Document:

<PAGE>

                                                                  Exhibit 10(a)3

             ALLETE EXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLAN
                     FORM OF LONG-TERM CASH INCENTIVE AWARD
                       PRESIDENT OF ALLETE PROPERTIES, LLC

                        2006 GOALS AND AWARD OPPORTUNITY
                        --------------------------------

Base Salary                                                              $

       TIMES

Award Opportunity (percent of base salary)                               %
                                                                         ------

       EQUALS

Target Award Opportunity                                                 $

       TIMES

Performance Scorecard Achievement (0% - 120%) /1

       EQUALS

Cash Incentive Award /2                                                  $
                                                                         -------

/1 The  Performance Scorecard includes one financial goal and six strategic
nonfinanical goals. Goal achievement will be determined at the end of 2006.

/2 Award Vesting:  30% on February 1, 2007; 30% on February 1, 2008; 40% on
February 1, 2009.<PAGE>

                                                                  Exhibit 10(a)4
                                     ALLETE
                EXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLAN
                                  STOCK GRANT
                     [PRESIDENT OF ALLETE PROPERTIES, LLC]

Name

SS #

In accordance with the terms of ALLETE's Executive Long-Term Incentive
Compensation Plan (the "Plan"), as determined by and through the Executive
Compensation Committee of ALLETE's Board of Directors, ALLETE hereby grants to
you (the "Participant") the right to receive ALLETE Common Stock, as set forth
below, subject to the terms and conditions set forth in this Grant (including
Annex A hereto and all documents incorporated herein by reference):

     Number of Shares of ALLETE Common Stock:

     Date of Grant:                                     February 1, 2006

     Vesting Period:                                    30% on February 1, 2007
                                                        30% on February 1, 2008
                                                        40% on February 1, 2009

This Grant is made in accordance with the Plan, which was approved by ALLETE's
shareholders at the 2005 Annual Meeting.

Further terms and conditions of the Grant are set forth in Annex A hereto, which
is an integral part of this Grant.

All terms, provisions and conditions set forth in the Plan and not set forth
herein are incorporated by reference. To the extent any provision hereof is
inconsistent with a provision of the Plan, the provisions of the Plan will
govern.

IN WITNESS WHEREOF, ALLETE has caused this Grant to be executed by its Chairman,
President and Chief Executive Officer as of the date and year first above
written.

                                     ALLETE

                                     By:________________________________________
                                                Chairman, President and CEO

Attachment:  Annex A

<PAGE>

                                     ANNEX A
                                       TO
                                     ALLETE
                 EXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLAN
                                   STOCK GRANT
                      [PRESIDENT OF ALLETE PROPERTIES, LLC]

     1.   FURTHER TERMS AND CONDITIONS OF STOCK GRANT. The Grant of Shares
evidenced by the Grant to which this is annexed is subject to the following
additional terms and conditions:

     (a)  DIVIDEND EQUIVALENTS. The Participant shall not receive Dividend
     Equivalents with respect to the number of Shares subject to the Grant.

     (b)  PAYMENT. Subject to the provisions of subsection (c) hereof, payment
     shall be made within two and one half months after the end of the vesting
     period, after withholding Shares equal in value to the Participant's income
     tax obligation via a deposit of ALLETE common stock into an account in the
     ALLETE Invest Direct plan.

     (c)  PAYMENT UPON DEATH, RETIREMENT, DISABILITY, FORFEITURE OF UNVESTED
 SHARES UPON UNSATISFACTORY JOB PERFORMANCE, OR OTHER TERMINATION OF EMPLOYMENT.

     (1)  During the Vesting Period (i) if the Participant retires
          pursuant to the terms of a tax qualified retirement plan of ALLETE or
          a Subsidiary or upon such other retirement as may be approved by the
          Committee, (ii) in the event of the death of the Participant while in
          the employ of ALLETE or a Subsidiary, or (iii) in the event of the
          termination of the employment of the Participant due to Disability (as
          defined in Section 22(e)(3) of the Code), all unvested Shares of Stock
          shall vest and be paid within two and one half months after such event
          to the Participant (or the Participant's beneficiary or estate). The
          payment shall be prorated based upon the number of whole calendar
          months within the three year Vesting Period which had elapsed as of
          the date of death, retirement or termination due to Disability in
          relation to the number of calendar months in the three year Vesting
          Period. A whole month is counted in the calculation if the Participant
          was in the position as of the 15th of the month.

     (2)  If prior to payment of all Shares, the Participant is demoted, or
          ALLETE or a Business Unit determines, in its sole discretion, that the
          Participant's job performance is unsatisfactory, ALLETE reserves the
          right to cancel or amend the Participant's grant relating to any
          unpaid Shares, with the result that some portion or all of the
          Participant's unpaid Shares are forfeited.

     (3)  If the Participant's employment with ALLETE or any Subsidiary
          terminates for any reason other than death, Disability or retirement,
          as specified in subsection (c)(1) hereof, all Shares to the extent not
          yet vested shall, except as otherwise provided by the Committee, be
          forfeited on the date of such other termination of employment.

                                                                               1

<PAGE>

     2.   RATIFICATION OF ACTIONS. By receiving the Grant or other benefit
under the Plan, the Participant and each person claiming under or through
Participant shall be conclusively deemed to have indicated the Participant's
acceptance and ratification of, and consent to, any action taken under the Plan
or the Grant by ALLETE, the Board or the Committee.

     3.   NOTICES. Any notice hereunder to ALLETE shall be addressed to
ALLETE, 30 West Superior Street, Duluth, Minnesota 55802, Attention: Manager -
Executive Compensation and Employee Benefits, Human Resources, and any notice
hereunder to the Participant shall be directed to the Participant's address as
indicated by ALLETE's records, subject to the right of either party to designate
at any time hereafter in writing some other address.

     4.   DEFINITIONS. Capitalized terms not otherwise defined herein shall
have the meanings given them in the Plan.

     5.   GOVERNING LAW AND SEVERABILITY. To the extent not preempted by the
Federal law, the Grant will be governed by and construed in accordance with the
laws of the State of Minnesota, without regard to conflicts of law provisions.
In the event any provision of the Grant shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of the
Grant, and the Grant shall be construed and enforced as if the illegal or
invalid provision had not been included.<PAGE>

                                                                   Exhibit 10(b)

                     ALLETE EXECUTIVE ANNUAL INCENTIVE PLAN
                              FORM OF ANNUAL AWARD
                       PRESIDENT OF ALLETE PROPERTIES, LLC

                   2006 FINANCIAL GOALS AND AWARD OPPORTUNITY
                   ------------------------------------------

Achievement Bonus Pool (0.0% - 0.84% of Total Land Sales)       $

         PLUS

Incentive Bonus Pool (0.0% - 0.35% of Total Net Income)         $

         EQUALS

Bonus Pool Opportunity                                          ------
                                                                $

         TIMES

Performance Scorecard Goal Achievement (0% - 120%) /1           %

         EQUALS

Annual Incentive Award                                          $
                                                                ======

/1 The Performance Scorecard includes one financial goal and six strategic
nonfinanical goals. Goal achievement will be determined at the end of 2006.Purchase and Sale Agreement

    
      

    

     

    Exhibit
      10.1

     

    
      EXECUTION
        COPY

       

      

       

      

       

      PURCHASE
        AND SALE AGREEMENT

       

      between

       

      SOUTHERN
        UNION COMPANY

       

      and

       

      UGI
        CORPORATION

       

      Dated
        as of January 26, 2006 

      

      

       

      
        
          
             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
            

          

        

      

      TABLE
        OF CONTENTS

       

      

      
        	 	 Page
	 ARTICLE I. DEFINITIONS   	
                 1

              
	
                 Section
                  1.1. Certain Defined
                  Terms                                                         
                  

              	
                 1

              
	
                 Section
                  1.2. Other Defined Terms  

              	
                 9

              
	 	 
	 ARTICLE II. PURCHASE AND
                SALE                                                        
                	
                 11

              
	
                 Section
                  2.1. Purchase and Sale of Assets and
                  Stock                                                    

              	
                 11

              
	
                 Section
                  2.2. Assumed
                  Liabilities                                                              
                  

              	
                 11

              
	
                 Section
                  2.3. Retained
                  Liabilities                                                                
                  

              	
                 12

              
	
                 Section
                  2.4. Condition on Assignment or Assumption of Contracts and
                  Rights                                     
                  

              	
                 13

              
	
                 Section
                  2.5. Settlement of Intercompany
                  Accounts                                                       
                  

              	
                 13

              
	 	 
	 ARTICLE III. PURCHASE
                PRICE                                                                     
                	
                 13

              
	
                 Section
                  3.1. Purchase
                  Price        

              	
                 13

              
	
                 Section
                  3.2. Adjustment to Estimated Purchase
                  Price     

              	
                 14

              
	 	 
	 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF
                BUYER                                              
                	
                 15

              
	
                 Section
                  4.1. Organization, Existence and Qualification 

              	
                 15

              
	
                 Section
                  4.2. Authority Relative to this Agreement and Binding
                  Effect                                          
                  

              	
                 15

              
	
                 Section
                  4.3. Governmental and Other Required
                  Consents                                                

              	
                 16

              
	
                 Section
                  4.4. Availability of
                  Funds                                                                
                  

              	
                 16

              
	
                 Section
                  4.5.
                  Filings                                                                          
                  

              	
                 16

              
	
                 Section
                  4.6.
                  Brokers                                                                     
                  

              	
                 16

              
	
                 Section
                  4.7.
                  Litigation                                                                      
                  

              	
                 16

              
	
                 Section
                  4.8. Independent
                  Investigation                                                          
                  

              	
                 16

              
	
                 Section
                  4.9. Investment Intent; Investment Experience; Restricted
                  Securities                                     
                  

              	
                 17

              
	
                 Section
                  4.10.
                  PUHCA                                                                          
                  

              	
                 17

              
	 	 
	 ARTICLE V. REPRESENTATIONS AND WARRANTIES OF
                SELLER                                     
                	
                 17

              
	
                 Section
                  5.1. Organization, Existence and
                  Qualification                                                            
                  

              	
                 17

              
	
                 Section
                  5.2. Authority Relative to this Agreement and Binding
                  Effect                                                 
                  

              	
                 18

              
	
                 Section
                  5.3. Governmental and Other Required
                  Consents                                                  
                  

              	
                 18

              
	
                 Section
                  5.4. Capitalization of the Subsidiaries; Title to
                  Stock                                                 
                  

              	
                 18

              
	
                 Section
                  5.5. Title to Assets;
                  Encumbrances                                                        

              	
                 19

              
	
                 Section
                  5.6. Financial
                  Statements                                                                

              	
                 19

              
	
                 Section
                  5.7. Compliance with Legal Requirements; Governmental
                  Permits                                        

              	
                 20

              
	
                 Section
                  5.8. Legal Proceedings; Outstanding
                  Orders                                                    

              	
                 20

              
	
                 Section
                  5.9. Taxes      

              	
                 20

              
	
                 Section
                  5.10. Intellectual
                  Property                                                                

              	
                 21

              
	
                 Section
                  5.11. Personal
                  Property        

              	
                 21

              
	
                 Section
                  5.12. Material
                  Contracts                                                                    

              	
                 21

              
	
                 Section
                  5.13. Employee Benefit Matters  

              	
                 21

              
	
                 Section
                  5.14. Environmental
                  Matters                                                            

              	
                 22

              
	
                 Section
                  5.15. Absence of Certain Changes or
                  Events        

              	
                 23

              

      

      

                               

        
          
            -
              -

            
            

          

          
            
            

            
              

            

          

          
            
            

             

          

        

      
        	 	 

                Page

              
	
                 Section
                  5.16. Regulatory Matters 

              	 23
	
                 Section
                  5.17.
                  Brokers                                                            

              	 24
	
                 Section
                  5.18.
                  Disclaimer                                                            

              	 24
	
                 Section
                  5.19.
                  Insurance                                                            

              	 24
	
                 Section
                  5.20. Absence of Undisclosed
                  Liabilities                                                

              	 25
	
                 Section
                  5.21. Sufficiency of
                  Assets                                                    

              	 25
	
                 Section
                  5.22.
                  PUHCA                                                            

              	 25
	 	 
	 ARTICLE VI.
                COVENANTS                                                     	 25
	
                 Section
                  6.1. Covenants of
                  Seller         

              	 25
	
                 Section
                  6.2. Covenants of
                  Buyer                                                        

              	 27
	
                 Section
                  6.3. Governmental
                  Filings                                                        

              	 28
	
                 Section
                  6.4. Seller
                  Marks                                                            

              	 29
	
                 Section
                  6.5. Acknowledgment by
                  Buyer                                                    

              	 30
	
                 Section
                  6.6. Transition
                  Plan                                                            

              	 30
	
                 Section
                  6.7. Purchase of Leased
                  Assets                                                        

              	 31
	
                 Section
                  6.8. Meter
                  Reading                                                                

              	 31
	
                 Section
                  6.9.
                  Insurance                                                                

              	 31
	
                 Section
                  6.10. Rick of
                  Loss                                                                

              	 32
	
                 Section
                  6.11. Rate
                  Matters                                                                

              	 33
	
                 Section
                  6.12. Outstanding Payments and Bank
                  Accounts                                                

              	 33
	
                 Section
                  6.13. Preparation of Audited Financial Statements of the
                  Business                                        

              	 33
	
                 Section
                  6.14. Collective Bargaining
                  Agreement                                                        

              	 34
	 	 
	 ARTICLE VII. CONDITIONS
                PRECEDENT                                                                 	 34
	
                 Section
                  7.1. Seller’s Conditions Precedent to
                  Closing                                                    

              	 34
	
                 Section
                  7.2. Buyer’s Conditions Precedent to
                  Closing                                                    

              	 35
	
                 

              	 
	 ARTICLE VIII.
                CLOSING                                                                             	 36
	
                 Section
                  8.1.
                  Closing                  

              	 36
	 	 
	 ARTICLE IX.
                TERMINATION                                                                 	 37
	
                 Section
                  9.1. Termination
                  Rights                                                                    

              	 37
	
                 Section
                  9.2. Limitation on Right to Terminate; Effect of
                  Termination                                                

              	 38
	 	 
	 ARTICLE X. EMPLOYEE
                MATTERS                                                                         	 38
	
                 Section
                  10.1. Employee
                  Agreement                                                                    

              	 38
	
                 

              	 
	 ARTICLE XI. TAX
                MATTERS                                                                             	 38
	
                 Section
                  11.1. Purchase Price
                  Allocation                                                                

              	 38
	
                 Section
                  11.2. Cooperation with Respect to Like-Kind
                  Exchange                                                    

              	 39
	
                 Section
                  11.3. Transaction
                  Taxes                                                                        

              	 39
	
                 Section
                  11.4. Real and Personal Property
                  Taxes                                                            

              	 40
	
                 Section
                  11.5. Other
                  Taxes                                                                            

              	 40
	
                 Section
                  11.6. Straddle
                  Period                                                                        

              	 40

      

      

      
        
          -
            -

          
          

        

        
          
          

          
            

          

        

        
          
          

          

           

        

      

      
        	 	 

                Page

              
	
                 Section
                  11.7. Cooperation on Tax Matters 

              	 41
	 	 
	 ARTICLE XII.
                INDEMNIFICATION                                                                                 	 41
	
                 Section
                  12.1. Indemnification by
                  Seller                                                                        

              	 41
	
                 Section
                  12.2. Indemnification by
                  Buyer                                                                        

              	 42
	
                 Section
                  12.3. Limitations on Seller’s
                  Liability                                                                    

              	 42
	
                 Section
                  12.4. Limitation on Buyer’s
                  Liability                                                                        

              	 44
	
                 Section
                  12.5. Claims
                  Procedure                                                                                

              	 44
	
                 Section
                  12.6. Exclusive
                  Remedy                                                                                

              	 45
	
                 Section
                  12.7. Waiver and
                  Release                                                                                

              	 45
	 	 
	 ARTICLE XIII. GENERAL
                PROVISIONS                                                                     	 46
	
                 Section
                  13.1.
                  Expenses                                                                            

              	 46
	
                 Section
                  13.2.
                  Notices                                                                            

              	 46
	
                 Section
                  13.3.
                  Assignment                                                                        

              	 47
	
                 Section
                  13.4. Successor
                  Bound                                                                        

              	 47
	
                 Section
                  13.5. Governing Law

              	 47
	
                 Section
                  13.6.
                  Cooperation                                                                        

              	 47
	
                 Section
                  13.7. Construction of
                  Agreement                                                                

              	 48
	
                 Section
                  13.8.
                  Publicity                                                                            

              	 48
	
                 Section
                  13.9.
                  Waiver                                                                                

              	 48
	
                 Section
                  13.10. Parties in
                  Interest                                                                        

              	 49
	
                 Section
                  13.11. Section and Paragraph
                  Headings                                                                

              	 49
	
                 Section
                  13.12.
                  Amendment                                                                                

              	 49
	
                 Section
                  13.13. Entire
                  Agreement                                                                            

              	 49
	
                 Section
                  13.14.
                  Counterparts                                                                                

              	 49
	
                 Section
                  13.15.
                  Severability                                                                                

              	 49
	
                 Section
                  13.16. Consent to
                  Jurisdiction                                                                        

              	 50

      

      

       

      
        
          
            -
              -

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
            

             

          

        

      

      LIST
        OF EXHIBITS

       

      Exhibit
        6.6    Transition
        Services

      Exhibit
        10.1   Employee
        Agreement

       

      LIST
        OF SCHEDULES

       

      Schedule
        1.1(a) 
Base Statement 

      Schedule
        1.1(b) 
Certain Excluded Assets

      Schedule
        2.2         
 Assumed Proceedings

      Schedule
        2.3(b)      Other Matters

      Schedule
        4.3           Buyer’s
        Governmental and Other Required Consents

      Schedule
        5.2           Seller’s
        Authority

      Schedule
        5.3           Seller’s
        Governmental and Other Required Consents

      Schedule
        5.5          
Encumbrances

      Schedule
        5.6           Financial
        Statements

      Schedule
        5.7           Compliance with
        Legal Requirements; Governmental Permits

      Schedule
        5.8           Legal
        Proceedings; Outstanding Orders

      Schedule
        5.9           Taxes

      Schedule
        5.10         
Intellectual Property

      Schedule
        5.12         
Material Contracts

      Schedule
        5.13         
Employee Matters

      Schedule
        5.14         
Environmental Matters

      Schedule
        5.15         Absence
        of Certain Changes or Events

      Schedule
        5.16        
Regulatory Matters

      Schedule
        5.17        
Brokers

      Schedule
        5.19        
Seller’s Insurance

      Schedule
        5.20        Absence of
        Undisclosed Liabilities

      Schedule
        5.21        Sufficiency
        of Assets

      Schedule
        6.1         
Conduct of the Business Prior to the Closing Date

      Schedule
        6.2(c)     Seller Guarantees and Surety
        Instruments

      Schedule
        6.7         
Leased Assets

      

      

      
        
          
            -
              iv -

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
            

             

          

        

      

      PURCHASE
        AND SALE AGREEMENT

       

      This
        PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of
        the 26th day of January, 2006, by and between SOUTHERN UNION COMPANY,
        a Delaware corporation (“Seller”), and UGI CORPORATION, a Pennsylvania
        corporation (“Buyer”). Capitalized terms used herein shall have the meanings
        ascribed to them in Article I, unless otherwise provided.

       

      W
        I T N E S S E T H :

       

      WHEREAS,
        Seller or the Subsidiary owns all of the Assets and
        Seller owns all of the capital stock of the Subsidiary; and

       

      WHEREAS,
        Buyer desires to purchase, and Seller desires to sell,
        the Assets owned by Seller and the capital stock of the Subsidiary, subject
        in
        all respects to the provisions of this Agreement.

       

      NOW,
        THEREFORE, in consideration of the premises and other good
        and valuable consideration, the receipt and sufficiency of which are hereby
        acknowledged, the parties hereby agree as follows:

       

      ARTICLE
        I.  

       

      DEFINITIONS

       

      
        	Section
                1.1.   	
                Certain
                  Defined Terms.

              

      

       

      For
        purposes of this Agreement, the following terms have the
        meanings specified or referred to in this Article I (such definitions to
        be
        equally applicable to both the singular and plural forms of the terms
        defined):

       

      “Affiliates”
or
“Affiliated
        Entities”
— shall have the following meaning: entities
        shall be deemed “Affiliated” as to each other to the extent (i) one of the
        entities directly or indirectly controls the other, or the direct or indirect
        control of one of the entities is exercised by the officers, directors,
        stockholders, or partners of the other entity (whether or not such persons
        exercise such control in their capacities as officers, directors, stockholders,
        or partners) or (ii) is deemed to be an Affiliate under existing statutes
        or
        regulations of the SEC.

       

      “Assets”
        — means all of the
        assets, property and interests of every type and description, real, personal
        or
        mixed, tangible and intangible, owned by Seller, directly or indirectly through
        the Subsidiary, and relating primarily to the Business, other than the Excluded
        Assets.

       

      “Assumed
        Environmental
        Liabilities” — means all Environmental
        Liabilities of Seller or the Subsidiary relating to the Business or the Assets,
        whether arising or relating to the period before or after the Closing, other
        than the Retained Environmental Liabilities.

       

      “Base
        Statement” — means the statement as to the Working
        Capital of the Business as of September 30, 2005 set forth in Schedule
        1.1(a).

       

      
        
          -
            -

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      “Business”—
means
        the Business conducted in Pennsylvania
        by Seller and the Subsidiary (other than the business conducted by PEI Power
        Corporation and Seller’s corporate and shared service activities conducted in
        Pennsylvania), including:

       

      (a)  the
        regulated and non-regulated gas distribution business conducted in Pennsylvania
        by Seller through PG Energy and the provision of related
        services and products and the engagement in related activities, including
        agreements as to appliances and other equipment in Pennsylvania by Seller
        through PG Energy; and

       

      (b)  all
        activities conducted by PG Energy Services, Inc., including the equipment
        servicing business.

       

      “Business
        Day” — means any day that is not a Saturday,
        Sunday or other day on which banks in New York City are
        authorized or required by law to close.

       

      “CERCLA”
—
means
        the Comprehensive Environmental Response
        Compensation and Liability Act (42 U.S.C. section 9601 et seq.), as
        amended.

       

      “Claim
        Notice” — means a written notice of a claim given
        by a party seeking indemnification pursuant to the terms of this Agreement
        that
        specifies in reasonable detail the nature of the Losses and the estimated
        amount
        of such Losses.

       

      “Confidentiality
        Agreement” — means that certain
        confidentiality agreement dated as of January 13, 2006, between Buyer and
        Seller.

       

      “Consent”
—
means
        any approval, consent, ratification,
        waiver, clearance or other authorization from any Person.

       

      “Contract”
—
means
        any agreement, contract, document,
        instrument, obligation, promise or undertaking (whether written or oral)
        that is
        legally binding, including Easements.

       

      “Current
        Assets”— means the current Assets (other than
        Excluded Assets) of the Business as reflected in the categories set forth
        on the
        Base Statement as of the relevant date of determination and prepared in
        accordance with Schedule 1.1(a).

       

      “Current
        Liabilities” — means the current Assumed
        Liabilities of the Business as reflected in the categories set forth on the
        Base
        Statement as of the relevant date of determination and prepared in accordance
        with Schedule 1.1(a).

       

      “Easements”
—
means
        all easements, rights of way,
        permits, licenses, prescriptive rights and other ways of necessity, whether
        or
        not of record, relating to real property.

       

      “Encumbrance”
—
means
        any charge, adverse claim, lien,
        option, encumbrance, mortgage, pledge or security interest.

       

      “Environmental
        Claim” — means any
        and all written administrative, regulatory or judicial actions, suits, demands,
        demand letters, claims, liens, investigations, proceedings or notices of
        noncompliance or violation by any third party (including any Governmental
        Body)
        alleging potential liability (including, without limitation, potential liability
        for enforcement, 

       

      
        
          -
            -

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      investigatory
        costs, damages, Losses, contribution,
        indemnification, cost recovery, compensation, injunctive relief, cleanup
        costs,
        governmental resource costs, removal costs, remedial costs, natural resources
        damages, property damages, personal injuries or penalties) arising out of,
        based
        on or resulting from (a) the presence, or Release or threatened Release into
        the
        environment, of any Hazardous Materials at any location operated, leased
        or
        managed by Seller or the Subsidiary; (b) any violation of any Environmental
        Law; or (c) one or more Releases of the same or substantially the same Hazardous
        Material, from or at the same location regardless of whether such Releases
        resulted from the same event or from multiple events over time.

       

      “Environmental
        Law” — means any Order or Legal
        Requirement, and any judicial and administrative interpretation thereof and
        related policies, guidelines and standards, relating to pollution or protection
        of human health or the environment or natural resources, including those
        relating to (a) emissions, discharges, Releases or threatened Releases of
        Hazardous Material into the environment (including ambient air, surface water,
        groundwater or land), and (b) the manufacture, processing, distribution,
        use,
        treatment, storage, disposal, transport or handling of Hazardous Material,
        each
        as in effect as of the date of determination.

       

      “Environmental
        Liability”— means any liability,
        responsibility or obligation arising out of or relating to: 

       

      (c)  the
        presence of any Hazardous Material in the fixtures, structures, soils,
        groundwater, surface water or air on, under or about or emanating from the
        assets and properties currently or formerly used, operated, owned, leased,
        controlled, possessed, occupied or maintained by a Person (including
        predecessors-in-interest to such Person) and any such Hazardous Material
        emanating to adjoining or other properties;

       

      (d)  the
        use, generation, production, manufacture, treatment, storage, disposal, Release,
        threatened Release, discharge, spillage, loss, seepage or filtration of
        Hazardous Materials by a Person (including predecessors-in-interest to such
        Person) or its employees, agents or contractors from, on, under or about
        the
        assets or properties currently or formerly used, operated, owned, leased,
        controlled, possessed, occupied or maintained by such Person (including
        predecessors-in-interest to such Person) or the presence therein or thereunder
        of any underground or above-ground tanks for the storage of fuel, oil, gasoline
        and/or other petroleum products or by-products or other Hazardous
        Material;

       

      (e)  the
        violation or noncompliance or alleged violation or noncompliance by a Person
        (including predecessors-in-interest to such Person) or its employees, agents
        or
        contractors of any Environmental Law arising from or related to its or their
        conduct, actions or operations or the former or current use, operation,
        ownership, lease, possession, control, occupancy, maintenance or condition
        of
        any of the former or current Assets or properties of such Person (including
        predecessors-in-interest to such Person);

       

      (f)  the
        failure by a Person or its employees, agents, or contractors to have obtained
        or
        maintained in effect any certificate, permit or authorization required by
        any
        Environmental Law as a result of its or their conduct, actions or operations
        or
        the use, operation, ownership, lease, control, possession, occupancy,
        maintenance or condition of such Person’s assets or properties;

       

      (g)  any
        and all Proceedings arising out of any of the above-described matters, including
        Proceedings by Governmental Bodies for enforcement, investigation, monitoring,
        cleanup, containment, removal, treatment, response, restoration, remedial
        or
        other actions or damages and Proceedings by any third party seeking damages,
        contribution, indemnification, cost recovery, compensation or injunctive
        relief;
        and

       

      (h)  any
        and all remedial work and other corrective action (including investigation
        or
        monitoring of site conditions, or any clean-up, containment, treatment,
        response, restoration or removal) taken by, or the costs of which are imposed
        upon, a Person arising from any of the above-described matters.

       

      “ERISA”
—
means
        the Employee Retirement Income Security
        Act of 1974, as amended, or any successor law, and regulations and rules
        issued
        pursuant to that act or any successor law.

       

      “Excluded
        Assets” — means the following assets, each of
        which shall be excluded from the Assets, and not acquired by Buyer, at Closing:
        

       

      (i)  assets
        of Seller located outside of the Commonwealth of Pennsylvania (none of which
        relate primarily to the Business) and assets, all of which are described
        in
Schedule 1.1(b), that Seller uses in both the Business and in Seller’s
        other businesses (including, without limitation, the business conducted by
        PEI
        Power Corporation and Seller’s corporate and shared services activities
        conducted in Pennsylvania), which includes Contracts regarding the procurement
        of services or goods by Seller for use in both the Business and in Seller’s
        other businesses;

       

      (j)  cash
        and cash equivalents (including cash held by the Subsidiary), other than
        petty
        cash held locally for the benefit of the Business;

       

      (k)  except
        as otherwise set forth in the Employee Agreement, assets attributable to
        or
        related to an Employee Plan of Seller;

       

      (l)  the
        stock record and minute books of Seller, duplicate copies of all books and
        records transferred to Buyer, and all records prepared in connection with
        the
        sale of the Business (including bids received from third parties and analyses
        relating to the Business);

       

      (m)  assets
        disposed of by Seller or the Subsidiary after the date of this Agreement
        to the
        extent such dispositions are not prohibited by this Agreement or are approved
        by
        Buyer pursuant to Section 6.1;

       

      (n)  rights
        to refunds of Taxes for periods prior to the Closing Date payable with respect
        to the Business, assets, properties or operations of Seller or any member
        of any
        affiliated group of which any of them is a member;

       

      (o)  accounts
        owing, by and among Seller and its Affiliates, including the Subsidiary;

       

      (p)  all
        deferred tax assets or collectibles;

       

      (q)  any
        insurance policy, bond, letter of credit or other similar item, and any cash
        surrender value in regard thereto;

       

      (r)  the
        Seller Marks and the PG Marks;

       

      (s)  all
        of the capital stock of PEI Power Corporation and all of the assets of PEI
        Power
        Corporation;

       

      (t)  the
        Real Property and office building located at 417 Lackawanna Avenue, Scranton,
        PA; and

       

      (u)  the
        other assets listed in Schedule 1.1(a).

       

      “Final
        Order” — means an action by a Governmental Body 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,
        reconsideration or application for review of the action is pending and the
        time
        for filing any such petition or application has passed, (iii) such Governmental
        Body does not have the action under reconsideration on its own motion and
        the
        time in which such reconsideration is permitted has passed, and (iv) no appeal
        to a court or a request for stay by a court of the Governmental Body’s action is
        pending or in effect and the deadline for filing any such appeal or request
        has
        passed.

       

      “GAAP”
—
means
        generally accepted United States
        accounting principles, applied on a consistent basis.

       

      “Good
        Utility Practices” — means any of the practices,
        methods and activities approved by a significant portion of the gas distribution
        industry 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 gas 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 Utility
        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 distribution industry.

       

      “Governmental
        Body” — means any of the following that
        possesses competent jurisdiction:

       

      (v)  federal,
        state, county, local, municipal or other governmental body;

       

      (w)  governmental
        or quasi-governmental authority of any nature (including any governmental
        agency, branch, department, official or entity and any court or other tribunal);
        or

       

      (x)  any
        governmental body entitled to exercise any administrative, executive, judicial,
        legislative, police, regulatory or taxing authority or power of any
        nature.

       

      (y)  “Hazardous
        Material”— means any waste or other chemical, material or substance that is
        listed, defined, designated, or classified as, or otherwise determined to
        be,
        hazardous, radioactive, toxic, or a pollutant or a contaminant, or words
        of
        similar import, under or pursuant to any Environmental Law, including any
        admixture or solution thereof, and specifically including oil, natural gas,
        petroleum and all derivatives thereof or synthetic substitutes therefor,
        asbestos or asbestos-containing materials, any flammable substances or
        explosives, any radioactive materials, any toxic wastes of substances, urea
        formaldehyde foam insulation, toluene or polychlorinated biphenyls.

       

      “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.

       

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

       

      “IRS”
—
means
        the Internal Revenue Service or any
        successor agency.

       

      “Knowledge”
—
means
        with respect to Seller, the actual
        knowledge of any of Julie H. Edwards, Seller’s Senior Vice President and Chief
        Financial Officer, Michael I. German, Seller’s Senior Vice President, Utility
        Operations, Harry E. Dowling, President and Chief Operating Officer of PG
        Energy, Vincent A. Bonaddio, Executive Vice President, Operations and
        Engineering Services of PG Energy, John M. Beberus, Director-Human Resources
        of
        PG Energy, Joseph F. Butcher, Vice President-Customer Service of PG Energy,
        Thomas J. Koval, Vice President & Controller of PG Energy, and Bruce Davis,
        Jr., Vice President, Gas Supply and Marketing of PG Energy.

       

      “Legal
        Requirement” — 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.

       

      “Losses”
—
means
        all claims, losses, liabilities, causes
        of action, costs and expenses (including, without limitation, involving theories
        of negligence or strict liability and including court costs and reasonable
        attorneys’ fees and disbursements in connection therewith).

       

      “Material
        Adverse Effect” — means an occurrence or
        condition that (alone or together with other similar occurrences or conditions)
        has, or is reasonably likely to have, a material adverse effect on the business,
        operation, financial condition or results of operations of the Business taken
        as
        a whole. For purposes of this Agreement, an occurrence or condition shall
        not
        constitute a Material Adverse Effect if it arises from general business,
        economic or financial market conditions, from conditions generally affecting
        the
        industries in which the Business operates, or from the transactions contemplated
        by this Agreement.

       

      “Material
        Contract” — means a Contract relating primarily
        to the Business that involves a total commitment by or to any party thereto
        of
        at least $250,000 on an annual basis and that cannot be terminated by Seller
        or
        the Subsidiary upon 90 days’ notice or less without penalty to Seller or the
        Subsidiary.

       

      “Order”
—
means
        any award, decision, injunction,
        judgment, order, writ, decree, ruling, 

       

      
        
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      subpoena,
        or verdict entered, issued, made, or rendered by any
        court, administrative agency, other Governmental Body, or by any arbitrator,
        each of which possesses competent jurisdiction.

       

      “Organizational
        Documents” — means the articles or
        certificate of incorporation and the bylaws of a corporation or the comparable
        organizational and governing documents of other Persons.

       

      “PCBs”
—
means
        polychlorinated biphenyls.

       

      “Permitted
        Encumbrances” — means any of the
        following:

       

      (z)  mechanics’,
        carriers’, workers’ and other similar liens arising in the ordinary course of
        business, which in the aggregate are not substantial in amount and do not
        interfere with the present use of the Assets to which they apply;

       

      (aa)  liens
        for current Taxes and assessments not yet due and payable or for Taxes the
        validity of which is being contested in good faith;

       

      (bb)  usual
        and customary non-monetary real property Encumbrances, covenants, imperfections
        in title, Easements, restrictions and other title matters (whether or not
        the
        same are recorded) that do not materially interfere with the operation of
        that
        portion of the Business currently conducted on such real property;

       

      (cc)  Encumbrances
        securing the payment or performance of any of the Assumed Liabilities;

       

      (dd)  all
        applicable zoning ordinances and land use restrictions;

       

      (ee)  with
        respect to any Asset that consists of a leasehold or other possessory interest
        in real property, all Encumbrances, covenants, imperfections in title,
        Easements, restrictions and other title matters (whether or not the same
        are
        recorded) to which the underlying fee estate in such real property is subject
        that do not currently materially interfere with the operation of that portion
        of
        the Business currently conducted on such real property; and

       

      (ff)  any
        other Encumbrances, Contracts, obligations, defects or irregularities of
        any
        kind whatsoever affecting the Assets or the Stock that, individually or in
        the
        aggregate, are not such as are reasonably likely to have an adverse financial
        impact of more than $750,000 on the Business that are not terminated, released
        or waived on or before the Closing Date.

       

      “Person”
—
means
        any individual, corporation (including
        any nonprofit corporation), general or limited partnership, limited liability
        company, joint venture, estate, trust, association, organization or Governmental
        Body.

       

      “PG
        Energy” — means PG Energy,
        a division of Seller.

       

      “PG
        Marks”— means “PG
        Energy,” “PG Energy Services” and “PG,” either alone or in combination with
        other words and all marks, trade dress, logos, monograms, domain names and
        other
        source identifiers similar to any of the foregoing or embodying any of the
        foregoing alone 

       

      
        
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      or
        in combination with other words, and any corporate, entity or
        trade names incorporating any of the foregoing.

       

      “Proceeding”
—
means
        any claim, action, arbitration,
        hearing, audit, litigation or suit commenced, brought, conducted, or heard
        by or
        before, or otherwise involving, any Governmental Body or arbitrator.

       

      “Real
        Property” — means all real property owned or leased
        by Seller or the Subsidiary in the operation of the Business, together with
        all
        interests in real property (including Easements) used or held for use by
        Seller
        or the Subsidiary in the operation of the Business.

       

      “Related
        Documents” — means any Contract provided for in
        this Agreement to be entered into by one or more of the parties hereto in
        connection with the transactions contemplated by this Agreement, including
        the
        Employee Agreement, the transition agreement contemplated by Section 6.6,
        special warranty deeds or quitclaim deeds (with each interest in Real Property
        owned by Seller to be conveyed to Buyer with a special warranty deed to the
        extent Seller was provided with a special warranty deed when it acquired
        such
        Real Property interest and each interest in Real Property owned by Seller
        to be
        conveyed to Buyer with a quitclaim deed to the extent Seller was provided
        with a
        quitclaim deed when it acquired such Real Property interest), quitclaim blanket
        easement assignments (one easement assignment document per county or applicable
        jurisdiction; Seller shall not be obligated to provide a conveyance document
        for
        each individual easement), conveyances, motor vehicle certificates of title
        and
        special assignment and assumption instruments.

       

      “Release”
—
means
        any presence, emission, dispersal,
        disposal, spilling, leaking, emitting, discharging, depositing, pumping,
        pouring, escaping, leaching, dumping, releasing or migration into the indoor
        or
        outdoor environment (including the abandonment or disposal of any barrels,
        containers or other closed receptacles containing any Hazardous Materials),
        or
        in, into or from any facility, including the movement of any Hazardous Materials
        through the air, soil, surface water, groundwater or property.

       

      “Representative”
—
means
        with respect to a particular
        Person, any director, officer, employee, agent, consultant, advisor, or other
        representative of such Person, including legal counsel, accountants and
        financial advisors.

       

      “Retained
        Environmental Liabilities” —
        means all Environmental Liabilities of Seller or the Subsidiary arising out
        of
        or relating to operations or activities unrelated to the Business or conducted
        outside of the Commonwealth of Pennsylvania during the period prior to the
        Closing.

       

      “Retained
        Indebtedness”
— means the First Mortgage Bonds due 2019,
        issued by Seller pursuant to the First Mortgage Bonds Indenture of Mortgage
        and
        Deed of Trust dated as of March 15, 1946 (as successor to PG Energy, Inc.,
        formerly Pennsylvania Gas and Water Company, and originally, Scranton-Spring
        Brook Water Service Company) to Guaranty Trust Company of New York.

       

      “SEC”
—
means
        the United States Securities and Exchange
        Commission or any successor agency.

       

      
        
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      “Settlement
        Interest”— means, with respect to any payment
        required to be made pursuant to Section 3.2(c) (a “Settlement Payment”), the sum
        of accrued interest on the amount of such Settlement Payment, calculated
        at the
        Settlement Rate as from time to time in effect, for the period from the Closing
        Date to and including the date upon which such Settlement Payment is made
        (calculated on the basis of the actual number of days elapsed in a year of
        365
        or 366 days, as the case may be).

       

      “Settlement
        Rate”— means, on
        any date, with respect to the Settlement Payment, the “target” federal funds
        rate reported in the “Money Rates” section of the Eastern Edition of The Wall
        Street Journal published for such date. In the event The Wall Street Journal
        ceases publication of such federal funds rate or fails on any particular
        date to
        publish such federal funds rate, the Settlement Rate shall instead refer
        to the
        rate for the last transaction in overnight federal funds arranged prior to
        such
        date by JP Morgan Chase.

       

      “Stock”—
means
        all of the capital stock of the
        Subsidiary.

       

      “Subsidiary”—
means
        PG Energy Services Inc., a
        Pennsylvania corporation.

       

      “Tax”
—
means
        any tax (including any income tax, capital
        gains tax, value-added tax, sales and use tax, franchise tax, payroll tax,
        withholding tax or property tax), levy, assessment, tariff, duty (including
        any
        customs duty), deficiency, franchise fee or payment, payroll tax, utility
        tax,
        gross receipts tax or other fee or payment, and any related charge or amount
        (including any fine, penalty, interest or addition to tax), imposed, assessed
        or
        collected by or under the authority of any Governmental Body.

       

      “Tax
        Return” — means any return (including any
        information return), report, statement, schedule, notice, form, or other
        document or information filed with or submitted to, or required to be filed
        with
        or submitted to, any Governmental Body in connection with the determination,
        assessment, collection, or payment of any Tax or in connection with the
        administration, implementation, or enforcement of or compliance with any
        Legal
        Requirement relating to any Tax.

       

      “Threatened”
—
shall
        have the following meaning: a claim,
        dispute, or other matter will be deemed to have been “Threatened” if any demand
        or statement has been made in writing or any notice has been given in writing,
        and Seller has Knowledge of the same.

       

      “Working
        Capital”— means the amount by which Current
        Assets exceeds Current Liabilities as of the relevant date of determination,
        determined in accordance with Schedule 1.1(a).

       

      “Working
        Capital Target”— means $67,500,000.

       

      
        	Section
                1.2.   	
                Other
                  Defined Terms.

              

      

       

      In
        addition to the terms defined in Section 1.1, certain other
        terms are defined elsewhere in this Agreement as indicated below and, whenever
        such terms are used in this Agreement, they shall have their respective defined
        meanings.

       

      
        
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      Term Section

       

      Agreement Recitals

      Allocation
 11.1

      Antitrust
        Authorities 6.3

      Assumed
        Liabilities 2.2

      Audited
        Financials 6.13

      Balance
        Sheet 5.6

      Buyer
        Indemnitees 12.1

      Buyer’s
        Pension Plan Employee Agreement

      CBA 6.14

      Chambers 12.1(d)

      Closing 8.1

      Closing
        Date 8.1

      Closing
        Statement 3.2(a)

      CPA
        Firm 3.2(b)

      Deductible
 12.3(c)

      Employee Employee
        Agreement

      Employee
        Agreement 10.1

      Employee
        Plans 5.13(a)

      Environmental
        Permits 5.14(a)(ii)

      Estimated
        Purchase Price 3.1

      Final
        Closing Statement 3.2(b)

      Final
        Purchase Price 3.1

      Financial
        Statements 5.6

      Indemnified
        Party 12.5(a)

      Indemnifying
        Party 12.5(a)

      Large
        Volume Meters 6.8

      Leased
        Assets 6.7

      Main
        Extension Agreement 12.1(d)

      Non-Transferred
        Employees Employee Agreement

      Non-Transferred
        Terminated Employees Employee Agreement

      Notice
        Period 12.5(a)

      Objection 3.2(b)

      PA
        PUC 6.11

      Pre-Closing
        Tax Period 11.5

      PUHCA
        1935 4.10

      PUHCA
        2005 4.10

      Purchase
        Price  3.1

      PURTA 11.4

      Retained
        Liabilities 2.3

      Review
        Period 3.2(b)

      Seller
        Indemnitees 12.2

      Seller
        Marks 6.4

      Seller’s
        Pension Plan Employee Agreement

      Seller’s
        401(k) Plan Employee Agreement

      Settlement
        Payment 1.1

      Straddle
        Period 11.6

      
        
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      Transaction
        Taxes 11.3

      Transportation
        Agreement 12.1(d)

      Upset
        Date 9.1(e)

      

      ARTICLE
        II.  

       

      PURCHASE
        AND SALE

       

      
        	Section
                2.1.   	
                Purchase
                  and Sale of Assets and
                  Stock.

              

      

       

      Upon
        the terms and subject to the conditions contained herein, at
        the Closing, Seller shall sell, transfer, assign, convey and deliver to Buyer,
        and Buyer shall purchase and accept delivery from Seller, all of the Assets
        owned directly by Seller and all of the Stock.

       

      
        	Section
                2.2.   	
                Assumed
                  Liabilities.

              

      

       

      In
        further consideration for the sale of the Assets and the Stock,
        at the Closing, and subject to the other terms and conditions of this Agreement,
        Buyer will satisfy Buyer’s obligations under the Employee Agreement and will
        assume and agree to pay, perform and discharge when due, or cause the Subsidiary
        to pay, perform and discharge when due, all liabilities and obligations,
        of
        every kind or nature, arising out of or relating to:

       

      (a)  the
        ownership of the Assets and the conduct or operation of the Business prior
        to
        the Closing Date, other than the Retained Liabilities;

       

      (b)  the
        ownership or use of the Assets by Buyer or the Subsidiary or the conduct
        or
        operation of the Business by Buyer or the Subsidiary, in each case on and
        after
        the Closing Date, including all liabilities, responsibilities and obligations
        relating to or arising from the following:

       

      (i)  performance
        of the Contracts included in the Assets and assigned to Buyer at Closing
        or
        retained by the Subsidiary, except that Buyer shall not assume any liabilities
        or obligations for any breach or default by Seller or the Subsidiary under
        any
        such Contract occurring or arising prior to the Closing Date;

       

      (ii)  customer
        advances, customer deposits and construction advances, unperformed service
        obligations, Easement relocation obligations, and engineering and construction
        required to complete scheduled construction, construction work in progress,
        and
        other capital expenditure projects, in each case relating to the Business
        and
        outstanding on or arising after the Closing Date;

       

      (iii)  the
        Assumed Environmental Liabilities;

       

      (iv)  Taxes
        for periods on and after the Closing Date to the extent Buyer is legally
        obligated to pay such Taxes in accordance with Article XI; and

       

      (v)  Proceedings
        based on conduct, actions, inaction, facts, circumstances or conditions arising
        or occurring on or after the Closing Date, Proceedings described in Schedule
        2.2, Proceedings arising from or related to any other Assumed Liability;
        and

       

      (vi)  obligations
        and liabilities of Buyer and its Affiliates under the Employee Agreement.

       

      The
        liabilities, responsibilities and obligations to be assumed by
        Buyer or retained by the Subsidiary pursuant to this Section 2.2 are hereinafter
        collectively referred to as the “Assumed Liabilities.” Subject to the other
        terms and conditions of this Agreement, Buyer, for itself and each of its
        Affiliates (including the Subsidiary upon Closing), hereby irrevocably and
        unconditionally waives and releases Seller from all Assumed Liabilities and
        all
        liabilities or obligations relating to the Business or the Assets to the
        extent
        arising from events or occurrences on or after the Closing Date or to the
        extent
        otherwise relating to the period after the Closing. Notwithstanding anything
        in
        this Section 2.2 to the contrary, Assumed Liabilities shall not include any
        liabilities, responsibilities or obligations expressly stated to be Retained
        Liabilities pursuant to Section 2.3.

       

      
        	Section
                2.3.   	
                Retained
                  Liabilities.

              

      

       

      Buyer
        shall not assume, and Seller shall retain and pay, perform
        and discharge when due, all of the liabilities and obligations, of every
        kind
        and nature, relating to or arising from the following (collectively, the
        “Retained Liabilities”):

       

      (a)  all
        obligations of Seller or the Subsidiary with respect to any indebtedness
        for
        money borrowed by Seller or the Subsidiary (including items due to Seller’s
        Affiliates), including, without limitation, the Retained Indebtedness and
        payment obligations arising on or after the Closing Date relating to the
        Business under any equipment or vehicle lease or under any line extension
        Contracts or similar construction arrangements, it being understood and agreed
        that such leases, Contracts and similar arrangements do not create indebtedness
        for money borrowed;

       

      (b)  Taxes
        for periods prior to the Closing Date to the extent Seller or the Subsidiary
        is
        legally obligated to pay such Taxes in accordance with Article XI;

       

      (c)  Excluded
        Assets and all liabilities or obligations of Seller and its Affiliates related
        to their businesses other than the Business;

       

      (d)  Retained
        Environmental Liabilities;

       

      (e)  Proceedings
        involving Seller, the Subsidiary, any of the Assets or the Business based
        on
        conduct (including Seller’s or the Subsidiary's performance under any Contract
        included among the Assets), action, inaction, facts, circumstances or conditions
        arising or occurring before the Closing Date, but expressly excluding any
        such
        liabilities or obligations for Proceedings relating to Assumed Liabilities
        (including Proceedings described in Section 2.2(b)(v)), and all liabilities
        or obligations relating to the matter set forth on Schedule 2.3(b);
        and

       

      (f)  obligations
        and liabilities of Seller and its Affiliates under the Employee Agreement.

       

      Seller,
        for itself and each of its Affiliates, hereby irrevocably
        and unconditionally waives and releases Buyer and each of its Affiliates
        from
        all Retained Liabilities.

       

      
        
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          1

          
            

          

        

        
          
          

        

      

      Condition
        on Assignment or Assumption of Contracts and
        Rights.

       

      Anything
        in this Agreement to the contrary notwithstanding, this
        Agreement shall not constitute an agreement to assign or assume any Contract
        or
        any claim or right or any benefit arising thereunder or resulting therefrom
        if
        an attempted assignment or assumption thereof, without the Consent of a third
        party thereto, would constitute a breach thereof. Any transfer or assignment
        to
        Buyer by Seller of any property or property rights or any Contract that requires
        the Consent of any third party shall be made subject to such Consent being
        obtained. If such Consent is not obtained, or if an attempted assignment
        thereof
        would be ineffective or would affect the rights of Seller thereunder such
        that
        Buyer would not in fact receive all such rights, Seller will cooperate with
        Buyer in any arrangement, including an operating or other services agreement
        if
        reasonably required by Buyer, reasonably designed to provide for Buyer, at
        Seller’s cost, the benefits under any such Contract or rights including, without
        limitation, enforcement for the benefit of Buyer of any and all rights of
        Seller
        against a third party or Governmental Body thereto arising out of the breach
        or
        cancellation by such third party or Governmental Body or otherwise. To the
        extent that Buyer does receive all of the benefits of any such Contract or
        rights pursuant to the preceding sentence, such Contract shall be a Contract
        deemed to have been assigned or transferred to Buyer pursuant to Section
        2.2(b)(i). Notwithstanding the foregoing, Seller shall not be obligated
        (although Buyer is permitted at its expense) to provide any arrangement or
        effect any assignment pursuant to this Section 2.4 (i) that results in an
        out-of-pocket cost or expenditure by Seller, or exposure to or continuation
        of
        liability to Seller, resulting from such arrangements and assignments, that
        would be reasonably estimated to be in excess of $350,000, in the aggregate,
        except as otherwise expressly provided for by this Agreement, or (ii) where
        Seller has continuing liability or exposure due to any third party’s failure to
        release Seller as a result of such third party’s unwillingness to accept Buyer
        as assignee; provided, however, that if Buyer, at Buyer's option, indemnifies
        Seller from such continuing liability or exposure on terms and conditions
        reasonably satisfactory to Seller, then Seller shall provide an arrangement
        or
        assignment of the Contract to Buyer.

       

      
        	Section
                2.4.   	
                Settlement
                  of Intercompany Accounts.

              

      

       

      At
        or prior to the Closing, Seller shall cause all intercompany
        payables, receivables and loans between PG Energy and the Subsidiary, on
        the one
        hand, and Seller and its Affiliates (other than PG Energy and the Subsidiary),
        on the other hand, to be settled or cancelled.

       

      ARTICLE
        III.  

       

      PURCHASE
        PRICE

       

      Section
        3.1.   Purchase
        Price. Subject to the terms and conditions of
        this Agreement, the aggregate purchase price (the “Purchase Price”) for the
        Assets owned directly by Seller and for the Stock shall be an amount equal
        to
        FIVE HUNDRED EIGHTY MILLION DOLLARS ($580,000,000) in cash
        (the “Estimated Purchase Price”), as adjusted in accordance with Section 3.2 (as
        so adjusted, the “Final Purchase Price”), plus
        the assumption by Buyer at Closing of the Assumed
        Liabilities. 

       

      
        	Section
                3.2.   	
                Adjustment
                  to Estimated Purchase
                  Price.

              

      

       

      (a)  Within
        90 days following the Closing Date, Seller shall prepare and deliver

       

      
        
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      to
        Buyer a statement (the “Closing Statement”), utilizing the same
        accounting methods, policies, practices, procedures and adjustments as were
        used
        in the preparation of the Base Statement (and otherwise in accordance with
        GAAP,
        with such exceptions to GAAP as indicated on Schedule 1.1(a)) and
        shall set forth in reasonable detail the amount of Working Capital of the
        Business as of 12:01 a.m. on the Closing Date (as well as the adjustments
        contemplated in Section 6.8), and a calculation of the adjustment to the
        Estimated Purchase Price that is payable based upon the difference between
        the
        Working Capital Target and the Working Capital in the Closing Statement.
        Buyer
        agrees, at no cost to Seller, to give Seller and its authorized representatives
        reasonable access to such employees, officers and other facilities and such
        books and records of Buyer and the Subsidiaries as are reasonably necessary
        to
        allow Seller and its authorized representatives to prepare the Closing
        Statement. The Closing Statement shall be prepared in accordance with
Schedule 1.1(a). The Base Statement was prepared using the same
        accounting methods, policies, practices, procedures and adjustments as were
        used
        in the preparation of the Financial Statements and otherwise in accordance
        with
        GAAP (and with such exceptions to GAAP as indicated on Schedule
        1.1(a)).

       

      (b)  Following
        its receipt from Seller of the Closing Statement, Buyer shall have 15 Business
        Days to review the Closing Statement and to inform Seller in writing of any
        disagreement (the “Objection”) that it may have with the Closing Statement,
        which objection shall specify in reasonable detail Buyer’s disagreement with the
        Closing Statement. If Seller does not receive the Objection within such
        15-Business Day period, the amount of Working Capital set forth on the Closing
        Statement delivered pursuant to Section 3.2(a) shall be deemed to have been
        accepted by Buyer and shall become binding upon Buyer. If Buyer does timely
        deliver an Objection to Seller, Seller shall then have 15 Business Days from
        the
        date of receipt of such Objection (the “Review Period”) to review and respond to
        the Objection. Buyer and Seller shall attempt in good faith to resolve any
        disagreements with respect to the determination of the Working Capital of
        the
        Business as of the Closing Date or the amount of the adjustment to the Estimated
        Purchase Price. If they are unable to resolve all of their disagreements
        with
        respect to the determination of Working Capital of the Business as of the
        Closing Date or the amount of the adjustment to the Estimated Purchase Price
        within 15 Business Days following the expiration of Seller’s Review Period, they
        may refer, at the option of either Buyer or Seller, their differences to
        Ernst
& Young, or if Ernst & Young declines to accept such engagement, another
        internationally recognized firm of independent public accountants selected
        jointly by Buyer and Seller, which accountants shall determine, only with
        respect to the disagreements so submitted, whether and to what extent, if
        any,
        the amount of Working Capital of the Business as of the Closing Date set
        forth
        in the Closing Statement requires adjustment. If Buyer and Seller are unable
        to
        so select the independent public accountants within 15 Business Days of Ernst
        & Young declining to accept such engagement, either Buyer or Seller may
        thereafter request that the American Arbitration Association make such selection
        (as applicable, Ernst & Young, the firm selected by Buyer and Seller or the
        firm selected by the American Arbitration Association is herein referred
        to as
        the “CPA Firm”). Buyer and Seller shall direct the CPA Firm to use its
        reasonable best efforts to render its determination within 30 days after
        the
        issue is first submitted to the CPA Firm. The CPA Firm’s determination shall be
        conclusive and binding upon Buyer and Seller. The fees and disbursements
        of the
        CPA Firm shall be shared equally by Buyer and Seller. Buyer and Seller shall
        make readily available to the CPA Firm all relevant books and records relating
        to the Closing Statement and all other items reasonably requested by the
        CPA
        Firm. The Closing Statement as agreed to by Buyer and Seller or as determined
        by
        the CPA Firm shall be referred to as the “Final Closing Statement.”

       

      
        
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      In
        the event of a positive difference between Working Capital on
        the Final Closing Statement from the Working Capital Target, Buyer shall
        pay to
        Seller in cash the amount of such difference, plus the Settlement Interest
        thereon. In the event of a negative difference between the Working Capital
        Target from the Working Capital on the Final Closing Statement, Seller shall
        pay
        to Buyer in cash the amount of such difference, plus the Settlement Interest
        thereon. All amounts payable under this Section 3.2(c) shall be paid within
        five
        Business Days of the determination of the Final Closing Statement by wire
        transfer of immediately available funds to a bank account in the United States
        of America designated in writing by the recipient not less than one Business
        Day
        before such payment.

       

      ARTICLE
        IV.  

       

      REPRESENTATIONS
        AND WARRANTIES OF BUYER

       

      
        	Section
                4.1.   	
                Organization,
                  Existence and
                  Qualification.

              

      

       

      Buyer
        is a corporation duly incorporated, validly existing, and in
        good standing under the laws of the Commonwealth of Pennsylvania, with full
        corporate power and authority to conduct its business as it is now being
        conducted, to own or use the properties and assets that it purports to own
        or
        use, to perform its obligations under all Contracts to which it is a party,
        and
        to execute and deliver this Agreement and the Related Documents to which
        Buyer
        is a party. Buyer is duly qualified to do business as a foreign corporation
        and
        is in good standing under the laws of each state in which the failure to
        be so
        qualified or in good standing would materially adversely affect the business
        or
        properties of Buyer or Buyer’s ability to consummate the transactions
        contemplated hereby.

       

      
        	Section
                4.2.   	
                Authority
                  Relative to this Agreement and Binding
                  Effect.

              

      

       

      The
        execution, delivery and performance of this Agreement and the
        Related Documents by Buyer have been duly authorized by all necessary corporate
        action. The execution, delivery and performance of this Agreement and the
        Related Documents by Buyer will not result in (a) any conflict with or breach
        or
        violation of or default under the Organizational Documents of Buyer, (b)
        a
        violation or breach of any term or provision of, or constitute a default
        or
        accelerate the performance required under, any indenture, mortgage, deed
        of
        trust, security agreement, loan agreement, or material Contract to which
        Buyer
        is a party or by which its assets are bound, whether with or without notice
        or
        the passage of time or both, or (c) a violation of any Order of any Governmental
        Body. This Agreement constitutes, and the Related Documents to be executed
        by
        Buyer when executed and delivered will constitute, valid and binding obligations
        of Buyer, enforceable against Buyer in accordance with their respective terms,
        except as such enforceability may be limited by (i) bankruptcy or similar
        laws
        from time to time in effect affecting the enforcement of creditors’ rights
        generally or (ii) the availability of equitable remedies generally.

       

      
        	Section
                4.3.   	
                Governmental
                  and Other Required
                  Consents.

              

      

       

      Except
        for those Consents described in Schedule 4.3, no
        Consent of any Governmental Body or third party is required to be obtained
        by
        Buyer in connection with the execution and delivery by Buyer of this Agreement
        or the Related Documents or the consummation by Buyer of the transactions
        contemplated by this Agreement or the Related Documents. Buyer has no

       

      
        
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      knowledge
        of any facts or circumstances relating to Buyer or its
        Affiliates that reasonably would be likely to preclude or prolong either
        (i) the
        receipt of such required consents or (ii) consummation of the transactions
        contemplated by this Agreement in accordance with its terms.

       

      
        	Section
                4.4.   	
                Availability
                  of Funds.

              

      

       

      Buyer
        will have available on the Closing Date sufficient funds to
        enable it to consummate the transactions contemplated by this Agreement.

       

      
        	Section
                4.5.   	
                Filings.

              

      

       

      No
        statement furnished by Buyer for inclusion in any filing with
        any Governmental Body in connection with obtaining such Governmental Body’s
        Consent for the consummation of the transactions contemplated by this Agreement
        will contain, as of the date such information is so provided, any untrue
        statement of a material fact or will omit to state, as of the date such
        information is so provided, any material fact that is necessary to make the
        statements contained therein, in light of the circumstances under which they
        were made, not misleading.

       

      
        	Section 4.6.
                  	
                Brokers.

              

      

       

      Except
        for Credit Suisse First Boston, no broker or finder has
        acted for or on behalf of Buyer or any Affiliate of Buyer in connection with
        this Agreement or the transactions contemplated by this Agreement. No broker
        or
        finder is entitled to any brokerage or finder’s fee, or to any commission, or to
        any other compensation based in any way on agreements, arrangements or
        understandings made by or on behalf of Buyer or any Affiliate of Buyer for
        which
        Seller or any Affiliate of Seller has or will have any liability or obligation
        (contingent or otherwise).

       

      
        	Section 4.7.
                  	
                Litigation.

              

      

       

      There
        are no pending or, to the knowledge of Buyer, threatened
        Proceedings by any Person against Buyer that would reasonably be expected
        to
        have a material adverse effect on the ability of Buyer to perform or comply
        with
        its obligations under this Agreement and the Related Documents to which Buyer
        will be a party or the consummation of the transfer of the Assets and Stock
        to
        Buyer and the assumption of the Assumed Liabilities by Buyer.

       

      
        	Section 4.8.
                  	
                Independent
                  Investigation.

              

      

       

      Buyer
        is knowledgeable about the businesses engaged in by Seller
        through PG Energy and the Subsidiary and of the usual and customary practices
        of
        companies engaged in businesses similar to the Business and has had access
        to
        the Assets, the officers and employees of Seller, and the books, records
        and
        files of Seller relating to the Business and the Assets. In making the decision
        to enter into this Agreement and to consummate the transactions contemplated
        hereby, Buyer has relied solely on the basis of its own independent due
        diligence investigation of the Business and upon the representations and
        warranties made in Article V.

       

      
        	Section 4.9.
                  	
                Investment
                  Intent; Investment Experience; Restricted
                  Securities.

              

      

       

      
        
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      Buyer
        is acquiring the Stock 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 Stock, Buyer is not offering or selling,
        and
        will not offer or sell, for Seller in connection with any distribution of
        the
        Stock, and Buyer does not have a participation and 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 Stock, 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 Stock. Buyer is an “accredited investor” as such term is defined in
        Regulation D under the Securities Act. Buyer understands that the Stock has
        not
        been registered pursuant to the Securities Act or any applicable state
        securities laws, that the Stock will be characterized as “restricted securities”
under federal securities laws and that under such laws and applicable
        regulations the Stock cannot be sold or otherwise disposed of without
        registration under the Securities Act or an exemption therefrom.

       

      
        	Section 4.10.
                  	
                PUHCA.

              

      

       

      Buyer
        is exempt from registration as a “holding company” as
        defined in, and is not otherwise subject to, the Public Utility Holding Company
        Act of 1935, as amended (“PUHCA 1935”), except for Section 9(a)(2) thereof.
        Buyer will be a “holding company” under the Public Utility Holding Company Act
        of 2005 (“PUHCA 2005”) but is eligible to obtain a waiver of the accounting,
        record-retention and filing requirements thereof. The execution and delivery
        of
        this Agreement by Buyer does not and will not violate any provision of PUHCA
        1935 or PUHCA 2005 or any rules or regulations thereunder pertaining to
        Buyer.

       

      ARTICLE
        V.  

       

      REPRESENTATIONS
        AND WARRANTIES OF SELLER

       

      
        	Section 5.1.
                  	
                Organization,
                  Existence and
                  Qualification.

              

      

       

      Each
        of Seller and the Subsidiary is a corporation duly
        incorporated, validly existing and in good standing under the laws of its
        respective jurisdiction of incorporation, with full corporate power and
        authority to conduct the portion of the Business conducted by it as it is
        now
        being conducted, to own or use its portion of the Assets and to perform its
        obligations under all Contracts to which it is a party. Seller has full
        corporate power and authority to execute and deliver this Agreement and the
        Related Documents to which Seller is a party. Each of Seller and the Subsidiary
        is duly qualified to do business as a foreign corporation and is in good
        standing under the laws of the Commonwealth of Pennsylvania and each other
        state
        in which the failure to be so qualified or in good standing would have a
        Material Adverse Effect. 

       

      
        	Section 5.2.
                  	
                Authority
                  Relative to this Agreement and Binding
                  Effect.

              

      

       

      The
        execution, delivery and performance of this Agreement and the
        Related Documents by Seller have been duly authorized by all requisite corporate
        action. Except as set forth in Schedule 5.2, the execution, delivery and
        performance of this Agreement and the Related Documents by Seller will not
        result in (a) any conflict with or breach or violation of or default 

       

      
        
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      under
        the Organizational Documents of Seller or the Subsidiary,
        (b) a violation or breach of any term or provision of, or constitute a default
        or accelerate the performance required under, any indenture, mortgage, deed
        of
        trust, security agreement, loan agreement, or Material Contract to which
        Seller
        or the Subsidiary is a party or by which any of the Assets are bound, whether
        with or without notice or the passage of time or both, or (c) a violation
        of any
        Order of any Governmental Body, except for such exceptions to the foregoing
        clauses (b) and (c) that, individually or in the aggregate, would not be
        reasonably likely to have a Material Adverse Effect or that will be cured,
        waived or otherwise remedied on or prior to the Closing Date. This Agreement
        constitutes, and the Related Documents to be executed by Seller when executed
        and delivered will constitute, valid and binding obligations of Seller,
        enforceable against Seller in accordance with their respective terms, except
        as
        enforceability may be limited by (i) bankruptcy or similar laws from time
        to
        time in effect affecting the enforcement of creditors’ rights generally or (ii)
        the availability of equitable remedies generally.

       

      
        	Section 5.3.
                  	
                Governmental
                  and Other Required
                  Consents.

              

      

       

      Except
        as set forth in Schedule 5.3, no Consent of any
        Governmental Body or third party is required to be obtained by Seller or
        the
        Subsidiary in connection with the execution and delivery by Seller of this
        Agreement or the Related Documents or the consummation of the transactions
        contemplated by this Agreement or the Related Documents, other than any Consent
        the failure of which to be obtained would not be reasonably likely to have
        a
        Material Adverse Effect. Seller has no knowledge of any facts or circumstances
        relating to Seller, any Subsidiary or their Affiliates that reasonably would
        be
        likely to preclude or prolong 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.
                  	
                Capitalization
                  of the Subsidiaries; Title to
                  Stock.

              

      

       

      (a)  Seller
        owns all of the issued and outstanding shares of the capital stock of the
        Subsidiary, free and clear of any Encumbrances except Permitted Encumbrances,
        and all of such shares are duly authorized and validly issued and are fully
        paid, non-assessable and free of preemptive rights. The
        Subsidiary does not have, and is not bound by, any outstanding subscriptions,
        options, warrants, calls, commitments or agreements of any character calling
        for
        the purchase or issuance of any security of such Subsidiary, including any
        securities representing the right to purchase or otherwise receive any shares
        of
        capital stock or any other equity security of such Subsidiary. The Subsidiary
        is
        not required to acquire by any means, directly or indirectly, any capital
        stock,
        voting rights, equity interests or investments in another Person, which would
        constitute a material acquisition or investment for the Business.

       

      (b)  The
        Subsidiary does not have any direct or indirect interest in any other
        Person.

       

      
        	Section 5.5.
                  	
                Title
                  to Assets;
                  Encumbrances.

              

      

       

      Seller
        or the Subsidiary has good and indefeasible title to the
        Assets reflected in the Financial Statements except those that in the aggregate
        are not material to the Business and those disposed of since the date of
        the
        Financial Statements in the ordinary course of business or otherwise disposed
        of
        in accordance with this Agreement. None of the Assets are subject to any

       

      
        
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      Encumbrance
        except (a) Encumbrances described in Schedule
        5.5 and (b) Permitted Encumbrances. Except as set
        forth in Schedule 5.5, Seller or the Subsidiary owns or possesses all
        Easements necessary to conduct the Business as now being conducted without
        any
        known conflict with the rights of others, in each case except to the extent
        that
        the failure to own or possess such Easements would not have a Material Adverse
        Effect. Except in cases that individually or in the aggregate are not reasonably
        likely to result in a Material Adverse Effect, (i) Seller or the Subsidiary
        enjoys peaceful and undisturbed possession under all material leases of Real
        Property, and (ii) to Seller’s Knowledge, all such leases are valid and
        subsisting and in full force and effect.

       

      
        	Section 5.6.
                  	
                Financial
                  Statements.

              

      

       

      (a)  Schedule
        5.6 sets forth the unaudited combined statement of assets and liabilities
        of
        the Business as of September 30, 2005 (the “Balance Sheet”) and the unaudited
        combined statement of profit of the Business for the nine-month period ended
        September 30, 2005 (collectively, the “Financial
        Statements”). Except as set forth in Schedule 5.6,
        the Financial Statements have been prepared on a pre-tax basis consistent
        with
        Seller’s consolidated audited financial statements as of, and for its fiscal
        year ended, December 31, 2004, which Seller financial statements were prepared,
        in all material respects, in accordance with GAAP. Except as set forth in
        Schedule 5.6, the Balance Sheet presents fairly in all material respects
        the combined financial condition of the Business as of its date and the
        statement of profit included in the Financial Statements presents fairly
        in all
        material respects the combined results of operations of the Business for
        the
        period covered thereby. The books and records of Seller and the Subsidiary
        from
        which the Financial Statements were derived were complete and accurate in
        all
        material respects at the time of such preparation. 

       

      (b)  Seller
        and the Subsidiary maintain a system of internal accounting controls with
        respect to the Business 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 assets is compared with existing
        assets at reasonable intervals and appropriate action is taken with respect
        to
        any differences.

       

      (c)  Seller
        has established, maintains and evaluates controls and procedures with respect
        to
        the Business that are designed to ensure that material information relating
        to
        the Business is made known to Seller’s Chief Executive Officer and its Chief
        Financial Officer by others in the Business, and such controls and procedures
        are effective to perform the functions for which they were established.

       

      
        	Section 5.7.
                  	
                Compliance
                  with Legal Requirements; Governmental
                  Permits.

              

      

       

      Except
        as relates to tax matters (which are provided for in
        Section 5.9), employee benefit matters (which are provided for in Section
        5.13)
        or environmental matters (which are provided for in Section 5.14) and except
        as
        set forth in Schedule 5.7, to Seller’s Knowledge: (a) neither Seller nor
        the Subsidiary is in violation of any Legal Requirement or Order that is
        applicable to it that is material to the conduct or operation of the Business,
        or to the ownership or use of any of 

       

      
        
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      the
        Assets, in either case taken as a whole; and (b) Seller or the
        Subsidiary possesses all permits, licenses, and authorizations from Governmental
        Bodies required by any applicable Legal Requirement or Order material to
        the
        operation of the Business substantially in the manner in which it is currently
        being conducted by Seller and the Subsidiary, taken as a whole.

       

      
        	Section 5.8.
                  	
                Legal
                  Proceedings; Outstanding
                  Orders.

              

      

       

      Except
        as set forth in Schedule 5.8, as of the date of this
        Agreement, there is no pending or Threatened Proceeding (a) that has been
        commenced against Seller or the Subsidiary that is reasonably likely to have
        an
        adverse financial effect on the Business of more than $400,000 or (b) that
        challenges, or that may have the effect of preventing, delaying, making illegal
        or otherwise interfering with, the transactions contemplated hereby. Except
        as
        disclosed in Schedule 5.8, as of the date of this Agreement, there are no
        outstanding Orders against Seller or the Subsidiary that relate to or arise
        out
        of the conduct of the Business or the ownership, condition or operation of
        the
        Business or the Assets (other than any Order relating to rates, tariffs and
        similar matters arising in the ordinary course of business) which individually
        or in the aggregate would have an adverse financial effect on the Business
        of
        more than $400,000.

       

      
        	Section 5.9.
                  	
                Taxes.

              

      

       

      Seller
        or the Subsidiary has filed all United States federal,
        state and local income Tax Returns required to be filed by Seller or the
        Subsidiary or requests for extensions to file such Tax Returns have been
        timely
        filed, and Seller or the Subsidiary has paid and discharged or made adequate
        provision for all Taxes (other than Retained Liabilities) except where failure
        to so file, pay, discharge or make adequate provision for are not, individually
        or in the aggregate, reasonably likely to have a material impact on the
        Business. There are no pending audits, other examinations, or Threatened
        Proceedings relating to any Tax matters of the Subsidiary or relating to
        the
        Business except as set forth in Schedule 5.9. There are no Tax liens
        on the Assets or the assets of the Subsidiary. As of the date of this Agreement,
        neither Seller (with respect to the Business) nor the Subsidiary has granted
        any
        waiver of any statute of limitations, or any extension of a period for the
        assessment of, any Tax except as set forth in Schedule 5.9. As of the
        Closing Date, neither the Subsidiary nor the Seller (but only to the extent
        secured by the Business or the Assets) will be a party to, be bound by or
        have
        any obligation under any Tax sharing agreement or similar agreement or
        arrangement pursuant to which the Subsidiary or Seller has assumed an obligation
        to satisfy any Tax obligations of another person or entity. Up to and including
        the Closing Date, Subsidiary has not carried on its business and other
        activities in such a way that would result in the recognition by Subsidiary
        of
        liabilities for Taxes after the Closing Date as result of such activities
        (for
        example, Subsidiary has not engaged in a Code Section 355 transaction and
        has
        not engaged in any activity or accounting practice that is a “reportable
        transaction” as defined in Treas. Reg. Section 1.6011-4). The only
        representations and warranties given in respect of tax matters are those
        contained in Section 5.9 and none of the other representations and warranties
        shall be deemed to constitute, directly or indirectly, a representation or
        warranty in respect of tax matters.

       

      
        	Section 5.10.
                  	
                Intellectual
                  Property.

              

      

       

      Except
        as set forth on Schedule 5.10, Seller and the
        Subsidiary possesses or has adequate rights to use all trademarks, trade
        names,
        patents, service marks, brand marks, brand names, 

       

      
        
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      computer
        programs, databases, industrial designs and copyrights
        necessary for the operation of the Business in the manner in which it is
        currently being conducted by Seller or the Subsidiary, 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 5.10, Seller has
        no Knowledge of (a) any infringement or claimed infringement by Seller or
        the
        Subsidiary 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 Seller or the Subsidiary 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.

       

      
        	Section 5.11.
                  	
                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.

       

      
        	Section 5.12.
                  	
                Material
                  Contracts.

              

      

       

      Schedule
        5.12 contains a complete list of all Material
        Contracts. Except as described in Schedule 5.12, all of the Material
        Contracts are in full force and effect as of the date hereof and, to Seller’s
        Knowledge, there are no defaults under any such Contracts except for any
        failure
        to be in full force and effect and for any default that, individually or
        in the
        aggregate, will not have a Material Adverse Effect.

       

      
        	Section 5.13.
                  	
                Employee
                  Benefit
                  Matters.

              

      

       

      (a)  Schedule
        5.13 lists (i) each “Employee Benefit Plan,” as such term is defined in
        Section 3(3) of ERISA, that is covered by any provision of ERISA and that
        is
        maintained by Seller for the benefit of the Employees and each other material
        fringe benefit plan, policy or arrangement currently maintained by Seller
        for
        the benefit of the Employees that provides for pension, deferred compensation,
        bonuses, severance, employee insurance coverage or similar employee benefits
        (collectively, the “Employee Plans”); and (ii) each collective bargaining, union
        or other employee association agreement, employment agreement and other material
        agreement, policy or arrangement maintained by Seller for the Employees.
        Seller
        has made available to Buyer copies of all documents setting forth the terms
        of
        such plans, policies, agreements and arrangements, or summaries of any such
        plans, policies, agreements and arrangements not otherwise in writing.

       

      (b)  Seller’s
        Pension Plan and Seller’s 401(k) Plan are the only Employee Plans that are
        intended to be qualified under Section 401(a) of the IRC.

       

      (c)  The
        Subsidiary does not employ any Employees or any other individuals and does
        not
        currently maintain any Employee Plan.

       

      (d)  To
        the Seller’s Knowledge, each Employee Benefit Plan maintained by Seller for the
        benefit of the Employees has been established and administered in all material
        respects in accordance with its terms and the applicable provisions of ERISA
        and
        the IRC.

       

      (e)  The
        only representations and warranties given in respect of employee benefit
        matters
        are those contained in this Section 5.13 and none of the other representations
        and warranties contained in this Agreement shall be deemed to constitute,
        directly or indirectly, a representation or warranty in respect of employee
        benefit matters.

       

      
        	Section 5.14.
                  	
                Environmental
                  Matters.

              

      

       

      (a)  Except
        as set forth in Schedule 5.14:

       

      (i)  Compliance.
        Each of Seller and the Subsidiary is in compliance with all Environmental
        Laws
        applicable to the Assets or the Business except where the failure to be in
        compliance with such Environmental Laws would not, individually or in the
        aggregate, have an adverse financial effect on the Business of more than
        $400,000. Neither Seller nor the Subsidiary has received any written
        communication that alleges that either Seller or the Subsidiary is not in
        compliance with applicable Environmental Laws related to the Assets or the
        Business except for any such written communications relating to matters that
        would not, individually or in the aggregate, have an adverse financial effect
        on
        the Business of more than $400,000. To the Knowledge of Seller, neither Seller
        nor the Subsidiary have used any waste disposal site, or otherwise disposed
        of,
        or transported, or arranged for the transportation of, any Hazardous Materials
        to any location in violation in any material respect of any Environmental
        Law
        that relates to the Assets or the Business.

       

      (ii)  Environmental
        Permits. Seller and the Subsidiary have obtained or applied for all
        environmental, health and safety permits and authorizations (collectively,
        the
“Environmental Permits”) necessary for the construction of their facilities or
        the conduct of their present operations related to the Assets or the Business,
        and all such permits are in good standing or, where applicable, a renewal
        application has been timely filed and is pending agency approval, and each
        of
        Seller and the Subsidiary is in compliance with all terms and conditions
        of its
        respective Environmental Permits related to the Assets or the Business, in
        each
        case except where the failure to obtain or apply or be in compliance with
        such
        Environmental Permits or the requirement to make any expenditure in connection
        with such Environmental Permits would not, individually or in the aggregate,
        have an adverse financial effect on the Business of more than $400,000.

       

      (iii)  Environmental
        Claims. To the Knowledge of Seller, there is no Environmental Claim related
        to the Assets or the Business pending (x) against Seller or the Subsidiary,
        (y)
        against any person or entity whose liability for any Environmental Claim
        Seller
        or the Subsidiary has retained or assumed either contractually or by operation
        of law, or (z) against any real or personal property or operations that Seller
        or the Subsidiary owns, leases or manages, in whole or in part, which, in
        the
        cases of (x), (y) or (z) would reasonably be expected to have, in the aggregate,
        an adverse financial effect on the Business of more than $400,000.

       

      (iv)  Releases.
        Seller has no Knowledge of any Releases of any Hazardous Material related
        to the
        Assets or the Business and its assets, properties and operations that would
        reasonably be expected to form the basis of any Environmental Claim against
        Seller or the Subsidiary, or against any person or entity whose liability
        for
        any Environmental Claim Seller or the Subsidiary has retained or assumed
        either
        contractually or by operation of law, except for Releases of Hazardous
        Materials, the liability for which would not reasonably be 

       

      
        
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      expected
        to have, in the aggregate, an adverse financial effect on
        the Business of more than $400,000, or would not constitute an Assumed
        Liability.

       

      (v)  Predecessors.
        Seller has no Knowledge, with respect to any predecessor of Seller or any
        Subsidiaries, of any Environmental Claim or Environmental Liability related
        to
        the Assets pending or threatened, or of any Release of Hazardous Materials
        that
        would reasonably be expected to form the basis of any Environmental Claim
        or
        Environmental Liability related to the Assets, that would reasonably be expected
        to have a Material Adverse Effect.

       

      (vi)  Disclosure.
        Seller has no Knowledge of any material facts related to the Assets that
        Seller
        reasonably believes would form the basis of an Environmental Claim or
        Environmental Liability (i) arising from the failure to have the necessary
        pollution control equipment currently required or known to be required in
        the
        future by applicable Environmental Laws or (ii) relating to current remediation
        activities or remediation activities known to be required in the future,
        in
        either case that would reasonably be expected to have a Material Adverse
        Effect.

       

      (b)  The
        only representations and warranties given in respect of environmental matters
        and compliance with and liability under Environmental Laws are those contained
        in this Section 5.14 and none of the other representations and warranties
        shall
        be deemed to constitute, directly or indirectly, a representation or warranty
        in
        respect of environmental matters and compliance with and liability under
        Environmental Laws.

       

      
        	Section 5.15.
                  	
                Absence
                  of Certain Changes or
                  Events.

              

      

       

      Except
        (a) as set forth in Schedule 5.15, (b) for any
        intercompany receivables or payables that will be paid, cancelled or offset
        prior to Closing as contemplated in Section 2.5 and (c) any actions taken
        by
        Seller or the Subsidiary that would be permitted by Section 6.1(a), since
        September 30, 2005, the Business has been conducted in the ordinary course,
        except in connection with any process relating to a sale of the Business,
        including entering into this Agreement. Since September 30, 2005, there has
        not
        been any event or condition, or series of events or conditions, occurring
        outside the normal course of business affecting the Assets that either (i)
        has
        resulted in, or (ii) to Seller’s Knowledge, will result in, a Material Adverse
        Effect.

       

      
        	Section 5.16.
                  	
                Regulatory
                  Matters.

              

      

       

      (a)  Schedule
        5.16 sets forth all of the currently pending rate filings relating to the
        Business heretofore made by Seller before any Governmental Body and each
        other
        currently pending rate Proceeding of any Governmental Body (other than
        Proceedings that also affect other Persons engaged in a business similar
        to the
        Business such as generic or industry-wide Proceedings) that is reasonably
        likely
        to have a Material Adverse Effect.

       

      (b)  All
        currently effective material filings relating to the Business heretofore
        made by
        Seller or the Subsidiary with any Governmental Body were made in material
        compliance with Legal Requirements then applicable thereto and the information
        contained therein was true and correct in all material respects as of the
        respective dates of such filings.

       

      
        
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      (c)  Seller
        has certificates of public convenience from the Pennsylvania Public Utility
        Commission (“PA PUC”) or is otherwise legally entitled to provide service in all
        areas (a) where it currently provides service to its customers as part of
        the Business or (b) as identified on its tariff.

       

      
        	Section 5.17.
                  	
                Brokers.

              

      

       

      Except
        as set forth on Schedule 5.17, no broker or finder
        has acted for or on behalf of Seller or any Affiliate of Seller in connection
        with this Agreement or the transactions contemplated by this Agreement. No
        broker or finder is entitled to any brokerage or finder’s fee, or to any
        commission, or to any other compensation based in any way on agreements,
        arrangements or understandings made by or on behalf of Seller or any Affiliate
        of Seller for which Buyer has or will have any liability or obligation
        (contingent or otherwise).

       

      
        	Section 5.18.
                  	
                Disclaimer.

              

      

       

      Except
        as otherwise expressly set forth in this Article V, Seller
        expressly disclaims any representations or warranties of any kind or nature,
        express or implied, as to the condition, value or quality of the assets or
        properties currently or formerly used, operated, owned, leased, controlled,
        possessed, occupied or maintained by Seller or the Subsidiary, and Seller
        SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY,
        USAGE,
        SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO SUCH ASSETS
        OR
        PROPERTIES, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE
        ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, IT BEING UNDERSTOOD
        THAT SUCH ASSETS AND PROPERTIES ARE BEING ACQUIRED, “AS IS, WHERE IS” ON THE
        CLOSING DATE, AND IN THEIR PRESENT CONDITION, WITH ALL FAULTS AND THAT BUYER
        SHALL RELY ON ITS OWN EXAMINATION AND INVESTIGATION THEREOF.

       

      
        	Section 5.19.
                  	
                Insurance.

              

      

       

      (a)  Schedule
        5.19 sets forth a true and complete list of all current policies of property
        and casualty insurance, insuring the properties, assets, employees and/or
        operations of the Business (collectively, the “Policies”). All premiums payable
        under such Policies have been paid in a timely manner and Seller and the
        Subsidiary have complied in all material respects with the terms and conditions
        of all such Policies.

       

      (b)  All
        material Policies are in full force and effect. Neither Seller nor the
        Subsidiary is in material default under any provisions of the Policies, and
        there is no claim by Seller or the Subsidiary 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.

       

      
        	Section 5.20.
                  	
                Absence
                  of Undisclosed
                  Liabilities.

              

      

       

      Except
        as disclosed on Schedule 5.20, neither Seller nor
        the Subsidiary has any indebtedness or liability, absolute or contingent,
        related to the Assets or the Business of a nature 

       

      
        
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      required
        by GAAP to be reflected in a consolidated corporate
        balance sheet relating to the Business, except liabilities, obligations or
        contingencies that (a) are accrued or reserved against in the Financial
        Statements or reflected in the notes thereto, (b) were incurred or accrued
        in
        the ordinary course of business (including liens of current taxes and
        assessments not in default) since September 30, 2005, or (c) to Seller’s
        Knowledge, would not reasonably be expected, individually or in the aggregate,
        to have an adverse financial effect on the Business of more than
        $1,000,000.

       

      
        	Section 5.21.
                  	
                Sufficiency
                  of
                  Assets.

              

      

       

      Except
        as set forth on Schedule 5.21, the Assets include
        all assets, properties and rights necessary for the operation of the Business
        consistent with past practice and as currently operated.

       

      
        	Section 5.22.
                  	
                PUHCA.

              

      

       

      Seller
        is not a “holding company” as defined in the Public Utility
        Holding Company Act of 1935, as amended (“PUHCA 1935”), or the Public Utility
        Holding Company Act of 2005 (“PUHCA 2005”). The execution and delivery of this
        Agreement by Seller does not and will not violate any provision of PUHCA
        1935 or
        PUHCA 2005 or any rules or regulations thereunder pertaining to Seller.

       

      ARTICLE
        VI.  

       

      COVENANTS

       

      
        	Section 6.1.
                  	
                Covenants
                  of
                  Seller.

              

      

       

      Seller
        agrees to observe and perform the following covenants and
        agreements:

       

      (a)  Conduct
        of the Business Prior to the Closing Date. With respect to the Business,
        except (x) as contemplated in this Agreement or in Schedule 6.1,
        (y) as required by any Legal Requirement or Order or (z) as otherwise
        expressly consented to in writing by Buyer, which consent will not be
        unreasonably withheld or delayed, prior to the Closing, Seller will, with
        respect to the Business, and will cause the Subsidiary to:

       

      (i)  not
        make or permit any material change in the general nature of the Business;

       

      (ii)  maintain
        the Business in the ordinary course of business consistent with Good Utility
        Practices, and maintain the Assets in their present condition, reasonable
        wear
        and tear excepted, subject to retirements in the ordinary course of
        business;

       

      (iii)  not
        enter into, assign, amend, renew or extend, any material transaction or Material
        Contract other than in the ordinary course of business, provided that such
        ordinary course exception shall not be applicable to any (A) collective
        bargaining agreement (as to which Section 6.14 shall apply) or (B) 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;

       

      
        
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      (iv)  not
        purchase, sell, lease, dispose of or otherwise transfer or make any Contract
        for
        the purchase, sale, lease, disposition or transfer of, or subject to any
        Encumbrance (other than a Permitted Encumbrance), any material Assets other
        than
        in the ordinary course of business;

       

      (v)  not
        hire any new employee unless such employee is a bona fide replacement for
        either
        a presently-filled position or a vacancy in an authorized position with the
        Business;

       

      (vi)  not
        make any unbudgeted capital expenditure or capital expenditure commitment
        in
        excess of $500,000 in the aggregate except in the event of
        service interruption, emergency or casualty loss;

       

      (vii)  comply
        in all material respects with all applicable material Legal Requirements
        and
        Orders, including without limitation those relating to the filing of reports
        and
        the payment of Taxes due to be paid prior to the Closing, other than those
        contested in good faith;

       

      (viii)  except
        in the ordinary course of business or in accordance with the terms of any
        existing Contract, Employee Plan or collective bargaining agreement, not
        grant
        any material increase or change in total compensation or benefits (taken
        as a
        whole) to any of the Transferred Employees or enter into any employment,
        severance or similar Contract with any Person or amend any such existing
        Contracts to increase any amounts payable thereunder or benefits provided
        thereunder;

       

      (ix)  not
        terminate any Material Contract except in the case of a breach of such Contract
        by the other party thereto;

       

      (x)  not
        create, incur, assume, guarantee or otherwise become liable with respect
        to any
        indebtedness for money borrowed other than in the ordinary course of business
        (it being understood and agreed that customer advances, customer deposits
        and
        construction advances do not create indebtedness for money borrowed), except
        pursuant to advances made by Seller to the Business or to the Subsidiary;

       

      (xi)  not
        amend the Organizational Documents of the Subsidiary;

       

      (xii)  not
        make any change in the stock ownership of the Subsidiary and not grant, issue,
        sell, dispose of, pledge or otherwise encumber any interest in the Subsidiary;
        and

       

      (xiii)  not
        make any commitment to take any of the actions prohibited by this Section
        6.1(a).

       

      (b)  Access
        to the Business, Assets and Records; Updating Information.

       

      (i)  From
        and after the date hereof and until the Closing Date, Seller shall permit
        Buyer
        and its Representatives to have, on reasonable notice and at reasonable times,
        

       

      
        
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      reasonable
        access to all properties, employees, offices and books,
        papers and records to the extent that they reasonably relate to the ownership,
        operation, obligations and liabilities of the Business, the Subsidiary and
        the
        Assets; provided, however, that such access shall not unreasonably
        interfere with the operation of the Business; and provided, further,
        that Buyer hereby agrees to defend, indemnify and hold harmless Seller from
        and
        against all Losses arising out of or relating to Buyer’s access provided
        pursuant to this Section 6.1(b)(i). Without limiting the application of the
        Confidentiality Agreement, all documents or information furnished by Seller
        or
        obtained by Buyer hereunder shall be subject to the Confidentiality
        Agreement.

       

      (ii)  Seller
        will notify Buyer as promptly as practicable of any significant change in
        the
        ordinary course of business for the Business and of any material Proceedings
        (Threatened or pending) involving or affecting the Business or the transactions
        contemplated by this Agreement, of any unbudgeted capital expenditure or
        commitment in excess of $100,000, individually, or $500,000 in the aggregate,
        and shall use reasonable efforts to keep Buyer fully informed of such
        events.

       

      (c)  Consents.
        Subject to Section 2.4(b), Seller will use its commercially reasonable efforts
        and act diligently to obtain all necessary Consents required to consummate
        the
        transactions contemplated hereby in a timely manner, including any Consent
        required under any Legal Requirement or Contract applicable to the Business
        and
        all Consents listed in Schedule 5.3.

       

      
        	Section 6.2.
                  	
                Covenants
                  of
                  Buyer.

              

      

       

      Buyer
        agrees to observe and perform the following covenants and
        agreements:

       

      (a)  Consents.
        Buyer will use its commercially reasonable efforts and act diligently to
        assist
        Seller in obtaining all necessary Consents required to consummate the
        transactions contemplated hereby in a timely manner, including any Consent
        required under any Legal Requirement or Contract applicable to the Business,
        and
        all Consents listed in Schedule 5.3, and will use its commercially
        reasonable efforts and act diligently to obtain all Consents described in
        Section 4.3 in a timely manner.

       

      (b)  Access
        to Information. After Closing, Buyer will, and will cause its
        Representatives to, afford to Seller, including its Representatives, reasonable
        access to all books, records, files and documents related to the Business
        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, the Subsidiary or the Business for which Seller may be
        responsible, to discharge its obligations under this Agreement and the other
        Related Documents to which it is a party and for other reasonable purposes
        and
        will afford Seller reasonable assistance in connection therewith. 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 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 6.2(b). In addition, on and after the Closing Date, at Seller’s request,
        Buyer shall make available to Seller 

       

      
        
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          15

          
            

          

        

        
          
          

        

      

      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 (i) such access to such employees
        shall not unreasonably interfere with the normal conduct of the operations
        of
        Buyer and (ii) Seller shall reimburse Buyer for the out-of-pocket costs
        reasonably incurred by Buyer in making such employees available to Seller.

       

      (c)  Seller
        Guarantees and Surety Instruments. Buyer shall use its commercially
        reasonable efforts to assist Seller in obtaining full and complete releases
        on
        the guarantees, letters of credit, bonds and other surety instruments provided
        by Seller in connection with the Business or for the benefit of the Subsidiary,
        all of which have been listed by Seller on Schedule 6.2(c). For
        purposes of this Section 6.2(c), commercially reasonable efforts shall include:
        (i) Buyer’s assumption of the Contracts on the terms set forth in this
        Agreement; and (ii) an obligation on the part of Buyer to provide a
        guaranty, letter of credit, bond or other surety instrument at Closing to
        the
        extent required by any Contract assumed by Buyer or retained by the Subsidiary
        at Closing and, in general, no later than 90 days after the Closing Date
        but
        effective as of the Closing Date, an equivalent surety instrument to be
        substituted for any surety instrument provided by Seller to any beneficiary
        in
        connection with the Business or for the benefit of the Subsidiary. Buyer
        shall
        indemnify, defend and hold harmless Seller and its Affiliates for any and
        all
        Losses (in each case without deduction or set off) incurred on account of
        Seller’s guarantees, letters of credit, bonds and other surety instruments on or
        after the Closing Date insofar as such Losses relate to events occurring
        on or
        after Closing.

       

      
        	Section 6.3.
                  	
                Governmental
                  Filings.

              

      

       

      (a)  HSR
        Act Filing. Buyer and Seller shall make an appropriate filing of a
        Notification and Report Form pursuant to the HSR Act with respect to the
        transactions contemplated hereby within ten Business Days following the
        execution of this Agreement. Buyer and Seller shall 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 necessary
        to
        cause the expiration or termination of the applicable waiting periods under
        the
        HSR Act as soon as practicable. 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 reasonable
        actions to obtain clearance from the Antitrust Authorities, or if such clearance
        cannot be obtained, to reach an agreement, settlement, consent providing
        for
        divestiture, a “hold separate” agreement, contractual undertakings with third
        parties or any other relief with the concerned Antitrust Authority in order
        to
        permit the consummation of the transactions contemplated by this Agreement.
        Buyer shall exercise its commercially reasonable efforts, and Seller shall
        cooperate fully with Buyer, to prevent the entry in any Proceeding brought
        by an
        Antitrust Authority or any Governmental Body of an Order that would prohibit,
        make unlawful or delay the consummation of the transactions contemplated
        by this
        Agreement. Seller shall not oppose any efforts of Buyer, including Buyer’s
        proffer of consent to any Order, to complete lawfully the transactions
        contemplated by this Agreement, and shall cooperate in good faith with Buyer
        and
        the Antitrust Authorities to the same effect.
 Notwithstanding the foregoing, neither party shall be
        required to agree to any divestiture of or material restriction on, a material
        

       

      
        
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      business,
        a material asset or a material group of related assets
        that, in any such case, is owned or operated by it or any of its
        Affiliates.

       

      (b)  Other
        Regulatory Filings. Buyer and Seller will, as soon as reasonably practicable
        following the execution of this Agreement, but no later than fifteen Business
        Days thereafter with respect to the joint application to the Pennsylvania
        Public
        Utility Commission, prepare and file with each Governmental Body 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 such Consents and will cooperate with each
        other
        in seeking such Consents. To such end, the parties agree to make available
        the
        personnel and other resources of their respective organizations in order
        to
        obtain all such Consents. Each party will promptly inform the other party
        of any
        communication received by such party from, or given by such party to, any
        Governmental Body from which any such Consent is required and of any material
        communication 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
        consult with each other in advance of any meeting or conference with, any
        such
        Governmental Body or, in connection with any Proceeding by a private party,
        with
        such other Person, and to the extent permitted by such Governmental Body
        or
        other Person, give the other party the opportunity to attend and to participate
        in such meetings and conferences. Neither party shall take any action in
        connection with obtaining any Consent from any Governmental Body that is
        intended to create, allocate, or shift to the other party any liability arising
        from the obtaining of such Consent. Notwithstanding the foregoing, neither
        party
        shall be required to agree to any divestiture of or material restriction
        on, a
        material business, a material asset or a material group of related assets
        that,
        in any such case, is owned or operated by it or any of its Affiliates.

       

      
        	Section 6.4.
                  	
                Seller
                  Marks.

              

      

       

      Within
        180 days after the Closing Date, Buyer shall cease using
        any names, marks, trade names, trademarks and corporate symbols and logos
        incorporating “Southern Union”, “Southern,” “SU,” and “SUG,” (collectively and
        together with all other names, marks, trade names, trademarks and corporate
        symbols and logos owned by Seller or any of its Affiliates other than the
        PG
        Marks, the “Seller Marks”). shall use commercially reasonable efforts to remove
        from the Assets any and all Seller Marks and shall amend the relevant
        Organizational Documents of the Subsidiary to change the name of the Subsidiary
        to a name that does not include any Seller Mark or any name or term confusingly
        similar to any Seller Mark. 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 6.4,
        Seller shall be entitled to specific performance of this Section 6.4 and
        to
        injunctive relief against further violations, as well as any other remedies
        at
        law or in equity available to Seller.

       

      
        	Section 6.5.
                  	
                Acknowledgment
                  by
                  Buyer.

              

      

       

      In
        order to induce Seller to enter into and perform this Agreement
        and the Related Documents, Buyer acknowledges and agrees with Seller as
        follows:

       

      
        
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      THE
        REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE V OF THIS
        AGREEMENT CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES
        OF
        SELLER TO BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY AND
        BY
        THE RELATED DOCUMENTS, AND THERE ARE NO REPRESENTATIONS, WARRANTIES, COVENANTS,
        UNDERSTANDINGS OR AGREEMENTS, ORAL OR WRITTEN, IN RELATION THERETO BETWEEN
        THE
        PARTIES OTHER THAN THOSE INCORPORATED HEREIN AND THEREIN. EXCEPT FOR THE
        REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE V OF THIS
        AGREEMENT, BUYER DISCLAIMS RELIANCE ON ANY REPRESENTATIONS OR WARRANTIES,
        EITHER
        EXPRESS OR IMPLIED, BY OR ON BEHALF OF SELLER OR ITS AFFILIATES OR
        REPRESENTATIVES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER
        ACKNOWLEDGES AND AGREES THAT, EXCEPT AS PROVIDED IN SECTIONS 5.7, 5.11, 5.14
        AND
        5.21, THERE ARE NO REPRESENTATIONS OR WARRANTIES OF SELLER WITH RESPECT TO
        THE
        CONDITION OF THE ASSETS, COMPLIANCE WITH ENVIRONMENTAL LAWS AND ENVIRONMENTAL
        PERMITS OR THE PRESENCE OR RELEASES OF HAZARDOUS MATERIAL IN THE FIXTURES,
        SOILS, GROUNDWATER, SURFACE WATER OR AIR ON, UNDER OR ABOUT OR EMANATING
        FROM
        ANY OF THE PROPERTIES OR ASSETS OF SELLER OR THE SUBSIDIARY.

       

      
        	Section 6.6.
                  	
                Transition
                  Plan.

              

      

       

      Within
        15 days after the execution date of this Agreement, Buyer
        shall deliver to Seller 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 the Business by any automated or manual
        process using facilities or employees that are not included among the Assets
        or
        Transferred Employees. Seller will add its representatives to such team within
        15 days after receipt of Buyer’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 and after the Closing and any other transfer of
        control matters that any party reasonably believes should be addressed in
        such
        transition plan, including the matters set forth on Exhibit 6.6. 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. The terms and conditions
        governing such transition activities will be more fully set forth in a
        transition agreement reasonably satisfactory to the parties, including the
        matters set forth on Exhibit 6.6, to be executed and delivered by Buyer
        and Seller at the Closing.

       

      
        	Section 6.7.
                  	
                Purchase
                  of Leased
                  Assets.

              

      

       

      Buyer
        and Seller shall use commercially reasonable efforts to
        arrange for Buyer, on the Closing Date, to enter into new lease agreements
        covering the equipment listed on Schedule 6.7 and leased by the lessors
        to Seller and/or the Subsidiary as identified on Schedule 6.7 (the
“Leased Assets”), or if unable to do so, then for Buyer to purchase any Leased
        Assets directly from any such lessor on, or promptly after, the Closing Date
        upon Buyer’s payment directly to any lessor of the purchase price for any of the
        Leased Assets under the applicable lease. In either 

       

      
        
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      case,
        Buyer shall be responsible for, and shall pay any related
        transfer, registration, sales tax and similar fees, including expenses of
        counsel, if any, associated with any such lease arrangement or any transfer
        arising therefrom.

       

      
        	Section 6.8.
                  	
                Meter
                  Reading.

              

      

       

      On
        and prior to the Closing Date, Seller shall read the customer
        meters in their normal cycle and in due course render the related bills to
        its
        customers served by the Business. Seller shall also read each transportation
        customer meter (collectively, “Large Volume Meters”) on the day immediately
        preceding the Closing Date. Seller shall provide Buyer with the 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 Seller’s 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 Seller prior to the Closing Date through Large Volume Meters by Seller’s
        meter readings on the day immediately preceding Closing Date. Buyer shall
        determine by allocation the volumes of gas sold by Seller through all meters
        other than Large Volume Meters, prior to the Closing Date, and the gas sold
        by
        Seller, on and after the Closing Date and prior to its first meter reading
        through meters without charts. Such allocation shall be consistent with Seller’s
        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 Working Capital adjustment.

       

      
        	Section 6.9.
                  	
                Insurance.

              

      

       

      (a)  At
        Buyer’s request, Seller agrees to use commercially reasonable efforts to assert
        and diligently pursue all rights to insurance coverage under the Policies
        (other
        than with respect to Workman’s Compensation and punitive damage policies) and
        any other past insurance policies of Seller relating to the Business or the
        Assets (such insurance policies shall collectively be referred to herein
        as the
“Insurance Policies”) with respect to insured claims asserted prior to the
        Closing for matters included in the Assumed Liabilities pursuant to Section
        2.2(b)(v). Seller shall remit to Buyer all insurance proceeds obtained after
        Closing with respect to such insured claims. Furthermore, Seller agrees to
        use
        commercially reasonable efforts to negotiate with each of its insurance
        companies in order to provide Buyer the benefit of the coverage under the
        policies for all claims asserted on or after the Closing Date and to cooperate
        with Buyer with any efforts to obtain “tail” coverage, at Buyer’s sole cost,
        with respect to any “claims made policies.” Notwithstanding anything herein to
        the contrary, any recovery of insurance proceeds by Buyer shall be net of
        all
        Seller’s cost and expenses. Seller shall give access to Buyer to all of the
        non-privileged information relating to these matters and shall consult with
        Buyer on the progress thereof from time to time.

       

      (b)  After
        the Closing, Buyers shall be responsible for, and neither Seller nor any
        of its
        Affiliates shall have any responsibility for, the payment of any deductible
        amounts or underlying limits attributable to the Insurance Policies. Buyer
        acknowledges that certain of the Insurance Policies may require Seller or
        any of
        its Affiliates to provide an indemnity to the insurance carrier for deductible
        amounts and to provide collateral to secure such indemnity 

       

      
        
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      obligations.
        Buyer shall enter into an indemnification agreement
        in form mutually acceptable to Buyer and Seller wherein Buyer agrees to
        indemnify and hold harmless Seller or any of its Affiliates (as applicable)
        for
        any and all of the costs of maintaining such collateral and for any charges
        made
        against such collateral or indemnification payments in connection with claims
        arising or alleged to arise from the operations of the Business required
        to be
        paid by Seller of any of its Affiliates (as applicable) under or with respect
        to
        such Insurance Policies from and after the Closing Date.

       

      (c)  Seller
        makes no representation or warranty with respect to the applicability, validity
        or adequacy of any Insurance Policies, and Seller shall not be responsible
        to
        Buyer or any of its Affiliates for the failure of any insurer to pay under
        such
        Insurance Policy.

       

      (d)  Nothing
        in this Agreement is intended to provide or shall be construed as providing
        a
        benefit or release to any insurer or claims service organization of any
        obligation under any Insurance Policy. Nothing herein shall be construed
        as
        creating or permitting any insurer or claims service organization the right
        of
        subrogation against Seller or Buyer or any of their Affiliates in respect
        of
        payments made by one to the other under any Insurance Policy.

       

      
        	Section 6.10.
                  	
                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 impair, replace or restore the Assets as soon as possible
        to
        their prior condition; provided, however, anything contained in this Agreement
        to the contrary notwithstanding, Seller shall not be obligated to expend
        sums in
        excess of the proceeds of any insurance policy, 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 6.10 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 6.11.
                  	
                Rate
                  Matters.

              

      

       

      Seller
        has advised
        Buyer that Seller intends, except to the extent otherwise mutually agreed
        to by
        Seller and Buyer, to file a rate case with the PA PUC on or about March 15,
        2006. Seller agrees to prosecute diligently such rate case without regard
        to the
        pendency of this transaction to pursue the full amount to which Seller shall
        be
        lawfully entitled. Without limiting the provisions of Section 6.1(b), Seller
        shall give Buyer access to all information relating to the rate case and
        shall
        permit Buyer to consult with Seller and its counsel on the progress thereof
        from
        time to time. Notwithstanding the foregoing, Seller shall have discretion
        to
        conduct such proceeding in the manner consistent with the foregoing standards,
        but Seller shall not settle or 

       

      
        
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      compromise
        such proceeding without the prior written consent of
        Buyer, such consent not to be unreasonably withheld.

       

      
        	Section 6.12.
                  	
                Outstanding
                  Payments and Bank
                  Accounts.

              

      

       

      (a)  Notwithstanding
        anything contained herein to the contrary, (a) all of the bank accounts and
        lock
        boxes of Seller used in or in connection with the Business shall be considered
        “Assets” for the purposes of this Agreement and shall be transferred to Buyer at
        the Closing, (b) any checks that are in the possession of Seller at the Closing
        that relate to accounts receivable (or any other asset) included in the Assets
        shall be transferred to Buyer at the Closing and (c) any checks that are
        in the
        possession of Seller at the Closing that relate to accounts receivable (or
        any
        other asset) not included in the Assets shall be retained by Seller.

       

      (b)  From
        and after the Closing, (a) if Seller or any of its Affiliates receives or
        collects any funds relating to any accounts receivable (or any other asset)
        included in the Assets, Seller or its Affiliates shall remit any such amounts
        to
        Buyer as promptly as practicable but no later than ten (10) days after Seller
        or
        any of its Affiliates receives such sum, and (b) Seller and its Affiliates
        shall
        promptly forward all mail, remittance, receipts or other mailings received
        by
        any of them relating to the Business to Buyer.

       

      
        	Section 6.13.
                  	
                Preparation
                  of Audited Financial Statements of the
                  Business.

              

      

       

      If
        requested by
        Buyer, Seller shall prepare and deliver to Buyer audited consolidated balance
        sheets of the Business as of December 31, 2004 and 2005 and audited consolidated
        statements of income and cash flows of the Business for the 12-month period
        ended June 30, 2004, the 6-month period ended December 31, 2004 and the 12-month
        period ended December 31, 2005 (such audited balance sheets and statements
        of
        income and cash flows, the “Audited Financials”). If so requested, Seller shall
        use commercially reasonable efforts to deliver the Audited Financials to
        Buyer
        by the later of (i) the Closing Date or (ii) September 30, 2006. The Audited
        Financials shall be prepared in accordance with GAAP, and shall be accompanied
        by the unqualified opinion of the auditors of the Business. Seller shall
        consult
        with Buyer on a regular basis regarding the preparation of the Audited
        Financials, and Buyer shall reimburse Seller for the auditing fees and expenses
        of Seller’s external auditor relating to the preparation of the Audited
        Financials. Notwithstanding the foregoing, (i) Buyer shall use commercially
        reasonable efforts to seek a waiver from the SEC to minimize or reduce, to
        the
        extent practicable, its obligation to provide such Audited Financials in
        connection with its public filings or offerings and (ii) Seller’s requirement to
        deliver such Audited Financial Statements shall not be a condition to
        Closing.

       

      
        	Section 6.14.
                  	
                Collective
                  Bargaining
                  Agreement.

              

      

       

      Seller
        has advised Buyer that Seller intends to negotiate a
        renewal or extension of the Collective Bargaining Agreement between PG Energy
        and International Brotherhood of Electrical Workers, AFL-CIO, Scranton and
        Carbondale Operating Areas, including Mid Valley Local Union #2244 (the “CBA”).
        Seller agrees to negotiate such renewal or extension diligently to achieve
        commercially reasonable terms and conditions consistent with past practice.
        Seller shall give Buyer access to all information relating to the CBA renewal
        or
        extension and shall permit Buyer to consult with Seller and its counsel on
        the
        progress thereof from time to time. Notwithstanding the

       

      
        
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      foregoing,
        Seller shall have discretion to conduct such
        negotiations in the manner consistent with the foregoing standards, but Seller
        shall not enter into such renewal or extension without the prior written
        consent
        of Buyer, such consent not to be unreasonably withheld.

       

      ARTICLE
        VII.  

       

      CONDITIONS
        PRECEDENT

       

      
        	Section 7.1.
                  	
                Seller’s
                  Conditions Precedent to
                  Closing.

              

      

       

      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:

       

      (a)  Representations
        and Warranties True as of the Closing Date. Buyer’s representations and
        warranties in this Agreement shall have been true and correct in all material
        respects as of the date of this Agreement and shall be true and correct in
        all
        material respects as of the Closing Date as if made on the Closing Date,
        subject
        to changes expressly contemplated and permitted by this Agreement, except
        that
        representations and warranties made as of, or in respect of, only a specified
        date or period shall be true and correct in all material respects as of,
        or in
        respect of, such date or period.

       

      (b)  Compliance
        with Agreements. The covenants, agreements and conditions required by this
        Agreement and the Employee 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 the Closing Date, stating that the conditions specified in
        Sections 7.1(a) and 7.1(b) of this Agreement have been satisfied.

       

      (d)  Governmental
        Approvals and Other Consents. Seller shall have obtained all Consents of
        Governmental Bodies (or the Consent of the appropriate Governmental Body
        shall
        be able to be deemed to have been received in accordance with the applicable
        Legal Requirement) by Final Order and other Persons that are required in
        order
        to consummate the transactions contemplated hereby and to transfer the Assets
        and the Stock to Buyer without Seller incurring material liability under
        any
        Legal Requirement, Order or Contract.

       

      (e)  HSR
        Act. The applicable waiting period under the HSR Act with respect to the
        transactions contemplated hereby shall have expired or have been
        terminated.

       

      (f)  Injunctions.
        On the Closing Date, there shall be no Orders that operate to restrain, enjoin
        or otherwise prevent the consummation of the transactions contemplated by
        this
        Agreement.

       

      (g)  Documents.
        Buyer shall have delivered or shall stand ready to deliver all the certificates,
        instruments, Contracts and other documents specified to be delivered by it
        hereunder on or before the Closing Date, including pursuant to Section 8.1,
        and
        shall have taken such actions as Seller may have requested pursuant to Section
        11.2.

       

      
        	Section 7.2.
                  	
                Buyer’s
                  Conditions Precedent to
                  Closing.

              

      

       

      
        
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      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:

       

      (a)  Representations
        and Warranties True as of the Closing Date. Seller’s representations and
        warranties in this Agreement shall have been true and correct in all material
        respects as of the date of this Agreement and shall be true and correct in
        all
        material respects as of the Closing Date as if made on the Closing Date,
        subject
        to changes expressly contemplated and permitted by this Agreement, except
        (i)
        that representations and warranties made as of, or in respect of, only a
        specified date or period shall be true and correct in all material respects
        as
        of, or in respect of, such date or period, (ii) in the case of representations
        and warranties that are qualified by materiality or Material Adverse Effect,
        which representations and warranties shall have been when made, and shall
        be on
        the Closing Date, true and correct in all respects, and (iii) to the extent
        that
        any failure of such representations and warranties to be true and correct
        as
        aforesaid when taken in the aggregate would not have a Material Adverse
        Effect.

       

      (b)  Compliance
        with Agreements. The covenants, agreements and conditions required by this
        Agreement or the Employee 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, except where the failure to so perform or comply when
        taken
        in the aggregate would not have a Material Adverse Effect.

       

      (c)  Certificate.
        Seller shall execute and deliver to Buyer a certificate of an authorized
        officer
        of Seller, dated the Closing Date, stating that the conditions specified
        in
        Sections 7.2(a) and 7.2(b) of this Agreement have been satisfied.

       

      (d)  Governmental
        Approvals and Other Consents. Seller shall have obtained all Consents of
        Governmental Bodies (or the Consent of the appropriate Governmental Body
        shall
        be able to be deemed to have been received in accordance with the applicable
        Legal Requirement) by Final Order and other Persons that are required in
        order
        to consummate the transactions contemplated hereby other than those the failure
        of which to be obtained would not have a Material Adverse Effect, which Consents
        of Governmental Bodies shall contain no condition which could reasonably
        be
        expected to have a material adverse effect on the Assets or the Business
        or the
        Buyer or any of its Affiliates.

       

      (e)  HSR
        Act. The applicable waiting period under the HSR Act with respect to the
        transactions contemplated hereby shall have expired or have been
        terminated.

       

      (f)  Injunctions.
        On the Closing Date, there shall be no Orders that operate to restrain, enjoin
        or otherwise prevent the consummation of the transactions contemplated by
        this
        Agreement.

       

      (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 Section 8.1.

       

      
        
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      (h)  No
        Material Adverse Effect. No occurrence or condition (alone or together with
        other occurrences or conditions) giving rise to a Material Adverse Effect
        shall
        have occurred since the date of this Agreement.

       

      (i)  Retained
        Indebtedness Encumbrances. All Encumbrances on the Assets or the Business
        relating to the Retained Indebtedness shall have been terminated or otherwise
        released in a manner reasonably acceptable to Buyer. 

       

      ARTICLE
        VIII.  

       

      CLOSING

       

      
        	Section 8.1.
                  	
                Closing.

              

      

       

      The
        closing of the purchase and sale of the Assets (the “Closing”)
        will take place at the offices of Fleischman and Walsh, L.L.P., 1919
        Pennsylvania Avenue, N.W., Suite 600, Washington, D.C. 20006, on the fifth
        business day after the date on which the conditions specified in Sections
        7.1
        and 7.2 (excluding conditions that, by their terms, cannot be satisfied until
        the Closing) are satisfied or waived, unless another time, date and place
        is
        agreed to in writing by the parties; provided, however, that neither
        Seller nor Buyer shall be required to close the transactions contemplated
        by
        this Agreement until all conditions to the obligations of Seller or Buyer,
        as
        the case may be, shall have been satisfied or waived in accordance with the
        provisions of Article VII. The date of the Closing is referred to in this
        Agreement as the “Closing Date.” The transactions to be consummated on the
        Closing Date shall be deemed to have been consummated as of 12:01 a.m., local
        time, on the Closing Date. At the Closing, the following events shall occur,
        each event being deemed to have occurred simultaneously with the other
        events.

       

      (a)  Bill
        of Sale. Seller and Buyer shall execute and deliver a bill of sale and
        assignment and assumption agreement in a form reasonably acceptable to the
        parties.

       

      (b)  Stock
        Certificates; Resignations; FIRPTA. Seller shall deliver to Buyer: (i) the
        certificates representing the Stock, duly and validly endorsed to or registered
        in the name of Buyer or its nominees or accompanied by separate stock powers
        duly and validly executed by Seller, (ii) letters of resignation, effective
        as
        of the Closing Date, from each director and each officer of the Subsidiary
        and
        (iii) a certification of its non-foreign status as set forth in
        Section 1445 of the IRC and the Treasury regulations promulgated
        thereunder.

       

      (c)  Payment
        of Estimated Purchase Price. Buyer will pay to Seller an amount equal to the
        Estimated Purchase Price by wire transfer, in lawful money of the United
        States
        of America in immediately available funds, to such account as Seller shall
        have
        designated by notice to Buyer.

       

      (d)  Other
        Related Documents. To the extent consistent with the other provisions of
        this Agreement, Seller (or the appropriate Affiliate of Seller) and Buyer
        shall
        execute and deliver such other Related Documents and shall obtain and deliver
        such other certificates reasonably requested by a party that are necessary
        in
        order to satisfy any applicable Legal Requirements relating to the transfer
        of
        the Assets or the Stock to Buyer or the assumption 

       

      
        
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      of
        the Assumed Liabilities by Buyer; provided, however,
        that nothing in this clause (d) shall obligate Seller or any Affiliate of
        Seller
        to execute or deliver any document that affects, in a manner adverse to Seller,
        Seller’s liability to Buyer as expressed herein.

       

      ARTICLE
        IX.  

       

      TERMINATION

       

      
        	Section 9.1.
                  	
                Termination
                  Rights.

              

      

       

      This
        Agreement may be terminated in its entirety at any time prior
        to the Closing:

       

      (a)  By
        the mutual written agreement of Seller and Buyer;

       

      (b)  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 or restricting
        the
        transactions contemplated by this Agreement;

       

      (c)  By
        Buyer, upon the breach in any material respect of any of the representations
        and
        warranties of Seller contained herein or the failure by Seller to perform
        and
        comply in any material respect with any of the agreements and obligations
        required by this Agreement to be performed or complied with by Seller, provided
        that all such breaches or failures are reasonably likely to result in a Material
        Adverse Effect and are not cured or otherwise addressed by Seller in a manner
        reasonably acceptable to Buyer within 30 days of Seller’s receipt of a written
        notice from Buyer that such breaches or failures have occurred (or significant
        efforts have not been commenced to cure such misrepresentations or breaches
        if
        they are susceptible to cure but not capable of being cured within such 30
        days);

       

      (d)  By
        Seller, upon the breach in any material respect of any of the representations
        and warranties of Buyer contained herein or the failure by Buyer to perform
        and
        comply in any material respect with any of the agreements and obligations
        required by this Agreement to be performed or complied with by Buyer, provided
        that such breach or failure is not cured or otherwise addressed by Buyer
        in a
        manner reasonably acceptable to Seller within 30 days of Buyer’s receipt of a
        written notice from Seller that such a breach or failure has occurred (or
        significant efforts have not been commenced to cure such misrepresentation
        or
        breach if it is susceptible to cure but not capable of being cured within
        such
        30 days);

       

      (e)  By
        either party in writing if the Closing has not occurred by August 25, 2006
        (the
“Upset Date”); provided, however, that the right to terminate this
        Agreement under this Section 9.1(e) will not be available to any party that
        is
        in material breach of its representations, warranties, covenants or agreements
        contained herein; and provided further that in the event either party's
        conditions precedent to Closing set forth in Sections 7.1(d) or 7.1(e) or
        Sections 7.2(d) or 7.2(e) have not been satisfied prior to the Upset Date
        but
        are reasonably capable of being satisfied thereafter, then either party may
        request from the other up to four extensions of thirty days each following
        written notice to the other; or

       

      (f)  By
        Seller, if at Closing Buyer fails to make the payments required to be made
        by
        Buyer at Closing. 

       

      
        	Section 9.2.
                  	
                Limitation
                  on Right to Terminate; Effect of
                  Termination.

              

      

       

      
        
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      (a)  A
        party shall not be allowed to exercise any right of termination pursuant
        to
        Section 9.1 if the event giving rise to the termination right shall be due
        to
        the willful failure of such party seeking to terminate this Agreement to
        perform
        or observe in any material respect any of the covenants or agreements hereunder
        to be performed or observed by such party.

       

      (b)  If
        this Agreement is terminated as permitted under Section 9.1, such termination
        shall be without liability of or to any party to this Agreement, or any
        shareholder or Representative of such party; provided, however, that if
        such termination shall result from the willful failure of any party to fulfill
        a
        condition to the performance of any other party or to perform a covenant
        of this
        Agreement or from a material and willful breach by any party to this Agreement
        (it being understood that the failure to cure a breach shall not, by itself,
        be
        a willful breach of this Agreement), then such party shall (subject to the
        last
        sentence of this Section 9.2(b)) be fully liable for any and all damages
        sustained or incurred by the other party. If prior to Closing either party
        to
        this Agreement resorts to legal proceedings to enforce this Agreement, the
        prevailing party in such proceedings shall be entitled to recover all costs
        incurred by such party including reasonable attorney’s fees, in addition to any
        other relief to which such party may be entitled; provided, however,
        and notwithstanding anything to the contrary in this Agreement, in no event
        shall either party be entitled to receive any punitive, exemplary, special,
        remote, speculative, indirect or consequential damages (including any damages
        on
        account of lost profits or opportunities).

       

      ARTICLE
        X.  

       

      EMPLOYEE
        MATTERS

       

      
        	Section 10.1.
                  	
                Employee
                  Agreement.

              

      

       

      The
        parties have addressed the transfer of employees and employee
        benefit matters in a separate agreement, entitled Employee Agreement, executed
        and delivered of even date herewith, the terms and provisions of which agreement
        are incorporated into this Agreement as if fully set forth herein and a copy
        of
        which is attached hereto as Exhibit 10.1 (the “Employee
        Agreement”).

       

      ARTICLE
        XI.  

       

      TAX
        MATTERS

       

      
        	Section 11.1.
                  	
                Purchase
                  Price
                  Allocation.

              

      

       

      Within
        180 days after the Closing Date, Buyer and Seller shall use
        their good faith efforts to agree upon the allocation (the “Allocation”) of the
        Purchase Price to the individual assets or classes of assets within the meaning
        of Section 1060 of the IRC. If Buyer and Seller agree to such Allocation,
        Buyer
        and Seller covenant and agree that (a) the values assigned to the assets
        by the
        parties’ mutual agreement shall be conclusive and final for all purposes, and
        (b) neither Buyer nor Seller will take any position before any Governmental
        Body
        or in any Proceeding that is in any way inconsistent with such Allocation.
        Notwithstanding the foregoing, if Buyer and Seller cannot agree to an
        Allocation, Buyer and Seller covenant and agree to file, and to cause their
        respective Affiliates to file, all Tax Returns and schedules thereto (including,
        for example, amended returns, claims for refund, and those returns and forms
        required under Section 1060 of 

       

      
        
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      the
        IRC and any Treasury regulations promulgated thereunder)
        consistent with each of such party’s good faith Allocations, unless otherwise
        required because of a change in any Legal Requirement.

       

      
        	Section 11.2.
                  	
                Cooperation
                  with Respect to Like-Kind
                  Exchange.

              

      

       

      Buyer
        agrees that Seller may, at Seller’s election prior to the
        Closing Date, direct that all or a portion of the Purchase Price be delivered
        to
        a “qualified intermediary” (as defined in Treasury Regulation Section 1.1031(k)
        - (g)(4)) in order to enable Seller’s relinquishment of the Assets to qualify as
        part of a like-kind exchange of property covered by Section 1031 of the IRC.
        If
        Seller so elects, Buyer shall cooperate with Seller (but without being required
        to incur any out-of-pocket costs in the course thereof) in connection with
        Seller’s efforts to effect such like-kind exchange, which cooperation shall
        include, without limitation, taking such actions as Seller requests in order
        to
        enable Seller to qualify such transfer as part of a like-kind exchange of
        property covered by Section 1031 of the IRC (including any actions required
        to
        facilitate the use of a “qualified intermediary”), and Buyer agrees that Seller
        may assign all or part of its rights and delegate all or part of its obligations
        under this Agreement to a person or entity acting as a qualified intermediary
        to
        qualify the transfer of the Assets as part of a like-kind exchange of property
        covered by Section 1031 of the IRC. Buyer and Seller agree in good faith
        to use
        reasonable efforts to coordinate the transactions contemplated by this Agreement
        with any other transactions engaged in by either Buyer or Seller; provided
        that
        such efforts are not required to include an unreasonable delay in the
        consummation of the transactions contemplated by this Agreement.

       

      
        	Section 11.3.
                  	
                Transaction
                  Taxes.

              

      

       

      All
        transfer, documentary, recording, notarial, sales, use,
        registration, stamp and other similar taxes, fees and expenses (including,
        but
        not limited to, all applicable stock transfer, real estate transfer or gains
        Taxes and including any penalties, interest and additions to such tax)
        (“Transaction Taxes”) incurred in connection with this Agreement and the
        transactions contemplated hereby shall be borne by Buyer, to the extent that
        Buyer is legally obligated to pay such Transaction Taxes, and shall be borne
        by
        Seller, to the extent Seller is legally obligated to pay such Transaction
        Taxes,
        regardless of whether the tax authority seeks to collect such Taxes from
        Seller
        or Buyer. Buyer and Seller shall cooperate in timely making and filing all
        Tax
        Returns as may be required to comply with the provisions of laws relating
        to
        such Transaction Taxes. Seller shall prepare all tax filings related to any
        Transaction Taxes. Fifteen days prior to making such filings, Seller shall
        provide to Buyer Seller’s work papers for Buyer’s review and approval. Ten days
        prior to the filing date, Buyer shall provide to Seller approval of such
        work
        papers. Buyer shall also be responsible for (a) administering the payment
        of such Transaction Taxes, (b) defending or pursuing any proceedings related
        thereto and (c) paying any expenses related thereto. Seller shall give prompt
        written notice to Buyer of any proposed adjustment or assessment of any
        Transaction Taxes with respect to the transaction, or of any examination
        of said
        transaction in a sales, use, transfer or similar tax audit. In any proceedings,
        whether formal or informal, Seller shall permit Buyer to participate and
        control
        the defense of such proceeding and shall take all actions and execute all
        documents required to allow such participation. Seller shall not negotiate
        a
        settlement or compromise of any Transaction Taxes without the prior written
        consent of Buyer, which consent shall not be unreasonably withheld or
        delayed.

       

      
        
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        	Section 11.4.
                  	
                Real
                  and Personal Property
                  Taxes.

              

      

       

      All
        real (including public utility realty tax) and personal
        property Taxes and assessments arising with respect to the Assets and the
        assets
        of Subsidiary, and including for this purpose the Pennsylvania Utility Real
        Property Tax (“PURTA”) and any similar utility Taxes of any other jurisdiction
        shall be prorated between Buyer and Seller based on the relative periods
        of time
        the Assets were owned by each respective party or their respective Affiliates
        during the fiscal period for which such Taxes are imposed by the applicable
        taxing jurisdiction (as such fiscal period is or may be reflected on the
        bill
        rendered by such taxing jurisdiction, but in the case of Taxes imposed based
        on
        the specific day of ownership of assets, a fiscal period shall be deemed
        to be
        the 365 day period ending with such date). Upon receipt by Buyer of the tax
        bill, invoice or other statement regarding such real and personal property
        Taxes, Buyer shall calculate the pro rata share of such tax bill,
        invoice or other statement attributable to Buyer and Seller. Buyer then shall
        forward, as soon as practicable, to Seller a copy of such tax bill, invoice
        or
        statement along with the supporting documentation relating to the calculation
        of
        the pro rata share to Seller. Seller then shall forward to Buyer
        payment in immediately available funds of its pro rata share of such
        Taxes as soon as practicable in advance of the due date of the tax bill,
        invoice
        or statement and in time to avoid the incurrence of penalties or interest.
        Upon
        its receipt of such payment, Buyer will pay the full amount of the tax bill,
        invoice or statement to the applicable taxing authority. In the event Seller
        first receives a tax bill, invoice or statement relating to the Assets from
        a
        taxing authority, Seller shall immediately forward such tax bill, invoice
        or
        statement to Buyer.

       

      
        	Section 11.5.
                  	
                Other
                  Taxes.

              

      

       

      Except
        as otherwise provided in Sections 11.3 and 11.4, Seller
        shall be responsible for (i) all Taxes (or the non-payment thereof) of Seller
        and its Subsidiary for all taxable periods ending on or before the Closing
        Date
        and the portion through the end of the Closing Date for any taxable period
        that
        includes (but does not end on) the Closing Date (“Pre-Closing Tax Period”), (ii)
        all Taxes of any member of an affiliated, consolidated, combined or unitary
        group of which Seller or any its Subsidiary (or any predecessor of any of
        the
        foregoing) is or was a member on or prior to the Closing Date, including
        pursuant to Treasury Regulation §1.1502-6 or any analogous or similar state,
        local, or foreign law or regulation, (iii) any and all Taxes of any Person
        (other than Seller and its Subsidiary) imposed on Seller or its Subsidiary
        as a
        transferee or successor, by contract or pursuant to any law, rule, or
        regulation, which Taxes relate to an event or transaction occurring on or
        before
        the Closing, and (iv) any Taxes of Seller that do not relate to the Business
        or
        the Assets purchased pursuant to this Agreement. 

       

      
        	Section 11.6.
                  	
                Straddle
                  Period.

              

      

       

      In
        the case of any taxable period that includes (but does not end
        on) the Closing Date (a “Straddle Period”), the amount of any Taxes based on or
        measured by income or receipts of Seller and its Subsidiary for the Pre-Closing
        Tax Period shall be determined based on an interim closing of the books as
        of
        the close of business on the Closing Date (and for such purpose, the taxable
        period of any partnership or other pass-through entity in which Seller or
        its
        Subsidiary holds a beneficial interest shall be deemed to terminate at such
        time) and the amount of other 

       

      
        
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      Taxes
        of Seller and its Subsidiary for a Straddle Period that
        relates to the Pre-Closing Tax Period shall be deemed to be the amount of
        such
        Tax for the entire taxable period multiplied by a fraction the numerator
        of
        which is the number of days in the taxable period ending on the Closing Date
        and
        the denominator of which is the number of days in such Straddle Period.

       

      
        	Section 11.7.
                  	
                Cooperation
                  on Tax
                  Matters.

              

      

       

      Buyer,
        the Seller and its Subsidiary shall cooperate fully, as and
        to the extent reasonably requested by the other Party, in connection with
        the
        filing of Tax Returns pursuant to this Article XI and any audit, litigation
        or
        other proceeding with respect to Taxes. Such cooperation shall include the
        retention and (upon the other Party's request) the provision of records and
        information that are reasonably relevant to any such audit, litigation or
        other
        proceeding and making employees available on a mutually convenient basis
        to
        provide additional information and explanation of any material provided
        hereunder.

       

      ARTICLE
        XII.  

       

      INDEMNIFICATION

       

      
        	Section 12.1.
                  	
                Indemnification
                  by
                  Seller.

              

      

       

      From
        and after Closing and subject to the other provisions of this
        Article XII, Seller shall indemnify and hold harmless Buyer, its
        Representatives, Affiliates, successors and permitted assigns (collectively,
        the
“Buyer Indemnitees”) from and against any and all Losses actually incurred by a
        Buyer Indemnitee, and directly resulting from:

       

      (a)  any
        representations and warranties made by Seller in this Agreement not being
        true
        and correct when made or when required by this Agreement to be true and correct,
        or any breach or default by Seller in the performance of its covenants,
        agreements, or obligations under this Agreement or the Employee Agreement
        required to be performed prior to Closing;

       

      (b)  any
        breach or default by Seller in the performance of its covenants, agreements,
        or
        obligations under this Agreement or the Employee Agreement required to be
        performed after Closing;

       

      (c)  Seller’s
        failure to perform or satisfy any of the Retained Liabilities and all
        liabilities associated with the Excluded Assets; and

       

      (d)  any
        amount required to be reimbursed by the Business to Chambers Development
        Company, Inc. (“Chambers”) pursuant to the third paragraph in Section 4.1 of the
        Gas Main Extension Deposit Agreement, dated November 22, 2005, between Chambers
        and the Business (the “Main Extension Agreement”) (and any similar successor
        provision thereto). Notwithstanding the foregoing, Seller shall not be liable
        to
        the Business for any liabilities or losses under this Section 12.1(d) for
        any
        reimbursements of Project Costs pursuant to the third paragraph in Section
        4.1
        of the Main Extension Agreement caused by the action or inaction or the
        Business’s or Business’ failure to deliver landfill gas in breach of the Firm
        Transportation Agreement (the “Transportation Agreement”) between the Business
        and PEI Power Corporation.

       

      
        
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        	Section 12.2.
                  	
                Indemnification
                  by
                  Buyer.

              

      

       

      From
        and after Closing and subject to the other provisions of this
        Article XII, Buyer shall indemnify and hold harmless Seller, its
        Representatives, Affiliates, successors and permitted assigns (collectively,
        the
“Seller Indemnitees”) from and against any and all Losses actually incurred by a
        Seller Indemnitee, and directly resulting from:

       

      (a)  any
        representations and warranties made by Buyer in this Agreement not being
        true
        and correct when made or when required by this Agreement to be true and correct,
        or any breach or default by Buyer in the performance of its covenants,
        agreements, or obligations under this Agreement or the Employee Agreement
        required to be performed prior to Closing;

       

      (b)  any
        breach or default by Buyer in the performance of its covenants, agreements,
        or
        obligations under this Agreement or the Employee Agreement required to be
        performed after Closing; and

       

      (c)  the
        Assumed Liabilities.

       

      
        	Section 12.3.
                  	
                Limitations
                  on Seller’s
                  Liability.

              

      

       

      Notwithstanding
        anything to the contrary in this Agreement, the
        liability of Seller under this Agreement and any documents delivered in
        connection herewith or contemplated hereby shall be limited as follows:

       

      (a)  IN
        NO EVENT SHALL SELLER BE LIABLE TO THE BUYER INDEMNITEES FOR ANY EXEMPLARY,
        PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES;
        provided, however, that if Buyer is held liable to a third party for
        any of such damages and Seller is obligated to indemnify Buyer for the matter
        that gave rise to such damages, then Seller shall be liable for, and obligated
        to reimburse Buyer for, such damages.

       

      (b)  Except
        as provided below, the representations and warranties of Seller set forth
        in
        this Agreement shall survive the Closing until the first anniversary of the
        Closing Date; provided however, that (i) the representations and
        warranties set forth in Section 5.2 (Authority Relative to this Agreement
        and
        Binding Effect), Section 5.5 (Title to Assets; Encumbrances), and Section
        5.17
        (Brokers) shall survive indefinitely, and (ii) representations and warranties
        set forth in Section 5.9 (Taxes) shall survive for a period equal to the
        applicable statute of limitations for the taxable year for each Tax. The
        other
        terms of this Agreement and the agreements delivered in connection herewith
        shall survive the Closing. All representations and warranties, covenants
        and
        agreements of Seller under this Agreement and the indemnities granted by
        Seller
        in Section 12.1 shall terminate at 5:00 p.m., East Coast time, on the
        applicable survival termination date set forth above; provided,
        however, that such indemnities shall survive with respect only to any
        specific matter that is the subject of a proper Claim Notice delivered in
        good
        faith in compliance with the requirements of this Section 12.3 until the
        earlier
        to occur of (i) the date on which a final nonappealable resolution of the
        matter described in such Claim Notice has been reached, including the
        determination of all related Losses, if any, regardless of when such Losses
        are
        finally determined or (ii) the date on which the matter described in such
        Claim Notice has

       

      
        
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      otherwise
        reached final resolution, including the determination of
        all related Losses, if any, regardless of when such Losses are finally
        determined. In no event shall any amounts be recovered from Seller under
        Section
        12.1 or otherwise for any matter for which a Claim Notice is not delivered
        to
        Seller prior to the close of business on the applicable expiration date set
        forth above.

       

      (c)  Notwithstanding
        anything to the contrary in this Agreement, in no event shall Seller indemnify
        the Buyer Indemnitees, or be otherwise liable in any way whatsoever to the
        Buyer
        Indemnitees, for any Losses otherwise subject to indemnification by Seller
        pursuant to Section 12.1(a) (determined after giving effect to the other
        provisions of this Section 12.3) until the Buyer Indemnitees have incurred
        Losses otherwise indemnifiable pursuant to Section 12.1(a) that in the aggregate
        exceed Eight Million Five Hundred Thousand Dollars ($8,500,000) (the
“Deductible”), after which Seller shall then be liable for all Losses incurred
        by the Buyer Indemnitees that are indemnifiable pursuant to Section 12.1(a)
        in
        excess of such amount up to the maximum amount set forth in Section 12.3(d).
        Losses subject to indemnification by Seller pursuant to Section 12.1(a) relating
        to any single breach or series of related breaches by Seller shall not
        constitute Losses, and therefore shall not be applied toward the Deductible
        or
        be indemnifiable hereunder, unless such Losses relating to any single breach
        or
        series of related breaches exceed $50,000. For the purposes of calculating
        the
        Deductible, none of the dollar limitations or Material Adverse Effect
        qualifiers contained in the representations and warranties
        of Article V shall be included in calculating Losses that comprise the
        Deductible.

       

      (d)  Notwithstanding
        anything to the contrary in this Agreement, in no event shall Seller indemnify
        the Buyer Indemnitees, or be otherwise liable in any way whatsoever to the
        Buyer
        Indemnitees, for any Losses otherwise subject to indemnification by Seller
        (determined after giving effect to the other provisions of this Section 12.3)
        that in the aggregate exceed Fifty Million Dollars ($50,000,000).

       

      (e)  Seller
        shall have no liability for any claim or Loss (i) that would be covered by
        insurance maintained by or for the benefit of Buyer or any Affiliate of Buyer
        (including any such insurance coverage applicable to the Business the benefit
        of
        which Buyer would realize if Buyer were to maintain insurance coverage as
        is
        customary for the industry in which the Business is conducted consistent
        with
        the coverage described in Schedule 5.19) or for which Buyer otherwise
        recovers payments in respect of such Loss from any other source(s) (whether
        in a
        lump sum or stream of payments) or (ii) that is the type normally recoverable
        by
        the Business through rates and is in fact substantially recovered by Buyer
        through rates, provided that Buyer shall have made a good faith effort to
        recover any such claim or loss through rates and that such recovery is not
        indeterminable due to the terms of any rate settlement agreed to by Buyer,
        or is
        otherwise recovered by Buyer through rates. No cost or expense relating to
        any
        such claim or Loss that is actually recovered on the basis of the foregoing
        shall be included in determining the extent of Losses suffered by the Buyer
        Indemnitees for purposes of Section 12.3(c) or Section 12.3(d). Buyer agrees
        to
        use its commercially reasonable efforts to give timely and effective written
        notice to the appropriate insurance carrier(s) of any occurrence or
        circumstances that, in the judgment of Buyer consistent with its customary
        risk
        management practices, appear likely to give rise to a claim against Buyer
        that
        is likely to involve one or more insurance policies of Buyer. Any such notice
        shall be given in good faith by Buyer without regard to the possibility of
        indemnification payments by Seller under Section 12.1, and shall be processed
        by
        Buyer in good faith and in a manner consistent with its risk management
        practices involving claims for which 

       

      
        
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      no
        third party contractual indemnification is available. Buyer
        agrees that (x) if it is entitled to receive payment from Seller for a
        Loss, and (y) if Buyer has obtained insurance that may cover the claim or
        matter giving rise to such Loss, then (z) such insurance shall be primary
        coverage and Buyer will make a claim under such insurance (if such claim
        can be
        made in good faith) before enforcing its right to receive payment from Seller.
        If at any time subsequent to the receipt by a Buyer Indemnitee of an indemnity
        payment from Seller hereunder, such Buyer Indemnitee (or any Affiliate thereof)
        receives any recovery, settlement or other similar payment with respect to
        the
        Loss for which it receives such indemnity payment, such Buyer Indemnitee
        shall
        promptly pay to Seller an amount equal to the amount of such recovery, less
        any
        expense incurred by such Buyer Indemnitee (or its Affiliates) in connection
        with
        such recovery, but in no event shall any such payment exceed the amount of
        such
        indemnity payment.

       

      (f)  Notwithstanding
        any language contained in any Related Document (including deeds and other
        conveyance documents relating to the Real Property), the representations
        and
        warranties of Seller set forth in this Agreement will not be merged into
        any
        such Related Document and the indemnification obligations of Seller, and
        the
        limitations on such obligations, set forth in this Agreement shall control.
        No
        provision set forth in any such Related Document shall be deemed to enlarge,
        alter or amend the terms or provisions of this Agreement.

       

      
        	Section 12.4.
                  	
                Limitation
                  on Buyer’s
                  Liability.

              

      

       

      IN
        NO EVENT SHALL BUYER BE LIABLE TO THE SELLER INDEMNITEES FOR
        ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE
        DAMAGES; provided, however, that if Seller is held liable to a third
        party for any of such damages and Buyer is obligated to indemnify Seller
        for the
        matter that gave rise to such damages, then Buyer shall be liable for, and
        obligated to reimburse Seller for, such damages.

       

      
        	Section 12.5.
                  	
                Claims
                  Procedure.

              

      

       

      (a)  All
        claims for indemnification under Section 12.1 or 12.2, or any other provision
        of
        this Agreement except as otherwise expressly provided in this Agreement,
        shall
        be asserted and resolved pursuant to this Article XII. Any Person claiming
        indemnification hereunder is referred to as the “Indemnified Party” and any
        Person against whom such claims are asserted hereunder is hereinafter referred
        to as the “Indemnifying Party.” In the event that any Losses are asserted
        against or sought to be collected from or threatened to be sought from an
        Indemnified Party by a third party, including a Governmental Body, said
        Indemnified Party shall with reasonable promptness provide to the Indemnifying
        Party a Claim Notice. The Indemnifying Party shall not be obligated to indemnify
        the Indemnified Party with respect to any such Losses if the Indemnified
        Party
        fails to notify the Indemnifying Party thereof in accordance with the provisions
        of this Agreement in reasonably sufficient time so that the Indemnifying
        Party’s
        ability to defend against the Losses is not prejudiced. The Indemnifying
        Party
        shall have 30 days from the personal delivery or receipt of the Claim Notice
        (the “Notice Period”) to notify the Indemnified Party (i) whether or not it
        disputes the liability of the Indemnifying Party to the Indemnified Party
        hereunder with respect to such Losses and/or (ii) whether or not it
        desires, at the sole cost and expense of the Indemnifying Party, to defend
        the
        Indemnified Party against such Losses; provided, however, that any
        Indemnified Party is hereby authorized prior to and during the Notice Period
        to
        file any motion, answer or other pleading that it shall deem necessary 

       

      
        
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      or
        appropriate to protect its interests or those of the
        Indemnifying Party (and of which it shall have given notice and opportunity
        to
        comment to the Indemnifying Party) and not prejudicial to the Indemnifying
        Party. In the event that the Indemnifying Party notifies the Indemnified
        Party
        within the Notice Period that it desires to defend the Indemnified Party
        against
        such Losses, the Indemnifying Party shall have the right to defend all
        appropriate proceedings, and with counsel of its own choosing, which proceedings
        shall be promptly settled or prosecuted by them to a final conclusion. If
        the
        Indemnified Party desires to participate in, but not control, any such defense
        or settlement it may do so at its sole cost and expense. If requested by
        the
        Indemnifying Party, the Indemnified Party agrees to cooperate with the
        Indemnifying Party and its counsel in contesting any Losses that the
        Indemnifying Party elects to contest or, if appropriate and related to the
        claim
        in question, in making any counterclaim against the Person asserting the
        third
        party Losses, or any cross-complaint against any Person. No claim may be
        settled
        or otherwise compromised without the prior written consent of the Indemnifying
        Party.

       

      (b)  The
        Indemnified Party shall provide reasonable assistance to the Indemnifying
        Party
        and provide access to its books, records and personnel as the Indemnifying
        Party
        reasonably requests in connection with the investigation or defense of the
        Losses. The Indemnifying Party shall promptly upon receipt of reasonable
        supporting documentation reimburse the Indemnified Party for out-of-pocket
        costs
        and expenses incurred by the latter in providing the requested assistance.

       

      (c)  With
        regard to third party claims for which Buyer or Seller is entitled to
        indemnification under Section 12.1 or 12.2, such indemnification shall be
        paid
        by the Indemnifying Party upon (i) the entry of an Order against the Indemnified
        Party and the expiration of any applicable appeal period or (ii) a settlement
        with the consent of the Indemnifying Party, provided that no such consent
        need
        be obtained if the Indemnifying Party fails to respond to the Claim Notice
        as
        provided in Section 12.5(a). Notwithstanding the foregoing but subject to
        Section 12.5(a), and provided that there is no dispute as to the applicability
        of indemnification, expenses of counsel to the Indemnified Party shall be
        reimbursed on a current basis by the Indemnifying Party as if such expenses
        are
        a liability of the Indemnifying Party.

       

      
        	Section 12.6.
                  	
                Exclusive
                  Remedy.

              

      

       

      Except
        as otherwise provided in Sections 3.2(b), 6.4 or 9.2, the
        rights, remedies and obligations of the Buyer Indemnitees and the Seller
        Indemnitees set forth in this Article XII will be the exclusive rights, remedies
        and obligations of such Persons after the Closing with respect to all
        post-Closing claims relating to this Agreement, the events giving rise to
        this
        Agreement and the transactions provided for herein or contemplated hereby
        or
        thereby. No Proceeding for termination or rescission, or claiming repudiation,
        of this Agreement may be brought or maintained by either party against the
        other
        following the Closing Date no matter how severe, grave or fundamental any
        breach, default or nonperformance may be by one party. Accordingly, the parties
        hereby expressly waive and forego any and all rights they may possess to
        bring
        any such Proceeding.

       

      
        
          -
            -

          
          

        

        
          33

          
            

          

        

        
          
          

        

      

      

       

      
        	Section 12.7.
                  	
                Waiver
                  and
                  Release.

              

      

       

      Buyer,
        on behalf of itself and each other Buyer Indemnitee, hereby
        forever waives, relieves, releases and discharges the Seller Indemnitees
        and
        their successors and assigns from any and all rights, liabilities, Proceedings
        (including future Proceedings) and Losses of any Buyer Indemnitee, whether
        known
        or unknown at the Closing Date, which any Buyer Indemnitee has or incurs,
        or may
        in the future have or incur, arising out of or related to any Assumed
        Liability.

       

      ARTICLE
        XIII.  

       

      GENERAL
        PROVISIONS

       

      
        	Section 13.1.
                  	
                Expenses.

              

      

       

      Except
        as otherwise specifically provided herein, each party will
        pay all costs and expenses of its performance of and compliance with this
        Agreement, provided, however, that, notwithstanding anything to the
        contrary contained herein, Buyer will pay the filing fees associated with
        the
        HSR Act.

       

      
        	Section 13.2.
                  	
                Notices.

              

      

       

      All
        notices, requests and other communications hereunder shall be
        in writing and shall be deemed to have been given upon receipt if either
        (a)
        personally delivered with written acknowledgment of such receipt, (b) sent
        by
        prepaid first class mail, and registered or certified and a return receipt
        requested, as of the date such receipt indicates by signature, (c) sent by
        overnight delivery via a nationally recognized carrier with written
        acknowledgment of such receipt or (d) by facsimile with, and as of the date
        of,
        completed transmission being acknowledged:

       

      If
        to Seller, to:

       

      

       

      Southern
        Union Company

       

      5444
        Westheimer Road 

       

      Houston,
        TX 77056

       

      Attention:
        Julie H. Edwards, SVP and CFO

       

      Telecopier:
        (713) 989-1166

       

      with
        a copy (which shall not constitute notice),
        to:

       

      

       

      Southern
        Union Company

       

      5444
        Westheimer Road

       

      Houston,
        TX 77056

       

      Attention:
        Monica M. Gaudiosi, SVP and Associate General
        Counsel

       

      Telecopier:
        (713) 989-1213

       

      
        
          -
            -

          
          

        

        
          34

          
            

          

        

        
          
          

        

      

      and
        a copy (which shall not constitute notice)
        to:

       

      

       

      Fleischman
        and Walsh, L.L.P.

       

      1919
        Pennsylvania Avenue, N.W., Suite 600

       

      Washington,
        D.C. 20006

       

      Attention:
        Seth M. Warner, Esquire

       

      Telecopier:
        (202) 265-5706

       

      If
        to Buyer, to:

       

      UGI
        Corporation

      460
        North Gulph Road

      King
        of Prussia, PA 19406

      Attention:
        Robert H. Knauss

      Vice
        President and General Counsel

      Facsimile:
        (610) 992-3258

      with
        a copy (which shall not constitute notice) to:

      

      Morgan
        Lewis & Bockius LLP

      1701
        Market Street

      Philadelphia,
        PA 19103

      Attention:
        Howard L. Meyers

      Facsimile:
        (215) 963-5001

       

      or
        at such other address or number as shall be given in writing by
        a party to the other party.

       

      
        	Section 13.3.
                  	
                Assignment.

              

      

       

      This
        Agreement may not be assigned, by operation of law or
        otherwise, by any party hereto without the prior written consent of the other
        party hereto, such consent not to be unreasonably withheld; provided,
        however, in the event of any such assignment by a party by operation of law
        without the consent of the other party as required above, such other party
        may
        consent to such assignment after it has occurred and, in such event, this
        Agreement and all the provisions hereof shall be binding upon the Person
        receiving such assignment by operation of law. Notwithstanding the foregoing,
        (a) Seller may assign all or part of its rights or delegate all or part of
        its
        duties under this Agreement, without the prior written consent of Buyer,
        to a
        qualified intermediary chosen by Seller to structure all or part of the
        transactions contemplated hereby as a like-kind exchange of property covered
        by
        Section 1031 of the IRC and (b) Buyer may assign all or part of its rights,
        but
        not its obligations, under this Agreement to a wholly owned subsidiary.

       

      
        	Section 13.4.
                  	
                Successor
                  Bound.

              

      

       

      Subject
        to the provisions of Section 13.3, this Agreement shall be
        binding upon and inure to the benefit of the parties hereto and their respective
        successors and permitted assigns.

       

      
        
          -
            -

          
          

        

        
          35

          
            

          

        

        
          
          

        

      

      

       

      
        	Section 13.5.
                  	
                Governing
                  Law.

              

      

       

      The
        validity, performance, and enforcement of this Agreement and
        all Related Documents, unless expressly provided to the contrary, shall be
        governed by the laws of the State of New York without giving effect to the
        principles of conflicts of law of such state.

       

      
        	Section 13.6.
                  	
                Cooperation.

              

      

       

      Each
        of the parties hereto agrees to use its commercially
        reasonable efforts to take or cause to be taken all action, and to do or
        cause
        to be done all things necessary, proper or advisable under applicable laws,
        regulations or otherwise, to consummate and to make effective the transactions
        contemplated by this Agreement, including the timely performance of all actions
        and things contemplated by this Agreement to be taken or done by each of
        the
        parties hereto.

       

      
        	Section 13.7.
                  	
                Construction
                  of
                  Agreement.

              

      

       

      The
        terms and provisions of this Agreement represent the results
        of negotiations between Buyer and Seller, each of which has been represented
        by
        counsel of its own choosing, and neither of which has acted under duress
        or
        compulsion, whether legal, economic or otherwise. Accordingly, the terms
        and
        provisions of this Agreement shall be interpreted and construed in accordance
        with their usual and customary meanings, and Buyer and Seller hereby waive
        the
        application in connection with the interpretation and construction of this
        Agreement of any rule of law to the effect that ambiguous or conflicting
        terms
        or provisions contained in this Agreement shall be interpreted or construed
        against the party whose attorney prepared the executed draft or any earlier
        draft of this Agreement. It is understood and agreed that neither the
        specification of any dollar amount in the representations and warranties
        contained in this Agreement nor the inclusion of any specific item in the
        Schedules or Exhibits is intended to imply that such amounts or higher or
        lower
        amounts, or the items so included or other items, are or are not material,
        and
        none of the parties shall use the fact of the setting of such amounts or
        the
        fact of any inclusion of any such item in the Schedules or Exhibits in any
        dispute or controversy between the parties as to whether any obligation,
        item or
        matter is or is not material for purposes hereof. The word “including” in this
        Agreement shall mean including without limitation. Words in the singular
        shall
        be held to include the plural and vice versa and words of one gender shall
        be
        held to include the other genders as the context requires. The terms “hereof,”
“herein,” and “herewith” and words of similar import shall, unless otherwise
        stated, be construed to refer to this Agreement as a whole (including all
        of the
        Schedules and Exhibits hereto) and not to any particular provision of this
        Agreement, and Article, Section, paragraph, Exhibit and Schedule references
        are
        to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement
        unless otherwise specified.

       

      
        	Section 13.8.
                  	
                Publicity.

              

      

       

      Neither
        party hereto shall issue, make or cause the publication of
        any press release or other announcement with respect to this Agreement or
        the
        transactions contemplated hereby, or otherwise make any disclosures relating
        thereto, without the consent of the other party, such consent not to be
        unreasonably withheld or delayed; provided, however, that such consent
        shall not be required where such release or announcement is required by
        applicable law or the rules or 

       

      
        
          -
            -

          
          

        

        
          36

          
            

          

        

        
          
          

        

      

      regulations
        of a securities exchange, in which event the party so
        required to issue such release or announcement shall endeavor, wherever
        possible, to furnish an advance copy of the proposed release to the other
        party.

       

      
        	Section 13.9.
                  	
                Waiver.

              

      

       

      Except
        as otherwise expressly provided in this Agreement, neither
        the failure nor any delay on the part of any party to exercise any right,
        power
        or privilege hereunder shall operate as a waiver thereof, nor shall any single
        or partial exercise or waiver of any such right, power or privilege preclude
        any
        other or further exercise thereof, or the exercise of any other right, power
        or
        privilege available to each party at law or in equity.

       

      
        	Section 13.10.
                  	
                Parties
                  in
                  Interest.

              

      

       

      This
        Agreement (including the documents and instruments referred
        to herein) is not intended to confer upon any Person, other than the parties
        hereto and their successors and permitted assigns, any rights or remedies
        hereunder provided, however, that the indemnification provisions in Article
        XII
        shall inure to the benefit of the Buyer Indemnitees and the Seller Indemnitees
        as provided therein.

       

      
        	Section 13.11.
                  	
                Section
                  and Paragraph
                  Headings.

              

      

       

      The
        section and paragraph headings in this Agreement are for
        reference purposes only and shall not affect in any way the meaning or
        interpretation of this Agreement.

       

      
        	Section 13.12.
                  	
                Amendment.

              

      

       

      This
        Agreement may be amended only by an instrument in writing
        executed by the parties hereto.

       

      
        	Section 13.13.
                  	
                Entire
                  Agreement.

              

      

       

      This
        Agreement, the Exhibits and Schedules hereto and the
        documents specifically referred to herein and the Confidentiality Agreement
        constitute the entire agreement, understanding, representations and warranties
        of the parties hereto, and supersede all prior agreements, both written and
        oral, between Buyer and Seller. All Exhibits and Schedules annexed hereto
        or
        referred to herein are hereby incorporated in and made a part of this Agreement
        as if set forth in full herein. Disclosure of any fact or item in any Schedule
        referenced by a particular paragraph or Section in this Agreement shall,
        should
        the existence of the fact or item or its contents be relevant to any other
        paragraph or Section, be deemed to be disclosed with respect to that other
        paragraph or Section whether or not any explicit cross-reference appears
        therein; provided, however, that notwithstanding the foregoing, no disclosures
        shall be deemed to be disclosed on Schedule 5.20 except for such
        disclosures explicitly set forth thereon or explicitly incorporated by reference
        into Schedule 5.20.

       

      
        	Section 13.14.
                  	
                Counterparts.

              

      

       

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

       

      
        
          -
            -

          
          

        

        
          37

          
            

          

        

        
          
          

        

      

      

       

      
        	Section 13.15.
                  	
                Severability.

              

      

       

      If
        any term or other provision of this Agreement is invalid,
        illegal or incapable of being enforced by any rule of law or public policy,
        all
        other conditions and provisions of this Agreement shall nevertheless remain
        in
        full force and effect so long as the economic or legal substance of the
        transactions contemplated hereby is not affected in any manner materially
        adverse to any party. Upon such determination that any term or other provision
        is invalid, illegal or incapable of being enforced, the parties hereto shall
        negotiate in good faith to modify this Agreement so as to effect the original
        intent of the parties as closely as possible in an acceptable manner to the
        end
        that transactions contemplated hereby are fulfilled to the greatest extent
        possible.

       

      
        	Section 13.16.
                  	
                Consent
                  to
                  Jurisdiction.

              

      

       

      The
        parties hereby irrevocably submit to the exclusive
        jurisdiction of the courts of the State of New York located in the Borough
        of Manhattan and the federal courts of the United States of America located
        in
        the Southern District of the State of New York over any dispute arising out
        of
        or relating to this Agreement or any of the transactions contemplated hereby,
        and each party irrevocably agrees that all claims in respect of such dispute
        or
        proceeding shall be heard and determined in such courts. The parties hereby
        irrevocably waive, to the fullest extent permitted by applicable law, any
        objection which they may now or hereafter have to the venue of any dispute
        arising out of or relating to this Agreement or any of the transactions
        contemplated hereby brought in such court or any defense of inconvenient
        forum
        for the maintenance of such dispute. Each party agrees that a judgment in
        any
        such dispute may be enforced in other jurisdictions by suit on the judgment
        or
        in any other manner provided by applicable law.

       

      

       

      

       

      

       

      

       

      

       

      [signature
        page to follow]

       

      
        
          -
            -

          
          

        

        
          38

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the parties have caused this
        Agreement to be executed and delivered by their duly authorized officers
        as of
        the date first written above.

       

      

      SOUTHERN
        UNION COMPANY

       

      

       

      

       

      By: /s/
        Julie H. Edwards

       

      Name: Julie
        H. Edwards

       

      Title: Senior
        Vice President and Chief Financial Officer

       

      UGI
        CORPORATION

       

      

       

      

       

      By: /s/
        Robert H. Knauss

       

      Name: Robert
        H. Knauss

       

      Title: Vice
        President and General Counsel

       

      

      

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      

        EMPLOYEE
          AGREEMENT

        

        This
          EMPLOYEE AGREEMENT (this “Agreement”), is made as of the 26th
          day of
          January, 2006, by and between SOUTHERN UNION COMPANY, a Delaware corporation
          (“Seller”), and UGI CORPORATION, a Pennsylvania corporation
          (“Buyer”).

        

        W
          I T N E S S E T H:

        

        WHEREAS,
          Seller is engaged in the Business;

        

        WHEREAS,
          Seller and Buyer have entered into the Purchase and Sale Agreement, dated
          as of
          January 26, 2006 (the “Sale Agreement”), in which this Agreement is incorporated
          by reference; and

        

        WHEREAS,
          Buyer intends to cause an Affiliate to offer employment to all persons
          who are
          employed in the Business and to assume responsibility for certain employee
          benefits upon the terms and conditions set forth in this Agreement;

        

        NOW,
          THEREFORE, in consideration of the respective covenants, representations
          and

        warranties
          herein contained, the parties agree as follows:

        

        ARTICLE
          I

        DEFINITIONS

        

        Section
          1.1 General.
          Capitalized
          terms used in this Agreement (including Schedules to this Agreement) not
          defined
          herein shall have the meanings ascribed to them in the Sale Agreement.
          For
          purposes of this Agreement (including Schedules to this Agreement), the
          following terms shall have the meanings set forth below.

        

        “Base
          Compensation” shall
          mean an Employee’s base hourly wages or base salary, as applicable.

        

        “COBRA”
          shall
          mean the continuation coverage requirements for group health plans under
          Title X
          of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended,
          and
          as codified in IRC Section 4980B and ERISA Sections 601-608.

        

        “Continuation
          Period” shall
          mean the one-year period following the Closing Date.

         

        “Employee”
          shall
          mean a person who is a full-time or part-time employee of Seller, whether
          or not
          covered by a collective bargaining agreement, whose responsibilities pertain
          primarily to the Business on the Closing Date, including an employee who
          is not
          actively at work on the Closing Date because the employee is on workers’
compensation, on an approved leave of absence (including an approved leave
          of
          absence with a legal or contractual right to reinstatement, military leave,
          maternity leave, or leave under the Family and Medical Leave Act of 1993)
          or
          absent due to vacation, disability, illness or other similar circumstance
          except
          that a 

        
          
            --

            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        person
          who is absent due to, and who is on, long-term disability shall not be
          deemed to
          be an “Employee” hereunder where such person is unable to perform the essential
          functions of his or her job, with or without reasonable accommodation (or
          otherwise consistent with applicable Legal Requirements). A preliminary
          list of
          Employees, as of January 26, 2006, is set forth in Schedule 1.1. 

        

        “For
          Cause” shall
          mean (1) the commission by the Transferred Employee of a criminal or other
          act
          that causes or is reasonably likely to cause substantial economic damage
          to
          Buyer or substantial injury to the business reputation of Buyer, (2) the
          commission by the Transferred Employee of an act of fraud, theft or financial
          dishonesty in the performance of the Transferred Employee’s duties on behalf of
          Buyer, (3) the continuing failure or continuing refusal of the Transferred
          Employee to satisfactorily perform the duties of the Transferred Employee
          to
          Buyer, (4) the material disregard or violation by the Transferred Employee
          of
          the legal rights of any employees of the Buyer or of the Buyer’s written
          policies regarding harassment or discrimination, or (5) any other conduct
          materially detrimental to the Buyer’s business.

        

        “Former
          Employee” shall
          mean a person who was formerly employed by Seller whose responsibilities
          pertained primarily to the Business and who is not an Employee on the Closing
          Date.

        

        “Liabilities”
          shall
          mean any direct or indirect liability (whether absolute, accrued or unaccrued,
          fixed or unfixed, choate or inchoate, secured or unsecured, liquidated
          or
          unliquidated, matured or unmatured, known or unknown, contingent or otherwise),
          indebtedness, obligation, expense, claim, charge, cause of action, deficiency,
          guarantee or endorsement of or by a party, including those arising under
          any
          applicable law or action, under any award of any court, administrative
          agency,
          tribunal or arbitrator, and under any contract or undertaking. 

        

        “Transferred
          Employee”
          shall
          mean an Employee who accepts Buyer’s offer of employment pursuant to Section 2.3
          and commences employment with Buyer or its Affiliate. 

        

        Section 1.2 Terms
          Defined Elsewhere.
          For
          purposes of this Agreement (including Schedules to this Agreement), the
          following terms have the meanings set forth in the sections
          indicated.

        

        Term     Section

        

         

        Absent
          Employee...........................2.3(a)

        Absent
          Employee’s Start Date............2.3(a)

        Agreement
           Preamble

        Buyer
           Preamble

        Buyer’s
          401(k) Plan             3.2

        Buyer’s
          Pension Plan .........................3.1

        Pennsylvania
          VEBAs..........................4.6(c)

        Post-Retirement
          Benefits.....................4.6(a)

        
          
            --

            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        

        Sale
          Agreement ............................... Preamble

        Seller Preamble

        Seller’s
          401(k) Plan 3.2

        Seller’s
          Flex Plan................................ 4.5

        Seller’s
          Pension Plan 3.1

        WARN
          Act.................................... . 7.3(a)

         

        ARTICLE
          II

        EMPLOYEES

        

        Section
          2.1 Employee
          List.
          As soon
          as administratively feasible following the execution of the Sale Agreement,
          Seller shall provide to Buyer an updated list, as of the date of the Sale
          Agreement, of Employees originally provided to Buyer in Schedule 1.1, which
          shall consist not only of the names, but also (to the extent permitted
          by
          applicable Legal Requirements) job titles, job locations, Base Compensation,
          dates of hire, and union or non-union status, of all Employees. Seller
          shall
          provide Buyer with a revised Schedule 1.1, updated as of the Closing Date,
          within ten (10) days following the Closing Date.

        

        Section
          2.2 Collective
          Bargaining Agreements. Except
          as
          otherwise provided in Section 4.6, the Collective Bargaining Agreement
          between
          PG Energy and International Brotherhood of Electrical Workers, AFL-CIO,
          Scranton
          and Carbondale Operating Areas, including Mid Valley Local Union #2244,
          and the
          Collective Bargaining Agreement between PG Energy and Utility Workers Union
          of
          America, AFL-CIO, Local Unions #406, 407, 408 and 529, shall be binding
          on
          Buyer, and Buyer shall assume and agree to perform all obligations of PG
          Energy
          thereunder relating to the period on and after the Closing Date. 

         

        Section
          2.3 Offers
          of Employment to Employees 

        

        (a)
          At
          least thirty (30) days prior to the anticipated Closing Date, Buyer shall
          offer
          employment to all Employees (including Employees who are not actively at
          work on
          the Closing Date because the Employee is on workers’ compensation, on an
          approved leave of absence (including an approved leave of absence with
          a legal
          or contractual right to reinstatement, military leave, maternity leave,
          or leave
          under the Family and Medical Leave Act of 1993) or absent due to vacation,
          disability, illness or other similar circumstance (each, an “Absent Employee”)),
          effective as of 12:01 a.m. on the Closing Date (except as provided in the
          following sentence), with at least the same level of Base Compensation
          as was in
          effect for each such Employee immediately prior to the Closing Date. The
          offer
          to an Absent Employee shall be made for employment effective as of the
          expiration of the approved leave of absence or the Absent Employee’s other
          return from workers’ compensation, vacation, disability, illness or other
          similar circumstance provided that such offer of employment shall remain
          open no
          later than (1) one hundred eighty (180) days following the Closing Date
          or (2)
          such longer period as may be consistent with applicable Legal Requirements
          (as
          to each Absent Employee, the “Absent Employee’s Start Date”). An Absent Employee
          who does not return to work after the expiration of an approved leave of
          absence
          or otherwise under the preceding sentence shall not be considered a Transferred
          Employee hereunder. Notwithstanding the foregoing, the parties 

        
          
            --

            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        agree
          that the Employee listed in Schedule 2.3(a) may have the opportunity to
          continue
          employment with Seller; provided that Buyer shall have reasonable access
          to the
          Employee listed in Schedule 2.3(a) prior to and after the Closing
          Date.

        

        (b)
          Buyer
          shall notify Seller of the Employees’ responses to Buyer’s offers of employment
          under this Section 2.3 as soon as administratively feasible after receiving
          each
          Employee’s response. Buyer and Seller shall cooperate fully to facilitate the
          preparation of Buyer’s offers of employment and such offers shall include the
          language set forth in Schedule 2.3(b) or similar language reasonably acceptable
          to Buyer and Seller. 

        

        Section
          2.4 Employment
          of Transferred Employees

        

        (a)
          Buyer
          shall employ, as of 12:01 a.m. on the Closing Date, all of the Employees
          who
          accept Buyer’s offer of employment, except that each Absent Employee shall be
          deemed employed by Buyer as of 12:01 a.m. on the Absent Employee’s Start
          Date.

        

        (b)
          In
          the event that (1) on the Closing Date or during the Continuation Period,
          the
          employment of a Transferred Employee (other than a Transferred Employee
          covered
          by a collective bargaining agreement) is terminated, other than For Cause,
          or
          (2) during the Continuation Period, Buyer fails to provide a Transferred
          Employee (other than a Transferred Employee covered by a collective bargaining
          agreement) with at least the same level of Base Compensation as was in
          effect
          immediately prior to the Closing Date, then Buyer shall be responsible
          for and
          shall pay to such Transferred Employee, in a lump sum payment, not later
          than
          sixty (60) days following the date of the Transferred Employee’s termination of
          employment, the following severance benefit: two weeks of the Employee’s Base
          Compensation at termination of employment for each full or partial year
          of
          service, measured from the Transferred Employee’s date of hire reflected in
          Schedule 1.1, not to exceed fifty-two (52) weeks of such Base Compensation;
          provided, however, that in no event shall such severance benefit be less
          than
          six (6) weeks of such Base Compensation. The costs incurred, directly or
          indirectly, in connection with the termination of employment of any Transferred
          Employee on or after the Closing Date shall be borne exclusively by Buyer.
          The
          foregoing sets forth Buyer’s sole obligation for severance payable to any
          Employee in connection with the Business and the transactions contemplated
          by
          the Sale Agreement.

         

        

        Section
          2.5 Leaves
          of Absence.
          Buyer
          and its Affiliates shall honor all terms and conditions of leaves of absence
          that have been granted by Seller to an Employee, including leaves that
          are
          scheduled to commence on or after the Closing Date. As soon as administratively
          feasible following execution of the Sale Agreement, Seller shall provide
          to
          Buyer a list reflecting the Employees that have been granted a leave of
          absence
          and all of the terms and conditions associated therewith.

         

        Section
          2.6 Prior
          Service Credit.
          On and
          after the Closing Date, for each Transferred Employee, Buyer and its Affiliates
          shall recognize, for eligibility, vesting and vacation accrual purposes,
          under
          employee benefit and employment-related plans and programs of Buyer and
          its
          Affiliates, such Transferred Employee’s service, as recognized under Seller’s

        
          
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        Pension
          Plan, prior to the Closing Date. On and after the Closing Date, for each
          Transferred Employee who, as of the Closing Date, is covered by a collective
          bargaining agreement, Buyer and its Affiliates shall recognize, for benefit
          accrual purposes under Buyer’s Pension Plan, such Transferred Employee’s
          service, as recognized under Seller’s Pension Plan, prior to the Closing Date.

        

        Section
          2.7 Vacation.
          Buyer
          shall permit each Transferred Employee to carry forward and to receive
          paid time
          off for all vacation days (including sick days and personal days) accrued
          prior
          to the Closing Date. As soon as administratively feasible following execution
          of
          the Sale Agreement, Seller shall provide to Buyer a list reflecting the
          paid
          time off balances standing to the credit of each Transferred Employee as
          of the
          date of the Sale Agreement. Seller shall provide Buyer with a revised list,
          updated as of the Closing Date, within ten (10) days following the Closing
          Date.

        ARTICLE
          III

        PENSION,
          401(k) AND NONQUALIFIED PLANS

        

        Section
          3.1 Pension
          Plans. Seller
          has no defined benefit plan that covers the Employees and that is intended
          to be
          a qualified plan other than the Employees’ Retirement Plan of Southern Union
          Company Pennsylvania Division (“Seller’s Pension Plan”). Following the Closing
          Date, Seller shall retain sponsorship of, and all assets (held in trust),
          liabilities and obligations under, Seller’s Pension Plan. Effective as of the
          Closing Date, all Transferred Employees shall become fully vested in their
          accrued benefits, determined as of the Closing Date, under Seller’s Pension
          Plan, and shall not accrue additional benefits under Seller’s Pension Plan. In
          addition to Buyer’s satisfaction of its other obligations under the collective
          bargaining agreements referred to in Section 2.2, Buyer shall cause an
          existing
          Buyer-sponsored defined benefit plan, or in the alternative, Buyer shall
          establish a defined benefit plan (in either case, “Buyer’s Pension Plan”), to
          cover Transferred Employees who are covered by a collective bargaining
          agreement, shall credit benefit accrual service recognized under Seller’s
          Pension Plan as of the Closing Date as benefit accrual service under Buyer’s
          Pension Plan, and shall reduce each covered Transferred Employee’s accrued
          benefit under Buyer’s Pension Plan by the Transferred Employee’s accrued
          benefit, determined as of the Closing Date under Seller’s Pension Plan. As soon
          as administratively feasible following the Closing Date, Seller shall provide
          to
          Buyer a list that sets forth the accrued benefit under Seller’s Pension Plan, as
          of the Closing Date, of each Transferred Employee who is covered by a collective
          bargaining agreement. 

        

        Section
          3.2 401(k)
          Plans.
          Seller
          has no defined contribution plan that covers the Employees and that is
          intended
          to be a qualified plan other than the Southern Union Savings Plan, which
          includes a qualified cash or deferred arrangement under IRC Section 401(k)
          (“Seller’s 401(k) Plan”). As of the Closing Date, Seller shall vest the
          Transferred Employees in their account balances under Seller’s 401(k) Plan. If
          the Transferred Employees will be eligible to participate in a defined
          contribution plan maintained by Buyer ("Buyer’s 401(k) Plan"), immediately
          following the Closing Date, Buyer shall take all actions necessary to ensure
          that Buyer’s 401(k) Plan accepts from any Transferred Employee a rollover or
          direct rollover of all of his or her account balance under Seller’s 401(k) Plan,
          including his or her loan balances and related loan documentation; provided
          that
          a Transferred Employee shall only be permitted to roll 

        
          
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        over
          his
          or her loan balances and related loan documentation if the Transferred
          Employee
          makes a rollover or direct rollover of all of his or her account balance
          under
          Seller’s 401(k) Plan. If the Transferred Employees will be eligible to
          participate in Buyer’s 401(k) Plan, the trustee or recordkeeper of Seller’s
          401(k) Plan shall transfer to the trustee or recordkeeper of Buyer’s 401(k) Plan
          any loan documentation for loans to be rolled over or transferred to Buyer’s
          401(k) Plan. The Transferred Employees shall not be required to roll over,
          or
          otherwise transfer, their account balances under Seller’s 401(k) Plan to Buyer’s
          401(k) Plan. 

        

        Section
          3.3 Nonqualified
          Plans.
          Seller
          shall comply fully with, and Buyer shall assume no liability or responsibility
          whatsoever with respect to the Southern Union Company Supplemental Deferred
          Compensation Plan, which is a nonqualified pension plan maintained by
          Seller.

        

        ARTICLE
          IV

        OTHER
          BENEFITS

        

        Section
          4.1 Welfare
          Benefit Plans. Except
          as
          provided in Section 4.6, coverage of all Transferred Employees under each
          Employee Plan which is an “employee welfare benefit plan” within the meaning of
          Section 3(1) of ERISA to which Seller or any Affiliate of Seller is a party
          or
          by which any of them is bound, shall cease as of the Closing Date, subject
          to
          the health coverage continuation rights as are required to be provided
          by Seller
          under COBRA attributable to a “qualifying event” (as defined in
          COBRA).  

         

        Section
          4.2 COBRA.
          On and
          after the Closing Date, Buyer shall provide continuation coverage required
          under
          COBRA to all eligible Transferred Employees. 

        

        Section
          4.3 Individuals
          on Long-Term Disability. Any
          individual who, as of the Closing Date, is eligible for long-term disability
          benefits shall be covered under Seller’s long-term disability plan and any other
          applicable Seller benefit plans for which the individual is eligible. In
          addition, any Employee who, as of the Closing Date, is absent due to short-term
          disability, who does not become a Transferred Employee, and who becomes
          eligible
          for long-term disability benefits under Seller’s long-term disability plan after
          the Closing Date shall be covered under Seller’s long-term disability plan.
          Buyer shall have no Liabilities with respect to any individual described
          under
          this Section 4.3. 

        

        Section
          4.4 Workers’
          Compensation. With
          respect to occurrences relating to Employees prior to the Closing Date,
          workers’
compensation benefits shall be subject to Seller’s workers’ compensation
          policies, programs and plans, and Seller shall bear sole financial
          responsibility with respect to such benefits. With respect to occurrences
          relating to Transferred Employees on or after the Closing Date, workers’
compensation benefits shall be subject to Buyer’s workers’ compensation
          policies, programs and plans, and Buyer shall bear sole financial responsibility
          with respect to such benefits. 

        

        Section
          4.5 Flexible
          Spending Accounts.
          As soon
          as administratively feasible after the Closing Date, Seller shall transfer
          to
          Buyer’s flexible benefits plan, in cash, any health care and dependent care
          balances standing to the credit of Transferred Employees under
          the
          Southern 

        
          
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        Union
          Company Flexible Benefit Plan (“Seller’s Flex Plan”) as of the day immediately
          preceding the Closing Date, and Buyer shall reimburse Transferred
          Employees for
          all
          eligible health and dependent care expenses submitted on or after the Closing
          Date. As soon as administratively feasible after the Closing Date, Seller
          shall
          provide to Buyer a list of those Transferred Employees who
          have
          participated in the health or dependent care reimbursement accounts under
          Seller’s Flex Plan, together with their elections made prior to the Closing Date
          with respect to such accounts, and balances standing to their credit as
          of the
          day immediately prior to the Closing Date. 

        

        Section
          4.6 Post-Retirement
          Benefit Plans 

        

        (a)
          Post-retirement health and life insurance benefits available to Employees
          and
          Former Employees (“Post-Retirement Benefits”) are described in the document
          entitled “The Southern Union Company Postretirement Medical and Death Benefits
          for PG Energy Employees Application of Statement of Financial Accounting
          Standards Nos. 106 and 132(R) to the Fiscal Year Ending December 31, 2005,” a
          draft copy of which Seller has provided to Buyer. Following the Closing
          Date,
          Seller shall retain responsibility for all liabilities and obligations
          of
          Seller, if any, to provide Post-Retirement Benefits to Former Employees,
          Employees who are not Transferred Employees, and those Transferred Employees
          who, as of the Closing Date, have attained age fifty-five (55) and completed
          twenty (20) years of vesting service under Seller’s Pension Plan. 

        .
          

        (b)
          Following the Closing Date, Buyer shall assume responsibility for all
          liabilities and obligations of Seller, if any, to provide Post-Retirement
          Benefits to those Transferred Employees who, as of the Closing Date, have
          not
          attained age fifty-five (55) and completed twenty (20) years of vesting
          service
          under Seller’s Pension Plan. Nothing herein is intended to confer upon any
          person any right to Post-Retirement Benefits to which he or she is not
          otherwise
          entitled. 

        

        (c)
          Following the Closing Date, Seller shall retain the “Pennsylvania VEBAs,” as
          defined in the following sentence, and the assets held therein shall be
          applied,
          in accordance with the terms of the Pennsylvania VEBAs, for the benefit
          of the
          Former Employees, the Employees who are not Transferred Employees, and
          those
          Transferred Employees who, as of the Closing Date, have attained age fifty-five
          (55) and completed twenty (20) years of vesting service under Seller’s Pension
          Plan. The “Pennsylvania VEBAs” are the Pennsylvania Enterprises, Inc. Employees’
Life Insurance Benefits Trust - Union (PG Energy Life VEBA Union), the
          Pennsylvania Enterprises, Inc. Employees’ Life Insurance Benefits Trust -
          Non-Union (PG Energy Life VEBA Non-Union), the Pennsylvania Enterprises,
          Inc.
          Employees’ Medical Insurance Benefits Trust - Union (PG Energy Medical VEBA
          Union), and the Pennsylvania Enterprises, Inc. Employees’ Medical Insurance
          Benefits Trust - Non-Union (PG Energy Medical VEBA Non-Union). 

         

        ARTICLE
          V

        LIABILITIES

        

        Except
          as
          otherwise provided in this Agreement, Buyer, for itself and its Affiliates,
          assumes and agrees to pay, perform, fulfill and discharge when due all
          Liabilities, including 

        
          
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        litigation
          costs, with respect to a Transferred Employee or a dependent or beneficiary
          of a
          Transferred Employee relating to, arising out of or resulting from employment
          in
          connection with the Business prior to, on or after the Closing Date. Anything
          herein to the contrary notwithstanding, Seller retains and shall pay, perform,
          fulfill and discharge all Liabilities with respect to Former Employees
          and
          Employees who are not Transferred Employees. 

         

        ARTICLE
          VI

        RECORDS
          AND INFORMATION

        

        Section
          6.1 Records.
          On or
          soon after the Closing Date, Seller shall deliver to Buyer, to the extent
          permitted by applicable Legal Requirements, all personnel files and records
          in
          its possession relating to the Transferred Employees, including active
          contracts, litigation files, annual reviews, grievances and any other
          information that is part of the personnel file of a Transferred Employee.
          Prior
          to the Closing Date, subject to applicable Legal Requirements, Seller shall
          provide Buyer with reasonable access to information and records in its
          possession relating to the Transferred Employees. Subject to applicable
          Legal
          Requirements, from and after the Closing Date, all such files and records
          shall
          be the property of Buyer, provided, that Seller may copy such files and
          records
          prior to transferring them to Buyer. 

        

        Section
          6.2 Access
          to Information.
          From and
          after the Closing Date, Buyer shall afford to Seller reasonable and timely
          access and duplicating rights, during normal business hours and upon reasonable
          advance notice, to the personnel files and records in the possession or
          control
          of Buyer, insofar as such access is reasonably required for a reasonable
          business purpose, subject to applicable Legal Requirements. Without limiting
          the
          foregoing, information may be requested under this Section 6.2 for audit,
          accounting, claims, litigation and tax purposes, as well as for purposes
          of
          fulfilling disclosure and reporting obligations. 

        

        Section
          6.3 Confidentiality.
          Buyer
          and its Affiliates shall preserve the confidentiality, in accordance with
          all
          applicable Legal Requirements, of all information contained in the personnel
          files and records obtained from Seller pursuant to this Agreement.

        

        ARTICLE
          VII

        GENERAL
          PROVISIONS

        

        Section
          7.1 Cooperative
          Actions. Seller
          and Buyer shall cooperate with each other in carrying out, implementing
          and
          defending the terms of this Agreement, including cooperating with each
          other
          with respect to any claims or litigation challenging any of the terms of
          this
          Agreement. Seller and Buyer agree to good faith mutual cooperation in any
          investigation, inquiry or litigation which jointly involves them or in
          which a
          party makes a reasonable request for cooperation. Each party will make
          its
          employees available on a reasonable basis to give testimony and assistance
          in
          connection with any lawsuit, dispute, investigation or proceeding involving
          the
          other party; provided, however, that such other party shall pay for all
          out-of-pocket costs incurred in connection with providing such testimony
          and
          assistance. Except as otherwise provided in this Agreement, each party
          will pay
          all costs and expenses of its performance of and compliance with this
          Agreement.

        
          
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        Section
          7.2 Parties
          in Interest. No
          provision of this Agreement shall confer upon any person, other than the
          parties
          hereto, their Affiliates, successors and permitted assigns, any rights
          or
          remedies hereunder, including any rights or remedies with respect to the
          employment, compensation, benefits or other terms and conditions of employment
          of any person. Except as otherwise provided herein, no provision of this
          Agreement shall be construed to create any right or accelerate any entitlement
          to any compensation or benefit on the part of any Employee.

        

        Section
          7.3 WARN Act. 

        

        (a)
          On or
          before the Closing Date, Seller shall provide a list of the name and site
          of
          employment of any and all employees of Seller who have experienced, or
          who will
          experience, an employment loss or layoff (as defined by the Worker Adjustment
          and Retraining Notification Act of 1988 or any similar applicable state
          or local
          law requiring notice to employees in the event of a closing or layoff (the
“WARN
          Act”)) within ninety (90) days prior to the Closing Date. Seller shall update
          this list up to and including the Closing Date. 

        

        (b)
          For a
          period of ninety (90) days after the Closing Date, Buyer shall not engage
          in any
          conduct which would result in an employment loss or layoff for a sufficient
          number of employees of Buyer which, if aggregated with any such conduct
          on the
          part of Seller prior to the Closing Date, would trigger the WARN
          Act.

        

        Section
          7.4 Satisfaction
          of Liabilities by Affiliate.
          Obligations of Buyer hereunder may be satisfied by an Affiliate of
          Buyer.

        

         

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          of this page intentionally left blank]

        
          
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        IN
          WITNESS WHEREOF,
          the
          parties have caused this Agreement to be executed and delivered by their
          duly
          authorized officers as of the date first written above.

        

        

        SOUTHERN
          UNION COMPANY 

        

        

        By:
          /s/
          Julie H. Edwards________________

        Name:
          Julie
          H. Edwards________________

        Title:
          Senior
          Executive Vice President & CFO

        

        

        

        UGI
          CORPORATION

        

        

        By:
          /s/
          Robert H. Knauss________________

        Name:
          Robert
          H. Knauss________________

        Title:
          Vice
          President & General Counsel_____

        

        

        [Signature
          page to Employee Agreement between

        Southern
          Union Company and UGI Corporation]

        

        

        

        
          
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        LIST
          OF
          SCHEDULES

        

        

        Schedule
          1.1 
          Employees

        

        Schedule
          2.3(a)          Employee
          who may have Opportunity to
          Continue Employment with Seller

         

        Schedule
          2.3(b)          Employment
          Offers

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