Buyer will cause such records to be maintained for
not less than seven years from the Closing Date and will not dispose of such
records without first offering in writing to deliver them to Seller; provided,
however, that in the event that Buyer transfers all or a portion of the business
of the Companies to any third party during such period, Buyer may transfer to
such third party all or a portion of the books, records, files and documents
related thereof, provided such third party transferee expressly assumes in
writing the obligations of Buyer under this Section 6.1(b). In addition, on and
after the Closing Date, at Seller’s request, Buyer shall make available to
Seller and its Affiliates, employees, representatives and agents, those
employees of Buyer requested by Seller in connection with any Proceeding,
including to provide testimony, to be deposed, to act as witnesses and to assist
counsel; provided, however, that such access to such employees shall not
unreasonably interfere with the normal conduct of the operations of Buyer.
Seller shall reimburse Buyer 125% of the costs incurred by Buyer in complying
with the provisions of this Section 6.1(b). Notwithstanding the foregoing, Buyer
and the Companies shall not be required to provide any information which Buyer
reasonably believes it or the Companies are prohibited from providing to Seller
by reason of applicable Law, which constitutes or allows access to information
protected by the attorney/client privilege.
SECTION 6.2. Conduct of Business Pending the Closing. (a) During the Interim
Period, Seller shall cause the Companies to maintain their business in the
ordinary course of business consistent with Good Practices, and to use
commercially reasonable efforts to preserve, maintain and protect their assets
in material compliance with applicable Laws. Without limiting the foregoing,
during the Interim Period, except as otherwise expressly contemplated by this
Agreement or set forth in Schedule 6.2(a) or as consented to by Buyer, which
consent shall not be unreasonably withheld, conditioned or delayed, Seller shall
cause the Companies not to:
(i) sell or dispose of any of its assets or properties, other than sales and
dispositions in the ordinary course of business, sales or dispositions of
obsolete or surplus assets, sales and dispositions in connection with the normal
repair and/or replacement of assets or properties, or sales or dispositions in
accordance with any Material Contract; provided, that the Companies shall be
permitted to declare and distribute any cash dividends or other cash
distributions or to repay any intercompany debt;

 

14

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

 

(ii) merge or consolidate with any other Person (including with any of the other
Companies) or acquire all or substantially all of the assets of any other Person
or enter into any joint venture, partnership or similar venture with any other
Person;
(iii) grant, issue, sell, or otherwise dispose of any of their equity interests,
including granting options, warrants or other rights to acquire such equity
interests;
(iv) liquidate, dissolve, reorganize or otherwise wind up their business or
operations;
(v) purchase any equity securities of any Person (including securities or shares
issued by any of the Companies), except for short-term investments or cash
equivalents made in the ordinary course of business consistent with past
practices;
(vi) amend or modify their organizational documents;
(vii) effect any recapitalization, reclassification or like change in their
capitalization;
(viii) engage in any new line of business;
(ix) (A) change any material Tax or accounting methods, policies or practices
inconsistent with past practice, except as required by a change in GAAP or
applicable Law, (B) make, revoke or amend any material Tax election, (C) consent
to extend the period of limitations for the payment or assessment of any
material Tax, (D) enter into any closing agreement affecting any material Tax
liability or refund, or (E) settle or compromise any material Tax liability or
refund;
(x) except in accordance with the terms of any existing Contract, Benefit Plan
or CBA, grant any material increase or change in total compensation or benefits
(taken as a whole) to any employee of the Companies or enter into any material
employment, severance or similar Contract with any Person or amend any such
existing Contracts to materially increase any amounts payable or benefits
provided thereunder;
(xi) enter into, assign, amend, terminate or waive any material term under any
Material Contract other than in the ordinary course of business, provided that
such ordinary course exception shall not be applicable to any release or
assignment of any natural gas supply, pipeline transportation or storage
Contract for a term of more than one month unless there is a Legal Requirement
to the contrary;

 

15

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

 

(xii) purchase or lease (as lessee), or make any Contract for the purchase or
lease (as lessee) of, any material assets, other than (x) the purchase of
assets, including inventory, in the ordinary course of business, (y) pursuant to
capital expenditures per calendar year of up to 110% of all capital expenditures
for the Companies for the calendar year ended December 31, 2007; provided, that
Seller shall cause the Companies to make capital expenditures (excluding capital
expenditures for new business) in accordance with Schedule 6.2(a)(xii), or
(z) the purchase or lease (as lessee) of Assets amounting to less than
$1,000,000 in the aggregate;
(xiii) make any base rate filings or, other than in the ordinary course of
business (including fuel recovery filings), any other rate filing or tariff
change; or
(xiv) agree or commit to do any of the foregoing.
(b) Notwithstanding Section 6.2(a) or any other provision herein, the Companies
may take commercially reasonable actions with respect to gas or propane business
emergency situations and/or to comply with applicable Laws; provided, however,
that Seller shall provide Buyer with notice of such action as soon as reasonably
practicable.
(c) During the Interim Period, the Seller shall cause Gas-Oil Products to
continue to diligently complete the remediation work at the Georgetown, Delaware
property using commercially reasonable efforts, and the Seller shall ensure that
on the Closing Date, Gas-Oil Products will have funds in the amount of $864,954
(less any amounts used to remediate the site during the Interim Period), which
amounts shall not be included in the Net Working Capital.
SECTION 6.3. Support Obligations. (a) Buyer recognizes that Seller and/or
certain of the Non-Company Affiliates have provided guarantees or other credit
support to the Companies, all of which that are outstanding as of the date
hereof are set forth on Schedule 6.3(a) (such support obligations contained in
Schedule 6.3(a), as modified or replaced from time to time in the ordinary
course of business, are hereinafter referred to as the “Support Obligations”).
(b) Prior to the Closing, Buyer and Seller shall cooperate, and each shall use
its commercially reasonable efforts, to effect the full and unconditional
release, effective as of the Closing Date, of Seller and the Non-Company
Affiliates from all Support Obligations (except for those marked with an
asterisk on Schedule 6.3(a)), in the case of Buyer, by (among other things):
(i) furnishing a letter of credit to replace each existing letter of credit that
is a Support Obligation containing terms and conditions that are substantially
similar to the terms and conditions of such existing letter of credit and from
lending institutions that have a Credit Rating commensurate with or better than
that of lending institutions for such existing letter of credit;
(ii) instituting an escrow arrangement to replace each existing escrow
arrangement that is a Support Obligation with terms reasonably acceptable to the
counterparty of such existing escrow arrangement;
(iii) furnishing a guaranty to replace each existing guaranty that is a Support
Obligation, which replacement guaranty is issued by a Person having a Credit
Rating at least equal to “investment grade” and containing terms and conditions
that are substantially similar to the terms and conditions of such existing
guaranty;

 

16

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

 

(iv) posting a surety or performance bond to replace each existing surety or
performance bond that is a Support Obligation, which replacement surety or
performance bond is issued by a Person having a net worth and Credit Rating at
least equal to those of the issuer of such existing surety or performance bond,
and containing terms and conditions that are substantially similar to the terms
and conditions of such existing surety or performance bond; or
(v) replacing any other security agreement or arrangement on substantially
similar terms and conditions to the existing security agreement or arrangement
that is a Support Obligation.
(c) Buyer and Seller shall cooperate, and each shall use its commercially
reasonable efforts, to cause the beneficiary or beneficiaries of such Support
Obligations (except for those marked with an asterisk on Schedule 6.3(a)) to
(i) remit any cash to Seller or one of its Affiliates, as applicable, held under
any escrow arrangement that is a Support Obligation promptly following the
replacement of such escrow arrangement pursuant to Section 6.3(b)(ii) and (ii)
terminate, surrender and redeliver to Seller, one of its Affiliates or Seller’s
other designee each original copy of each original guaranty, letter of credit or
other instrument constituting or evidencing such Support Obligations.
(d) If Buyer and Seller are not successful, following the use of commercially
reasonable efforts, in obtaining the complete and unconditional release of
Seller and the Non-Company Affiliates from any Support Obligations (except for
those marked with an asterisk on Schedule 6.3(a)) by the Closing Date (each such
unreleased Support Obligation, until such time as such Support Obligation is
released in accordance with Section 6.3(d)(i), a “Continuing Support
Obligation”), then:
(i) from and after the Closing Date, Buyer and Seller shall continue to
cooperate, and each shall continue to use its commercially reasonable efforts,
to obtain promptly the full and unconditional release of Seller and the
Non-Company Affiliates from each Continuing Support Obligation;
(ii) Buyer shall indemnify Seller and the Non-Company Affiliates from and
against any liabilities, losses and reasonable costs or expenses incurred by
Seller and the Non-Company Affiliates from and after the Closing Date in
connection with each Continuing Support Obligation (including any demand or draw
upon, or withdrawal from, any Continuing Support Obligation);
(iii) Buyer shall not, and shall cause its Affiliates, including in all events
the Companies and their Affiliates, not to, effect any amendments or
modifications or any other changes to the contracts or obligations to which any
of the Continuing Support Obligations relate, or to otherwise take any action
that could increase, extend or accelerate the liability of Seller or any
Non-Company Affiliate under any Continuing Support Obligation, without Seller’s
prior written consent, which, subject to the application of the provisions of
this Section 6.3(d) to any such increase, extension or acceleration, shall not
be unreasonably withheld or delayed; and

 

17

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

 

(iv) if requested by Seller, at any time after three months after the Closing
Date, Buyer shall provide a letter of credit to Seller from a lending
institution that has a Credit Rating of “investment grade” or better for the
full amount of such Continuing Support Obligation.
SECTION 6.4. Confidentiality; Publicity. (a) Prior to Closing, neither Party
will make any public announcement or issue any public communication regarding
this Agreement or the proposed transaction, or any matter related to the
foregoing, without the prior written consent of the other Party (not to be
unreasonably withheld), except if such announcement or other communication is
required by applicable Law or Legal Requirement, in which case the disclosing
party shall, as permitted by applicable Law or Legal Requirement, first allow
the other Party at least one Business Day to review such announcement or
communication and the opportunity to comment thereon. The confidentiality
provisions set forth in paragraphs 1, 2, 3, 4 and 5 of the Confidentiality
Agreement shall be incorporated herein, with effect from the date hereof until
the earlier to occur of (i) the Closing, or (ii) two years from the date hereof.
(b) Seller will, for a period of three (3) years from the Closing Date, refrain
from, either alone or in conjunction with any other Person, or directly or
indirectly through its Affiliates, disclosing to any third party (other than any
of Seller’s Affiliates, agents, or advisors (including financial advisors,
counsel and accountants)) any confidential, proprietary or secret information
relating to the Companies or the business conducted by the Companies; provided
that the foregoing shall not apply to any disclosure required by applicable Law
or Legal Requirement (including as required by legal, judicial or administrative
process). Notwithstanding the foregoing, the restrictions contained in this
Section 6.4(b) shall in no event apply to any information (i) that is or becomes
generally available to the public or the industry in which a Company competes
(other than as a result of a breach of this Section 6.4(b)), (ii) that becomes
available to Seller or any of its Affiliates from a third party after the
Closing not bound by confidentiality agreement or any legal, fiduciary or other
obligation restricting disclosure that is known to Seller, or (iii) that is
independently developed by Seller or one of its Affiliates after the Closing
without the use of any confidential, proprietary or secret information relating
to the Companies in the possession of Seller prior to the Closing.
SECTION 6.5. Expenses. Except as otherwise expressly provided in this Agreement,
whether or not the transactions contemplated hereby are consummated, each Party
will pay its own costs and expenses, and Seller shall pay all of the third-party
costs and expenses of the Companies, incurred in anticipation of, relating to
and in connection with the negotiation and execution of this Agreement and the
transactions contemplated hereby. Notwithstanding this immediately preceding
sentence, each Party shall pay one-half of all filing fees required by
Governmental Entities with respect to Filings or Consents, including filing fees
in connection with filings under the HSR Act.
SECTION 6.6. Governmental Filings. (a) HSR Act Filing. Buyer and Seller shall
cooperate with each other and use their reasonable best efforts to make
appropriate filings of Notification and Report Forms pursuant to the HSR Act
with respect to the transactions contemplated hereby within 30 days following
the execution of this Agreement. Buyer and Seller shall cooperate with each
other and supply as promptly as practicable any additional information or
documentary material that may be requested pursuant to the HSR Act and shall
take all other actions reasonably necessary to cause the expiration or
termination of the applicable waiting periods under the HSR Act as soon as
practicable.

 

18

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

 

Buyer and Seller shall comply substantially with any additional requests for
information, including requests for production of documents and production of
witnesses for interviews or depositions, made by the Antitrust Division of the
United States Department of Justice, the United States Federal Trade Commission
or the antitrust or competition law authorities of any other jurisdiction (the
“Antitrust Authorities”) and take all other commercially reasonable actions to
obtain clearance from the Antitrust Authorities. Subject to Section 6.6(d),
Buyer and Seller shall cooperate with each other and exercise their commercially
reasonable efforts to prevent the entry in any Proceeding brought by an
Antitrust Authority or any Governmental Entity of an Order that would prohibit,
make unlawful or materially delay the consummation of the transactions
contemplated by this Agreement.
(b) Other Regulatory Filings. Buyer and Seller will, as soon as reasonably
practicable and in no event more than 60 days following the execution of this
Agreement, cooperate with each other to prepare and file with each applicable
Governmental Entity requests for such Consents as may be necessary for the
consummation of the transactions contemplated hereby in accordance with the
terms of this Agreement. Buyer and Seller will diligently pursue and use their
commercially reasonable efforts to obtain such Consents and will cooperate with
each other in seeking such Consents. To such end, the Parties agree to take
commercially reasonably efforts to make available the personnel and other
resources of their respective organizations in order to obtain all such
Consents.
(c) With respect to the obligations of the Parties set forth in this
Section 6.6, each Party will promptly inform the other Party of any material
communication received by such Party from, or given by such party to, any
Governmental Entity and of any material communication (either written or oral)
received or given in connection with any Proceeding by a private party, in each
case regarding any of the transactions contemplated hereby, and will permit the
other party to review any communication given by it to, and, to the extent
reasonably practical, consult with each other in advance of any meeting or
conference with, any such Governmental Entity or, in connection with any
Proceeding by a private party, with such other Person, and to the extent
permitted by such Governmental Entity or other Person, give the other Party the
opportunity to attend and to participate in such meetings and conferences;
provided, however, that no Party shall be required to provide to the other Party
any information related to such Party’s valuation of the proposed transactions.
(d) Notwithstanding anything in this Agreement to the contrary, the Parties
agree that (i) the obtaining of required consents and approvals of parties to
contracts with the Companies are the joint responsibility of Buyer and Seller
and that Buyer and Seller shall take, or cause to be taken, all commercially
reasonable actions to obtain such third-party consents and approvals of parties
to contracts with the Companies as are required in connection with the
consummation of the transactions contemplated hereby and (ii) any Filings or
Consents with or from any Governmental Entity are the joint responsibility of
Buyer and Seller, and that Buyer and Seller shall take, or cause to be taken,
all commercially reasonable actions to obtain such Filings or Consents with or
from any Governmental Entity as are required in connection with the consummation
of the transactions contemplated hereby.

 

19

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

 

SECTION 6.7. Meter Reading. On and prior to the Closing Date, Seller shall cause
the Companies to read the customer meters in their normal cycle and in due
course render the related bills to its customers served by the Companies. Seller
shall also cause the Companies to read each daily read transportation customer
meter (collectively, “Large Volume Meters”) on the day immediately preceding the
Closing Date. Seller shall provide Buyer with the Companies’ last meter reading
from each of the Large Volume Meters made on the day immediately preceding the
Closing Date as soon as practicable after the Closing Date. After the Closing
Date, Buyer shall read the customer meters for their first time, in the normal
cycle, and in due course render bills for service during the period between the
Companies’ last reading in the normal cycle and Buyer’s first reading in the
normal cycle to the customers. Buyer shall determine the volume of gas sold by
the Companies prior to the Closing Date through Large Volume Meters by the
Companies’ meter readings on the day immediately preceding the Closing Date.
Buyer shall determine by allocation the volumes of gas sold by the Companies’
through all meters other than Large Volume Meters, prior to the Closing Date,
and the gas sold by Buyer, on and after the Closing Date and prior to its first
meter reading through meters without charts. Such allocation shall be consistent
with the Companies’ past practices for unbilled revenues. Once such
determinations have been made by Buyer, the estimated amounts of accounts
receivable and earned but unbilled revenue and any other related payables or
liabilities shall be adjusted based upon such determinations for purposes of the
determination of the Actual Aggregate Net Working Capital pursuant to Section
2.2(b).
SECTION 6.8. Seller Marks. Buyer shall (i) within 90 days after the Closing
Date, cease using any names, marks, trade names, trademarks and corporate
symbols and logos incorporating “PPL” and any word or expression similar thereto
or constituting an abbreviation or extension thereof (collectively and together
with all other names, marks, trade names, trademarks and corporate symbols and
logos owned by Seller or any of its Affiliates, the “Seller Marks”) (other than
Seller Marks applicable to the Seller’s propane business, which Seller Marks the
Buyer shall cease using within 120 days after the Closing Date); (ii) within
90 days after the Closing Date, use commercially reasonable efforts to remove or
conceal from the Assets any and all Seller Marks (other than any Seller Marks
applicable to the Seller’s propane business, which shall be removed or concealed
within 120 days after the Closing, provided that any Seller Marks on any propane
tanks at distributor or customer locations shall be removed or concealed within
12 months after the Closing Date) and (iii) within 30 days after the Closing
Date, amend the relevant organizational documents of the Companies to change the
names of the Companies to names that do not include any Seller Mark or any name
or term confusingly similar to any Seller Mark; provided, however, that Buyer
shall not be required to remove or conceal Seller Marks from meter seals,
property tags, valves, manhole covers, tank or cylinder rings or from assets
that are not generally in public view or likely to adversely affect the Seller
Marks. Thereafter, Buyer shall not use any Seller Mark or any name or term
confusingly similar to any Seller Mark in connection with the sale of any
products or services, in the corporate or doing business name of any of its
Affiliates or otherwise in the conduct of its or any of its Affiliates’
businesses or operations. In the event that Buyer breaches this Section 6.8,
Seller shall be entitled to specific performance of this Section 6.8 and to
injunctive relief against further violations, as well as any other remedies at
law or in equity available to Seller.

 

20

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

 

SECTION 6.9. Risk of Loss. The risk of any loss, damage, impairment,
confiscation or condemnation of any of the Assets from any cause whatsoever
shall be borne by Seller at all times prior to the Closing, and by Buyer at all
times thereafter. If any such loss, damage, impairment, confiscation or
condemnation occurs, Seller shall apply the proceeds of any insurance policy,
judgment or award with respect thereto to repair, replace or restore the Assets
as soon as possible to their prior condition; provided, however, anything
contained in this Agreement to the contrary notwithstanding (except as required
by Section 6.2(a)(xii)), Seller shall not be obligated to expend sums in excess
of the proceeds of any insurance policy plus the amount of any applicable
deductible thereunder, judgment or award with respect to any loss, damage,
impairment, confiscation or condemnation of any of the Assets in order to
repair, replace or restore such Assets to their prior condition. The provisions
of this Section 6.9 shall apply in the event (“Casualty Event”) of any damage or
destruction to the Assets which would result in the nonoccurrence of a condition
precedent to Buyer’s obligation to consummate this Agreement. If a Casualty
Event shall occur, Buyer at its option, may proceed to close this Agreement on
the Closing Date, in which event Seller shall pay or assign to Buyer the
proceeds from any insurance policies covering Assets subject to the Casualty
Event to the extent such proceeds are received by or payable to Seller and have
not been used in or committed to the restoration or replacement of Assets
subject to the Casualty Event as of the Closing Date.
SECTION 6.10. Insurance. Seller shall maintain or cause to be maintained in full
force and effect the Policies throughout the Interim Period and shall thereafter
refrain from electing to terminate any Policy prior to the expiration of its
stated term. At Buyer’s request and expense (including payment of any applicable
deductible or other expense), Seller agrees to cooperate in good faith and use
commercially reasonable efforts to assert and diligently pursue all rights to
insurance coverage under the Policies and any other past insurance policies of
Seller or any of its Affiliates relating to the Companies or their respective
assets and properties with respect to claims arising from the operations of the
businesses of the Companies or their respective assets and properties prior to
the Closing to the extent such claims are asserted prior to the Closing Date.
Seller shall control the defense or settlement of any such claim prior to the
Closing Date, but Seller shall keep Buyer advised of material developments in
respect of such claims and Seller shall not settle any such claim for other than
monetary consideration without having first obtained Buyer’s written consent,
which shall not be unreasonably withheld. After the Closing Date, Buyer shall
control the defense or settlement of any such claim, but Buyer shall keep Seller
advised of any material developments in respect of such claims. Buyer shall be
solely responsible for providing insurance to the Companies for any claims made
after the Closing regardless of when the event or occurrence relating to any
claim arose.
SECTION 6.11. Termination of Certain Services and Contracts; Transition
Services. (a) Except as contemplated by this Agreement or as set forth on
Schedule 6.11(a), prior to the Closing, Seller shall, and shall cause the
Non-Company Affiliates to, take such actions as may be necessary to terminate,
sever, or assign to Seller or a Non-Company Affiliate (in each case with
appropriate mutual releases) effective upon or before the Closing all Contracts
and services between any of the Companies, on the one hand, and Seller or any
Non-Company Affiliate, on the other hand, including the termination or severance
of Tax services, legal services and banking services (to include the severance
of any centralized clearance accounts) (collectively such Contracts, the
“Terminated Contracts”). On and after the Closing, none of Buyer, the Companies
or any of their Affiliates shall have any further obligations or liabilities
pursuant to the Terminated Contracts.

 

21

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

 

(b) Concurrently with the Closing, in addition to the services to be provided
pursuant to Section 6.16(b), Seller shall, and shall cause certain of the
Non-Company Affiliates to, enter into one or more agreements with certain of the
Companies to provide those services set forth on Schedule 6.11(b) at a price
equal to 125% of cost (as allocated in accordance with the same methodologies
used for such allocations by the Companies and their Affiliates in accordance
with past practice) and in accordance with the other terms and conditions set
forth thereon (such agreements, the “Transition Services Agreements”). The
Parties will agree upon any remaining terms and conditions of the Transition
Services Agreements in a commercially reasonable manner as soon as practicable
after the date hereof and in any event within 90 days of the date hereof. The
Parties shall cooperate in good faith during the period between the date hereof
and the Closing Date in order to minimize, to the extent possible, the period of
time following the Closing Date that Buyer and the Companies will require
services to be provided under the Transition Services Agreements.
SECTION 6.12. Distributions . Notwithstanding anything in this Agreement to the
contrary, but except as required in Section 6.2(c), Seller shall have the right
to cause the Companies to pay cash dividends and make cash distributions to
Seller or its Affiliates at any time prior to the Closing. From and after the
Closing, Seller shall pay to Buyer as promptly as reasonably practicable any
amounts received by the Seller or any Non-Company Affiliate in connection with
payments received by them in respect of accounts receivable of the Companies.
SECTION 6.13. Transfer Taxes. Notwithstanding any provision of this Agreement to
the contrary, all Transfer Taxes incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by Buyer; provided, however,
that Seller shall be responsible for and pay all Transfer Taxes associated with
the transfer of all real estate interests and oil and mineral rights necessary
to operate and maintain the businesses and storage assets of the Companies.
Seller and Buyer shall cooperate in timely making all filings, Tax Returns,
reports and forms as may be required to comply with the provisions of such Tax
laws.
SECTION 6.14. Employee, Labor and Benefits Matters. (a) Parent Plans. As of the
Closing Date, the Companies shall cease to be participating employers under the
incentive, compensation and benefits arrangements that are sponsored, entered
into or maintained by Seller (the “Parent Plans”); provided, that Seller shall
take such actions as may be reasonably necessary (including amending the Parent
Plans) to fully vest each employee of the Companies in the benefits accrued by
such employees in the Parent Plans listed on Schedule 6.14(a) for the period
ending on or prior to the Closing Date. From and after the Closing Date, no
current or former employee of any of the Companies shall have any right to
accrue any further benefits, nor any right to continue as active participants
under the Parent Plans (except to the extent required by COBRA, and except to
the extent that any group medical, dental, prescription drug or vision care
benefits under any Parent Plans continue to be available, by their express
terms, through the end of the calendar month in which the Closing Date occurs).
As of the Closing Date, except as set forth in the immediately succeeding
sentence, the Companies shall be solely responsible for all obligations and
liabilities, whether incurred before, on or after the Closing Date, under the
incentive, compensation and benefits arrangements that are sponsored, entered
into or maintained solely by the Companies (and not by the Parent, the “Company
Plans”), and no obligations or liabilities under the Company Plans shall be
retained by Seller or any of its Affiliates. Seller shall assume and shall be
solely responsible for (i) a prorata portion of cash incentive bonus in respect
of the year the Closing occurs payable at the normal time such bonuses are paid
based on actual performance for the full period, and (ii) outstanding restricted
stock unit awards for Company employees, which amounts shall not be included in
Net Working Capital. As of the Closing, the Companies shall have fully accrued
in accordance with GAAP for all amounts with respect to all benefits provided or
made available to employees of the Companies in respect of the Company Plans,
except those amounts for which Seller has assumed responsibility to pay pursuant
to this Agreement.

 

22

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

 

(b) Continuity of Employment at Closing.
(i) Except for the executives and certain employees of the Companies who are
receiving long-term disability benefits under a Parent Plan, in each case as
listed in Schedule 6.14(b)(i), Buyer and Seller intend that there shall be
continuity of employment with respect to all employees of each of the Companies
immediately before and immediately after the Closing. Except as otherwise
provided in this Section 6.14, Buyer shall ensure that all persons who were
employed by any of the Companies on the day immediately preceding the Closing
Date (whether actively at work or absent from work due to holiday, vacation,
injury, sick leave, disability, jury duty, military leave or other leave of
absence) shall continue to be employed by the Buyer or the Companies on and
immediately after the Closing Date on such terms as comply with applicable Law,
and on the same terms (including salary, titles, job responsibilities, schedule
and location) as apply to such employees on the day immediately preceding the
Closing Date. In the event any disabled individual who is listed on
Schedule 6.14(b)(i) returns to active employment at the conclusion of such
leave, Buyer and the Companies shall employ such individual on the same terms as
applied to such employee immediately prior to the commencement of such leave.
(ii) Buyer shall indemnify, defend, and hold Seller harmless from and against
any and all liabilities, claims and obligations (including attorney’s fees and
other costs of defense) arising out of or otherwise in respect of (A) Buyer’s
failure to comply with the foregoing Section 6.14(b)(i), (B) a termination of
the employment of any employees of any of the Companies that occurs on or after
the Closing Date, or (C) any suit or claim of violation brought against Seller
or any of its Affiliates under WARN for any actions taken by Buyer or any of the
Companies or any of their Affiliates on or after the Closing Date with regard to
any site of employment, facility, operating unit or employee affected by this
Agreement.
(c) Assumption of Collective Bargaining Agreements.
(i) As of the Closing Date, Buyer shall cause the Companies to continue to
perform the requirements, obligations and liabilities of that Company under the
Collective Bargaining Agreement listed in Schedule 4.9(d) (individually, a
“CBA,” collectively, the “CBAs”). For employees of any of the Companies covered
by a CBA, the obligations of the Buyer and the Companies set forth in this
Section 6.14 shall be subject to the terms of the applicable CBA and all
applicable labor and employment law requirements. Notwithstanding anything
contained in this Section 6.14 to the contrary, the covenants contained in
Sections 6.14(d)(i) and (e)(i) shall not be applicable to any employees of the
Companies covered by a CBA.

 

23

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

 

(ii) Buyer agrees that Buyer shall be responsible for, and Buyer covenants to
pay or otherwise discharge, and shall indemnify and hold harmless, Seller and
its Affiliates against any liability, claim or obligation (including attorney’s
fees and other costs of defense) resulting from Buyer’s or any Company’s failure
to provide compensation or benefits from and after the Closing Date that are
required to be provided under the CBAs.
(d) Post-Closing Compensation and Benefits; General.
(i) Without limiting any additional rights under any Company Plan, (x) starting
on the Closing Date and continuing for a period of not less than 12 months
following the Closing Date, Buyer shall provide (or shall cause the Companies to
provide) each employee of any of the Companies with (x) base salary that is no
less favorable than that provided to such employee immediately prior to the
Closing Date, and (y) employee benefits (including without limitation incentive
opportunity, pension, savings, health, vision, dental, disability and life
insurance benefits, as well as vacation, time off, sick and holiday pay
programs) that are comparable in the aggregate to those provided to similarly
situated employees of Buyer; provided that (x) all such Buyer benefit plans (and
those of its Affiliate, Amerigas Propane, Inc.) are listed on Schedule 6.14(d),
and (y) true and complete copies of all such Buyer benefit plans are provided to
Seller (in each case of (x) and (y), as of the date hereof, and as updated no
later than 10 days prior to the Closing Date).
(ii) Without limiting the generality of the foregoing provisions of
Section 6.14(d)(i), from and after the Closing Date, Buyer shall (or shall cause
the Companies to) honor those arrangements set forth on Schedule 6.14(d)(ii).
(e) Severance.
(i) Without limiting the generality of the provisions of Section 6.14(d)(i), and
notwithstanding anything therein to the contrary, from and after the Closing
Date, Buyer shall provide (or cause the Companies to provide) severance pay and
benefits to each employee of any of the Companies whose employment terminates or
is terminated on or during the 12 month period following the Closing Date which
are no less favorable than those set forth in the severance program listed on
Schedule 6.14(e) (taking into account subsequent increases in compensation and
service). As a condition of any such severance benefits, Buyer and the Companies
shall require that eligible employees shall be required to execute (and not
revoke) a general release of all claims against Seller, Buyer, the Companies and
their respective Affiliates. Prior to the Closing, Seller shall cause the
changes described on Schedule 6.14(e)(i) to be effective.
(ii) In addition, from and after the Closing Date, Buyer shall assume full
responsibility to provide any severance or termination pay benefits that may be
required to be provided under CBAs.

 

24

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

 

(f) Service Credit. With respect to any incentive, compensation or employee
benefit arrangements as may be maintained for employees of any of the Companies
from time to time following the Closing Date by Buyer, the Companies or any of
their respective Affiliates (including without limitation plans or policies
providing severance benefits, vacation entitlement, and sick pay), service by
such employees performed for any of Seller, the Companies or any of their
Affiliates (or a predecessor to either such entity’s business or assets) shall
be treated as service with Buyer and the Companies and their respective
Affiliates, for purposes of determining eligibility to participate, vesting and
benefit accruals; provided, however, that such service need not be recognized to
the extent that such recognition would result in a duplication of benefits.
(g) Medical and Welfare Plan Obligations.
(i) Buyer agrees to waive any waiting periods or limitations for preexisting
conditions for each employee of any of the Companies under the welfare benefit
programs of Buyer made available to such Company employees on or following the
Closing Date, to the same extent such periods or limitations would have been or
were waived by Seller and its Affiliates for the same purpose under the
comparable type of welfare benefit program in which such Company employee was
participating or eligible to participate immediately prior to the Closing Date.
Buyer further agrees to credit each employee of any of the Companies for amounts
paid by such Company employee under the welfare benefit program in which such
Company employee was participating immediately prior to the Closing Date towards
satisfaction of the applicable deductibles and out-of-pocket limits recorded by
Seller’s or the Companies’ medical plan administrator as of the Closing Date
under the comparable type of welfare benefit program of Buyer or its Affiliates
in which such Company employee first participates on or after the Closing Date,
to the same extent such credit was given under the applicable welfare benefit
program, and in each case in respect of the plan year in which occurs the
Closing Date.
(ii) Buyer also shall honor (or cause the Companies to honor) all vacation,
personal and sick days accrued by such Company employees under the plans,
policies, programs and arrangements of Seller, the Companies or any or their
Affiliates (or a predecessor to either such entity’s business or assets)
immediately prior to the Closing Date.
(iii) Buyer shall provide (or shall cause the Companies to provide) continuation
health care coverage to employees of any of the Companies and their qualified
beneficiaries who incur a qualifying event, in accordance with the continuation
health care coverage requirements of Section 4980B of the Code and Title I,
Subtitle B, Part 6 of ERISA and any similar state local law (“COBRA”) on or
after the Closing Date.

 

25

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

 

(h) Flexible Spending Accounts. Seller, in accordance with the principles and
methods set forth in Revenue Ruling 2002-32, shall cause a transfer of assets
from a Code Section 125 cafeteria plan maintained by Seller in which any
employees of any of the Companies participate prior to the Closing Date to be
accepted into any Code Section 125 cafeteria plan that may be maintained on and
after the Closing Date by Buyer, any of its Affiliates, any of the Companies,
which transfer shall consist of cash equal to the account balances under the
first-mentioned Seller Code Section 125 cafeteria plan of such Company employees
who are employed on and after the Closing Date. Absent an available Code
Section 125 cafeteria plan of Buyer, no such transfer shall be made hereunder.
Buyer and Seller shall cooperate in good faith to effectuate the provisions of
this Section 6.14(h).
(i) Post-Retirement Benefits. The Companies currently sponsor retiree health
programs (the “Company Retiree Plans”) for current and former employees of the
Companies (and beneficiaries thereof) who meet (or met) the plans’ applicable
eligibility requirements, as well as related voluntary employees’ beneficiary
association trusts (the “Company VEBAs”). From and after the Closing, Buyer and
the Companies shall have all responsibility and liabilities for, and the Seller
and its Affiliates shall cease to have any responsibility or liability for, the
Company Retiree Plans and the Company VEBAs, whether arising before, on or after
the Closing Date.
(j) Pension Plan.
(i) The Companies currently sponsor a defined benefit pension plan (the “Company
Pension Plan”), assets in respect of which are held in a master trust sponsored
by the Seller (the “Seller’s Master Trust”). From and after the Closing, Buyer
and the Companies shall have all responsibility and liabilities for, and the
Seller and its Affiliates shall cease to have any responsibility or liability
for, the Company Pension Plan, whether arising before, on or after the Closing
Date
(ii) Prior to the Closing Date, Seller shall (x) cause the Companies to
establish a separate trust which is intended to be qualified under Section
401(a) of the Code and exempt from taxation under Section 501(a)(1) of the Code
(the “Company Trust”) to hold assets of the Company Pension Plan, and (y) cause
a transfer of assets from the Seller’s Master Trust to the Company Trust in
respect of Company Pension Plan liabilities, in a total amount determined in
accordance with this Section 6.14(j). Such transfer of assets shall be in cash
or in kind, as determined by Seller in its discretion.
(iii) Within a reasonable time after the execution of this Agreement, Seller
shall cause the trustee of the Seller’s Master Trust to determine the value of
the assets allocated to the Company Pension Plan as of the date of the execution
of this Agreement. As soon as practicable after such valuation is completed,
Seller shall cause the transfer of such amount of assets to the Company Trust
referred to above.
(iv) In addition to the amounts transferred to the Company Trust as described in
Sections 6.14(j)(i) through 6.14(j)(iii), immediately prior to the Closing Date,
Seller shall (A) cause all in kind assets transferred to the Company Trust in
accordance with Sections 6.14(j)(i) through 6.14(j)(iii) to be liquidated into
cash (such that only cash shall be held in the Company Trust as of the Closing
Date), and (B) provide satisfactory evidence of such transfer to Buyer at
Closing.

 

26

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

 

(v) Without limiting the generality of Section 6.14(f), Buyer shall continue to
provide the Company Pension Plan participants with credit for their service with
the Seller, the Companies and their Affiliates, as applicable, prior to the
Closing Date for all purposes for which such service was recognized under the
Company Pension Plan including, without limitation, vesting, benefit accrual,
eligibility to participate and eligibility for early retirement benefits
(including subsidies relating to such benefits).
(vi) Seller shall make the minimum contribution (if any) to the Company Trust on
or prior to the Closing Date as required under the Pension Protection Act during
the plan year beginning on January 1, 2008.
(k) 401(k) Plan.
(i) From and after the Closing Date, Buyer agrees to cause a defined
contribution plan that is maintained or contributed to by Buyer or one of its
Affiliates that is intended to be qualified under Section 401(a) of the Code and
tax-exempt under Section 501(a) of the Code (“Buyer’s 401(k) Plan”) to provide
each Company employee an opportunity to make a direct rollover to Buyer’s 401(k)
Plan of an eligible distribution from the PPL Subsidiary Savings Plan (“Seller’s
401(k) Plan”) that includes promissory notes reflecting such Company employee’s
then outstanding participant loans under Seller’s 401(k) Plan.
(ii) Seller and the Seller 401(k) Plan shall not place any Company employee’s
loan into default on account of the actions contemplated by this Agreement, or
on account of the Companies ceasing to be Affiliates of the Seller as of the
Closing Date, so long as such employee transfers such employee’s account balance
under the Seller’s 401(k) Plan, together with the loan, to the Buyer’s 401(k)
Plan through a direct rollover.
(l) Facility Closings; Employee Layoffs. For a period of ninety (90) days after
the Closing Date, neither Buyer nor any of the Companies shall terminate the
employment of any employees of any of the Companies in such numbers as would
trigger any liability under the Worker Adjustment, Retraining and Notification
Act, 29 U.S.C. § 2101, et seq. (“WARN”) or any state plant closing or severance
law. Buyer shall cause the Companies to comply with any notice or filing
requirements under WARN and any state plant closing or severance law.
(m) No Amendments; No Third Party Beneficiaries. All provisions contained in
this Section 6.14 are included for the sole benefit of the Parties to this
Agreement, and nothing herein, whether express or implied, shall create any
third party beneficiary or other rights (i) in any other Person, including,
without limitation, any current or former employee, any participant in any
Benefit Plan, or any dependent, alternative payee or beneficiary thereof, or
(ii) to continued employment with Seller, Buyer, any of the Companies, or any of
their respective Affiliates or continued participation in any Benefit Plan.

 

27

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

 

SECTION 6.15. Tax Matters. Except as provided in Section 6.13 relating to
Transfer Taxes:
(a) With respect to any Tax Return (except those listed in Schedule 6.15(a))
covering a taxable period ending on or before the Closing Date (a “Pre-Closing
Taxable Period”) that is required to be filed after the Closing Date with
respect to any Company, (i) Seller shall cause such Tax Return to be prepared
and shall deliver a draft of such Tax Return to Buyer for Buyer’s review and
comments at least 30 days prior to the due date for filing such Tax Return, and
(ii) Buyer shall cause such Tax Return to be executed and duly and timely filed
with the appropriate Taxing Authority and shall pay all Taxes due with respect
to the period covered by such Tax Return (subject to the rights of
indemnification and reimbursement from Seller for such Taxes set forth in
Section 6.15(b)). With respect to any Tax Return covering a taxable period
beginning on or before the Closing Date and ending after the Closing Date (a
“Straddle Taxable Period”) that is required to be filed after the Closing Date
with respect to a Company, (i) Buyer shall cause such Tax Return to be prepared
(in a manner consistent with practices followed in prior taxable periods) and
shall deliver a draft of such Tax Return to Seller for Seller’s review and
approval (which approval shall not be unreasonably withheld, conditioned or
delayed) at least 30 days prior to the due date for filing such Tax Return,
(ii) Seller and Buyer shall cooperate and consult with each other in order to
finalize such Tax Return, and (iii) thereafter Buyer shall cause such Tax Return
to be executed and duly and timely filed with the appropriate Taxing Authority
and shall pay all Taxes due with respect to the period covered by such Tax
Return (subject to the rights of indemnification and reimbursement from Seller
for such Taxes set forth in Section 6.15(b)). Those Tax Returns listed in
Schedule 6.15(a) will be prepared and filed by Seller and supplied to Buyer
within 10 days after the filing. The tax liability shown on such Tax Returns
shall be determined to be the liability of the Buyer, the Seller or both in a
method consistent with Section 6.15(b).
(b) As between Seller and Buyer, Seller shall be responsible for and indemnify
Buyer against, and Seller shall be entitled to all refunds or credits of, any
Tax with respect to a Company that is attributable to a Pre-Closing Taxable
Period or to that portion of a Straddle Taxable Period that ends on the Closing
Date (other than Taxes attributable to Buyer having not timely filed any Tax
Return in accordance with Section 6.15(a)), in each case to the extent that such
Tax exceeds the amount (if any) reflected as a liability for such Tax in the
Aggregate Net Working Capital. Within five days prior to the due date for the
payment of any such Tax, if (i) the amount of such Tax for which Seller is
responsible exceeds (ii) the amount reflected as a current liability for such
Tax in the Aggregate Net Working Capital, Seller shall pay to Buyer an amount
equal to such excess; if the amount described in clause (ii) exceeds the amount
described in clause (i), Buyer shall pay to Seller the amount of such excess.
With respect to a Straddle Taxable Period, Seller shall determine the Taxes
attributable to the portion of the Straddle Taxable Period that ends on the
Closing Date: (x) by an interim closing of the books of the relevant Company as
of the Closing Date as to all Taxes based on or measured by income or receipts
of a Company (and for such purpose, the taxable period of any partnership or
other pass-through entity in which a Company holds a beneficial interest shall
be deemed to terminate as of the Closing Date); and (y) as to all Taxes other
than those based on or measured by income or receipts of a Company (including ad
valorem or property Taxes (“Property Taxes”) and franchise Taxes based solely on
capital), by daily proration of such Taxes within the Straddle Tax Period. In
determining whether a Property Tax is attributable to a Pre-Closing Taxable
Period or a Straddle Taxable Period, any Property Tax that is based on the
assessed value of any assets, property or other rights as of any lien date or
other specified valuation date shall be deemed a Property Tax attributable to
the taxable period (whether a fiscal year or other tax year) specified on the
relevant Property Tax bill that is issued with respect to that lien date or
other valuation date. For the avoidance of doubt, any Taxes attributable to the
Section 338(h)(10) Elections shall be allocable to the Pre-Closing Taxable
Period.

 

28

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

 

(c) Buyer shall be responsible for and indemnify Seller against, and Buyer shall
be entitled to all refunds (including, but not limited to, property tax refunds)
and credits of, all Taxes of the Companies that are not the responsibility of
Seller pursuant to Section 6.15(b).
(d) With respect to any Tax for which Seller is responsible pursuant to Section
6.15(b), Seller shall have the right, at its sole cost and expense, to initiate
any claim for refund or credit and to control the prosecution, settlement or
compromise of any proceeding involving such Tax, including the determination of
the value of property for purposes of real and personal property ad valorem
Taxes. Buyer shall (and shall cause the relevant Companies to) take such action
in connection with any such proceeding as Seller shall reasonably request from
time to time to implement the preceding sentence, including the selection of
counsel and experts and the execution of powers of attorney. Buyer shall (and
shall cause the relevant Companies to) give written notice to Seller of its
receipt of any notice of any audit, examination, claim or assessment for any Tax
for which Seller may be responsible within 15 days after its receipt of such
notice; failure to give any such written notice within such 15-day period shall
cause Buyer to forfeit any rights it may have by reason of Section 4.12 or this
Section 6.15 to the extent Seller is actually prejudiced by such failure.
(e) With respect to any contest relating to Taxes (a “Tax Claim”) relating to a
Pre-Closing Taxable Period, Seller shall, solely at its own cost and expense,
control all proceedings and may make all decisions taken in connection with such
Tax Claim and, without limiting the foregoing, may in its sole discretion pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with any taxing authority with respect thereto. Buyer shall
cooperate with Seller, including agreeing to extension of the statute of
limitations, relating to Tax Claims by Seller for Pre-Closing Taxable Periods.
Seller and Buyer shall jointly control and participate in all proceedings taken
in connection with any Tax Claim relating to Taxes of the Company or any of its
Subsidiaries for a Straddle Period, and shall bear their own respective costs
and expenses. Neither Seller nor Buyer shall settle any such Tax Claim relating
to a Straddle Period without the prior written consent of the other, such
consent not to be unreasonably delayed, conditioned or withheld.
(f) Seller shall grant to Buyer (or its designees) access at all reasonable
times to all of the information, books and records relating to the Companies
within the possession of Seller (including workpapers and correspondence with
Taxing Authorities), and shall afford Buyer (or its designees) the right (at
Buyer’s expense) to take extracts therefrom and to make copies thereof, to the
extent reasonably necessary to permit Buyer (or its designees) to prepare Tax
Returns, respond to Tax audits and investigations, prosecute Tax protests,
appeals and refund claims and to conduct negotiations with Taxing Authorities.

 

29

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

 

Buyer shall grant or cause the Companies to grant to Seller (or its designees)
access at all reasonable times to all of the information, books and records
relating to the Companies within the possession of Buyer (including workpapers
and correspondence with Taxing Authorities) and to the employees of such
Companies, and shall afford Seller (or its designees) the right (at Seller’s
expense) to take extracts therefrom and to make copies thereof, to the extent
reasonably necessary to permit Seller (or its designees) to prepare Tax Returns,
respond to Tax audits and investigations, prosecute Tax protests, appeals and
refund claims and to conduct negotiations with Taxing Authorities. After the
Closing Date, Seller and Buyer will preserve all information, records or
documents in their respective possessions relating to liabilities for Taxes of
the Companies until six months after the expiration of any applicable statute of
limitations (including extensions thereof) with respect to the assessment of
such Taxes; provided, that neither Party shall dispose of any of the foregoing
items without first offering such items to the other Party.
(g) If, after the Closing, Buyer or any Company in Buyer’s possession receives a
refund or utilizes a credit of any Tax of any such Company attributable to a
Pre-Closing Taxable Period or that portion of a Straddle Taxable Period ending
on the Closing Date, Buyer shall pay to Seller within 10 Business Days after
such receipt or utilization an amount equal to such refund received or credit
utilized.
(h) Buyer, on the one hand, and Seller, on the other hand, shall join in timely
making elections under Section 338(h)(10) of the Internal Revenue Code of 1986,
as amended, and the rules and regulations thereunder (the “Code”) (and any
corresponding elections under state, local, or foreign tax law) (collectively
the “Section 338(h)(10) Elections”) with respect to the purchase and sale of the
PPL Gas Utilities Shares and the Companies, and Buyer and Seller shall cooperate
in the completion and timely filing of such elections in accordance with the
provisions of Treasury Regulation Section 1.338(h)(10)-1 (or any comparable
provisions of state, local or foreign Tax Law) or any successor provision.
Pursuant to Section 338(h)(10) of the Code and the Treasury Regulations
promulgated thereunder, the Purchase Price (together with applicable liabilities
and other relevant items), as adjusted in accordance with the terms hereof,
shall be allocated among the assets of the Companies as set forth in the
allocation schedule (the “Allocation Schedule”) to be mutually agreed by Seller
and Buyer within 60 days after the date hereof. Neither Seller nor Buyer shall
take any position (whether in financial statements, Tax Returns, tax audits, or
otherwise) that is inconsistent with such Allocation Schedule determined in
accordance with this Section 6.15(h). Seller will pay any Taxes attributable to
the making of the Section 338(h)(10) Elections.
(i) Seller hereby covenants and agrees to reasonably cooperate, at Buyer’s sole
cost and expense, with all Buyer requests for assistance in obtaining successor
employer treatment for federal, state, and local payroll Tax purposes of the
Companies, including the execution of any forms necessary for such treatment
(such as PA-100).
SECTION 6.16. Further Actions. (a) Subject to the terms and conditions of this
Agreement, each of Buyer and Seller agrees to use its reasonable best efforts
(except where a different efforts standard is specifically contemplated by this
Agreement, in which case such different standard shall apply) to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.

 

30

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

 

(b) Without limiting the foregoing, as soon as reasonably practicable following
the date hereof, Seller shall provide Buyer (at Seller’s sole cost and expense)
with (i) historical 2008 financial general ledger information applicable to the
pre-Closing period for the purposes of preparing historic rate case test year
information and (ii) business unit budget information prepared in accordance
with Seller’s budgetary process for preparing future rate case test year
information. In addition, during the period between October 1, 2008 and the
Closing Date, Seller shall provide Buyer (at Seller’s sole cost and expense)
with consultation regarding rate case information and Buyer’s preparation of
rate case filing schedules and responses to subsequent interrogatories.
(c) Subject to the terms and conditions of this Agreement, at any time and from
time to time after the Closing, at either Party’s request and without further
consideration, the other Party shall execute and deliver to such requesting
Party such other instruments of sale, transfer, conveyance, assignment and
confirmation, provide such materials and information and take such other actions
as such Party may reasonably request in order to consummate the transactions
contemplated by this Agreement.
SECTION 6.17. Preparation of Audited Financial Statements Seller shall use
commercially reasonable efforts to prepare and deliver to Buyer an audited
consolidated balance sheet of PPL Gas Utilities as of December 31, 2007, and as
of December 31, 2008, if the Closing occurs after February 28, 2009, and audited
consolidated statements of income and cash flows of PPL Gas Utilities for the
twelve-month period ended December 31, 2007, and December 31, 2008, if the
Closing occurs after February 28, 2009 (such audited balance sheet, statements
of income and cash flows and related notes to the financial statements, the
“Audited Financials”). In addition, Seller shall use commercially reasonable
efforts to prepare and deliver to Buyer an unaudited consolidated balance sheet
of PPL Gas Utilities as of the end of the interim period preceding the Closing
for which Buyer must provide interim financial statements of PPL Gas Utilities
in a report on Form 8-K and unaudited consolidated statements of income and cash
flows of PPL Gas Utilities for the interim period ending as of the date of such
balance sheet and for the prior year comparative period (such unaudited balance
sheets, statements of income and cash flows and related notes to the financial
statements, the “Interim Financials”). The Audited Financials and Interim
Financials shall be prepared in accordance with GAAP, except to the extent
permitted by Regulation S-X, adopted by the Securities and Exchange Commission,
and the Audited Financials shall be accompanied by the unqualified opinion of
the auditors of PPL Gas Utilities. Seller shall promptly advise Buyer of any
material issues relating to the preparation of the Audited Financials, and Buyer
shall reimburse Seller for the reasonable fees and expenses of Seller’s external
auditor relating to the preparation of the Audited Financials. Seller shall use
commercially reasonable efforts to deliver the Audited Financials and Interim
Financials to Buyer by the Closing Date, but Seller’s requirement to deliver
such Audited Financials and Interim Financials shall not be a condition to
Closing. In addition, upon Buyer’s request, Seller shall use commercially
reasonable efforts to provide such supplemental schedules and other unaudited
financial information as Buyer may reasonably request related to Audited
Financials and Interim Financials.

 

31

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

 

SECTION 6.18. Transition Plan.
Within 15 days after the execution date of this Agreement, Seller shall deliver
to Buyer a list of its proposed representatives to a joint transition team,
which shall include individuals with expertise from various functional
specialties associated or involved in providing billing, payroll and other
support services provided to PPL Gas Utilities by any automated or manual
process using facilities or employees that are not transferred to Buyer pursuant
to this Agreement. Buyer will add its representatives to such team within
15 days after receipt of Seller’s list. Such team will be responsible for
preparing as soon as reasonably practicable after the execution date of this
Agreement, and timely implementing, a transition plan that will identify and
describe substantially all of the various transition activities that the parties
will cause to occur before the Closing. Buyer and Seller shall use their
commercially reasonable efforts to cause their Representatives on such
transition team to cooperate in good faith and take all reasonable steps
necessary to develop a mutually acceptable transition plan by no later than
60 days after the date of this Agreement.
ARTICLE VII
SPECIFIED CONDITIONS
SECTION 7.1. Buyer’s Condition Precedents. The obligation of Buyer to consummate
the transactions contemplated by this Agreement shall be subject to fulfillment
at or prior to the Closing of the following conditions, any one or more of which
may be waived in writing by Buyer:
(a) Representations and Warranties. The representations and warranties of Seller
set forth in Article III and Article IV hereof shall be true and correct in all
material respects (except for representations and warranties that are qualified
by materiality, including by reference to Material Adverse Effect, which shall
be true and correct in all respects) on and as of the Closing Date as though
made on and as of such date or, in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on and as of such
earlier date.
(b) Compliance with Agreements. The covenants, agreements and obligations
required by this Agreement to be performed and complied with by Seller shall
have been performed and complied with in all material respects prior to or at
the Closing Date.
(c) Certificate. Seller shall execute and deliver to Buyer a certificate of an
authorized officer of Seller, dated as of the Closing Date, stating that the
conditions specified in Sections 7.1(a) and 7.1(b) of this Agreement have been
satisfied.
(d) Consents. The Consents or Filings marked with an asterisk on Schedule 3.3 or
Schedule 5.3 shall have been duly obtained by Final Order, made or given and
shall be in full force and effect, all terminations or expirations of applicable
waiting periods imposed by any Governmental Entity with respect to the
transactions contemplated thereby (including under the HSR Act) shall have
occurred, and none of such Consents or Filings shall impose terms or conditions
that would reasonably be expected to result in a Material Adverse Effect or a
material adverse effect on the Buyer.

 

32

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

 

(e) No Injunctions. On the Closing Date, there shall be no Laws or Orders that
operate to restrain, enjoin or otherwise prevent or make illegal the
consummation of the transactions contemplated by this Agreement. No action or
proceeding initiated by any Governmental Entity seeking an Order prohibiting the
consummation of the transactions contemplated by this Agreement shall be
pending.
(f) Material Adverse Change. There shall not have occurred from December 31,
2007 to the Closing Date any event or development that has had or is reasonably
expected to have a Material Adverse Effect.
(g) Documents. Seller shall have delivered or shall stand ready to deliver all
of the certificates, instruments, Contracts and other documents specified to be
delivered by it hereunder, including pursuant to Sections 2.4 and 6.11(b).
SECTION 7.2. Seller’s Condition Precedents. The obligation of Seller to
consummate the transactions contemplated by this Agreement shall be subject to
fulfillment at or prior to the Closing of the following conditions, any one or
more of which may be waived in writing by Seller:
(a) Representations and Warranties. The representations and warranties of Buyer
set forth in Article V hereof shall be true and correct in all material respects
(except for representations and warranties that are qualified by materiality,
including by reference to Material Adverse Effect, which shall be true and
correct in all respects) on and as of the Closing Date as though made on and as
of such date or, in the case of representations and warranties made as of a
specified date earlier than the Closing Date, on and as of such earlier date.
(b) Compliance with Agreements. The covenants, agreements and obligations
required by this Agreement to be performed and complied with by Buyer shall have
been performed and complied with in all material respects prior to or at the
Closing Date.
(c) Certificate. Buyer shall execute and deliver to Seller a certificate of an
authorized officer of Buyer, dated as of the Closing Date, stating that the
conditions specified in Sections 7.2(a) and 7.2(b) of this Agreement have been
satisfied.
(d) Consents. The Consents or Filings marked with an asterisk on Schedule 3.3 or
Schedule 5.3 shall have been duly obtained by Final Order, made or given and
shall be in full force and effect, all terminations or expirations of applicable
waiting periods imposed by any Governmental Entity with respect to the
transactions contemplated thereby (including under the HSR Act) shall have
occurred, and none of such Consents or Filings shall impose terms or conditions
that would reasonably be expected to result in a material adverse effect on
Seller and its Affiliates (taken as a whole).

 

33

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

 

(e) No Injunctions. On the Closing Date, there shall be no Laws or Orders that
operate to restrain, enjoin or otherwise prevent or make illegal the
consummation of the transactions contemplated by this Agreement. No action or
proceeding initiated by any Governmental Entity seeking an Order prohibiting the
consummation of the transactions contemplated by this Agreement shall be
pending.
(f) Documents. Buyer shall have delivered or shall stand ready to deliver all of
the certificates, instruments, Contracts and other documents specified to be
delivered by it hereunder, including pursuant to Section 2.4.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION AND RELEASE
SECTION 8.1. Survival. Other than Section 3.2 (Authorization), Section 3.6
(Title), Section 3.7 (Brokers) and Section 4.2(b) (Subsidiaries) which shall
survive indefinitely; Section 4.10 (Environmental Matters), which shall survive
until the third anniversary of the Closing Date; and Section 4.12 (Taxes), which
shall survive for a period equal to the applicable statute of limitations for
the taxable year for each Tax, the representations and warranties of Seller set
forth in this Agreement shall survive the Closing until the first anniversary of
the Closing Date. The covenants and agreements of the Parties contained in this
Agreement shall not terminate on the Closing Date and shall survive indefinitely
until performed in accordance with this Agreement.
SECTION 8.2. Indemnification by Seller. (a) From and after the Closing Date,
subject to the other provisions of this Article VIII, Seller agrees to indemnify
Buyer and its officers, directors, employees and Affiliates (collectively, the
“Indemnified Buyer Entities”) and to hold each of them harmless from and
against, any and all Damages suffered, paid or incurred by such Indemnified
Buyer Entity and arising out of or resulting from (i) any breach of any of the
representations and warranties made by Seller to Buyer, (ii) any breach by
Seller of any of its covenants or agreements contained in this Agreement,
(iii) any Indebtedness of the Companies not paid or otherwise satisfied in full
on or prior to the Closing Date, (iv) any Intercompany Accounts not settled or
cancelled prior to the Closing Date, (v) the matters referred to on Schedule
3.4, and (vi) except for matters identified with an asterisk on Schedule 4.10,
liabilities pursuant to Environmental Laws or Orders relating to the Companies’
(or their predecessors’) former manufactured gas plant properties or off-site
disposal sites (if any), in each case outside of the Commonwealth of
Pennsylvania, relating to any period prior to the Closing Date to the extent the
applicable property or site is identified by Buyer to Seller in writing on or
before the third anniversary of the Closing Date (regardless of whether such
Damages are suffered, paid or incurred prior to or following such third
anniversary).
(b) Notwithstanding anything to the contrary contained in this Section 8.2, the
Indemnified Buyer Entities shall be entitled to indemnification with respect to
any claim for indemnification pursuant to Section 8.2(a)(i):

 

34

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

 

(i) only if the amount of Damages with respect to such claim exceeds the amount
of $50,000 (any claim involving Damages equal to or less than such amount being
referred to as a “De Minimis Claim”);
(ii) only if, and then only to the extent that, the aggregate Damages to all
Indemnified Buyer Entities, with respect to all claims for indemnification
pursuant to Section 8.2(a)(i) (other than De Minimis Claims), exceed the amount
of one and one-half percent (1.5%) of the Purchase Price (the “Deductible”),
whereupon (subject to the provisions of clause (iii) below) Seller shall be
obligated to pay in full all such amounts but only to the extent such aggregate
Damages are in excess of the amount of the Deductible; and
(iii) only with respect to claims for indemnification under Section 8.2(a)(i)
made on or before the expiration of the survival period pursuant to Section 8.1
for the applicable representation or warranty.
(c) Notwithstanding anything to the contrary contained in this Section 8.2, in
no event shall the Indemnified Buyer Entities be entitled to aggregate Damages
in excess of the amount of fifteen percent (15%) of the Purchase Price (the
“Cap”). Notwithstanding anything in this Section 8.2 to the contrary, (i) a De
Minimis Claim, the Deductible and the Cap shall not apply to any indemnification
obligation of Seller related to Section 3.2 (Authorization), Section 3.6
(Title), Section 3.7 (Brokers) and Section 4.2(b) (Subsidiaries); provided,
however, that Seller shall not be required to indemnify the Indemnified Buyer
Entities for any breach of Sections 3.2, 3.6, 3.7 and 4.2(b) for Damages in
excess of the Purchase Price and (ii) the Cap shall not apply to any
indemnification obligation of Seller pursuant to Sections 8.2(a)(ii) through
8.2(a)(v), inclusive; provided, however, that Seller shall not be required to
indemnify the Indemnified Buyer Entities pursuant to Section 8.2(a)(v) for
Damages in excess of the Purchase Price.
(d) For the avoidance of doubt, there shall be no entitlement to an indemnity
under this Article VIII for a breach of the representations in Section 4.12
(Taxes) or the covenants in Section 6.2(a)(ix) if the Buyer is entitled to an
indemnity under Section 6.15.
SECTION 8.3. Indemnification by Buyer. (a) From and after the Closing, Buyer
hereby agrees to indemnify, defend and hold Seller and its officers, directors,
employees and Affiliates (collectively, the “Indemnified Seller Entities”)
harmless from and against any and all Damages suffered, paid or incurred by such
Indemnified Seller Entities and arising out of or resulting from (i) any breach
of any of the representations and warranties made by Buyer to Seller, (ii) any
breach by Buyer of any of its covenants or agreements contained in this
Agreement, or (iii) the ownership and/or operation of the Companies and their
assets, whether related to any period of time before or after the Closing and
whether arising out of contract, tort, strict liability, other Law or otherwise,
except for (A) criminal actions or fraud and (B) any matters for which any Buyer
Indemnified Entity is entitled to seek indemnification from Seller pursuant to
the terms of this Agreement.

 

35

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

 

(b) Notwithstanding anything to the contrary contained in this Section 8.3, in
no event shall the Indemnified Seller Entities be entitled to aggregate Damages
in excess of the Cap for claims under Section 8.3(a)(i).
SECTION 8.4. Indemnification Procedures. (a) If an Indemnified Buyer Entity or
an Indemnified Seller Entity (each, an “Indemnified Entity”) believes that a
claim, demand or other circumstances exists that has given or may reasonably be
expected to give rise to a right of indemnification under this Article VIII
(whether or not the amount of Damages relating thereto is then quantifiable),
such Indemnified Entity shall assert its claim for indemnification by giving
written notice thereof (a “Claim Notice”) to the party from which
indemnification is sought (the “Indemnifying Party”) (i) if the event or
occurrence giving rise to such claim for indemnification is, or relates to, a
claim, suit, action or proceeding brought by a Person not a party to this
Agreement or affiliated with any such party (a “Third Party”), within ten
Business Days following receipt of notice of such claim, suit, action or
proceeding by such Indemnified Entity, or (ii) if the event or occurrence giving
rise to such action or claim for indemnification is not, or does not relate to,
a claim brought by a Third Party, within 30 days after the discovery by the
Indemnified Entity of the circumstances giving rise to such Claim for indemnity.
Each Claim Notice shall describe the claim in reasonable detail.
(b) If any claim or demand by an Indemnified Entity under this Article VIII
relates to a Claim filed or made against an Indemnified Entity by a Third Party,
the Indemnifying Party may elect at any time to negotiate a settlement or a
compromise of such action or claim or to defend such action or claim, in each
case at its sole cost and expense (subject to the last sentence of this Section
8.4(b)) and with its own counsel. If, within thirty days of receipt from an
Indemnified Entity of any Claim Notice with respect to a Third Party action or
claim, the Indemnifying Party (i) advises such Indemnified Entity in writing
that the Indemnifying Party shall not elect to defend, settle or compromise such
action or claim or (ii) fails to make such an election in writing, such
Indemnified Entity may (subject to the Indemnifying Party’s continuing right of
election in the preceding sentence), at its option, defend, settle or otherwise
compromise or pay such action or claim; provided, that any such settlement or
compromise shall be permitted hereunder only with the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. Unless and
until the Indemnifying Party makes an election in accordance with this
Section 8.4(b) to defend, settle or compromise such action, all of the
Indemnified Entity’s reasonable costs and expenses arising out of the defense,
settlement or compromise of any such action or claim shall be Damages subject to
indemnification hereunder to the extent provided herein. Each Indemnified Entity
shall make available to the Indemnifying Party all information reasonably
available to such Indemnified Entity relating to such action or claim. In
addition, the parties shall render to each other such assistance as may
reasonably be requested in order to ensure the proper and adequate defense of
any such action or claim. The Party in charge of the defense shall keep the
other Parties fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. If the Indemnifying Party elects
to defend any such action or claim, then the Indemnified Entity shall be
entitled to participate in such defense with counsel reasonably acceptable to
the Indemnifying Party, at such Indemnified Entity’s sole cost and expense. In
the event the Indemnifying Party assumes the defense of (or otherwise elects to
negotiate or settle or compromise) any action or claim as described above, the
Indemnified Entity shall reimburse the Indemnifying Party for all costs and
expenses incurred by the Indemnifying Party in connection with such defense (or
negotiation, settlement or compromise) to the extent, if applicable, that such
costs and expenses do not exceed the amount of the remaining Deductible.

 

36

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

 

(c) This Section 8.4 shall not apply to claims relating to Taxes made under
Section 6.15, with respect to which the procedures set forth in Section 6.15
shall govern.
SECTION 8.5. General. (a) Each Indemnified Entity shall be obligated in
connection with any claim for indemnification under this Article VIII or
Section 6.15 to use all commercially reasonable efforts to obtain any insurance
proceeds available to such Indemnified Entity with regard to the applicable
claims and to recover any amounts to which it may be entitled in respect of the
applicable claims pursuant to contractual or other indemnification rights that
any of the Companies may have against Third Parties. The amount which the
Indemnifying Party is or may be required to pay to any Indemnified Entity
pursuant to this Article VIII or Section 6.15 shall be reduced (retroactively,
if necessary) by any net insurance proceeds actually recovered by or on behalf
of such Indemnified Entity in reduction of the related Damages. If an
Indemnified Entity shall have received the payment required by this Agreement
from the Indemnifying Party in respect of Damages and shall subsequently receive
insurance proceeds in respect of such Damages, then such Indemnified Entity
shall promptly repay to the Indemnifying Party a sum equal to the amount of such
insurance proceeds actually received.
(b) In addition to the requirements of Section 8.5(a), each Indemnified Entity
shall be obligated in connection with any claim for indemnification under this
Article VIII to use all commercially reasonable efforts to mitigate Damages upon
and after becoming aware of any event which could reasonably be expected to give
rise to such Damages.
(c) Subject to the rights of any insurance carriers contemplated in
Section 8.5(a) above, the Indemnifying Party shall be subrogated to any right of
action that the Indemnified Entity may have against any other Person with
respect to any matter giving rise to a claim for indemnification hereunder.
(d) The indemnification provided in this Article VIII shall be the exclusive
post-Closing remedy available to any Party hereto with respect to any breach of
any representation, warranty, covenant or agreement in this Agreement, or
otherwise in respect of the transactions contemplated by this Agreement, except
as otherwise expressly provided in this Agreement.
SECTION 8.6. “As Is” Sale; Release. (a) EXCEPT FOR THOSE EXPRESS REPRESENTATIONS
AND WARRANTIES CONTAINED IN ARTICLE III AND ARTICLE IV, (i) THE COMPANIES AND
SELLER’S INTEREST IN THE PPL GAS UTILITIES SHARES ARE BEING TRANSFERRED “AS IS,
WHERE IS, WITH ALL FAULTS,” AND (ii) SELLER EXPRESSLY DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO
THE CONDITION, VALUE OR QUALITY OF THE COMPANIES OR THE PPL GAS UTILITIES SHARES
OR THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS AND OTHER INCIDENTS OF THE
COMPANIES AND THEIR ASSETS.

 

37

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

 

(b) Except for the obligations of Seller under this Agreement and the Transition
Services Agreements, for and in consideration of the transfer of the PPL Gas
Utilities Shares, effective as of the Closing Date, Buyer hereby absolutely and
unconditionally releases, acquits and forever discharges, and shall cause each
of its Affiliates (including the Companies) to absolutely and unconditionally
release, acquit and forever discharge, Seller and its Affiliates (including PPL
Services Corporation), each of their present and former officers, directors,
managers, employees and agents and each of their respective heirs, executors,
administrators, successors and assigns, from any and all costs, expenses,
damages, debts, or any other obligations, liabilities and claims whatsoever,
whether known or unknown, both in law and in equity, including any claims under
Environmental Laws, in each case to the extent arising out of or resulting from
the ownership and/or operation of the Companies, or the assets, business,
operations, conduct, services, products and/or employees (including former
employees) of any of the Companies (and any predecessors), whether related to
any period of time before or after the Closing Date, except for criminal actions
or fraud; provided, however, that in the event Buyer’s Affiliates are sued by
Seller or its Affiliates for any matter subject to this release, Buyer’s
Affiliates shall have the right to raise any defenses or counterclaims in
connection with such lawsuits.
SECTION 8.7. Right to Specific Performance; Certain Limitations. Notwithstanding
anything in this Agreement to the contrary:
(a) Without limiting or waiving in any respect any rights or remedies of a Party
under this Agreement now or hereafter existing at law, in equity or by statute,
each of the Parties hereto shall be entitled to specific performance of the
obligations to be performed by the other Parties in accordance with the
provisions of this Agreement;
(b) No Representative, Affiliate of, or direct or indirect equity owner in,
Seller shall have any personal liability to Buyer or any other Person as a
result of the breach of any representation, warranty, covenant, agreement or
obligation of Seller in this Agreement and no Representative, Affiliate of, or
indirect equity owner in, Buyer shall have any personal liability to Seller or
any other Person as a result of the breach of any representation, warranty,
covenant, agreement or obligation of Buyer in this Agreement; and
(c) No Party shall be liable for special, punitive, exemplary, incidental,
consequential or indirect damages, or lost profits, or losses calculated by
reference to any multiple of earnings or earnings before interest, tax,
depreciation or amortization (or any other valuation methodology) whether based
on contract, tort, strict liability, other Law or otherwise and whether or not
arising from the other Party’s sole, joint or concurrent negligence, strict
liability or other fault for any matter relating to this Agreement and the
transactions contemplated hereby; provided, however, that if a Party is held
liable to a third party for any of such damages and the other Party is obligated
to indemnify such Party for the matter that gave rise to such damages, then such
indemnifying Party shall be liable for, and obligated to reimburse the other
Party for, the total amount of such damages howsoever characterized.

 

38

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

 

ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. Grounds for Termination. This Agreement may be terminated:
(a) by either Buyer or Seller (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant or other agreement
contained herein) if the Closing shall not have occurred or is not reasonably
likely to occur within 12 months after the date of this Agreement (the “Outside
Date”) (provided, that if on the Outside Date all the Consents required in order
to satisfy the conditions set forth in Section 7.1(d) and Section 7.2(d) have
not been obtained and such conditions are being diligently pursued by the
appropriate Party, and all of the other conditions to Closing contained in
Article VII have been fulfilled or are capable of being fulfilled, then, at the
option of either Buyer or Seller, (which shall be exercised by written notice on
or before the Outside Date), the Outside Date shall be extended to 15 months
after the date of this Agreement);
(b) by Buyer if (i) Seller shall have breached any of the covenants or
agreements contained in this Agreement to be complied with by Seller such that
the closing condition set forth in Section 7.1(b) would not be satisfied or
(ii) there exists a breach of any representation or warranty of Seller contained
in this Agreement such that the closing condition set forth in Section 7.1(a)
would not be satisfied; provided, in the case of (i) or (ii), that such breach
is not cured by Seller within 30 Business Days after Seller receives written
notice of such breach from Buyer;
(c) by Seller if (i) Buyer shall have breached any of the covenants or
agreements contained in this Agreement to be complied with by Buyer such that
the closing condition set forth in Section 7.2(b) would not be satisfied or
(ii) there exists a breach of any representation or warranty of Buyer contained
in this Agreement such that the closing condition set forth in Section 7.2(a)
would not be satisfied; provided, in the case of (i) or (ii), that such breach
is not cured by Buyer within 30 Business Days after Buyer receives written
notice of such breach from Seller;
(d) by Buyer, on the one hand, or Seller, on the other hand, in writing if there
shall be in effect a nonappealable Order prohibiting, enjoining, restricting or
making illegal the transactions contemplated by this Agreement;
(e) by Seller, if at the Closing Buyer fails to make the payments required to be
made by Buyer; or
(f) at any time prior to the Closing Date by mutual written agreement of Buyer
and Seller.

 

39

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

 

SECTION 9.2. Effect of Termination. If this Agreement is terminated as permitted
by Section 9.1, such termination shall be without liability of either Party (or
either Party’s Affiliates or Representatives), except liability for any breach
of any covenants or other agreements under this Agreement prior to such
termination, or under the following provisions, which shall also survive
termination: Section 6.4, Section 6.5, Article IX and Article X.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Notices. All notices, requests and other communications hereunder
shall be in writing (including wire, telefax or similar writing) and shall be
sent, delivered or mailed, addressed, or telefaxed:
(a) if to Buyer, to:
UGI Utilities, Inc.
460 North Gulph Road
King of Prussia, PA 19406
Attn: General Counsel
Facsimile: (610) 992-3258
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attn: Howard L. Meyers
Facsimile: (215) 963-5001
(b) if to Seller, to:
PPL Corporation
Two North Ninth Street
Allentown, PA 18101
Attn: General Counsel
Facsimile: (610) 774-4455
with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: Mario A. Ponce
Fax: (212) 455-2502

 

40

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

 

Each such notice, request or other communication shall be given (i) by mail
(postage prepaid, registered or certified mail, return receipt requested),
(ii) by hand delivery, (iii) by nationally recognized courier service or (iv) by
telefax, receipt confirmed (with a confirmation copy to be sent by first class
mail; provided that the failure to send such confirmation copy shall not prevent
such telefax notice from being effective). Each such notice, request or
communication shall be effective (x) if mailed, three calendar days after
mailing at the address specified in this Section 10.1 (or in accordance with the
latest unrevoked written direction from such Party), (y) if delivered by hand or
by internationally recognized courier service, when delivered at the address
specified in this Section 10.1 (or in accordance with the latest unrevoked
written direction from the receiving Party) and (z) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 10.1
(or in accordance with the latest unrevoked written direction from the receiving
Party), and the appropriate confirmation is received; provided that notices
received on a day that is not a Business Day or after 5:00 p.m. Eastern Time on
a Business Day will be deemed to be effective on the next Business Day.
SECTION 10.2. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is found to be invalid or unenforceable in any jurisdiction, (a) a
suitable and equitable provision shall be substituted therefor in order to carry
out, so far as may be valid or enforceable, such provision and (b) the remainder
of this Agreement and the application of such provision to other Persons or
circumstances shall not be affected by such invalidity or unenforceability, nor
shall such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other jurisdiction.
SECTION 10.3. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall,
taken together, be considered one and the same agreement. Any facsimile or
electronically transmitted copies hereof or signature hereon shall, for all
purposes, be deemed originals.
SECTION 10.4. Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the agreements, appendices, exhibits, schedules and certificates
referred to herein or delivered pursuant hereto) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the Parties with respect to the subject matter hereof (including
the Confidentiality Agreement, between PPL Corporation and Buyer, dated
October 11, 2007 (the “Confidentiality Agreement”)). The terms and provisions of
this Agreement are intended solely for the benefit of the Parties and their
respective successors or permitted assigns, and it is not the intention of the
Parties to confer third-party beneficiary rights upon any other Person.
SECTION 10.5. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
any conflict or choice of law provision that would result in the application of
another state’s law.

 

41

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

 

SECTION 10.6. Consent to Jurisdiction; Waiver of Jury Trial. Each of the Parties
hereto irrevocably submits to the exclusive jurisdiction of the United States
District Court for the Southern District of New York located in the borough of
Manhattan in the City of New York, or if such court does not have jurisdiction,
the Supreme Court of the State of New York, New York County, for the purposes of
any suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby. Each of the Parties hereto further agrees that
service of any process, summons, notice or document by U.S. certified mail to
such Party’s respective address set forth in Section 10.1 shall be effective
service of process for any action, suit or proceeding in New York with respect
to any matters to which it has submitted to jurisdiction as set forth above in
the immediately preceding sentence. Each of the Parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (a) the United States District Court for the Southern District of New
York or (b) the Supreme Court of the State of New York, New York County, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 10.7. Assignment. Neither this Agreement nor any of the rights or
obligations hereunder shall be assigned by any of the Parties hereto without the
prior written consent of the other Party; provided that Buyer may transfer any
of its rights and obligations under this Agreement to an affiliated partnership
or corporation, including for purposes of having such partnership or corporation
take ownership of the PPL Gas Utilities Shares, so long as Buyer remains jointly
and severally obligated to satisfy all of Buyer’s obligations under the terms of
this Agreement. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the Parties and
their respective successors and permitted assigns. Any attempted assignment in
violation of the terms of this Section 10.7 shall be null and void, ab initio.
SECTION 10.8. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.9. Construction. References in this Agreement to any gender include
references to all genders, and references to the singular include references to
the plural and vice versa. The words “include”, “includes” and “including” when
used in this Agreement shall be deemed to be followed by the phrase “without
limitation”. Unless the context otherwise requires, references in this Agreement
to Articles, Sections, Exhibits, Schedules, Appendices and Attachments shall be
deemed references to Articles and Sections of, and Exhibits, Schedules,
Appendices and Attachments to, such Agreement. Unless the context otherwise
requires, the words “hereof”, “hereby” and “herein” and words of similar meaning
when used in this Agreement refer to this Agreement in its entirety and not to
any particular Article, Section or provision of this Agreement. Each Party
acknowledges that this Agreement was negotiated by it with the benefit of
representation by legal counsel, and any rule of construction or interpretation
otherwise requiring this Agreement to be construed or interpreted against any
Party shall not apply to any construction or interpretation hereof.

 

42

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

 

SECTION 10.10. Amendments and Waivers. This Agreement may not be amended,
supplemented or modified except by an instrument in writing signed on behalf of
Buyer and Seller. Any term or condition of this Agreement may be waived at any
time by the Party that is entitled to the benefit thereof, but no such waiver
shall be effective, unless set forth in a written instrument duly executed by or
on behalf of the Party waiving such term or condition. No waiver by any Party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion.
SECTION 10.11. Schedules and Exhibits. Except as otherwise provided in this
Agreement, all Exhibits and Schedules referred to herein are intended to be and
hereby are made a part of this Agreement. Any disclosure in any Party’s Schedule
under this Agreement corresponding to and qualifying a specific numbered
paragraph shall be deemed to correspond to and qualify any other numbered
paragraph relating to such Party to which the applicability of the disclosure is
readily apparent. Certain information set forth in the Schedules is included
solely for informational purposes, is not an admission of liability with respect
to the matters covered by the information, and may not be required to be
disclosed pursuant to this Agreement. The specification of any dollar amount in
the representations and warranties contained in this Agreement or the inclusion
of any specific item in the Schedules is not intended to imply that such amounts
(or higher or lower amounts) are or are not material, and no Party shall use the
fact of the setting of such amounts or the fact of the inclusion of any such
item in the Schedules in any dispute or controversy between the parties as to
whether any obligation, item, or matter not described herein or included in a
Schedule is or is not material for purposes of this Agreement.
[Remainder of page intentionally left blank]

 

43

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

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
as of the day and year first above written.

            PPL Corporation
      By:           Name:           Title:           UGI Utilities, Inc.
      By:           Name:           Title:        

 

44

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

 

Appendix A
As used in the Agreement, the following terms have the following meanings:
“Actual Aggregate Net Working Capital” has the meaning set forth in
Section 2.2(b).
An “Affiliate” of any Person means any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first Person. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether through
ownership of voting securities or ownership interests, by contract or otherwise,
and specifically with respect to a corporation, partnership or limited liability
company, means direct or indirect ownership of more than 50% of the voting
securities in such corporation or of the voting interest in a partnership or
limited liability company.
“Aggregate Net Working Capital” means (without duplication), except as otherwise
provided in this Agreement, the sum of the Net Working Capital of the Companies,
as determined in accordance with the methodology used in the preparation of the
sample calculation of Aggregate Net Working Capital set forth on Schedule 1.1
(which sets forth a sample calculation as of December 31, 2007) and in
accordance with GAAP as of 12:01 A.M. (Eastern time) on the Closing Date.
“Agreement” has the meaning set forth in the Preamble.
“Allocation Schedule” has the meaning set forth in Section 6.15(h).
“Antitrust Authorities” has the meaning set forth in Section 6.6(a).
“Asset” means all of the assets, properties, rights, claims, contracts and
interests of every type and description, real, personal or mixed, tangible and
intangible, owned by the Companies.
“Audited Financials” has the meaning set forth in Section 6.17.
“Base Purchase Price” has the meaning set forth in Section 2.1(b).
“Benefit Plans” has the meaning set forth in Section 4.9(a).
“Business Day” means any day, other than Saturday, Sunday or any other day on
which banks located in the State of New York are authorized or required to
close.
“Buyer” has the meaning set forth in the Preamble.
“Buyer’s 401(k) Plan” has the meaning set forth in Section 6.14(k)(i).
“Cap” has the meaning set forth in Section 8.2(c).
“Casualty Event” has the meaning set forth in Section 6.9.

 

 

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

 

“CBA” has the meaning set forth in Section 6.14(c)(i).
“Claim” means any demand, claim, action, legal proceeding (whether at law or in
equity), investigation or arbitration.
“Claim Notice” has the meaning set forth in Section 8.4(a).
“Closing” has the meaning set forth in Section 2.3.
“Closing Capital Expenditure Amount” means the positive difference, if any,
between (i) the scheduled capital expenditures (excluding capital expenditures
for new business) for the Companies on a cumulative basis from January 1, 2008
through the Closing Date as set forth on Schedule 6.2(a)(xii), with such
cumulative amount equal to the scheduled cumulative expenditure balance for the
month of Closing Date, multiplied by the cumulative number of days from
January 1, 2008 through the Closing Date divided by the cumulative number of
days from January 1, 2008 through the last day of the month of that the Closing
Date occurs; minus (ii) the actual capital expenditures (excluding capital
expenditures for new business) made by the Companies on a cumulative basis from
January 1, 2008 through the Closing Date. For the avoidance of doubt, if the
calculation in the immediately preceding sentence results in a negative value,
then the Closing Capital Expenditure Amount shall be zero.
“Closing Date” has the meaning set forth in Section 2.3.
“COBRA” has the meaning set forth in Section 6.14(g)(iii).
“Code” has the meaning set forth in Section 6.15(h).
“Companies” means each of PPL Gas Utilities, Penn Fuel and Gas-Oil Products.
“Company Pension Plan” has the meaning set forth in Section 6.14(j)(i).
“Company Plans” has the meaning set forth in Section 6.14(a).
“Company Reports” has the meaning set forth in Section 4.13.
“Company Retiree Plans” has the meaning set forth in Section 6.14(i).
“Company Trust” has the meaning set forth in Section 6.14(j)(ii).
“Company VEBAs” has the meaning set forth in Section 6.14(i).
“Confidentiality Agreement” has the meaning set forth in Section 10.4.
“Consent” has the meaning set forth in Section 3.3.
“Continuing Support Obligation” has the meaning set forth in Section 6.3(d).

 

A-2

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

 

“Contract” means any written contract, lease, license, evidence of indebtedness,
mortgage, indenture, purchase order, binding bid, letter of credit, security
agreement, undertaking or other agreement that is legally binding.
“Credit Rating” means, with respect to any Person, the rating then assigned to
such Person’s unsecured, senior long-term debt obligations not supported by
third party credit enhancements, or if such Person does not have such a rating,
then the rating then assigned to such Person as an issuer, by Moody’s or Fitch,
as applicable.
“Damages” means any and all claims, injuries, lawsuits, liabilities, losses,
damages, judgments, fines, penalties, deficiencies, costs and expenses,
including the reasonable fees and disbursements of counsel and experts
(including reasonable fees of attorneys and paralegals, whether at the
pre-trial, trial, or appellate level, or in arbitration) and all amounts
reasonably paid in investigation, defense, or settlement of any of the
foregoing.
“De Minimis Claim” has the meaning set forth in Section 8.2(b)(i).
“Deductible” has the meaning set forth in Section 8.2(b)(ii).
“Easements” means all easements, rights of way, permits, prescriptive rights and
other ways of necessity, whether or not of record, relating to real property.
“Environmental Law” means any applicable statute, ordinance, Order or regulation
of any Governmental Entity relating to (a) the protection, preservation or
restoration of the environment (including air, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource), or (b) the treatment, storage or disposal of
Hazardous Substances.
“ERISA” has the meaning set forth in Section 4.9(a).
“Estimated Aggregate Net Working Capital” has the meaning set forth in
Section 2.2(a).
“Filing” has the meaning set forth in Section 3.3.
“Final Order” means an action by a Governmental Entity as to which (i) no
request for stay of the action is pending, no such stay is in effect and if any
time period is permitted by statute or regulation for filing any request for
such stay, such time period has passed, (ii) no petition for rehearing of the
action is pending and the time for filing any such petition or application has
passed, (iii) such Governmental Entity does not have the action under
reconsideration on its own motion and (iv) no appeal to a court or a request for
stay by a court of the Governmental Entity’s action is pending or in effect and
the deadline for filing any such appeal or request has passed.
“Financial Statements” has the meaning set forth in Section 4.3.
“GAAP” means generally accepted accounting principles in the United States, as
consistently applied by PPL Gas Utilities and Penn Fuel in accordance with their
past practices.

 

A-3

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

 

“Gas-Oil Products” means Gas-Oil Products, Inc. of Delaware, a Delaware
corporation.
“Gas-Oil Shares” has the meaning set forth in Section 4.2(b).
“Good Practices” means any of the practices, methods and activities approved by
a significant portion of the gas or propane distribution industry, as
applicable, as good practices applicable to operations of similar design, size
and capacity or any of the practices, methods or activities which, in the
exercise of reasonable judgment by an operator of a distribution business in
light of the facts known at the time the decision was made, could have been
expected to accomplish the desired result at a reasonable cost consistent with
good business practices, reliability, safety, expedition and applicable law.
Good Practices are not intended to be limited to the optimal practices, methods
or acts to the exclusion of all others, but rather to be practices, methods or
acts generally accepted in the gas or propane distribution industry, as
applicable.
“Governmental Entity” means any court, tribunal, arbitrator, authority, agency,
commission, legislative body, official or other instrumentality of the United
States or any foreign, state, county, city or other political subdivision or
similar governing entity, and including any governmental, quasi-governmental or
non-governmental body administering, regulating or having general oversight over
electric reliability or gas, electricity, power or other markets.
“Hazardous Substance” means any substance or material listed, defined or
classified as a pollutant, contaminant, hazardous substance, toxic substance, or
hazardous waste under any Environmental Law, including, petroleum,
polychlorinated biphenyls, and friable asbestos, but excluding propane.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or any successor law, and regulations and rules issued by the U.S.
Department of Justice or the Federal Trade Commission pursuant to that act or
any successor law.
“Indebtedness” means any of the following classified under GAAP as long-term:
(a) any indebtedness for borrowed money, (b) any obligations evidenced by bonds,
debentures, notes or other similar instruments, (c) any obligations to pay the
deferred purchase price of property, services or any other deferred cost (except
trade accounts payable as a current liability in the ordinary course of
business), (d) any obligations as lessee under capitalized leases, (e) any
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to acquired property, (f) any obligations,
contingent or otherwise, under acceptance credit, letters of credit or similar
facilities, and (g) any guaranty of any of the foregoing.
“Indemnified Buyer Entity” has the meaning set forth in Section 8.2(a).
“Indemnified Entity” has the meaning set forth in Section 8.4(a).
“Indemnified Seller Entity” has the meaning set forth in Section 8.3(a).
“Indemnifying Party” has the meaning set forth in Section 8.4(a).

 

A-4

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

 

“Independent Accounting Firm” means Deloitte & Touche LLP or, if such firm is
unable to take such engagement, an independent accounting firm of national
reputation that is selected by mutual agreement of Seller and Buyer or, if
Seller and Buyer do not reach mutual agreement on the independent accounting
firm to be selected within five (5) days after either Party first receives
written notice from the other Party requesting such mutual agreement in
connection with a requirement for such Independent Accounting Firm under this
Agreement, then by mutual agreement by Seller’s and Buyer’s respective
accounting firms; provided, that if Seller’s and Buyer’s respective accounting
firms do not reach mutual agreement on an independent accounting firm within
five (5) days after such decision is referred to them for determination, then
the independent accounting firm shall be selected by the American Arbitration
Association pursuant to the then effective and applicable rules of the American
Arbitration Association (with Seller and Buyer sharing equally the cost of such
selection process).
“Intercompany Accounts” has the meaning set forth in Section 2.5.
“Interim Financials” has the meaning set forth in Section 6.17.
“Interim Period” means the period beginning on the date hereof and ending at the
Closing.
“Knowledge” means, (i) in the case of Seller, the actual knowledge (as opposed
to any constructive or imputed knowledge) of the individuals listed on
Schedule 2(a), and (ii) in the case of Buyer, the actual knowledge (as opposed
to any constructive or imputed knowledge) of the individuals listed on
Schedule 2(b).
“Large Volume Meters” has the meaning set forth in Section 6.7.
“Law” means, with respect to any Person, any statute, law, standards, code,
common law, treaty, ordinance, rule, administrative interpretation, regulation,
order, writ, injunction, directive, judgment, decree or other requirement of any
Governmental Entity applicable to such Person or any of its respective
properties or assets, as amended from time to time.
“Legal Requirements” means any federal, state, county, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, adopted code, principle of common law, regulation,
rule, directive, approval, notice, tariff, franchise agreement, statute or
treaty, or stock exchange rule.
“Lien” means, with respect to any property or asset, any charge, adverse claim,
lien, option, mortgage, pledge, security interest, right of first refusal or
other encumbrance.

 

A-5

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

 

“Material Adverse Effect” means any change or event that is materially adverse
to (i) the assets, liabilities, operations or condition of the Companies, taken
as a whole, in each case, except for any such change, event or effect resulting
from or arising out of (a) changes in economic conditions generally or in the
industries in which the Companies operate, whether international, national,
regional or local, (b) changes in international, national, regional, state or
local wholesale or retail markets for electric power or gas, propane or other
fuel supply or transportation or related products, including those due to
actions by competitors, (c) changes in general regulatory or political
conditions, including any acts of war or terrorist activities, (d) changes in
national, regional, state or local fuel transportation or distribution systems
or channels, (e) strikes, work stoppages or other labor disturbances,
(f) increases in the costs of commodities or supplies, including fuel,
(g) effects of weather or meteorological events, (h) any change of Law,
accounting standards or regulatory policy after the date of this Agreement, (i)
changes or adverse conditions in the securities markets, including those
relating to debt financing, (j) the announcement, execution or delivery of this
Agreement or the consummation of the transactions contemplated hereby, and
(k) any actions specifically required to be taken or consented to pursuant to or
in accordance with this Agreement, in the case of each of clauses (e), (f) and
(h) which do not have a materially disproportionate effect on any of the
Companies, or (ii) the Seller’s ability to perform its obligations hereunder.
“Material Contracts” means all Contracts requiring or guaranteeing (including by
collateral signature, surety, or joint and several debt) payments in excess of
$500,000 per annum or $2,000,000 in the aggregate, or which contain any covenant
restricting the ability of the Companies to compete or to engage in any activity
or business, except for Contracts with respect to which the Companies will not
be bound or have liability after the Closing or which are terminable on less
than ninety (90) days’ notice without penalty.
“Net Working Capital” means, except as otherwise provided in this Agreement, the
net working capital of a Company, as determined in accordance with the
methodology used in the preparation of the sample calculation of Aggregate Net
Working Capital set forth on Schedule 1.1, and in accordance with GAAP as of
12:01 A.M. (Eastern time) on the Closing Date.
“Non-Company Affiliates” means any Affiliate of Seller, except for the
Companies.
“Order” means any award, decision, injunction, judgment, order, writ, decree,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, other Governmental Entity, or by any arbitrator, each of
which possesses competent jurisdiction.
“Outside Date” has the meaning set forth in Section 9.1(a).
“Parent Plans” has the meaning set forth in Section 6.14(a).
“Party” or “Parties” means Seller and Buyer, individually, a “Party”, and
collectively as the “Parties”.
“Penn Fuel” means Penn Fuel Propane, LLC, a Pennsylvania limited liability
company.
“Penn Fuel Interests” has the meaning set forth in Section 4.2(b).

 

A-6

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

 

“Permitted Lien” means (a) any Lien for Taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings, (b) any mechanics’,
workmen’s, repairmen’s, warehousemen’s, carriers’ or other like Lien arising in
the ordinary course of business with respect to a liability that is not yet due
or delinquent or which is being contested in good faith by Seller or its
Affiliates, including the Companies, (c) imperfections or irregularities of
title and other Liens that would not, individually or in the aggregate,
materially detract from the value of the assets to which they attach,
(d) zoning, planning, and other similar limitations and restrictions, all rights
of any Governmental Entity to regulate a property, (e) any Lien set forth in any
franchise or governing ordinance under which any portion of the Companies’
businesses is conducted, (f) all rights of condemnation, eminent domain or other
similar rights of any Person, (g) any Lien to be released on or prior to
Closing, and (h) any other Lien which does not materially interfere with the
Companies’ use of the assets used in their businesses.
“Person” means any natural person, corporation, general partnership, limited
partnership, limited liability company, proprietorship, other business
organization, trust, union, association or Governmental Entity.
“Policies” has the meaning set forth in Section 4.11.
“PPL Gas Utilities” has the meaning set forth in the Recitals.
“PPL Gas Utilities Shares” has the meaning set forth in the Recitals.
“Pre-Closing Taxable Period” has the meaning set forth in Section 6.15(a).
“Proceeding” means any claim, action, arbitration, hearing, audit, litigation or
suit commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Entity or arbitrator.
“Property Taxes” has the meaning set forth in Section 6.15(b).
“Purchase Price” has the meaning set forth in Section 2.1(b).
“Real Property” means all real property owned or leased by the Companies,
together with all interests in real property (including Easements) used or held
for use by the Companies.
“Representatives” means the officers, directors, managers, employees, counsel,
accountants, financial advisers or consultants of a Person.
“Section 338(h)(10) Elections” has the meaning set forth in Section 6.15(h).
“Securities Act” has the meaning set forth in Section 5.8.
“Seller” has the meaning set forth in Preamble.
“Seller Mark” or “Seller Marks” has the meaning set forth in Section 6.8.
“Seller’s 401(k) Plan” has the meaning set forth in Section 6.14(k)(i).
“Seller’s Master Trust” has the meaning set forth in Section 6.14(j)(i).

 

A-7

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

 

“Straddle Taxable Period” has the meaning set forth in Section 6.15(a).
“Support Obligations” has the meaning set forth in Section 6.3(a).
“Tax” or “Taxes” means any United States local, state or federal or foreign
income, profits, franchise, withholding, ad valorem, personal property (tangible
and intangible), employment, payroll, sales and use, social security,
disability, occupation, real property, severance, excise and other taxes,
charges, levies or other assessments imposed by a Taxing Authority, including
any interest, penalty or addition thereto and shall include any liability for
the payment of the foregoing obligations of another Person as a result of
(a) being or having been a member of an affiliated, consolidated, combined,
unitary or aggregate group of corporations; (b) being or having been a party to
any tax sharing agreement or any express or implied obligation to indemnify any
Person; and (c) being or having been a transferee, successor, or otherwise
assuming the obligations of another Person to pay the foregoing amounts.
“Tax Claim” has the meaning set forth in Section 6.15(e).
“Tax Returns” means any return, report or similar statement required to be filed
with respect to any Taxes (including any attached schedules), including any
information return, claim for refund, amended return and declaration of
estimated Tax.
“Taxing Authority” means, with respect to any Tax, the Governmental Entity that
imposes such Tax, and the agency (if any) charged with the collection of such
Tax for such entity or subdivision.
“Terminated Contracts” has the meaning set forth in Section 6.11(a).
“Third Party” has the meaning set forth in Section 8.4(a).
“Transfer Taxes” means all transfer, sales, use, goods and services, value
added, documentary, stamp duty, gross receipts, excise, transfer and conveyance
Taxes and other similar Taxes, duties, fees or charges.
“Transition Services Agreements” has the meaning set forth in Section 6.11(b).
“WARN” has the meaning set forth in Section 6.14(l).

 

A-8