<PAGE>
=================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported) June 7, 1999
SOUTHERN UNION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 1-6407 75-0571592
(State or other juris- (Commission (I.R.S. Employer
diction of incorpora- File Number) Identification No.)
tion or organization)
504 Lavaca Street, Eighth Floor 78701
Austin, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(512) 477-5852
=================================================================
<PAGE>
ITEM 5. OTHER EVENTS
On June 7, 1999 Southern Union Company (the "Company") and
Pennsylvania Enterprises, Inc. (NYSE: PNT) announced that they
have entered into a definitive merger agreement. The agreement
calls for Southern Union Company to acquire Pennsylvania Enter-
prises, Inc. in a transaction valued at approximately $500
million, including assumption of debt. For each share of PNT
common stock, PNT shareholders will receive shares of Company
common stock valued at $32 per PNT share plus cash of $3 per PNT
share, subject to adjustments at closing as described in the
agreement. Based on the Company's closing price of $21.6250 on
June 4, 1999, the last trading day prior to announcement of the
merger, approximately 16.0 million shares (an exchange ratio of
1.47977) of Company common stock would be issued to PNT share-
holders at closing, based on PNT shares outstanding on May 28,
1999. The actual number of shares to be issued will be deter-
mined at closing based on a trading price average for the Com-
pany's common stock prior to closing. At least approximately
15.3 million shares (an exchange ratio of 1.40930) but not more
than approximately 17.8 million shares (an exchange ratio of
1.64419) would be issued, based on PNT shares outstanding on
May 28, 1999.
The agreement of merger is included herein as an exhibit to this
Form 8-K. All descriptions to the terms thereof are qualified by
reference thereto.
ITEM 7. EXHIBITS
2 Agreement of Merger between Southern Union Company and
Pennsylvania Enterprises, Inc. dated as of June 7, 1999.
20 Southern Union Company press release dated June 7, 1999
announcing its proposal to merge with Pennsylvania
Enterprises, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SOUTHERN UNION COMPANY
----------------------
(Registrant)
Date June 15, 1999 By RONALD J. ENDRES
----------------- ----------------------------
Ronald J. Endres
Executive Vice President and
Chief Financial Officer
Date June 15, 1999 By DAVID J. KVAPIL
----------------- ----------------------------
David J. Kvapil
Senior Vice President and
Corporate Controller
(Principal Accounting
Officer)
<PAGE>
AGREEMENT OF MERGER
between
SOUTHERN UNION COMPANY
and
PENNSYLVANIA ENTERPRISES, INC.
Dated as of June 7, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS
Section 1.1 Certain Defined Terms
Section 1.2 Other Defined Terms
ARTICLE II THE MERGER; OTHER TRANSACTIONS
Section 2.1 The Merger
Section 2.2 Effective Time of the Merger
Section 2.3 Closing
Section 2.4 Certificate of Incorporation; By-laws
Section 2.5 Directors and Officers
Section 2.6 Other Transactions
ARTICLE III CONVERSION OF SHARES
Section 3.1 Effect of the Merger
Section 3.2 Exchange of PNT Common Stock Certificates
and PG Preferred Stock Certificates
Section 3.3 Dissenting Shares
Section 3.4 PNT Option Plans
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SUG
Section 4.1 Organization, Existence and Qualification
Section 4.2 Capitalization
Section 4.3 Subsidiaries; Investments
Section 4.4 Authority Relative to this Agreement
and Binding Effect
Section 4.5 Governmental Approvals
Section 4.6 Public Utility Holding Company Status;
Regulation as a Public Utility
Section 4.7 Compliance with Legal Requirements;
Governmental Authorizations
Section 4.8 Legal Proceedings; Orders
Section 4.9 SEC Documents
Section 4.10 Taxes
Section 4.11 Intellectual Property
Section 4.12 Title to Assets
Section 4.13 Indebtedness
Section 4.14 Machinery and Equipment
Section 4.15 Material Contracts
Section 4.16 Insurance
Section 4.17 Employees
Section 4.18 Employee Benefit Plans
Section 4.19 Environmental Matters
Section 4.20 No Material Adverse Change
Section 4.21 Brokers
Section 4.22 Regulatory Proceedings
Section 4.23 Proxy Statement; Registration Statement
Section 4.24 Vote Required
Section 4.25 Disclaimer of Representations and Warranties
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PNT
Section 5.1 Organization, Existence and Qualification
Section 5.2 Capitalization
Section 5.3 Subsidiaries; Investments
Section 5.4 Authority Relative to this Agreement
and Binding Effect
Section 5.5 Governmental Approvals
Section 5.6 Public Utility Holding Company Status;
Regulation as a Public Utility
Section 5.7 Compliance with Legal Requirements;
Governmental Authorizations
Section 5.8 Legal Proceedings; Orders
Section 5.9 SEC Documents
Section 5.10 Taxes
Section 5.11 Intellectual Property
Section 5.12 Title to Assets
Section 5.13 Indebtedness
Section 5.14 Machinery and Equipment
Section 5.15 Material Contracts
Section 5.16 Insurance
Section 5.17 Employees
Section 5.18 Employee Benefit Plans
Section 5.19 Environmental Matters
Section 5.20 No Material Adverse Change
Section 5.21 Brokers
Section 5.22 PNT Rights Agreement
Section 5.23 Regulatory Proceedings
Section 5.24 Proxy Statement; Registration Statement
Section 5.25 Vote Required
Section 5.26 Opinion of Financial Advisor
Section 5.27 Disclaimer of Representations and Warranties
ARTICLE VI COVENANTS
Section 6.1 Covenants of PNT
(a) Conduct of the Business Prior to the
Closing Date
(b) Customer Notifications
(c) Access to the Acquired Companies' Offices,
Properties and Records; Updating
Information
(d) Governmental Approvals; Third Party Consents
(e) Dividends
(f) Issuance of Securities
(g) Accounting
(h) No Shopping
(i) Solicitation of Proxies; PNT Proxy Statement
(j) PNT Shareholder Approval
(k) Rule 145 Letters
(l) Financing Activities
(m) PNT Disclosure Schedule
Section 6.2 Covenants of SUG
(a) Governmental Approvals; Third Party Consents
(b) Employees; Benefits
(c) Rule 16b-3
(d) Tax Matters
(e) Blue Sky Permits
(f) Listing Application
(g) Directors
(h) Technology: Pennsylvania Operations
(i) Charitable Contributions
(j) Collective Bargaining Agreements
(k) Restrictions on Unusual Distributions;
Anti-Dilution
(l) Solicitation of Proxies; SUG Proxy Statement
(m) SUG Shareholder Approval
(n) SUG Disclosure Schedule
Section 6.3 Additional Agreements
ARTICLE VII CONDITIONS
Section 7.1 Conditions to SUG's Obligation to Effect
the Merger
Section 7.2 Conditions to PNT's Obligations to Effect
the Mergers
ARTICLE VIII TERMINATION
Section 8.1 Termination Rights
Section 8.2 Effect of Termination
Section 8.3 Termination Fee; Expenses
ARTICLE IX INDEMNIFICATION; REMEDIES
Section 9.1 Directors' and Officer's Indemnification
Section 9.2 Representations and Warranties
ARTICLE X GENERAL PROVISIONS
Section 10.1 Expenses
Section 10.2 Notices
Section 10.3 Assignment
Section 10.4 Successor Bound
Section 10.5 Governing Law; Forum; Consent to Jurisdiction
Section 10.6 Waiver of Trial By Jury
Section 10.7 Cooperation; Further Documents
Section 10.8 Construction of Agreement
Section 10.9 Publicity; Organizational and Operational
Announcements
Section 10.10 Waiver
Section 10.11 Parties in Interest
Section 10.12 Specific Performance
Section 10.13 Section and Paragraph Headings
Section 10.14 Amendment
Section 10.15 Entire Agreement
Section 10.16 Counterparts
Disclosure Schedules:
- --------------------
PNT Disclosure Schedule
SUG Disclosure Schedule
<PAGE>
AGREEMENT OF MERGER
This AGREEMENT OF MERGER (this "Agreement") is made as of the 7th
day of June, 1999, by and between SOUTHERN UNION COMPANY, a
Delaware corporation ("SUG"), and PENNSYLVANIA ENTERPRISES, INC.,
a Pennsylvania corporation ("PNT").
RECITALS
WHEREAS, the Board of Directors of each of SUG and PNT has
approved and deems it advisable and in the best interests of
their respective shareholders to consummate the merger of PNT
with and into SUG upon the terms and subject to the conditions
set forth herein; and
WHEREAS, in furtherance thereof, the Board of Directors of each
of SUG and PNT has approved this Agreement and the merger of PNT
with and into SUG, with SUG being the surviving corporation (the
"Merger");
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be
legally bound hereby, SUG and PNT hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this Agree-
- ----------------------------------
ment, 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):
"Acquired Companies" -- PNT and its Subsidiaries, collectively,
------------------
and each, an "Acquired Company."
"Applicable Contract" -- any Contract (a) under which any
-------------------
Acquired Company has any rights, (b) under which any Acquired
Company has any obligation or liability, or (c) by which any
Acquired Company or any of the assets owned or used by it is
bound.
"Average Trading Price" -- of SUG Common Stock, as of any date,
---------------------
will equal the average of the reported closing market prices of
such stock for the ten consecutive trading days ending on the
third trading day prior to such date (counting from and including
the trading day immediately preceding such date). The closing
market price for each day in question will be the last sale
price, regular way or, if no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction
reporting system of the principal national securities exchange on
which SUG Common Stock is listed or admitted to trading.
"CERCLA" -- the Comprehensive Environmental Response, Compensa-
------
tion and Liability Act of 1980, as amended.
"Closing Date" -- the date on which the Closing actually takes
------------
place.
"COBRA" -- the Consolidated Omnibus Budget Reconciliation Act of
-----
1985, as amended, or any successor law, and regulations and rules
issued pursuant to that act or any successor law, and also the
requirements of Part 6 of Subtitle B of Title I of ERISA.
"Consent" -- any approval, consent, ratification, waiver, or
-------
other authorization (including any Governmental Authorization).
"Contract" -- any agreement, contract, document, instrument,
--------
obligation, promise or undertaking (whether written or oral) that
is legally binding.
"DGCL" -- the Delaware General Corporation Law.
----
"Encumbrance" -- any charge, adverse claim, lien, mortgage,
-----------
pledge, security interest or other encumbrance.
"Environment" -- soil, land surface or subsurface strata, surface
-----------
waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air),
plant and animal life, and any other environmental medium or
natural resource.
"Environmental Law" -- any Legal Requirement that requires or
-----------------
relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other
prohibitions and of the commencements of activities, such as
resource extraction or construction, that could have significant
impact on the Environment;
(b) preventing or reducing to acceptable levels the release
of pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are
generated;
(d) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful; or
(e) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest
to recover for injuries done to public assets or for damages to
natural resources.
"ERISA" -- 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.
"Exchange Act" -- the Securities Exchange Act of 1934, as
------------
amended, or any successor law, and regulations and rules issued
by the SEC pursuant to that act or any successor law.
"Facilities" -- any real property, leaseholds, or other interests
----------
currently or formerly owned or operated by any Acquired Company
and any buildings, plants, structures, or equipment (including
motor vehicles, tank cars, and rolling stock) currently or
formerly owned or operated by any Acquired Company.
"FERC" -- the Federal Energy Regulatory Commission or any succes-
----
sor agency.
"Final Order" -- an action by a Governmental Body as to which:
-----------
(a) 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 regu-
lation for filing any request for such stay, such time period has
passed; (b) no petition for rehearing, reconsideration or appli-
cation for review of the action is pending and the time for
filing any such petition or application has passed; (c) 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 (d) 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" -- generally accepted United States accounting principles,
----
applied on a consistent basis.
"Governmental Authorization" -- any approval, consent, license,
--------------------------
franchise, certificate of public convenience and necessity, per-
mit, waiver or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Govern-
mental Body or pursuant to any Legal Requirement.
"Governmental Body" -- any:
-----------------
(a) nation, state, county, city, town, village, district or
other jurisdiction of any nature;
(b) federal, state, county, local, municipal or other govern-
ment;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department,
official or entity and any court or other tribunal); or
(d) body exercising, or entitled to exercise, any adminis-
tive, executive, judicial, legislative, police, regulatory or
taxing authority or power of any nature.
"Hazardous Activity" -- the distribution, generation, handling,
------------------
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treat-
ment, or use (including any withdrawal or other use of ground-
water) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, any other
act, business, operation, or thing that increases the danger, or
risk of danger, or poses an unreasonable risk of harm to persons
or property on or off the Facilities, or that may affect the
value of the Facilities or the Acquired Companies.
"Hazardous Materials" -- any waste or other substance that is
-------------------
listed, defined, designated, or classified as, or otherwise de-
termined to be, hazardous, radioactive, or toxic or a pollutant
or a contaminant under or pursuant to any Environmental Law,
including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing
materials.
"HSR Act" -- 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" -- the Internal Revenue Code of 1986, as amended.
---
"IRS" -- the Internal Revenue Service or any successor agency.
---
"Knowledge" -- an individual will be deemed to have "Knowledge"
---------
of a particular fact or other matter if such individual is
actually aware of such fact or other matter. A Person (other
than an individual) will be deemed to have "Knowledge" of a par-
ticular fact or other matter if any individual who is serving as
a director or officer of such Person or any material Subsidiary
of it or other management employee with direct responsibility for
such particular fact or other matter of such Person or any
material Subsidiary of it (or in any similar capacity) has actual
knowledge of such fact or other matter.
"Legal Requirement" -- any federal, state, county, local, munici-
-----------------
pal, foreign, international, multinational, or other administra-
tive order, constitution, law, ordinance, principle of common
law, regulation, rule, tariff, franchise agreement, statute or
treaty.
"Material Contract" -- a Contract involving a total commitment by
-----------------
or to any party thereto of at least $100,000 on an annual basis
or at least $500,000 on its remaining term which cannot be termi-
nated on no more than sixty (60) days' notice without penalty or
additional cost to the Acquired Company as the terminating party.
"Occupational Safety and Health Law" -- any Legal Requirement
----------------------------------
designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program,
whether governmental or private (including those promulgated or
sponsored by industry associations and insurance companies),
designed to provide safe and healthful working conditions.
"Order" -- any award, decision, injunction, judgment, order,
-----
ruling, subpoena, or verdict entered, issued, made, or rendered
by any court, administrative agency, or other Governmental Body
or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will
---------------------------
be deemed to have been taken in the "Ordinary Course of Business"
only if:
(a) such action and authorization therefor is consistent with
the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person; and
(b) such action is not required by law to be authorized by
the board of directors (or similar authority) of such Person or
of such Person's parent company (if any).
"Organizational Documents" -- (a) the articles or certificate of
------------------------
incorporation and the bylaws of a corporation; (b) the partner-
ship agreement and any statement of partnership of a general
partnership; (c) the limited partnership agreement and the cer-
tificate of limited partnership of a limited partnership; (d) the
certificate of formation and the members, operating or similar
agreement of a limited liability company; (e) any charter or
similar document adopted or filed in connection with the crea-
tion, formation or organization of a Person; and (f) any amend-
ment to any of the foregoing.
"PBCL" -- the Pennsylvania Business Corporation Law.
----
"Person" -- any individual, corporation (including any non-profit
------
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization,
labor union, organized group of persons, entity of any other
type, or Governmental Body.
"PG Preferred Stock" -- each series of the cumulative preferred
------------------
stock, par value $100.00 per share, of PG Energy.
"PNT Balance Sheet" -- the audited consolidated balance sheet of
-----------------
the Acquired Companies at December 31, 1998 (including the notes
thereto), provided by PNT to SUG as part of the PNT Financial
Statements.
"PNT Common Stock" -- the common stock, no par value, of PNT.
----------------
"PNT Disclosure Schedule" -- the disclosure schedule delivered by
-----------------------
PNT to SUG concurrently with the execution and delivery of this
Agreement.
"PNT Material Adverse Effect" -- a material adverse effect (i) on
---------------------------
the business, operations, financial condition or results of
operations of PNT and its Subsidiaries, taken as a whole, or (ii)
on the ability of PNT and its Subsidiaries to consummate the
Mergers in accordance with this Agreement.
"PNT Permitted Liens" -- Encumbrances securing Taxes, assess-
-------------------
ments, governmental charges or levies, or the claims of material-
men, mechanics, carriers and like persons, all of which are not
yet due and payable or which are being contested in good faith;
Encumbrances (other than any Encumbrance imposed by ERISA) in-
curred on deposits made in the Ordinary Course of Business in
connection with worker's compensation, unemployment insurance or
other types of social security; the Encumbrances created by and
the Encumbrances permitted under the Indenture of Mortgage and
Deed of Trust, dated as of March 15, 1946, between PG Energy
(formerly known as Scanton-Spring Brook Water Service Company)
and Morgan Guaranty Trust Company of New York (formerly known as
Guaranty Trust Company of New York), as Trustee, as amended or
supplemented from time to time; in the case of leased real
property, Encumbrances (not attributable to an Acquired Company
as lessee) affecting the landlord's (and any underlying land-
lord's) interest in any leased real property; and such other
Encumbrances which are not, individually or in the aggregate,
reasonably likely to have a PNT Material Adverse Effect.
"Proceeding" -- any action, arbitration, hearing, litigation or
----------
suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"PUHCA" -- the Public Utility Holding Company Act of 1935, as
-----
amended, or any successor law, and regulations and rules issued
by the SEC pursuant to that act or any successor law.
"Related Documents" -- any Contract provided for in this Agree-
-----------------
ment to be entered into by one or more of the parties hereto or
their respective Subsidiaries in connection with the Mergers.
"Release" -- any spilling, leaking, emitting, discharging, de-
-------
positing, escaping, leaching, dumping, or other releasing into
the Environment, whether intentional or unintentional.
"Representative" -- with respect to a particular Person, any
--------------
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accoun-
tants, and financial advisors.
"SEC" -- the United States Securities and Exchange Commission or
---
any successor agency.
"Securities Act" -- the Securities Act of 1933, as amended, or
--------------
any successor law, and regulations and rules issued by the SEC
pursuant to that act or any successor law.
"Subsidiary" -- with respect to any Person (the "Owner"), any
----------
Person of which securities or other interests having the power to
elect a majority of that other Person's board of directors or
similar governing body, or otherwise having the power to direct
the business and policies of that corporation or other Person
(other than securities or other interests having such power only
upon the happening of a contingency that has not occurred) are
held by the Owner or one or more of its Subsidiaries; when used
without reference to a particular Person, "Subsidiary" means a
Subsidiary of PNT.
"SUG Balance Sheet" -- the audited consolidated balance sheet of
-----------------
SUG at June 30, 1998 (including the notes thereto), provided by
SUG to PNT as part of the SUG Financial Statements.
"SUG Common Stock" -- the Common Stock, par value $1.00 per
----------------
share, of SUG.
"SUG Disclosure Schedule" -- the disclosure schedule delivered by
-----------------------
SUG to PNT concurrently with the execution and delivery of this
Agreement.
"SUG Material Adverse Effect" -- a material adverse effect (i) on
---------------------------
the business, operations, financial condition or results of
operations of SUG and its Subsidiaries, taken as a whole, or (ii)
on the ability of SUG to consummate the Mergers in accordance
with this Agreement.
"SUG Permitted Liens" -- Encumbrances securing Taxes, assess-
-------------------
ments, governmental charges or levies, or the claims of material-
men, mechanics, carriers and like persons, all of which are not
yet due and payable or which are being contested in good faith;
Encumbrances (other than any Encumbrance imposed by ERISA) in-
curred on deposits made in the Ordinary Course of Business in
connection with worker's compensation, unemployment insurance or
other types of social security; in the case of leased real
property, Encumbrances (not attributable to SUG as lessee)
affecting the landlord's (and any underlying landlord's) interest
in any leased real property; and such other Encumbrances which
are not, individually or in the aggregate, reasonably likely to
have an SUG Material Adverse Effect.
"Tax" -- 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 pay-
ment, 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 col-
lected by or under the authority of any Governmental Body or pay-
able pursuant to any tax-sharing agreement or any other Contract
relating to the sharing or payment of any such tax, levy, assess-
ment, tariff, duty, deficiency or fee.
"Tax Return" -- 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.
"Threat of Release" -- a reasonable likelihood of a Release that
-----------------
will require action under Environmental Laws in order to prevent
or mitigate damage to the Environment that may result from such
Release.
"Threatened" -- a claim, Proceeding, dispute, action, or other
----------
matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has
been given (orally or in writing), or if any other event has
occurred or any other circumstance exists, that would lead a di-
rector, officer or management employee of a comparable gas dis-
tribution company to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, com-
menced, taken or otherwise pursued in the future.
Section 1.2 Other Defined Terms. In addition to the terms de-
- --------------------------------
fined 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.
TERM SECTION
---- -------
4.10% PG Preferred Stock 5.2
5.75% PG Preferred Stock 5.2
Acquired Company Option Plans 3.4
Agreement Introductory Paragraph
Business Combination 6.1(h)(4)
Cash Consideration 3.1(a)(2)
Certificates 3.2(b)
Closing 2.3
Confidentiality Agreement 6.1(c)
Conversion Price 3.1(a)
Dissenting Shares 3.3
Effective Time 2.2
Employees 6.2(b)
Exchange Ratio 3.1(a)(1)
Honesdale 2.6
Honesdale Merger 2.6
Indemnified Parties 9.1(a)
Initial Termination Date 8.1(j)
Maximum Value 3.1(a)
Merger Recitals
Merger Consideration 3.1(a)
Mergers 2.6
Minimum Value 3.1(a)
NYSE 3.4
Paying Agent 3.2(a)
PBGC 4.18(b)
PG Energy 2.6
PG Energy Merger 2.6
PNT Introductory Paragraph
PNT Benefit Plans 5.18(a)
PNT Commonly Controlled Entity 5.18(e)
PNT Financial Statements 5.9
PNT Meeting 6.1(j)(1)
PNT Options 3.4
PNT Proxy Statement 4.23
PNT Rights 3.1(a)
PNT Rights Agreement 3.1(a)
PNT SEC Documents 5.9
PNT Shareholders' Approval 5.25
Registration Statement 4.23
Rule 145 Affiliates 6.1(k)
Rule 145 Letters 6.1(k)
Stock Consideration 3.1(a)(1)
SUG Introductory Paragraph
SUG Benefit Plans 4.18(a)
SUG Commonly Controlled Entity 4.18(e)
SUG Financial Statements 4.9
SUG Meeting 6.2(m)
SUG Proxy Statement 4.23
SUG SEC Documents 4.9
SUG Shareholders' Approval 4.24
Superior Proposal 6.1(h)
Surviving Corporation 2.1
Third Party Beneficiary 10.11
ARTICLE II
THE MERGER; OTHER TRANSACTIONS
Section 2.1 The Merger. Upon the terms and subject to the con-
- -----------------------
ditions of this Agreement, at the Effective Time (as defined in
Section 2.2), PNT will be merged with and into SUG in accordance
with the laws of the State of Delaware and the Commonwealth of
Pennsylvania. SUG will be the surviving corporation in the
Merger (the "Surviving Corporation") and will continue its corpo-
rate existence under the laws of the State of Delaware. The
Merger will have the effect as provided in the applicable provi-
sions of the DGCL and the PBCL. Without limiting the generality
of the foregoing, upon the Merger, all the rights, privileges,
immunities, powers and franchises of PNT and SUG will vest in the
Surviving Corporation and all obligations, duties, debts and lia-
bilities of PNT and SUG will be the obligations, duties, debts
and liabilities of the Surviving Corporation.
Section 2.2 Effective Time of the Merger. On the Closing Date,
- -----------------------------------------
with respect to the Merger, (i) a duly executed certificate of
merger complying with the requirements of the DGCL will be exe-
cuted and filed with the Secretary of State of the State of Dela-
ware and (ii) a duly executed articles of merger and plan of
merger complying with the requirements of the PBCL will be filed
with the Secretary of State of the Commonwealth of Pennsylvania.
The Merger will become effective upon filing the certificate of
merger with the Secretary of State of the State of Delaware and
the articles of merger and plan of merger with the Secretary of
State of the Commonwealth of Pennsylvania (the "Effective Time").
Section 2.3 Closing. Unless this Agreement has been terminated
- --------------------
and the transactions contemplated herein have been abandoned pur-
suant to Article VIII hereof, the closing of the transactions
contemplated by this Agreement (the "Closing") will take place at
10:00 a.m., Eastern Time, on the Closing Date to be specified by
the parties, which shall be no later than the tenth business day
after satisfaction or waiver of all of the conditions set forth
in Article VII hereof (other than Sections 7.1(a), 7.1(b),
7.1(c), 7.1(f), 7.1(g), 7.1(h), 7.1(k), 7.1(l), 7.2(a), 7.2(b),
7.2(c), 7.2(e), 7.2(f) and 7.2(h), which shall be satisfied or
waived on the Closing Date) at the offices of Fleischman and
Walsh, L.L.P., counsel to SUG, unless another date or place is
agreed to in writing by the parties hereto.
Section 2.4 Certificate of Incorporation; By-laws. Pursuant to
- --------------------------------------------------
the Merger, the Restated Certificate of Incorporation of SUG, as
in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and (ii) the By-laws of SUG
as in effect immediately prior to the Effective Time, shall be
the By-laws of the Surviving Corporation until thereafter amended
as provided by law.
Section 2.5 Directors and Officers. The directors and officers
- -----------------------------------
of SUG immediately prior to the Effective Time will be the direc-
tors and officers of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and
By-laws of the Surviving Corporation.
Section 2.6 Other Transactions. Immediately after the Effective
- -------------------------------
Time on the Closing Date, the Surviving Corporation shall cause
Honesdale Gas Company ("Honesdale"), a wholly-owned Subsidiary of
PG Energy, Inc., a Subsidiary of PNT ("PG Energy"), to merge with
and into PG Energy by complying with the requirements of the PBCL
(the "Honesdale Merger"). Immediately after the consummation of
the Honesdale Merger on the Closing Date, the Surviving Corpora-
tion shall cause PG Energy to merge with and into SUG, as the
Surviving Corporation, by complying with the requirements of the
PBCL and the DGCL (the "PG Energy Merger"). The Merger, the
Honesdale Merger and the PG Energy Merger shall hereinafter be
referred to collectively as the "Mergers."
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Effect of the Merger. As of the Effective Time, by
- ---------------------------------
virtue of the Merger and without any action on the part of the
holders of any shares of PNT Common Stock:
(a) Each issued and outstanding share of PNT Common Stock
(other than Dissenting Shares (as defined in Section 3.3) covered
by Section 3.3) and each associated stock purchase right (collec-
tively, the "PNT Rights") issued pursuant to the Rights Agree-
ment, dated as of April 26, 1995 between PNT and Chemical Bank,
as Rights Agent (the "PNT Rights Agreement"), which will be ter-
minated at the Effective Time (any reference in this Agreement to
PNT Common Stock will be deemed to include the associated PNT
Rights), will be converted into the right of each holder thereof
to receive the following consideration (the "Merger Considera-
tion"):
(1) that number of fully paid and nonassessable shares of
SUG Common Stock (the "Stock Consideration") equal to $32.00
divided by the Conversion Price (as defined below) rounded to the
nearest hundred-thousandth (the "Exchange Ratio"); and
(2) an amount in cash without interest (the "Cash Consid-
eration") equal to the sum of $3.00, plus, if the Average Trading
Price of SUG Common Stock as of the Closing Date is less than
$19.46250, the product of (x) the amount of such shortfall not to
exceed $2.16250 and (y) the Exchange Ratio.
"Conversion Price" shall mean the Average Trading Price of SUG
Common Stock as of the Closing Date. Notwithstanding the fore-
going, if the Conversion Price as calculated pursuant to the pre-
ceding sentence and without regard to this sentence (i) is less
than the Minimum Value, then the Conversion Price will be equal
to the "Minimum Value," or (ii) is greater than the "Maximum
Value," then the Conversion Price will be equal to the "Maximum
Value." "Minimum Value" will be $19.46250 and "Maximum Value"
will be $22.70625.
Each holder of PNT Common Stock shall surrender all such holder's
certificates formerly representing ownership of PNT Common Stock
in the manner provided in Section 3.2. All such shares of PNT
Common Stock, when so converted, shall no longer be outstanding
and shall be canceled and automatically converted into the right
to receive the Merger Consideration therefor upon the surrender
of such certificate in accordance with Section 3.2. Any payment
made pursuant to this Section 3.1(a) shall be made net of appli-
cable withholding taxes to the extent such withholding is
required by law.
(b) No fractional share of SUG Common Stock shall be issued
in connection with the Merger. Each holder of shares of PNT Com-
mon Stock shall be entitled to receive in lieu of any fractional
share of SUG Common Stock to which such holder otherwise would
have been entitled pursuant to this Section 3.1 (after taking
into account all shares of PNT Common Stock then held of record
by such holder) a cash payment in an amount equal to the product
of (i) the fractional interest of a share of SUG Common Stock to
which such holder otherwise would have been entitled and (ii) the
closing price of a share of SUG Common Stock on the NYSE on the
trading day immediately prior to the Effective Time. Payment of
such amounts shall be made by SUG.
Section 3.2 Exchange of PNT Common Stock Certificates and PG
- -------------------------------------------------------------
Preferred Stock Certificates.
- ----------------------------
(a) SUG's registrar and transfer agent, or such other bank or
trust company as may be selected by SUG and be reasonably accept-
able to PNT, will act as paying agent ("Paying Agent") for the
holders of PNT Common Stock in connection with the Merger, pursu-
ant to an agreement providing for the matters set forth in this
Section 3.2 and such other matters as may be appropriate and the
terms of which shall be reasonably satisfactory to SUG and PNT,
to receive the consideration to which holders of PNT Common Stock
become entitled pursuant to Section 3.1. Contemporaneous with
the Effective Time, SUG will deposit in trust with the Paying
Agent for the benefit of holders of PNT Common Stock, the aggre-
gate Cash Consideration and the SUG Common Stock necessary to pay
the aggregate Merger Consideration as contemplated by Section
3.1(a) with respect to each share of PNT Common Stock.
(b) At the Effective Time of the Merger, SUG will instruct
the Paying Agent to promptly, and in any event not later than
three (3) business days following the Effective Time, mail (and
to make available for collection by hand) to each holder of
record of a certificate or certificates, which immediately prior
to the Effective Time represented outstanding shares of PNT Com-
mon Stock (the "Certificates"), whose shares of PNT Common Stock
were converted pursuant to Section 3.1(a) into the right to re-
ceive the Merger Consideration (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon delivery of
the Certificates to the Paying Agent and shall be in such form
and have such other provisions as SUG may reasonably specify) and
(ii) instructions (which shall provide that at the election of
the surrendering holder Certificates may be surrendered, and pay-
ment therefor collected, by hand delivery) for use in effecting
the surrender of the Certificates in exchange for payment of the
Merger Consideration. Upon surrender of a Certificate for can-
cellation to the Paying Agent or to such other agent or agents as
may be appointed by SUG, together with such letter of transmit-
tal, duly executed, the holder of such Certificate shall be en-
titled to receive in exchange therefor the Merger Consideration
for each share of PNT Common Stock formerly represented by such
Certificate, to be mailed (or made available for collection by
hand if so elected by the surrendering holder) within three (3)
business days of receipt thereof, and the Certificate so surren-
dered shall forthwith be canceled. If payment of the Merger Con-
sideration is to be made to a Person other than the Person in
whose name the surrendered Certificate is registered, it shall be
a condition of payment that the Certificate so surrendered shall
be properly endorsed or shall be otherwise in proper form for
transfer and that the Person requesting such payment shall have
paid any transfer and other Taxes required by reason of the pay-
ment of the Merger Consideration to a Person other than the reg-
istered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that
such Tax either has been paid or is not applicable. Until sur-
rendered as contemplated by this Section 3.2, each Certificate
(other than Certificates representing PNT Common Stock held by
SUG or Dissenting Shares) shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger
Consideration as contemplated by this Section 3.2.
(c) The Paying Agent shall invest the funds representing the
aggregate Cash Consideration, as directed by SUG, in (i) direct
obligations of the United States of America, (ii) obligations for
which the full faith and credit of the United States of America
is pledged to provide for the payment of principal and interest
or (iii) commercial paper rated the highest quality by either
Moody's Investors Service, Inc., or Standard and Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. Any net
earnings with respect to such finds shall be the property of and
paid over to SUG as and when requested by SUG; provided, however,
-------- -------
that any such investment or any such payment of earnings may not
delay the receipt by holders of Certificates of the Merger Con-
sideration.
(d) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed,
the Paying Agent will issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration deliverable in
respect thereof as determined in accordance with this Article
III, provided that the Person to whom the Merger Consideration is
-------- ----
paid shall, as a condition precedent to the payment thereof, give
the Paying Agent a bond in such sum as it may ordinarily require
and indemnify the Surviving Corporation in a manner satisfactory
to it against any claim that may be made against the Surviving
Corporation with respect to the Certificate claimed to have been
lost, stolen or destroyed.
(e) After the Effective Time, the stock transfer books of PNT
shall be closed and there shall be no transfers on the stock
transfer books of the Surviving Corporation of shares of PNT Com-
mon Stock that were outstanding immediately prior to the Effec-
tive Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be canceled
and exchanged for the Merger Consideration as provided in this
Article III.
(f) Any portion of the funds held by the Paying Agent that
remain undistributed to the former shareholders of PNT for
eighteen (18) months after the Effective Time shall be delivered
by the Paying Agent to the Surviving Corporation, which shall
thereafter act as the Paying Agent, and any former shareholders
of PNT who have not complied with this Article III prior to
eighteen (18) months after the Effective Time shall thereafter
look only as a general creditor to the Surviving Corporation for
payment of their claim for the Merger Consideration.
(g) The Surviving Corporation shall not be liable to any
holder of PNT Common Stock for Merger Consideration delivered to
a public official pursuant to any applicable abandonment, escheat
or similar law. Any amounts remaining unclaimed by holders of
any such shares of PNT Common Stock seven years after the Effec-
tive Time (or such earlier date immediately prior to the time at
which such amounts would otherwise escheat to or become property
of any Governmental Body) shall, to the extent permitted by ap-
plicable law, become the property of the Surviving Corporation,
free and clear of any claims or interest of any such holders or
their successors, assigns or personal representatives previously
entitled thereto.
Section 3.3 Dissenting Shares. Notwithstanding anything in this
- ------------------------------
Agreement to the contrary, shares of PNT Common Stock outstanding
immediately prior to the Effective Time the holder of which filed
with PNT, prior to the vote to secure the PNT Shareholders' Ap-
proval, a written notice of intention to demand payment (collec-
tively, the "Dissenting Shares"), shall not be converted into the
right to receive the Merger Consideration, as provided in Section
3.1(a) hereof, unless and until such holder fails to perfect or
effectively withdraws or otherwise loses his right to appraisal
and payment under the PBCL. If, after the Effective Time, any
holder of PNT Common Stock fails to perfect or effectively with-
draws or loses his right to appraisal, such Dissenting Shares
shall thereupon be treated as if they had been converted as of
the Effective Time into the right to receive the Merger Consider-
ation to which such holder is entitled, without interest or divi-
dends thereon. PNT shall give SUG prompt notice of any demands
received by PNT for appraisal of PNT Common Stock, and, prior to
the Effective Time, SUG shall have the right to participate in
all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, PNT shall not, except with the prior
written consent of SUG, make any payment with respect to or offer
to settle, any such demands.
Section 3.4 PNT Option Plans. Each outstanding option to pur-
- -----------------------------
chase shares of PNT Common Stock or other similar interest (col-
lectively, the "PNT Options"), granted under any stock option
plans or under any other plan or arrangement of any Acquired
Company (the "Acquired Company Option Plans") together with the
applicable exercise prices, are disclosed in Section 5.18 of the
PNT Disclosure Schedule. Unless otherwise agreed by the parties
hereto, each PNT Option under the PNT 1992 Stock Option Plan as
to which the holder has consented to a conversion to cash and
each PNT Option under the PNT Stock Incentive Plan that is out-
standing at the Effective Time shall be converted at the Effec-
tive Time into a right to receive in respect thereof a cash
payment in an amount equal to the product of (x) the amount by
which (i) the sum of the Cash Consideration plus the product of
(a) the Exchange Ratio and (b) the closing price of a share of
SUG Common Stock on the New York Stock Exchange (the "NYSE") on
the trading day immediately prior to the date on which the Ef-
fective Time occurs exceeds (ii) the exercise price of such PNT
Option (if less than (i)) and (y) the number of shares of PNT
Common Stock subject thereto. Such cash payment (net of appli-
cable withholding taxes) shall be made on the Closing Date or as
promptly thereafter as reasonably practicable. PNT shall use its
reasonable best efforts to obtain the consent of holders of op-
tions outstanding under the 1992 Stock Option Plan to a conver-
sion to cash in accordance herewith. PNT Options under the 1992
Stock Option Plan as to which consent is not obtained shall be
converted into such number of options to purchase SUG Common
Stock such that the aggregate option value, based on the Merger
Consideration, and the aggregate exercise price are preserved and
otherwise having the same terms as the PNT Options being con-
verted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SUG
SUG, as to SUG and its Subsidiaries, represents and warrants to
PNT that:
Section 4.1 Organization, Existence and Qualification. SUG is a
corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Delaware, with full cor-
porate 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 Con-
tracts to which it is a party, and to execute and deliver this
Agreement. SUG is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state
or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the business
conducted by it, requires such qualification as a foreign corpo-
ration except such failures to be so qualified or in good
standing as are not, individually or in the aggregate, reasonably
likely to have an SUG Material Adverse Effect.
Section 4.2 Capitalization. The authorized capital stock of SUG
- ---------------------------
consists of (i) 50,000,000 shares of SUG Common Stock, of which
29,745,234 shares were issued and outstanding on May 28, 1999,
and (ii) 1,500,000 shares of Cumulative Preferred Stock, no par
value, none of which are issued or outstanding. The issued and
outstanding shares of SUG Common Stock have been validly issued
and are fully paid and nonassessable. The shares of SUG Common
Stock to be issued as part of the Merger Consideration have been
duly authorized and when issued and delivered in accordance with
the terms of this Agreement, will have been validly issued and
will be fully paid and nonassessable and the issuance thereof is
not subject to any preemptive or other similar right. Except as
specifically described in the SUG SEC Documents delivered to PNT
prior to the date of this Agreement, as of the date of this
Agreement, no shares of SUG Common Stock are held, in treasury or
otherwise, by SUG or any of its Subsidiaries and except as set
forth in Section 4.2 of the SUG Disclosure Schedule, there are no
outstanding (i) securities convertible into SUG Common Stock or
other capital stock of SUG or any of its material Subsidiaries,
(ii) warrants or options to purchase SUG Common Stock or other
securities of SUG or any of its material Subsidiaries or (iii)
commitments to issue shares of SUG Common Stock (other than pur-
suant to the Merger) or other securities of SUG or any of its
material Subsidiaries.
Section 4.3 Subsidiaries; Investments. Except as set forth in
- --------------------------------------
Section 4.3 of the SUG Disclosure Schedule, as of the date of
this Agreement, SUG has no Subsidiaries or investments in any
Person except for marketable securities reflected in the SUG SEC
Documents delivered to PNT prior to the date of this Agreement,
and SUG is the registered owner and holder of all of the issued
and outstanding shares of capital stock of its Subsidiaries and
has good title to such shares. The outstanding capital stock of
each material Subsidiary of SUG has been validly issued and is
fully paid and nonassessable. All such capital stock owned by
SUG or any of its Subsidiaries is free and clear of any Encum-
brance (except for any Encumbrance imposed by federal or state
securities laws).
Section 4.4 Authority Relative to this Agreement and Binding
- -------------------------------------------------------------
Effect. The execution, delivery and performance of this Agree-
- ------
ment and the Related Documents by SUG have been duly authorized
by all requisite corporate action, except, as of the date of this
Agreement, for the SUG Shareholders' Approval. Except as set
forth in Section 4.4 of the SUG Disclosure Schedule, the execu-
tion, delivery and performance of this Agreement and the Related
Documents by SUG will not result in a violation or breach of any
term or provision of, or constitute a default or accelerate the
performance required under, the Organizational Documents of SUG,
any indenture, mortgage, deed of trust, security agreement, loan
agreement, or Material Contract to which SUG is a party or by
which its assets are bound, or violate any order, writ, injunc-
tion or decree of any Governmental Body, with such exceptions as
are not, individually or in the aggregate, reasonably likely to
have an SUG Material Adverse Effect. This Agreement constitutes
and the Related Documents to be executed by SUG when executed and
delivered will constitute valid and binding obligations of SUG,
enforceable against SUG in accordance with their terms, except as
enforceability may be limited by (i) bankruptcy or similar laws
from time to time in effect affecting the enforcement of credi-
tors' rights generally or (ii) the availability of equitable
remedies generally.
Section 4.5 Governmental Approvals. Except for the Missouri
- -----------------------------------
Public Service Commission (with respect to the Mergers), the
Florida Public Service Commission (with respect to the securities
issued and debt assumed by SUG in connection with the Mergers),
the Pennsylvania Public Utility Commission and as required by the
HSR Act, no approval or authorization of any Governmental Body
with respect to performance under this Agreement by SUG is re-
quired to be obtained by SUG in connection with the execution and
delivery by SUG of this Agreement or the consummation of the
transactions contemplated by this Agreement, the failure to ob-
tain which are, individually or in the aggregate, reasonably
likely to have an SUG Material Adverse Effect.
Section 4.6 Public Utility Holding Company Status; Regulation as
- -----------------------------------------------------------------
a Public Utility. SUG is a "gas utility company" (as such term
- ----------------
is defined in PUHCA). SUG indirectly owns a minority interest in
a "foreign utility company" (as such term is defined in PUHCA)
that is exempt from, and is deemed not to be a public utility
company for purposes of, PUHCA pursuant to Section 33 thereof
with respect to which SUG has filed with the SEC a Form U-57
notification of foreign utility company status. Except as stated
above in this Section 4.6, neither SUG nor any of its Subsidi-
aries is a "holding company," a "subsidiary company," a "public
utility company" or an "affiliate" of a "public utility company,"
or a "holding company" within the meaning of such terms in PUHCA.
Section 4.7 Compliance with Legal Requirements; Governmental
- -------------------------------------------------------------
Authorizations.
- --------------
(a) Except as set forth in Section 4.7 of the SUG Disclosure
Schedule or specifically described in the SUG SEC Documents de-
livered to PNT prior to the date of this Agreement, and subject
to Section 4.19 of this Agreement, to the Knowledge of SUG, SUG
is not in violation of any Legal Requirement that is applicable
to it, to the conduct or operation of its business, or to the
ownership or use of any of its assets, other than such viola-
tions, if any, which are not, individually or in the aggregate,
reasonably likely to have an SUG Material Adverse Effect.
(b) The SUG SEC Documents delivered to PNT prior to the date
of this Agreement accurately describe all material regulation of
SUG that relates to the utility business of SUG. Except as set
forth in Section 4.7 of the SUG Disclosure Schedule, SUG has and
is in material compliance with all material Governmental Autho-
rizations necessary to conduct its business and to own, operate
and use all of its assets as currently conducted.
Section 4.8 Legal Proceedings; Orders. Except as set forth in
Section 4.8 of the SUG Disclosure Schedule or as specifically
described in the SUG SEC Documents delivered to PNT prior to the
date of this Agreement, there is no pending Proceeding:
(1) that has been commenced by or against, or that other-
wise relates to, SUG that is reasonably likely to have an SUG
Material Adverse Effect; or
(2) as of the date of this Agreement, that challenges, or
that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, the Mergers or any of the transac-
tions contemplated hereby.
To the Knowledge of SUG, no such Proceedings, audits or investi-
gations have been Threatened that are, individually or in the
aggregate, reasonably likely to have an SUG Material Adverse Ef-
fect.
Section 4.9 SEC Documents. SUG has made (and, with respect to
- --------------------------
such documents filed after the date hereof through the Closing
Date, will make) available to PNT a true and complete copy of
each report, schedule, registration statement (other than on Form
S-8), and definitive proxy statement filed by SUG with the SEC
since June 30, 1998 and through the Closing Date in substantially
the form filed with the SEC (the "SUG SEC Documents"). As of
their respective dates, the SUG SEC Documents, including without
limitation any financial statements or schedules included there-
in, complied (or will comply), in all material respects with the
requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder
applicable to such SUG SEC Documents, and did not (or will not)
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated
financial statements and unaudited interim financial statements
of SUG included in the SUG SEC Documents (collectively, the "SUG
Financial Statements") were (or will be) prepared in accordance
with GAAP applied on a consistent basis (except as may be indi-
cated therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q) and fairly pre-
sent (or will fairly present) in all material respects the finan-
cial position of SUG as of the respective dates thereof or the
results of operations and cash flows for the respective periods
then ended, as the case may be, subject, in the case of unaudited
interim financial statements, to normal, recurring adjustments
which are not material in the aggregate.
Section 4.10 Taxes. Except as set forth in Section 4.10 of the
- -------------------
SUG Disclosure Schedule:
(a) SUG and its Subsidiaries have timely filed all United
States federal, state and local income Tax Returns required to be
filed by or with respect to them or requests for extensions to
file such Tax Returns have been timely filed, granted and have
not expired, and SUG and its Subsidiaries have timely paid and
discharged all Taxes due in connection with or with respect to
the periods or transactions covered by such Tax Returns and have
paid all other Taxes as are due or made adequate provision there-
for in accordance with GAAP except where the failures to so file,
pay or discharge are not, individually or in the aggregate, rea-
sonably likely to have an SUG Material Adverse Effect. There are
no pending audits or other examinations relating to any Tax mat-
ters. There are no Tax liens on any assets of SUG or its Sub-
sidiaries. As of the date of this Agreement, SUG and its
Subsidiaries have not granted any waiver of any statute of limi-
tations with respect to, or any extension of a period for the
assessment of, any Tax. The accruals and reserves (including
deferred taxes) reflected in the SUG Balance Sheet are in all
material respects adequate to cover all material Taxes accruable
through the date thereof (including interest and penalties, if
any, thereon and Taxes being contested) in accordance with GAAP.
(b) Neither SUG nor any of its Subsidiaries is obligated
under any Contract with respect to industrial development bonds
or other obligations with respect to which the excludability from
gross income of the holder for federal or state income tax pur-
poses could be affected by the Merger or any of the transactions
contemplated by this Agreement.
Section 4.11 Intellectual Property. SUG has no Knowledge of (i)
- -----------------------------------
any infringement or claimed infringement by it of any patent
rights or copyrights of others or (ii) any infringement of the
patent or patent license rights, trademarks or copyrights owned
by or under license to it, except for any such infringements of
the type described in clause (i) or (ii) that are not, indi-
vidually or in the aggregate, reasonably likely to have an SUG
Material Adverse Effect.
Section 4.12 Title to Assets. Except (i) as set forth in Sec-
- -----------------------------
tion 4.12 of the SUG Disclosure Schedule, (ii) as specifically
described in the SUG SEC Documents delivered to PNT prior to the
date of this Agreement, (iii) as set forth in Section 4.19 of
this Agreement or (iv) as set forth in Section 4.19 of the SUG
Disclosure Schedule, none of SUG's assets are subject to any
Encumbrance other than SUG Permitted Liens.
Section 4.13 Indebtedness. All outstanding principal amounts of
- --------------------------
indebtedness for borrowed money of SUG as of June 4, 1999 are set
forth in Section 4.13 of the SUG Disclosure Schedule.
Section 4.14 Machinery and Equipment. Except for normal wear
- -------------------------------------
and tear and with such other exceptions as are not, individually
or in the aggregate, reasonably likely to have an SUG Material
Adverse Effect, SUG's machinery and equipment is in good
operating condition and in a state of reasonable maintenance and
repair.
Section 4.15 Material Contracts. Except as described in Section
- --------------------------------
4.15 of the SUG Disclosure Schedule or as specifically described
in the SUG SEC Documents delivered to PNT prior to the date of
this Agreement, and with such exceptions as are not, individually
or in the aggregate, reasonably likely to have an SUG Material
Adverse Effect, all of SUG's Material Contracts are in full force
and effect and neither SUG nor, to the Knowledge of SUG, any
other party thereto is in default thereunder nor has any event
occurred or is any event occurring that, with notice or the
passage of time or otherwise, is reasonably likely to give rise
to an event of default thereunder by any party thereto.
Section 4.16 Insurance. Section 4.16 of the SUG Disclosure
- -----------------------
Schedule sets forth a list of all policies of insurance held by
SUG as of the date of this Agreement. Since June 30, 1994, the
assets and the business of SUG have been continuously insured
with what SUG reasonably believes are reputable insurers against
all risks and in such amounts normally insured against by com-
panies of the same type and in the same line of business as SUG.
As of the date of this Agreement, no notice of cancellation, non-
renewal or material increase in premiums has been received by SUG
with respect to such policies, and SUG has no Knowledge of any
fact or circumstance that could reasonably be expected to form
the basis for any cancellation, non-renewal or material increase
in premiums, except for such cancellations, non-renewals and in-
creases which are not, individually or in the aggregate, reason-
ably likely to have an SUG Material Adverse Effect. SUG is not
in default with respect to any provision contained in any such
policy or binder nor has there been any failure to give notice or
to present any claim relating to the business or the assets of
SUG under any such policy or binder in a timely fashion or in the
manner or detail required by the policy or binder, except for
such defaults or failures which are not, individually or in the
aggregate, reasonably likely to have an SUG Material Adverse Ef-
fect. As of the date of this Agreement, there are no outstanding
unpaid premiums (except premiums not yet due and payable), and no
notice of cancellation or renewal with respect to, or disallow-
ance of any claim under, any such policy or binder has been
received by SUG as of the date hereof, except for such non-
payments of premiums, cancellations, renewals or disallowances
which are not, individually or in the aggregate, reasonably
likely to have an SUG Material Adverse Effect.
Section 4.17 Employees. Except as set forth on Section 4.17 of
- -----------------------
the SUG Disclosure Schedule, as of the date of this Agreement, no
labor union or other collective bargaining unit has been certi-
fied or recognized by SUG or its Subsidiaries, and, to the Knowl-
edge of SUG, as of the date of this Agreement, there are no
elections, organizing drives or material controversies pending or
Threatened between SUG or its Subsidiaries and any labor union or
other collective bargaining unit representing SUG's or its Sub-
sidiaries' employees. There is no pending or, to the Knowledge
of SUG, Threatened labor practice complaint, arbitration, labor
strike or other material labor dispute (excluding grievances)
involving SUG or its Subsidiaries which are, individually or in
the aggregate, reasonably likely to have an SUG Material Adverse
Effect. Except as described in Section 4.18 or specifically
described in the SUG SEC Documents delivered to PNT prior to the
date of this Agreement, as of the date of this Agreement, neither
SUG nor its Subsidiaries are a party to any employment agreement
with any employee pertaining to SUG or any of its Subsidiaries.
Section 4.18 Employee Benefit Plans.
- ------------------------------------
(a) Each of the SUG Benefit Plans has been operated and ad-
ministered in all material respects in accordance with its
governing documents and applicable federal and state laws (in-
cluding, but not limited to, ERISA and the IRC). For purposes of
this Agreement, "SUG Benefit Plans" shall mean all employee re-
tirement, welfare or other benefit plans, agreements, practices,
policies, programs, or arrangements identified and described in
Section 4.18 of the SUG Disclosure Schedule, which sets forth all
SUG Benefit Plans that are applicable to any employee of SUG or
its Subsidiaries employed by SUG or its Subsidiaries thirty (30)
days prior to the date of this Agreement or maintained by or
contributed to by SUG or its Subsidiaries.
(b) As to any SUG Benefit Plan subject to Title IV of ERISA,
there is no event or condition which presents the material risk
of plan termination, no accumulated funding deficiency, whether
or not waived, within the meaning of Section 302 of ERISA or Sec-
tion 412 of the IRC has been incurred for which any liability is
outstanding, no reportable event within the meaning of Section
4043 of ERISA (for which the notice requirements of Regulation
Section 4043 promulgated by the Pension Benefit Guaranty Corpora-
tion ("PBGC") have not been waived) has occurred within the last
six years, no notice of intent to terminate the SUG Benefit Plan
has been given under Section 4041 of ERISA, no proceeding has
been instituted under Section 4042 of ERISA to terminate the SUG
Benefit Plan, there has been no termination or partial termina-
tion of the SUG Benefit Plan within the meaning of Section
411(d)(3) of the IRC within the last six years, except with
respect to the conversion of the retirement income plan to a cash
balance plan for which full vesting was granted with respect to
affected employees, no event described in Sections 4062 or 4063
of ERISA has occurred, all PBGC premiums have been timely paid
and no liability to the PBGC has been incurred, except for PBGC
premiums not yet due.
(c) There is no matter pending (other than qualification de-
termination applications and filings and other required periodic
filings) with respect to any of the SUG Benefit Plans before the
IRS, the Department of Labor, the PBGC or in or before any other
governmental authority.
(d) Each trust funding an SUG Benefit Plan, which trust is
intended to be exempt from federal income taxation pursuant to
Section 501(c)(9) of the IRC, satisfies the requirements of such
section and has, whenever required by law, received a favorable
determination letter from the IRS regarding such exempt status
and, to the Knowledge of SUG has not, since receipt of the most
recent favorable determination letter, been amended or operated
in any way which would adversely affect such exempt status.
(e) With respect to any SUG Benefit Plan or any other "em-
ployee benefit plan" as defined in Section 3(3) of ERISA which is
established, sponsored, maintained or contributed to, or has been
established, sponsored, maintained or contributed to or, to the
Knowledge of SUG, with respect to any such plan which has been
established, sponsored, maintained or contributed to within six
years prior to the Closing Date, by SUG or its Subsidiaries or
any corporation, trade, business or entity under common control
or being a part of an affiliated service group with SUG, within
the meaning of Section 414(b), (c) or (m) of the IRC or Section
4001 of ERISA ("SUG Commonly Controlled Entity"), (i) no with-
drawal liability, within the meaning of Section 4201 of ERISA,
has been incurred, which withdrawal liability has not been satis-
fied and no such withdrawal liability is reasonably expected to
be incurred, (ii) no liability under Title IV of ERISA (in-
cluding, but not limited to, liability to the PBGC) has been
incurred by SUG or any SUG Commonly Controlled Entity, which lia-
bility has not been satisfied (other than for PBGC premiums not
yet due), (iii) no accumulated funding deficiency, whether or not
waived, within the meaning of Section 302 of ERISA or Section 412
of the IRC has been incurred for which any liability is out-
standing, (iv) there has been no failure to make any contribution
(including installments) to such plan required by Section 302 of
ERISA and Section 412 of the IRC which has resulted in a lien
under Section 302 of ERISA or Section 412 of the IRC and for
which any liability is currently outstanding, (v) to the Knowl-
edge of SUG, no action, omission or transaction has occurred with
respect to any such plan or any other SUG Benefit Plan which
could subject SUG or the plan or trust forming a part thereof to
a material civil liability or penalty under ERISA or other appli-
cable laws, or a material Tax under the IRC, (vi) any such plan
which is a Group Health Plan has complied in all material re-
spects with the provisions of Sections 601-608 of ERISA and Sec-
tion 4980B of the IRC, (vii) there are no pending or, to the
Knowledge of SUG, Threatened claims by or on behalf of any such
plan or any other SUG Benefit Plan, by any employees, former
employees or plan beneficiaries covered by such plan or otherwise
by or on behalf of any person involving any such plan (other than
routine non-contested claims for benefits) which could result in
a material liability to SUG and its Subsidiaries, taken as a
whole, and (viii) neither SUG nor any SUG Commonly Controlled
Entity has engaged in, or is a successor or parent corporation to
any entity or person that has engaged in, a transaction described
in Section 4069 of ERISA.
(f) The execution and delivery of this Agreement and the con-
summation of the transactions contemplated hereby will not (i)
require SUG to make a later contribution to, payment or transfer
of money or property or payment of greater benefits under or with
respect to any SUG Benefit Plan than SUG or its Subsidiaries are
currently required by the terms and provisions of such SUG Bene-
fit Plan to do, (ii) create or give rise to any additional eligi-
bility for participation, vested rights benefits or service
credits under any SUG Benefit Plan, or (iii) in and of themselves
cause or result in SUG incurring any civil liability or penalty
under ERISA or other applicable laws or Tax under the IRC.
(g) SUG is not a party to any Contract nor has it established
any policy or practice, which would require SUG to make a payment
or provide any other form of compensation or benefit to any Per-
son performing (or who within the past twelve months performed)
services for SUG during or upon termination of such services
which would not be payable or provided in the absence of the con-
summation of the transactions contemplated by this Agreement.
(h) Except as would affect unionized employees and/or re-
tirees who had been unionized employees, each SUG Benefit Plan
which is an "employee welfare benefit plan," as such term is
defined in Section 3(1) of ERISA, may be unilaterally amended or
terminated in its entirety without any liability being incurred
by SUG or any affiliate of SUG, except as to benefits accrued
thereunder prior to such amendment or termination.
(i) Section 4.18 of the SUG Disclosure Schedule contains a
true and complete list as of the date of this Agreement of each
SUG Benefit Plan, all stock option plans of SUG and any manage-
ment, employment, deferred compensation, severance (including any
payment, right or benefit resulting from a change in control),
bonus or other contract for personal services with any current or
former officer, director or employee, any consulting contract
with any person who prior to entering this such contract was a
director or officer of SUG or any plan, agreement, arrangement or
understanding similar to any of the foregoing.
(j) SUG has not contributed nor been obligated to contribute
to any "multi-employer plan" within the meaning of Section 3(37)
of ERISA within the last six years and has no outstanding lia-
bility with respect to any such plan.
Section 4.19 Environmental Matters. Except as set forth in Sec-
- -----------------------------------
tion 4.19 of the SUG Disclosure Schedule or as specifically de-
scribed in the SUG SEC Documents delivered to PNT prior to the
date of this Agreement, and with such other exceptions as are
not, individually or in the aggregate, reasonably likely to have
an SUG Material Adverse Effect:
(a) To the Knowledge of SUG, no Facility owned or operated by
SUG is currently, or was at any time, listed on the National
Priorities List promulgated under CERCLA, or on any comparable
state list, and SUG has not received any written notification of
potential or actual liability or a written request for informa-
tion from any Person under or relating to CERCLA or any compara-
ble Legal Requirement with respect to SUG or the Facilities;
(b) To the Knowledge of SUG, SUG and any Person for whose
conduct SUG is reasonably likely to be held responsible, and at
all times has been, in material compliance with any Environmental
Law. SUG has not received any Order, notice, or other communica-
tion from (i) any Governmental Body or private citizen acting in
the public interest, or (ii) the current or prior owner or opera-
tor of any Facilities, of any violation or failure to comply with
any Environmental Law, or of any obligation to undertake or bear
the cost of any environmental cleanup, or with respect to any
property or Facility at which Hazardous Materials generated by
SUG or any other Person for whose conduct SUG may be held re-
sponsible were transported for disposal;
(c) There are no pending or, to the Knowledge of SUG,
Threatened claims or Encumbrances arising under or pursuant to
any Environmental Law with respect to or affecting any of the
Facilities or any other properties and assets (whether real,
personal, or mixed) in which SUG has or had a direct or indirect
interest (including by ownership or use); and
(d) SUG has delivered or made available to PNT true and com-
plete copies and results of any environmental site assessments,
studies, analyses, tests or monitoring possessed by SUG and of
which it has Knowledge pertaining to Hazardous Materials or
Hazardous Activities in, on or under the Facilities, or con-
cerning compliance by SUG or any other Person for whose conduct
SUG is reasonably likely to be held responsible, with Environ-
mental Laws.
Section 4.20 No Material Adverse Change. Except as described in
- ----------------------------------------
the SUG SEC Documents that have been provided to PNT prior to the
date of this Agreement, since the date of the SUG Balance Sheet,
there has not been any SUG Material Adverse Effect, and no events
have occurred or circumstances exist that are, individually or in
the aggregate, reasonably likely to have an SUG Material Adverse
Effect, except that any SUG Material Adverse Effect that results
from or relates to (a) general business or economic conditions,
(b) conditions generally affecting the industries in which SUG
competes or (c) the announcement of the transactions contemplated
by this Agreement shall be disregarded.
Section 4.21 Brokers. SUG is not a party to, or in any way
- ---------------------
obligated under any Contract, and there are no outstanding claims
against SUG, for the payment of any broker's or finder's fees in
connection with the origin, negotiation, execution or performance
of this Agreement.
Section 4.22 Regulatory Proceedings. Except as set forth in
- ------------------------------------
Section 4.22 of the SUG Disclosure Schedule, other than purchase
gas adjustment provisions, SUG (a) has no rates that have been or
are being collected subject to refund, pending final resolution
of any rate proceeding pending before a Governmental Body or on
appeal to the courts, or (b) is a party to any rate proceeding
before a Governmental Body that are, individually or in the
aggregate, reasonably likely to result in any Orders having an
SUG Material Adverse Effect.
Section 4.23 Proxy Statement; Registration Statement. None of
- -----------------------------------------------------
the information supplied or to be supplied to PNT by or on behalf
of SUG for inclusion in the proxy statement, in definitive form,
relating to the PNT Meeting (as defined in Section 6.1(j)) to be
held in connection with the Merger (the "PNT Proxy Statement"),
supplied or to be supplied by or on behalf of SUG in the proxy
statement, in definitive form, relating to the SUG Meeting (as
defined in Section 6.2(m)) to be held in connection with the
Merger (the "SUG Proxy Statement") or supplied by or on behalf of
SUG in the Registration Statement on Form S-4 (and any amendments
thereto) to be filed by SUG with the SEC pursuant to the Securi-
ties Act to register the shares of SUG Common Stock constituting
the Stock Consideration (the "Registration Statement") will, in
the case of the Registration Statement, at the effective time of
the Registration Statement, at any time the Registration State-
ment is amended or supplemented, at the date the PNT Proxy State-
ment is first mailed to PNT's shareholders, at any time the PNT
Proxy Statement is amended or supplemented, at the time of the
PNT Meeting and at the Effective Time, in the case of the PNT
Proxy Statement, at the date the PNT Proxy Statement is first
mailed to PNT's shareholders, at any time the PNT Proxy Statement
is amended or supplemented and at the time of the PNT Meeting,
and in the case of the SUG Proxy Statement, at the date the SUG
Proxy Statement is first mailed to SUG's shareholders, at any
time the SUG Proxy Statement is amended or supplemented and at
the time of the SUG Meeting (giving effect to any documents in-
corporated by reference therein), contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement will comply as to
form and in substance in all material respects with the applica-
ble provisions of the Securities Act and the rules and regula-
tions thereunder. The SUG Proxy Statement will comply as to form
and in substance in all material respects with the applicable
provisions of the Exchange Act and the rules and regulations
thereunder.
Section 4.24 Vote Required. At the SUG Meeting, SUG will seek
- ---------------------------
the approval of the Merger (and any other transaction contem-
plated by this Agreement which requires the approval of SUG's
shareholders) by the holders of a majority of the outstanding
shares of SUG Common Stock (the "SUG Shareholders' Approval"),
and no other vote of the holders of any class or series of the
capital stock of SUG is required to approve this Agreement and
the Mergers.
Section 4.25 Disclaimer of Representations and Warranties.
- ----------------------------------------------------------
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS
ARTICLE IV, SUG MAKES NO OTHER REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, AND SUG HEREBY DISCLAIMS ANY SUCH OTHER
REPRESENTATIONS OR WARRANTIES, WHETHER BY SUG, ANY SUBSIDIARY OF
SUG, OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS OR REPRESENTATIVES, OR ANY OTHER PERSON, WITH RESPECT TO
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, NOT-
WITHSTANDING THE DELIVERY OR DISCLOSURE TO PNT OR ANY OF ITS
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES, OR ANY
OTHER PERSON, OF ANY DOCUMENTATION OR OTHER INFORMATION BY SUG,
ANY SUBSIDIARY OF SUG, OR ANY OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES, OR ANY OTHER
PERSON, WITH RESPECT TO ANY OF THE FOREGOING.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PNT
PNT, as to the Acquired Companies, represents and warrants to SUG
as follows:
Section 5.1 Organization, Existence and Qualification.
- ------------------------------------------------------
(a) Each Acquired Company is a corporation duly incorporated,
validly existing, and in good standing under the laws of its
state of incorporation, 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, and
to perform all its obligations under Applicable Contracts. Sec-
tion 5.1 of the PNT Disclosure Schedule sets forth the name of
each Acquired Company, the state or jurisdiction of its incorpo-
ration or formation, and, except as set forth on Section 5.1(a)
of the PNT Disclosure Schedule, each state or jurisdiction where
such Acquired Company is duly qualified as a foreign corporation.
Each Acquired Company is duly qualified to do business as a for-
eign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use
of the properties owned or used by it, or the nature of the busi-
ness conducted by it, requires such qualification as a foreign
corporation except such failures to be so qualified or in good
standing as are not, individually or in the aggregate, reasonably
likely to have a PNT Material Adverse Effect.
(b) PNT has delivered to SUG copies of the Organizational
Documents, as currently in effect, of each Acquired Company.
Section 5.2 Capitalization. The capital stock of PNT consists
- ---------------------------
of 30,000,000 shares of PNT Common Stock, of which 10,835,270
shares were issued and outstanding on May 28, 1999. PG Energy is
authorized to issue 997,500 shares of PG Preferred Stock, of
which (i) 47,451 shares of the Series 4.10% PG Preferred Stock
(the "4.10% PG Preferred Stock"), and (ii) 2,396 shares of the
Series 5.75% PG Preferred Stock (the "5.75% PG Preferred Stock"),
were issued and outstanding on May 28, 1999. The issued and out-
standing shares of PNT Common Stock and PG Preferred Stock have
been validly issued and are fully paid and nonassessable. Except
as specifically described in the PNT SEC Documents delivered to
SUG prior to the date of this Agreement, as of the date of this
Agreement, no shares of PNT Common Stock or PG Preferred Stock
are held, in treasury or otherwise, by PNT or any of its Subsidi-
aries and except as set forth in Section 5.2 of the PNT Disclo-
sure Schedule, there are no outstanding (i) securities
convertible into PNT Common Stock, PG Preferred Stock or other
capital stock PNT or any of its material Subsidiaries, (ii)
warrants or options to purchase PNT Common Stock or other
securities of PNT or any of its material Subsidiaries or (iii)
other commitments to issue shares of any PNT Common Stock, PG
Preferred Stock or other securities of PNT or any of its material
Subsidiaries.
Section 5.3 Subsidiaries; Investments. Except as set forth in
- --------------------------------------
Section 5.3 of the PNT Disclosure Schedule, as of the date of
this Agreement, PNT has no Subsidiaries or investments in any
Person (except for marketable securities disclosed to SUG) and,
except for the issued and outstanding PG Preferred Stock, PNT is
the registered owner and holder of all of the issued and out-
standing shares of capital stock of its Subsidiaries and has good
title to such shares. The outstanding capital stock of each
material Subsidiary has been validly issued and is fully paid and
nonassessable. All such capital stock owned by any Acquired Com-
pany is free and clear of any Encumbrance (except for any Emcum-
brance disclosed in the PNT SEC Documents filed to date, or
created or incurred by this Agreement in favor of SUG, or imposed
by federal or state securities laws).
Section 5.4 Authority Relative to this Agreement and Binding
- -------------------------------------------------------------
Effect. The execution, delivery and performance of this Agree-
- ------
ment and the Related Documents by PNT have been duly authorized
by all requisite corporate action, except, as of the date of this
Agreement, for the PNT Shareholders' Approval, the approval of
the Boards of Directors of PG Energy and Honesdale of the trans-
actions contemplated hereby and the approval of the holders of
common stock of each of PG Energy and Honesdale of the transac-
tions contemplated hereby. Except as set forth in the schedule
to be delivered by PNT to SUG within seven days of the date of
this Agreement, the execution, delivery and performance of this
Agreement and the Related Documents by PNT will not result in a
violation or breach of any term or provision of, or constitute a
default or accelerate the performance required under, the Organi-
zational Documents of any of the Acquired Companies, any inden-
ture, mortgage, deed of trust, security agreement, loan
agreement, or Material Contract to which any of the Acquired Com-
panies is a party or by which its assets are bound, or violate
any order, writ, injunction or decree of any Governmental Body,
with such exceptions as are not, individually or in the aggre-
gate, reasonably likely to have a PNT Material Adverse Effect.
This Agreement constitutes and the Related Documents to be exe-
cuted by any of the Acquired Companies when executed and de-
livered will constitute valid and binding obligations of such
Acquired Company, enforceable against such Acquired Company in
accordance with their 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 5.5 Governmental Approvals. Except as set forth in Sec-
- -----------------------------------
tion 5.5 of the PNT Disclosure Schedule and as required by the
HSR Act, no approval or authorization of any Governmental Body
with respect to performance under this Agreement by any Acquired
Company is required to be obtained by PNT in connection with the
execution and delivery by PNT of this Agreement or the consumma-
tion by the Acquired Companies of the transactions contemplated
by this Agreement, the failure to obtain which are, individually
or in the aggregate, reasonably likely to have a PNT Material
Adverse Effect.
Section 5.6 Public Utility Holding Company Status; Regulation as
- -----------------------------------------------------------------
a Public Utility. PNT is a "holding company" (as such term is
- ----------------
defined in PUHCA) exempt from certain provisions of PUHCA, and
has received no adverse notice from the SEC with respect to the
validity of its exempt status, pursuant to Section 3(a)(1) of
PUHCA. PG Energy is a "public utility company" (as such term is
defined in PUHCA). Honesdale is a "public utility company" (as
such term is defined in PUHCA). Each of PG Energy and Honesdale
is a "subsidiary company" of PNT, and an "affiliate" of the other
and of PNT (as such terms are defined in PUHCA). Except as
stated above in this Section 5.6, none of the Acquired Companies
is a "holding company," a "subsidiary company," a "public utility
company," or an "affiliate" of a "public utility company" or a
"holding company" within the meaning of such terms in PUHCA.
Section 5.7 Compliance with Legal Requirements; Governmental
- -------------------------------------------------------------
Authorizations.
- --------------
(a) Except as set forth in Section 5.7(a) of the PNT Disclo-
sure Schedule or as specifically described in the PNT SEC Docu-
ments delivered to SUG prior to the date of this Agreement, and
subject to Section 5.19 of this Agreement, to the Knowledge of
any Acquired Company, no Acquired Company is in violation of any
Legal Requirement that is applicable to it, to the conduct or
operation of its business, or to the ownership or use of any of
its assets, other than such violations, if any, which are not,
individually or in the aggregate, reasonably likely to have a PNT
Material Adverse Effect.
(b) The PNT SEC Documents delivered to SUG prior to the date
of this Agreement accurately describe all material regulation of
each Acquired Company that relates to the utility business of any
Acquired Company. Except as set forth on Section 5.7(a) of the
PNT Disclosure Schedule, each Acquired Company has and is in
material compliance with all material Governmental Authorizations
necessary to conduct its business and to own, operate and use all
of its assets as currently conducted.
Section 5.8 Legal Proceedings; Orders. Except as set forth in
- --------------------------------------
Section 5.8 of the PNT Disclosure Schedule or as specifically
described in the PNT SEC Documents delivered to SUG prior to the
date of this Agreement, there is no pending Proceeding:
(1) that has been commenced by or against, or that other-
wise relates to, any Acquired Company that is reasonably likely
to have a PNT Material Adverse Effect; or
(2) as of the date of this Agreement, that challenges, or
that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, the Mergers or any of the transac-
tions contemplated hereby.
To the Knowledge of PNT, except as set forth in Section 5.8 of
the PNT Disclosure Schedule, as of the date of this Agreement, no
such Proceedings, audits or investigations have been Threatened
that are, individually or in the aggregate, reasonably likely to
have a PNT Material Adverse Effect.
Section 5.9 SEC Documents. PNT has made (and, with respect to
- --------------------------
such documents filed after the date hereof through the Closing
Date, will make) available to SUG a true and complete copy of
each report, schedule, registration statement (other than on Form
S-8), and definitive proxy statement filed by PNT or PG Energy
with the SEC since December 31, 1998 through the Closing Date in
substantially the form filed with the SEC (the "PNT SEC Docu-
ments"). As of their respective dates, the PNT SEC Documents,
including without limitation any financial statements or sched-
ules included therein, complied (or will comply), in all material
respects with the requirements of the Securities Act or the Ex-
change Act, as the case may be, and the rules and regulations of
the SEC thereunder applicable to such PNT SEC Documents, and did
not (or will not) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circum-
stances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial
statements of PNT or PG Energy included in the PNT SEC Documents
(collectively, the "PNT Financial Statements") were (or will be)
prepared in accordance with GAAP (except as may be indicated
therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q) and fairly pre-
sent (or will fairly present) in all material respects the finan-
cial position of PNT and its Subsidiaries, or PG Energy, as the
case may be, as of the respective dates thereof or the results of
operations and cash flows for the respective periods then ended,
as the case may be, subject, in the case of unaudited interim
financial statements, to normal, recurring adjustments which are
not material in the aggregate.
Section 5.10 Taxes.
- -------------------
(a) The Acquired Companies have timely filed all United
States federal, state and local income Tax Returns required to be
filed by or with respect to them or requests for extensions to
file such Tax Returns have been timely filed, granted and have
not expired, and the Acquired Companies have timely paid and
discharged all Taxes due in connection with or with respect to
the periods or transactions covered by such Tax Returns and have
paid all other Taxes as are due or made adequate provision there-
for in accordance with GAAP except where failures to so file, pay
or discharge are not, individually or in the aggregate, reason-
ably likely to have a PNT Material Adverse Effect. There are no
pending audits or other examinations relating to any Tax matters.
There are no Tax liens on any assets of the Acquired Companies.
As of the date of this Agreement, none of the Acquired Companies
has granted any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment of, any Tax.
The accruals and reserves (including deferred taxes) reflected in
the PNT Balance Sheet are in all material respects adequate to
cover all material Taxes accruable through the date thereof
(including interest and penalties, if any, thereon and Taxes
being contested) in accordance with GAAP. Prior to the date of
this Agreement, no Acquired Company has at any time adopted a
plan of complete liquidation within the meaning of Section 332 of
the IRC.
(b) None of the Acquired Companies is obligated under any
Contract with respect to industrial development bonds or other
obligations with respect to which the excludability from gross
income of the holder for federal or state income tax purposes
could be affected by the Merger or any of the transactions con-
templated by this Agreement.
Section 5.11 Intellectual Property. Except as set forth in Sec-
- -----------------------------------
tion 5.11 of the PNT Disclosure Schedule, no Acquired Company has
any Knowledge of (i) any infringement or claimed infringement by
it of any patent rights or copyrights of others or (ii) any in-
fringement of the patent or patent license rights, trademarks or
copyrights owned by or under license to it, except for any such
infringements of the type described in clause (i) or (ii) that
are not, individually or in the aggregate, reasonably likely to
have a PNT Material Adverse Effect.
Section 5.12 Title to Assets. Except (i) as set forth in Sec-
- -----------------------------
tion 5.12 of the PNT Disclosure Schedule, (ii) as specifically
described in the PNT SEC Documents delivered to SUG prior to the
date of this Agreement, (iii) as set forth in Section 5.19 of
this Agreement or (iv) as set forth in Section 5.19 of the PNT
Disclosure Schedule, none of the Acquired Companies' assets are
subject to any Encumbrance other than PNT Permitted Liens.
Section 5.13 Indebtedness. All outstanding principal amounts of
- --------------------------
indebtedness for borrowed money of the Acquired Companies as of
June 4, 1999 are set forth in Section 5.13 of the PNT Disclosure
Schedule, except for inter-company indebtedness.
Section 5.14 Machinery and Equipment. Except for normal wear
- -------------------------------------
and tear, and with such exceptions as are not, individually or in
the aggregate, reasonably likely to have a PNT Material Adverse
Effect, the machinery and equipment of the Acquired Companies is
in good operating condition and in a state of reasonable mainte-
nance and repair.
Section 5.15 Material Contracts. Except as specifically de-
- --------------------------------
scribed in the PNT SEC Documents delivered to SUG prior to the
date of this Agreement, and with such exceptions as are not,
individually or in the aggregate, reasonably likely to have a PNT
Material Adverse Effect, all Material Contracts of the Acquired
Companies are in full force and effect and no Acquired Company
nor, to the Knowledge of PNT, any other party thereto is in de-
fault thereunder nor has any event occurred or is any event
occurring that with notice or the passage of time or otherwise,
is reasonably likely to give rise to an event of default there-
under by any party thereto.
Section 5.16 Insurance. Section 5.16(a) of the PNT Disclosure
- -----------------------
Schedule sets forth a list of all policies of insurance held by
the Acquired Companies as of the date of this Agreement. Except
as set forth in Section 5.16(b) of the PNT Disclosure Schedule,
since June 30, 1994, the assets and the business of the Acquired
Companies have been continuously insured with what PNT reasonably
believes are reputable insurers against all risks and in such
amounts normally insured against by companies of the same type
and in the same line of business as any of the Acquired Com-
panies. As of the date of this Agreement, no notice of cancella-
tion, non-renewal or material increase in premiums has been
received by any of the Acquired Companies with respect to such
policies, and no Acquired Company has Knowledge of any fact or
circumstance that could reasonably be expected to form the basis
for any cancellation, non-renewal or material increase in pre-
miums, except for such cancellations, non-renewals and increases
which are not, individually or in the aggregate, reasonably
likely to have a PNT Material Adverse Effect. None of the
Acquired Companies is in default with respect to any provision
contained in any such policy or binder nor has there been any
failure to give notice or to present any claim relating to the
business or the assets of the Acquired Companies under any such
policy or binder in a timely fashion or in the manner or detail
required by the policy or binder, except for such defaults or
failures which are not, individually or in the aggregate, reason-
ably likely to have a PNT Material Adverse Effect. As of the
date of this Agreement, there are no outstanding unpaid premiums
(except premiums not yet due and payable), and no notice of can-
cellation or renewal with respect to, or disallowance of any
claim under, any such policy or binder has been received by the
Acquired Companies as of the date hereof, except for such non-
payments of premiums, cancellations, renewals or disallowances
which are not, individually or in the aggregate, reasonably
likely to have a PNT Material Adverse Effect.
Section 5.17 Employees. Section 5.17(a) of the PNT Disclosure
- -----------------------
Schedule sets forth a list as of no more than thirty (30) days
prior to the date of this Agreement of all the present officers
and employees of the Acquired Companies. Except as set forth in
Section 5.17(b) of the PNT Disclosure Schedule, as of the date of
this Agreement, no labor union or other collective bargaining
unit has been certified or recognized by any of the Acquired Com-
panies, and, to the Knowledge of the Acquired Companies, as of
the date of this Agreement, there are no elections, organizing
drives or material controversies pending or Threatened between
any of the Acquired Companies and any labor union or other col-
lective bargaining unit representing any of the Acquired Com-
panies' employees. There is no pending or, to the Knowledge of
PNT, Threatened labor practice complaint, arbitration, labor
strike or other material labor dispute (excluding grievances)
involving any of the Acquired Companies which are, individually
or in the aggregate, reasonably likely to have a PNT Material
Adverse Effect. Except for collective bargaining agreements or
as described in or pursuant to Section 5.18 and Section
6.1(a)(16) or as attached as an exhibit to, or as specifically
described in, the PNT SEC Documents delivered to SUG prior to the
date of this Agreement, as of the date of this Agreement, to the
Knowledge of PNT, none of the Acquired Companies is a party to
any employment agreement with any employee pertaining to any of
the Acquired Companies.
Section 5.18 Employee Benefit Plans.
- ------------------------------------
(a) Except as set forth in Section 5.18 of the PNT Disclosure
Schedule, each of the PNT Benefit Plans has been operated and ad-
ministered in all material respects in accordance with its
governing documents and applicable federal and state laws (in-
cluding, but not limited to, ERISA and the IRC). For purposes of
this Agreement, "PNT Benefit Plans" shall mean all employee re-
tirement, welfare or other benefit plans, agreements, practices,
policies, programs, or arrangements identified and described in
Section 5.18 of the PNT Disclosure Schedule, which sets forth all
PNT Benefit Plans that are applicable to any employee of the
Acquired Companies identified in Section 5.17 of the PNT Disclo-
sure Schedule or maintained by or contributed to by any of the
Acquired Companies.
(b) Except as set forth in Section 5.18 of the PNT Disclosure
Schedule, as to any PNT Benefit Plan subject to Title IV of
ERISA, there is no event or condition which presents the material
risk of plan termination, no accumulated funding deficiency,
whether or not waived, within the meaning of Section 302 of ERISA
or Section 412 of the IRC has been incurred for which any lia-
bility is outstanding, no reportable event within the meaning of
Section 4043 of ERISA (for which the notice requirements of Regu-
lation Section 4043 promulgated by the PBGC have not been waived)
has occurred within the last six years, no notice of intent to
terminate the PNT Benefit Plan has been given under Section 4041
of ERISA, no proceeding has been instituted under Section 4042 of
ERISA to terminate the PNT Benefit Plan, there has been no termi-
nation or partial termination of the PNT Benefit Plan within the
meaning of Section 411(d)(3) of the IRC within the last six
years, no event described in Sections 4062 or 4063 of ERISA has
occurred, all PBGC premiums have been timely paid and no lia-
bility to the PBGC has been incurred, except for PBGC premiums
not yet due.
(c) There is no matter pending (other than qualification de-
termination applications and filings and other required periodic
filings) with respect to any of the PNT Benefit Plans before the
IRS, the Department of Labor, the PBGC or in or before any other
governmental authority.
(d) Except as set forth in Section 5.18 of the PNT Disclosure
Schedule, each trust funding a PNT Benefit Plan, which trust is
intended to be exempt from federal income taxation pursuant to
Section 501(c)(9) of the IRC, satisfies the requirements of such
section and has received a favorable determination letter from
the IRS regarding such exempt status and to the Knowledge of any
Acquired Company has not, since receipt of the most recent favor-
able determination letter, been amended or operated in any way
which would adversely affect such exempt status.
(e) Except as otherwise set forth in Section 5.18 of the PNT
Disclosure Schedule, with respect to any PNT Benefit Plan or any
other "employee benefit plan" as defined in Section 3(3) of ERISA
which is established, sponsored, maintained or contributed to, or
to the Knowledge of the Acquired Companies, with respect to any
such plan which has been established, sponsored, maintained or
contributed to within six years prior to the Closing Date, by the
Acquired Companies or any corporation, trade, business or entity
under common control or being a part of an affiliated service
group with any of the Acquired Companies, within the meaning of
Section 414(b), (c) or (m) of the IRC or Section 4001 of ERISA
("PNT Commonly Controlled Entity"), (i) no withdrawal liability,
within the meaning of Section 4201 of ERISA, has been incurred,
which withdrawal liability has not been satisfied and no such
withdrawal liability is reasonably expected to be incurred, (ii)
no liability under Title IV of ERISA (including, but not limited
to, liability to the PBGC) has been incurred by the Acquired Com-
panies or any PNT Commonly Controlled Entity, which liability has
not been satisfied (other than for PBGC premiums not yet due),
(iii) no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the
IRC has been incurred for which any liability is outstanding,
(iv) there has been no failure to make any contribution (in-
cluding installments) to such plan required by Section 302 of
ERISA and Section 412 of the IRC which has resulted in a lien
under Section 302 of ERISA or Section 412 of the IRC and for
which any liability is currently outstanding; (v) to the Knowl-
edge of any Acquired Company, no action, omission or transaction
has occurred with respect to any such plan or any other PNT
Benefit Plan which could subject any of the Acquired Companies,
the plan or trust forming a part thereof, or SUG to a material
civil liability or penalty under ERISA or other applicable laws,
or a material Tax under the IRC, (vi) any such plan which is a
Group Health Plan has complied in all material respects with the
provisions of Sections 601-608 of ERISA and Section 4980B of the
IRC, (vii) there are no pending or, to the Knowledge of any of
the Acquired Companies, Threatened claims by or on behalf of any
such plan or any other PNT Benefit Plan, by any employees, former
employees or plan beneficiaries covered by such plan or otherwise
by or on behalf of any person involving any such plan (other than
routine non-contested claims for benefits) which could result in
a material liability to the Acquired Companies taken as a whole
and (viii) neither the Acquired Companies nor any PNT Commonly
Controlled Entity has engaged in, or is a successor or parent
corporation to any entity or person that has engaged in, a
transaction described in Section 4069 of ERISA.
(f) Except as otherwise set forth in Section 5.18 of the PNT
Disclosure Schedule, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will
not (i) require SUG to make a later contribution to, payment or
transfer of money or property or payment of greater benefits
under or with respect to any PNT Benefit Plan than any of the
Acquired Companies is currently required by the terms and provi-
sions of such PNT Benefit Plan to do, (ii) create or give rise to
any additional eligibility for participation, vested rights bene-
fits or service credits under any PNT Benefit Plan, or (iii) in
and of themselves cause or result in SUG incurring any civil
liability or penalty under ERISA or other applicable laws or Tax
under the IRC.
(g) Except as otherwise set forth in Section 5.18 of the PNT
Disclosure Schedule, none of the Acquired Companies is a party to
any Contract nor has it established any policy or practice, which
would require it or SUG to make a payment or provide any other
form of compensation or benefit to any Person performing (or who
within the past twelve months performed) services for any of the
Acquired Companies during or upon termination of such services
which would not be payable or provided in the absence of the con-
summation of the transactions contemplated by this Agreement.
(h) Except as would affect retirees and unionized employees
and as otherwise set forth in Section 5.18 of the PNT Disclosure
Schedule, each PNT Benefit Plan which is an "employee welfare
benefit plan," as such term is defined in Section 3(1) of ERISA,
may be unilaterally amended or terminated in its entirety without
any liability being incurred by any of the Acquired Companies,
SUG or any affiliate of SUG, except as to benefits accrued there-
under prior to such amendment or termination.
(i) Section 5.18 of the PNT Disclosure Schedule contains a
true and complete list as of the date of this Agreement of each
PNT Benefit Plan, all Acquired Company Option Plans and any man-
agement, employment, deferred compensation, severance (including
any payment, right or benefit resulting from a change in con-
trol), bonus or other contract for personal services with any
current or former officer, director or employee, any consulting
contract with any person who prior to entering this such contract
was a director or officer of any Acquired Company or any plan,
agreement, arrangement or understanding similar to any of the
foregoing.
(j) None of the Acquired Companies has contributed nor been
obligated to contribute to any "multi-employer plan" within the
meaning of Section 3(37) of ERISA within the last six years, and
none of the Acquired Companies has any outstanding liability with
respect to any such plan.
Section 5.19 Environmental Matters. Except as set forth in Sec-
- -----------------------------------
tion 5.19 of the PNT Disclosure Schedule or as specifically de-
scribed in the PNT SEC Documents delivered to SUG prior to the
date of this Agreement, and with such other exceptions as are
not, individually or in the aggregate, reasonably likely to have
a PNT Material Adverse Effect:
(a) To the Knowledge of any Acquired Company, no Facility
owned or operated by any Acquired Company is currently, or was at
any time, listed on the National Priorities List promulgated
under CERCLA, or on any comparable state list, and no Acquired
Company has received any written notification of potential or
actual liability or a written request for information from any
Person under or relating to CERCLA or any comparable Legal Re-
quirement with respect to any Acquired Company or the Facilities;
(b) To the Knowledge of any Acquired Company, each Acquired
Company and any Person for whose conduct any Acquired Company is
reasonably likely to be held responsible, and at all times has
been, in material compliance with any Environmental Law. No
Acquired Company has received any Order, notice, or other com-
munication from (i) any Governmental Body or private citizen
acting in the public interest, or (ii) the current or prior owner
or operator of any Facilities, of any violation or failure to
comply with any Environmental Law, or of any obligation to under-
take or bear the cost of any environmental cleanup, or with
respect to any property or Facility at which Hazardous Materials
generated by any Acquired Company were transported for disposal;
(c) There are no pending or, to the Knowledge of any of the
Acquired Companies, Threatened claims arising under or pursuant
to any Environmental Law with respect to or affecting any of the
Facilities or any other properties and assets (whether real, per-
sonal, or mixed) in which any Acquired Company has or had a
direct or indirect interest (including by ownership or use); and
(d) PNT has delivered or made available to SUG true and com-
plete copies and results of any environmental site assessments,
studies, analyses, tests or monitoring possessed by any Acquired
Company of which any Acquired Company has Knowledge pertaining to
Hazardous Materials or Hazardous Activities in, on or under the
Facilities, or concerning compliance by any Acquired Company or
any other Person for whose conduct any Acquired Company is rea-
sonably likely to be held responsible, with Environmental Laws.
Section 5.20 No Material Adverse Change. Since the date of the
- ----------------------------------------
PNT Balance Sheet, except as specifically described in the PNT
SEC Documents delivered to SUG prior to the date of this Agree-
ment, there has not been any PNT Material Adverse Effect, and no
events have occurred or circumstances exist that are, indi-
vidually or in the aggregate, reasonably likely to have a PNT
Material Adverse Effect, except that any PNT Material Adverse
Effect that results from or relates to (a) general business or
economic conditions, (b) conditions generally affecting the
industries in which the Acquired Companies compete or (c) the
announcement of the transactions contemplated by this Agreement
shall be disregarded.
Section 5.21 Brokers. No Acquired Company is a party to, or in
- ---------------------
any way obligated under any Contract, and there are no out-
standing claims against any Acquired Company, for the payment of
any broker's or finder's fees in connection with the origin,
negotiation, execution or performance of this Agreement.
Section 5.22 PNT Rights Agreement. Prior hereto, PNT has de-
- ----------------------------------
livered to SUG a true and complete copy of the PNT Rights Agree-
ment. The consummation of the transactions contemplated by this
Agreement will not result in the triggering of any right or en-
titlement of the holders of the PNT Common Stock or other PNT
securities under the PNT Rights Agreement or any similar agree-
ment to which PNT or any of its Subsidiaries is a party.
Section 5.23 Regulatory Proceedings. Except as set forth in
- ------------------------------------
Section 5.23 of the PNT Disclosure Schedule, other than purchase
gas adjustment provisions, none of PNT or its Subsidiaries all or
part of whose rates or services are regulated by a Governmental
Body (a) has rates that have been or are being collected subject
to refund, pending final resolution of any rate proceeding
pending before a Governmental Body or on appeal to the courts, or
(b) is a party to any rate proceeding before a Governmental Body
that are, individually or in the aggregate, reasonably likely to
result in any Orders having a PNT Material Adverse Effect.
Section 5.24 Proxy Statement; Registration Statement. None of
- -----------------------------------------------------
the information supplied or to be supplied by or on behalf of PNT
and its Subsidiaries in either the PNT Proxy Statement or sup-
plied or to be supplied by PNT to SUG for inclusion in either the
SUG Proxy Statement or the Registration Statement, will, with
respect to the Registration Statement, at the effective time of
the Registration Statement, at any time the Registration State-
ment is amended or supplemented, at the date the PNT Proxy State-
ment is first mailed to PNT's shareholders, at any time the PNT
Proxy Statement is amended or supplemented, at the time of the
PNT Meeting and at the Effective Time, in the case of the PNT
Proxy Statement, at the date the PNT Proxy Statement is first
mailed to PNT's shareholders, at any time the PNT Proxy Statement
is amended or supplemented and at the time of the PNT Meeting and
in the case of the SUG Proxy Statement, at the date the SUG Proxy
Statement is first mailed to SUG's shareholders, at any time the
SUG Proxy Statement is amended or supplemented and at the time of
the SUG Meeting (giving effect to any documents incorporated by
reference therein), contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not mis-
leading. The PNT Proxy Statement will comply as to form and in
substance in all material respects with the applicable provisions
of the Exchange Act and the rules and regulations thereunder.
Section 5.25 Vote Required. Other than the approval of the
- ---------------------------
Merger by the holders of a majority of the outstanding shares of
PNT Common Stock (the "PNT Shareholders' Approval") and the
approval by the holders of common stock of each of PG Energy and
Honesdale, no vote of the holders of any class or series of the
capital stock of any Acquired Company is required to approve this
Agreement and the Mergers.
Section 5.26 Opinion of Financial Advisor. PNT has provided (or
- ------------------------------------------
promptly upon receipt of a written copy thereof, will provide)
SUG a copy of the opinion of Legg Mason Wood Walker, Incorpo-
rated, dated as of the date hereof, with respect to the Merger
Consideration to be received by the holders of PNT Common Stock
pursuant to the transactions contemplated by this Agreement.
Section 5.27 Disclaimer of Representations and Warranties.
- ----------------------------------------------------------
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS
ARTICLE V, PNT MAKES NO OTHER REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, AND PNT HEREBY DISCLAIMS ANY SUCH OTHER
REPRESENTATIONS OR WARRANTIES, WHETHER BY PNT, ANY SUBSIDIARY OF
PNT, OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS OR REPRESENTATIVES, OR ANY OTHER PERSON, WITH RESPECT TO
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, NOT-
WITHSTANDING THE DELIVERY OR DISCLOSURE TO SUG OR ANY OF ITS
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES, OR ANY
OTHER PERSON, OF ANY DOCUMENTATION OR OTHER INFORMATION BY PNT,
ANY SUBSIDIARY OF PNT, OR ANY OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES, OR ANY OTHER
PERSON, WITH RESPECT TO ANY OF THE FOREGOING.
ARTICLE VI
COVENANTS
Section 6.1 Covenants of PNT. PNT agrees to observe and perform
- -----------------------------
the following covenants and agreements:
(a) Conduct of the Business Prior to the Closing Date. With
-------------------------------------------------
respect to the Acquired Companies, except (i) as contemplated in
this Agreement, (ii) for a sale by PNT of Keystone Pipeline Ser-
vices, Inc. or by Keystone Pipeline Services, Inc. of its assets,
or the sale by any of the Acquired Companies of any real property
owned by any of them that is not used or useful in the Acquired
Companies' utility operations, (iii) the redemption or repurchase
of the PG Preferred Stock prior to the Effective Time, (iv) as
required by law or regulation or (v) as otherwise expressly con-
sented to in writing by SUG which consent will not be unreason-
ably withheld or delayed, prior to the Closing, PNT will cause
each Acquired Company to:
(1) Not make or permit any material change in the general
nature of its business;
(2) Maintain its Ordinary Course of Business in accordance
with prudent business judgment and consistent with past practice
and policy, and maintain its assets in good repair, order and
condition, reasonable wear and tear excepted, subject to retire-
ments in the Ordinary Course of Business;
(3) Preserve the Acquired Company as an ongoing business
and use reasonable efforts to maintain the goodwill associated
with the Acquired Company;
(4) Preserve all of the Acquired Companies' franchises,
tariffs, certificates of public convenience and necessity,
licenses, authorizations and other governmental rights and per-
mits;
(5) Not enter into any material transaction or Material
Contract other than in the Ordinary Course of Business;
(6) 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 lien, any of the assets
of the Acquired Company other than in the Ordinary Course of
Business;
(7) Not hire any new employee unless such employee is a
bona fide replacement for a presently-filled position with the
Acquired Company as of the date hereof except for no more than
ten (10) new employees to be hired by PG Energy Services, Inc.
for the conduct of the electric and natural gas marketing busi-
ness;
(8) Not file any material applications, petitions, mo-
tions, orders, briefs, settlement or agreements in any material
Proceeding before any Governmental Body which involves the
Acquired Company, and appeals related thereto without, to the
extent reasonably practicable, consulting SUG; provided, however,
-------- -------
that if such Proceeding is reasonably likely to have a PNT
Material Adverse Effect, PNT shall not make any such filing
without the consent of SUG, which consent shall not be unreason-
ably withheld or delayed.
(9) Not engage in any new (other than intercompany short-
term financing arrangements in the Ordinary Course of Business),
or modify any existing, intercompany transactions involving Key-
stone Pipeline Services, Inc., and not engage in or modify,
except in the Ordinary Course of Business, any material intercom-
pany transactions involving any other Acquired Company, except as
set forth in Section 6.1(a)(9) of the PNT Disclosure Schedule;
(10) Not voluntarily change in any material respect or
terminate any insurance policies disclosed on Section 5.16(a) of
the PNT Disclosure Schedule that presently are in effect unless
equivalent coverage is obtained;
(11) Except as disclosed or specifically contemplated in
this Agreement or in Section 6.1(a)(11) of the PNT Disclosure
Schedule, and with respect to budgeted expenditures known and
specifically disclosed in writing to SUG, subject to adjustments
in the Ordinary Course of Business and other deviations (which in
the aggregate shall not exceed 5% on an annualized basis during
the period from the date of this Agreement until the Closing
Date), not make any capital expenditure or capital expenditure
commitment;
(12) Not make any changes in financial policies or prac-
tices, or strategic or operating policies or practices, in each
case which involve any Acquired Company, except as required by
law, rule or regulation;
(13) Comply in all material respects with all applicable
material Legal Requirements and permits, including without limi-
tation those relating to the filing of reports and the payment of
Taxes due to be paid prior to the Closing, other than those con-
tested in good faith;
(14) Not adopt, amend (other than amendments that reduce
the amounts payable by SUG or any of its subsidiaries or amend-
ments required by law) or assume an obligation to contribute to
any PNT Benefit Plan or collective bargaining agreement or enter
into any employment, severance or similar contract with any Per-
son (including without limitation, contracts with management of
any Acquired Company or any of its affiliates that might require
payments be made upon consummation of the transactions contem-
plated hereby) or amend any such existing contracts to increase
any amounts payable thereunder or benefits provided thereunder;
(15) Except in the Ordinary Course of Business or in
accordance with the terms of any existing Contract, PNT Benefit
Plan or collective bargaining agreement, not grant any increase
or change in total compensation, benefits or pay any bonus to any
employees;
(16) Not grant or enter into any Contract, written or
oral, with respect to continued employment for any employee,
officer or director;
(17) Not make (i) any loan or advance to any officer,
director, stockholder or employee other than in the Ordinary
Course of Business or (ii) make any other loan or advance to any
Person other than in the Ordinary Course of Business;
(18) Not terminate any existing gas purchase, exchange or
transportation contract necessary to supply firm gas at all city
gate delivery points or enter into any new contract for the sup-
ply, transportation, storage or exchange of gas with respect to
the Acquired Companies' regulated gas distribution operations or
renew or extend or negotiate any existing contract providing for
the same where such contract is not terminable within sixty (60)
days without penalty unless specifically agreed to by SUG;
(19) Not amend any of its Organizational Documents; and
(20) Subject to Section 6.1(l), not issue or assume any
note, debenture or other evidence of indebtedness which by its
terms does not mature within two year(s) (except that PG Energy
shall have no more than $11,999,999 of indebtedness which matures
within one year from the date of any such issuance or assumption)
from the date of execution or issuance thereof, unless otherwise
redeemable or subject to prepayment at any time at the option of
the Acquired Company on not more than thirty (30) days notice
without penalty for such redemption or prepayment.
(b) Customer Notifications. At any time and from time to
----------------------
time reasonably requested by SUG prior to the Closing Date, each
Acquired Company will permit SUG at SUG's expense to insert pre-
printed single-page customer education materials into billing
documentation to be delivered to customers affected by this
Agreement; provided that, PNT has reviewed in advance and con-
-------- ----
sented to the content of such materials, which consent shall not
be unreasonably withheld. Other means of notifying customers may
be employed by either party, at the expense of the initiating
party, but in no event shall any notification be initiated with-
out the prior consent of the other party (which consent shall not
be unreasonably withheld).
(c) Access to the Acquired Companies' Offices, Properties and
---------------------------------------------------------
Records; Updating Information.
- -----------------------------
(1) From and after the date hereof and until the Closing
Date, the Acquired Companies shall permit SUG and its Representa-
tives to have, on reasonable notice and at reasonable times, rea-
sonable access to such of the offices, properties and employees
of the Acquired Companies, and shall disclose, and make available
to SUG and its Representatives all books, papers and records to
the extent that they relate to the ownership, operation, obliga-
tions and liabilities of or pertaining to the Acquired Companies
and their businesses and assets. Without limiting the application
of the Confidentiality Agreement dated May 10, 1999 between PNT
and SUG (the "Confidentiality Agreement"), all documents or in-
formation furnished by the Acquired Companies hereunder shall be
subject to the Confidentiality Agreement.
(2) PNT will notify SUG as promptly as practicable of any
significant change in the Ordinary Course of Business or opera-
tion of any of the Acquired Companies and of any material com-
plaints, investigations or hearings (or communications indicating
that the same may be contemplated) by any Governmental Body, or
the institution or overt threat or settlement of any material
Proceeding involving or affecting any of the Acquired Companies
or the transactions contemplated by this Agreement, and shall use
reasonable efforts to keep SUG fully informed of such events and
permit SUG's Representatives access to all materials prepared in
connection therewith, consistent with any applicable Legal Re-
quirement or Contract.
(3) As promptly as practicable after SUG's request, PNT
will furnish such financial and operating data and other informa-
tion pertaining to the Acquired Companies and their businesses
and assets as SUG may reasonably request; provided, however, that
-------- -------
nothing herein will obligate any of the Acquired Companies to
take actions that would unreasonably disrupt its Ordinary Course
of Business or violate the terms of any Legal Requirement or Con-
tract to which the Acquired Company is a party or to which any of
its assets is subject in providing such information, or to incur
any costs with respect to SUG's external auditors (or the Ac-
quired Companies' external auditors in the event a report by such
auditors is requested by SUG) providing accounting services with
respect to issuing an auditor's report required by or for SUG.
(d) Governmental Approvals; Third Party Consents. PNT will
--------------------------------------------
use its reasonable best efforts to obtain all necessary consents,
approvals and waivers from any Person required under any license,
lease, permit or Contract applicable to the Acquired Companies,
including, without limitation, the approvals of those Governmen-
tal Bodies and the consents of those third parties listed in Sec-
tion 5.4 and Section 5.5 of the PNT Disclosure Schedule and as
required by the HSR Act.
(e) Dividends. PNT shall not, nor shall it permit any of its
---------
Subsidiaries to: (i) declare or pay any dividends on or make
other distributions in respect of any of its or their capital
stock other than (A) dividends by a wholly owned Subsidiary to
PNT or another wholly owned subsidiary, (B) dividends by a less
than wholly owned Subsidiary consistent with past practice, (C)
regular quarterly dividends on PNT Common Stock with usual record
and payment dates that do not exceed the current rate of $1.20
per fiscal year, or (D) regular cumulative cash distributions on
the 4.10% PG Preferred Stock not to exceed an annual rate of
$4.10 per share or on the 5.75% PG Preferred Stock not to exceed
an annual rate of $5.75 per share; (ii) split, combine or reclas-
sify any capital stock or the capital stock of any Subsidiary or
issue or authorize or propose the issuance of any other securi-
ties in respect of, or in substitution for, shares of capital
stock or the capital stock of any Subsidiary; or (iii) redeem,
repurchase or otherwise acquire any shares of capital stock of
any Subsidiary other than (A) redemptions, repurchases and other
acquisitions of shares of capital stock in connection with the
administration of employee benefit and dividend reinvestment and
customer stock purchase plans as in effect on the date hereof in
the ordinary course of the operation of such plans consistent
with past practice, (B) intercompany acquisitions of capital
stock, (C) required redemptions of the 5.75% PG Preferred Stock,
(D) the redemption or repurchase of the PG Preferred Stock as
contemplated herein or (E) as set forth in Section 6.1(l) of this
Agreement.
(f) Issuance of Securities. PNT shall not, nor shall it per-
----------------------
mit any of its Subsidiaries to, issue, agree to issue, deliver,
sell, award, pledge, dispose of or otherwise encumber or autho-
rize or propose the issuance, delivery, sale, award, pledge,
disposal or other encumbrance of, any shares of its or their
capital stock of any class or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire,
any such shares or convertible or exchangeable securities, other
than as provided for in the PNT Benefit Plans, Acquired Company
Option Plans (including options to be granted to directors of
PNT pursuant to such PNT Benefit Plans and Acquired Company
Option Plans) and any dividend reinvestment or customer stock
purchase plans of PNT in effect as of the date hereof.
(g) Accounting. PNT shall not, nor shall it permit any of
----------
its Subsidiaries to, make any changes in their accounting
methods, principles or practices except as required by law, rule,
regulation or GAAP.
(h) No Shopping.
-----------
(1) PNT shall not, and shall not authorize or permit any
of its (or any of its Subsidiaries') officers, directors,
agents,financial advisors, attorneys, accountants or other repre-
sentatives to, directly or indirectly, solicit, initiate or
encourage submission of proposals or offers from any Person
relating to, or that could reasonably be expected to lead to, a
Business Combination or participate in any negotiations or dis-
cussions regarding, or furnish to any other Person any informa-
tion with respect to, or otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, any effort or
attempt by any other Person to do or seek a Business Combination;
provided, however, that, prior to the PNT Shareholders' Approval,
- -------- -------
PNT may, in response to an unsolicited written proposal from a
third party with respect to a Business Combination that PNT's
Board of Directors determines, in its good faith judgment, after
consultation with and the receipt of the advice of its financial
advisor and outside counsel with customary qualifications, is a
Superior Proposal, (i) furnish information to, and negotiate,
explore or otherwise engage in substantive discussions with such
third party, only if PNT's Board of Directors determines, in its
good faith judgment after consultation with its financial
advisors and outside legal counsel, that it is reasonably neces-
sary in order to comply with its fiduciary duties under appli-
cable law and (ii) take and disclose to PNT's shareholders a
position with respect to another Business Combination proposal,
or amend or withdraw such position, pursuant to Rule 14d-9 and
14e-2 under the Exchange Act, or make such disclosure to PNT's
shareholders which in the good faith judgment of PNT's Board of
Directors is required by applicable law, based on the advice of
its outside counsel. Prior to furnishing any non-public informa-
tion to, entering into negotiations with or accepting a Superior
Proposal from such third party, PNT will (i) provide written
notice to SUG to the effect that it is furnishing information to
or entering into discussions or negotiations with such third
party and (ii) receive from such third party an executed confi-
dentiality agreement containing substantially the same terms and
conditions as the Confidentiality Agreement. PNT will immedi-
ately cease and cause to be terminated any existing solicitation,
initiation, encouragement, activity, discussion or negotiations
with any parties conducted heretofore by PNT or any of its
representatives with respect to any Business Combination.
(2) Except as expressly permitted by this Section 6.1(h),
neither the PNT Board of Directors nor any committee thereof may,
(i) withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to SUG, the approval or recommenda-
tion by such Board of Directors or such committee of the Merger
or this Agreement, (ii) approve or recommend, or propose pub-
licly to approve or recommend, a Business Combination or (iii)
cause PNT to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement
related to any Business Combination. Notwithstanding the fore-
going, prior to the time at which the PNT Shareholders' Approval
has been obtained, in response to an unsolicited Business Combi-
nation proposal from a third party, if PNT's Board of Directors
determines, in its good faith judgment, after consultation with
and the receipt of the advice of its financial advisor and out-
side counsel with customary qualifications, that such proposal is
a Superior Proposal and that failure to do any of the actions set
forth in clauses (i), (ii) or (iii) above would create a reason-
able possibility of a breach of the fiduciary duties of PNT's
Board of Directors under applicable law, PNT's Board of Directors
may (i) withdraw or modify its approval or recommendation of the
Merger or this Agreement, approve or recommend a Business Combi-
nation or cause PNT to enter into a Business Combination and (ii)
negotiate with a third party with respect to such Business Combi-
nation proposal and, subject to PNT having paid to SUG the fees
described in Section 8.3(a) hereof and having entered into a
definitive agreement with respect to such Business Combination
proposal, terminate this Agreement; provided, however, that prior
-------- -------
to entering into a definitive agreement with respect to a Busi-
ness Combination proposal, the Company shall give SUG at least
five (5) day's notice thereof, and shall cause its representa-
tives to, negotiate with SUG to make such adjustments in the
terms and conditions of this Agreement as would enable PNT to
proceed with the transactions contemplated herein on such
adjusted terms; provided, further, that if PNT and SUG are unable
-------- -------
to reach an agreement on such adjustments within five (5) days
after such notice from PNT, PNT may enter into such definitive
agreement, subject to the provisions of Article VIII.
(3) PNT shall notify SUG orally and in writing of any such
inquiries, offers or proposals (including, without limitation,
the material terms and conditions of any such offer or proposal
and the identity of the Person making it), within one business
day of the receipt thereof, shall use all reasonable efforts to
keep SUG informed of the status and details of any such inquiry,
offer or proposal and shall give SUG two (2) day's advance notice
of the first delivery of non-public information to such Person.
If any such inquiry, offer or proposal is in writing, PNT shall
promptly deliver to SUG a copy of such inquiry, offer or pro-
posal.
(4) For purposes of this Agreement, (i) "Business Combina-
tion" means (other than the transactions contemplated or per-
mitted by this Agreement) (A) a merger, consolidation or other
business combination, share exchange, sale of shares of capital
stock, tender offer or exchange offer or similar transaction
involving PNT or any of its Subsidiaries, (B) acquisition in any
manner, directly or indirectly, of a material interest in any
capital stock of, or a material equity interest in a substantial
portion of the assets of, PNT or any of its Subsidiaries, in-
cluding any single or multi-step transaction or series of related
transactions that is structured to permit a third party to ac-
quire beneficial ownership of a majority or greater equity inter-
est in PNT or any of its Subsidiaries, or (C) the acquisition in
any manner, directly or indirectly, of any material portion of
the business or assets (other than immaterial or insubstantial
assets or inventory in the ordinary course of business or assets
held for sale) of PNT or any of its Subsidiaries and (ii)
"Superior Proposal" means a proposed Business Combination in-
volving at least 50% of the shares of capital stock or a material
portion of the assets of PNT that PNT's Board of Directors deter-
mines, after consulting with PNT's financial advisors and outside
counsel, is financially superior to the transactions contemplated
hereby and it appears that the party making the proposal is rea-
sonably likely to have the funds necessary to consummate the
Business Combination.
(i) Solicitation of Proxies; PNT Proxy Statement. Subject to
--------------------------------------------
Section 6.1(h), PNT shall use its reasonable best efforts to
solicit from its shareholders proxies in favor of the Merger and
shall take all other action necessary or, in the reasonable
opinion of SUG, advisable to secure the PNT Shareholders'
Approval. PNT shall cause PG Energy and Honesdale to approve the
Honesdale Merger and the PG Energy Merger.
(j) PNT Shareholder Approval.
------------------------
(1) Subject to the provisions of Section 6.1(h) and Sec-
tion 6.1(j)(2), PNT shall, as soon as reasonably practicable
after the date hereof (i) take all steps necessary to duly call,
give notice of, convene and hold a meeting of its shareholders
(including all adjournments thereof, the "PNT Meeting") for the
purpose of securing the PNT Shareholders' Approval, (ii) dis-
tribute to its shareholders the PNT Proxy Statement in accordance
with applicable federal and state law and with its Organizational
Documents, (iii) subject to the fiduciary duties of its Board of
Directors, recommend to its shareholders the approval of this
Agreement and the transactions contemplated hereby and (iv)
cooperate and consult with SUG with respect to each of the
foregoing matters.
(2) The PNT Meeting for the purpose of securing the PNT
Shareholders' Approval, including any adjournments thereof, will
be held on such date or dates as PNT and SUG mutually determine.
(k) Rule 145 Letters. PNT shall promptly identify to SUG all
----------------
officers and directors of any Acquired Company and any other per-
sons who are "affiliates" within the meaning of such term as used
in Rule 145 under the Securities Act ("Rule 145 Affiliates"), and
PNT shall use its reasonable efforts to provide to SUG under-
takings from such persons ("Rule 145 Letters") to the effect that
no disposition of shares of SUG Common Stock received in the
Merger will be made by such persons except within the limits and
in accordance with the applicable provisions of said Rule 145, as
amended from time to time, or except in a transaction which, in
the opinion of legal counsel satisfactory to SUG, is exempt from
registration under the Securities Act.
(l) Financing Activities. PNT shall, and shall cause its
--------------------
Subsidiaries to, cooperate, to the fullest extent commercially
reasonable and practicable, with SUG's requests with respect to
refinancing by the Acquired Companies of the current maturities
of any of their indebtedness, and any repurchase, redemption or
prepayment by any of the Acquired Companies of any of its
indebtedness or preferred stock that may be required prior to or
because of the Mergers or that SUG may request that the Acquired
Companies effect prior to the Mergers, so as to permit SUG to
have the maximum opportunity to refinance, on or promptly after
the Closing Date without any penalty except as may be due pursu-
ant to the terms of the Acquired Companies' indebtedness and pre-
ferred stock as in effect on the date of this Agreement, any of
the Acquired Companies' indebtedness or preferred stock out-
standing on the Closing Date, including, but not limited to, the
redemption or repurchase by PG Energy (or purchase by PNT) by the
Effective Time of all outstanding shares of PG Preferred Stock;
provided, however, that no Acquired Company shall be required to
- -------- -------
consummate prior to the Effective Time any such refinancing,
repurchase, redemption or repayment requested by SUG.
(m) PNT Disclosure Schedule. On the date hereof, PNT has
-----------------------
delivered to SUG the PNT Disclosure Schedule, accompanied by a
certificate signed by an executive officer of PNT stating the PNT
Disclosure Schedule is being delivered pursuant to this Section
6.1(m). The PNT Disclosure Schedule constitutes an integral part
of this Agreement and modifies the representations, warranties,
covenants or agreements of PNT contained herein to the extent
that such representations, warranties, covenants or agreements
expressly refer to the PNT Disclosure Schedule.
Section 6.2 Covenants of SUG. SUG agrees to observe and perform
- -----------------------------
the following covenants and agreements:
(a) Governmental Approvals; Third Party Consents. SUG will
--------------------------------------------
use its reasonable best efforts at SUG's sole expense to obtain
all necessary consents, approvals and waivers from any Person
required under any license, lease, permit, Contract or agreement
applicable to SUG, including, without limitation, the approvals
of the Missouri Public Service Commission, the Florida Public
Service Commission and the Pennsylvania Public Utility Commission
as described in Section 4.5 and as required by the HSR Act.
(b) Employees; Benefits. With respect to the employees
-------------------
(excluding unionized employees) listed in Section 5.17(a) of the
PNT Disclosure Schedule (or their successors employed pursuant to
Section 6.1(a)(7) above) (the "Employees"), except as otherwise
specified herein, SUG agrees as follows:
(1) During the 12 months immediately following the Closing
Date, to make available to the Employees who continue their ser-
vice with the Surviving Corporation or any Subsidiary of the Sur-
viving Corporation Benefit Plans that are no less favorable, in
the aggregate, than the Benefit Plans listed in Section 5.18 of
the PNT Disclosure Schedule offered to the Employees immediately
prior to the Effective Time. Notwithstanding the foregoing,
SUG's obligations under PNT's Directors' Retirement Plan, Direc-
tors' 1995 Stock Compensation Plan and Directors' Deferred Com-
pensation Plan shall be limited to obligations accrued through
and including the Effective Time, including, but not limited to,
the change in control provisions contained in such plans.
(2) For purposes of eligibility, vesting and benefit
accrual under all benefit plans provided to the Employees after
the Closing Date, SUG will recognize the tenure of employment, as
recognized by the Acquired Companies as of the Closing Date.
(3) All vacation time earned by the Employees prior to the
Closing Date must be taken by the end of the calendar year of the
Closing Date, except where the Employee is requested by PNT or
SUG to forego their vacation for business-related reasons. For
purposes of awarding vacation time at the beginning of each
calendar year following the Closing Date, SUG will recognize the
tenure of employment, as recognized by the Acquired Company as of
the Closing Date.
(4) SUG will permit each of the Employees to carry forward
all days of sick leave accrued prior to the Closing Date.
(c) Rule 16b-3. SUG will take all reasonable steps so that
----------
the acquisition of the Merger Consideration by officers and
directors of PNT (including Merger Consideration with respect to
PNT Common Stock held under PNT Benefit Plans), and cash payments
or substitute SUG options issued in exchange for PNT Options in
accordance with Section 3.4, will be exempt from Section 16(b) of
the Exchange Act by reason of Rule 16b-3 promulgated thereunder.
(d) Tax Matters. SUG will not take, or fail to take, any
-----------
action before or after the Closing Date that will adversely
affect the qualification of the Merger(s) as a reorganization
under Section 368(a)(1)(A) of the IRC.
(e) Blue Sky Permits. SUG shall use its best efforts to
----------------
obtain, prior to the effective date of the Registration State-
ment, all necessary state securities laws or "blue sky" permits
and approvals required to carry out the transactions contemplated
by the Agreement, and will pay all expenses incident thereto.
(f) Listing Application. Prior to the Closing, SUG shall
-------------------
cause the shares of SUG Common Stock constituting the Stock Con-
sideration and any other such shares required to be reserved for
issuance in connection with the Merger to be listed on the NYSE,
subject to official notice of issuance thereof.
(g) Directors. After the Effective Time on the Closing Date,
---------
three individuals to be selected prior to the Closing Date by SUG
from the Board of Directors of PNT immediately prior to the
Effective Time shall be elected to the Board of Directors of SUG
as the Surviving Corporation, and thereafter nominated and recom-
mended for reelection if necessary such that each of them shall
have a term of at least three years from the Closing Date, and
each such individual shall hold office in accordance with the
Certificate of Incorporation and By-laws of SUG as the Surviving
Corporation; provided that, any such individual who is also an
-------- ----
officer or employee of the Surviving Corporation shall be
required to resign as a director of the Surviving Corporation if
he resigns or is terminated as an officer or employee of the
Surviving Corporation.
(h) Technology: Pennsylvania Operations. SUG will give full
-----------------------------------
consideration to using or retaining PNT's technology and manage-
ment systems for the PNT operations after the Effective Time, if
SUG determines that they are superior to such technology and
management systems being used by SUG in its other operations and
it is in the best interests of SUG and PNT's operations. SUG
intends to operate the Acquired Companies' utility operations in
Pennsylvania as a separate division of the Surviving Corporation
headquartered in Pennsylvania.
(i) Charitable Contributions. SUG will maintain PNT's
------------------------
charitable contributions of at least the amount given and/or
committed in 1998 for at least the next three calendar years.
(j) Collective Bargaining Agreements. At the Effective Time,
--------------------------------
SUG agrees to assume all collective bargaining agreements
covering employees of any Acquired Company, and shall discharge
when due any and all liabilities of any Acquired Company under
such collective bargaining agreements relating to periods after
the Effective Time.
(k) Restrictions on Unusual Distributions; Anti-Dilution.
----------------------------------------------------
Except for an annual 5% stock dividend, SUG will not, prior to
the Effective Time, declare any stock dividend, stock split,
reclassification, recapitalization, combination or distribution
of assets, securities or other property to holders of, or
affecting, SUG Common Stock.
(l) Solicitation of Proxies; SUG Proxy Statement. SUG shall
--------------------------------------------
use its reasonable best efforts to solicit from SUG's share-
holders proxies in favor of the Merger and shall take all other
action necessary or, in the reasonable opinion of PNT, advisable
to secure the SUG Shareholders' Approval. All Lindemann family
members who own shares of SUG Common Stock as of the date of this
Agreement have provided PNT with a commitment and irrevocable
proxy to vote all of their shares of SUG Common Stock in favor of
the Merger, the form of which is attached hereto as Schedule
6.2(l).
(m) SUG Shareholder Approval.
------------------------
(1) Subject to the provisions of Section 6.2(m)(2), SUG
shall, as soon as reasonably practicable after the date hereof
(i) take all steps necessary to duly call, give notice of, con-
vene and hold a meeting of its shareholders (including all
adjournments thereof, the "SUG Meeting") for the purpose of
securing the SUG Shareholders' Approval, (ii) distribute to its
shareholders the SUG Proxy Statement in accordance with appli-
cable federal and state law and with its Organizational Docu-
ments, (iii) subject to the fiduciary duties of its Board of
Directors, recommend to its shareholders the approval of this
Agreement and the transactions contemplated hereby and (iv)
cooperate and consult with PNT with respect to each of the
foregoing matters.
(2) The SUG Meeting for the purpose of securing the SUG
Shareholders' Approval, including any adjournments thereof, will
be held on such date or dates as PNT and SUG mutually determine.
(n) SUG Disclosure Schedule. On the date hereof, SUG has
-----------------------
delivered to PNT the SUG Disclosure Schedule, accompanied by a
certificate signed by an executive officer of SUG stating that
the SUG Disclosure Schedule is being delivered pursuant to this
Section 6.2(n). The SUG Disclosure Schedule constitutes an
integral part of this Agreement and modifies the representations,
warranties, covenants or agreements of SUG contained herein to
the extent that such representations, warranties, covenants or
agreements expressly refer to the SUG Disclosure Schedule.
(o) Conduct of the Business Prior to the Closing Date.
-------------------------------------------------
Except as contemplated in this Agreement, as required by law or
regulation or as otherwise expressly consented to in writing by
PNT which consent will not be unreasonably withheld, prior to the
Closing, SUG will:
(1) Not make or permit any material change in the general
nature of its business;
(2) Maintain its present operations in the Ordinary Course
of Business in accordance with prudent business judgment and con-
sistent with past practice and policy, and maintain its assets in
good repair, order and condition, reasonable wear and tear
excepted, subject to retirements in the Ordinary Course of Busi-
ness;
(3) Preserve SUG as an ongoing business and use reasonable
efforts to maintain the goodwill associated with SUG; and
(4) Preserve all of SUG's franchises, tariffs, certifi-
cates of public convenience and necessity, licenses, authoriza-
tions and other governmental rights and permits.
(p) Access to SUG's Offices, Properties and Records; Updating
---------------------------------------------------------
Information.
- -----------
(1) From and after the date hereof and until the Closing
Date, SUG and its Subsidiaries shall permit PNT and its Represen-
tatives to have, on reasonable notice and at reasonable times,
reasonable access to such of the offices, properties and em-
ployees of SUG and its Subsidiaries, and shall disclose, and make
available to PNT and its Representatives all books, papers and
records to the extent that they relate to the ownership, opera-
tion, obligations and liabilities of or pertaining to SUG, its
Subsidiaries and their respective businesses and assets. Without
limiting the application of the Confidentiality Agreement, all
documents or information furnished by SUG and its Subsidiaries
hereunder shall be subject to the Confidentiality Agreement.
(2) SUG will notify PNT as promptly as practicable of any
significant change in the Ordinary Course of Business or opera-
tion of SUG or any of its Subsidiaries and of any material com-
plaints, investigations or hearings (or communications indicating
that the same may be contemplated) by any Governmental Body, or
the institution or overt threat or settlement of any material
Proceeding involving or affecting SUG or any of its Subsidiaries
or the transactions contemplated by this Agreement, and shall use
reasonable efforts to keep PNT fully informed of such events and
permit PNT's Representatives access to all materials prepared in
connection therewith consistent with any applicable Legal
Requirement or Contract.
(3) As promptly as practicable after PNT's request, SUG
will furnish such financial and operating data and other informa-
tion pertaining to SUG, its Subsidiaries and their respective
businesses and assets as PNT may reasonably request; provided,
--------
however, that nothing herein will obligate SUG or any of its Sub-
- -------
sidiaries to take actions that would unreasonably disrupt its
Ordinary Course of Business or violate the terms of any Legal
Requirement or Contract to which SUG or any of its Subsidiaries
is a party or to which any of its assets is subject in providing
such information, or to incur any costs with respect to PNT's
external auditors (or SUG's external auditors in the event a
report by such auditors is requested by PNT) providing accounting
services with respect to issuing an auditor's report required by
or for PNT.
Section 6.3 Additional Agreements.
- ----------------------------------
(a) The Registration Statement, the PNT Proxy Statement and
-------------------------------------------------------
the SUG Proxy Statement. As soon as practicable after the date
- -----------------------
hereof, PNT and SUG shall take such reasonable steps as are nec-
essary for the prompt preparation and filing with the SEC of (i)
the PNT Proxy Statement by PNT, (ii) the SUG Proxy Statement by
SUG and (iii) the Registration Statement, which will include in-
formation contained in the PNT Proxy Statement, by SUG. The
foregoing shall include without limitation: (i) obtaining and
furnishing the information required to be included therein, (ii)
after consultation between PNT and SUG, responding promptly to
any comments made by the SEC with respect to the PNT Proxy State-
ment, the SUG Proxy Statement and the Registration Statement and
any amendments and preliminary version thereof and (iii) causing
the Registration Statement to become effective, the PNT Proxy
Statement to be mailed to PNT's shareholders at the earliest
practicable date and the SUG Proxy Statement to be mailed to
SUG's shareholders at the earliest practicable date. PNT agrees,
as to information with respect to PNT, its officers, directors,
shareholders and Subsidiaries contained in the Registration
Statement, the PNT Proxy Statement and the SUG Proxy Statement,
and SUG agrees, as to information with respect to SUG, its offi-
cers, directors, shareholders and Subsidiaries contained in the
Registration Statement, the PNT Proxy Statement and the SUG Proxy
Statement, that such information, in the case of the PNT Proxy
Statement at the time of the mailing of the PNT Proxy Statement
and (as then amended or supplemented) at the time of the PNT
Meeting, in the case of the SUG Proxy Statement, at the time of
the mailing of the SUG Proxy Statement and (as then amended or
supplemented) at the time of the SUG Meeting or in the case of
the Registration Statement at the time of the mailing of the PNT
Proxy Statement (as then amended or supplemented), at the time of
the PNT Meeting and at the effective time of the Registration
Statement, will not contain any untrue statement of material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they are made, not misleading. No representation, warranty,
covenant or agreement is made by or on behalf of PNT with respect
to information supplied by any other party for inclusion in the
PNT Proxy Statement, the SUG Proxy Statement or the Registration
Statement. No representation, warranty, covenant or agreement is
made by or on behalf of SUG with respect to information supplied
by any other party for inclusion in the PNT Proxy Statement, the
SUG Proxy Statement or the Registration Statement. No filing of,
or amendment or supplement to, the PNT Proxy Statement, the SUG
Proxy Statement or the Registration Statement shall be made by
any party hereto without providing the other party with the
opportunity to review and comment thereon (except for any ongoing
SEC reporting required of SUG, PNT or PG Energy that will be
incorporated by reference). If at any time prior to the Effec-
tive Time any information relating to any party hereto or any of
their respective officers, directors, shareholders or Subsidi-
aries, should be discovered by any party hereto which should be
set forth in an amendment or supplement to the PNT Proxy State-
ment, the SUG Proxy Statement or the Registration Statement so
that the PNT Proxy Statement, the SUG Proxy Statement or the
Registration Statement would not include any untrue statement of
a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading, the party which discovers
such information shall promptly notify the other party hereto and
an appropriate amendment or supplement describing such informa-
tion shall be promptly prepared, filed with the SEC and, to the
extent required by law, disseminated to the shareholders of PNT
and/or the shareholders of SUG, as may be necessary.
(b) Further Assurances. Each of SUG, PNT and any Acquired
------------------
Company agrees to take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger
in accordance with this Agreement as promptly as possible. If,
at any time after the Effective Time, any such further action is
necessary or desirable to carry out the purpose of this Agreement
and to vest PNT or SUG with full right, title and possession to
all assets, property, rights, privileges, powers and franchises
of the Acquired Companies, PNT's shareholders and the officers
and directors of the Acquired Companies immediately prior to the
Effective Time are fully authorized in the name of their respec-
tive corporations or otherwise to take, and will take, all such
lawful and necessary action.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to SUG's Obligation to Effect the Merger.
- ----------------------------------------------------------------
The obligation of SUG to effect 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. PNT's representations and warranties in this Agreement
- ----
shall have been accurate in all material respects as of the date
of this Agreement and shall be accurate 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;
provided that, any such representation or warranty that is quali-
- -------------
fied by any standard of materiality (including, but not limited
to, PNT Material Adverse Effect) shall have then been, and shall
then be, accurate in all respects.
(b) Compliance with Agreements. The covenants, agreements
--------------------------
and conditions required by this Agreement to be performed and
complied with by any of the Acquired Companies shall have been
performed and complied with in all material respects prior to or
at the Closing Date.
(c) Certificate. PNT shall execute and deliver to SUG a
-----------
certificate of an authorized officer of PNT, dated the Closing
Date, stating that the conditions specified in Sections 7.1(a)
and 7.1(b) of this Agreement applicable to the Acquired Companies
have been satisfied.
(d) Governmental Approvals. All approvals, consents,
----------------------
opinions or rulings of all Governmental Bodies required in order
to consummate the transactions contemplated hereby shall have
been obtained by Final Order in such form as is, and with no con-
ditions that are, individually or in the aggregate, reasonably
likely to have a PNT Material Adverse Effect or a material
adverse effect on the business, operations, properties, financial
condition or results of operations of the Surviving Corporation.
The applicable waiting period under the HSR Act with respect to
the transactions contemplated hereby shall have expired or have
been terminated.
(e) Third Party Consents. Each of the consents required
--------------------
under Section 5.4 of this Agreement shall have been obtained to
the reasonable satisfaction of SUG, other than any such consents
which, if not obtained, are not, individually or in the aggre-
gate, reasonably likely to result in a PNT Material Adverse
Effect after the Closing. In addition, all consents and
approvals required, under the terms of any note, bond or inden-
ture listed on the schedule to be delivered pursuant to Section
5.4, to which any of the Acquired Companies is a party, shall
have been obtained.
(f) Injunctions. On the Closing Date, there shall be no
-----------
Orders which operate to restrain, enjoin or otherwise prevent the
consummation of this Agreement or the Mergers.
(g) Resignations. Each director of each Acquired Company
------------
shall, if requested by SUG, resign any position as a director of
an Acquired Company effective as of the Closing Date in accor-
dance with such Subsidiary's Organizational Documents and appli-
cable provisions of the PBCL; provided that, such resignations
-------- ----
shall not cause the termination of any such Person's employment
as an employee of an Acquired Company or reduce any such
employee's then current level of compensation.
(h) Opinion of Tax Counsel. On the Closing Date, SUG shall
----------------------
have received from Roberts and Holland, L.L.P., special tax
counsel to SUG, an opinion to the effect that the Merger will
constitute a "reorganization" within the meaning of IRC Section
368(a)(1)(A), that the Honesdale Merger and the PG Energy Merger
will each constitute "reorganizations" within the meaning of IRC
Section 368(a)(1)(A) or "liquidations" within the meaning of IRC
Section 332, and that no gain or loss will be recognized by SUG
or any of the Acquired Companies with respect to the Mergers.
(i) Shareholder Approvals. The SUG Shareholders' Approval
---------------------
and the PNT Shareholders' Approval shall have been obtained, and
all of the outstanding shares of the PG Preferred Stock shall
have been redeemed in accordance with the Organizational Docu-
ments of PG Energy, purchased by PNT or repurchased by PG Energy.
(j) Dissenter's Rights. Demand for payment of dissenters'
------------------
rights by shareholders of PNT with respect to the Merger shall
not equal or exceed seven percent of the outstanding shares of
PNT Common Stock entitled to vote thereon.
(k) Rule 145 Letters. Each Rule 145 Affiliate shall have
----------------
executed and delivered to SUG a Rule 145 Letter, in form and
substance reasonably satisfactory to SUG and its counsel.
(l) Registration Statement. The Registration Statement shall
----------------------
have become effective, no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no pro-
ceedings for that purpose shall have been initiated or threatened
by the SEC.
(m) Listing of SUG Common Stock. The shares of SUG Common
---------------------------
Stock constituting the Stock Consideration and any other shares
of SUG Common Stock required to be issued or reserved hereunder
to consummate the transactions contemplated by this Agreement
shall have been authorized for listing, upon official notice of
issuance, on the NYSE.
Section 7.2 Conditions to PNT's Obligations to Effect the
- ----------------------------------------------------------
Mergers. The obligation of PNT to effect the transactions con-
- -------
templated 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. SUG's representations and warranties in this Agreement
- ----
shall have been accurate in all material respects as of the date
of this Agreement and shall be accurate 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;
provided that, any such representation or warranty that is quali-
- -------- ----
fied by any standard of materiality (including, but not limited
to, SUG Material Adverse Effect) shall have then been, and shall
then be, accurate in all respects.
(b) Compliance with Agreements. The covenants, agreements
--------------------------
and conditions required by this Agreement to be performed and
complied with by SUG shall have been performed and complied with
in all material respects prior to or at the Closing Date.
(c) Certificate. SUG shall execute and deliver to PNT a
-----------
certificate of an authorized officer of SUG, dated the Closing
Date, stating that the conditions specified in Sections 7.2(a)
and 7.2(b) of this Agreement applicable to SUG have been
satisfied.
(d) Governmental Approvals. All approvals, consents,
----------------------
opinions or rulings of all Governmental Bodies required in order
to consummate the transactions contemplated hereby shall have
been obtained by Final Order in such form as is, and with no
conditions that are, individually or in the aggregate, reasonably
likely to have a material adverse effect on the business, opera-
tions, properties, financial condition or results of operations
of the Surviving Corporation. The applicable waiting period
under the HSR Act with respect to the transactions contemplated
hereby shall have expired or have been terminated.
(e) Injunctions. On the Closing Date, there shall be no
-----------
Orders which operate to restrain, enjoin or otherwise prevent the
consummation of this Agreement or the Mergers.
(f) Opinion of Counsel. On the Closing Date, PNT shall have
------------------
received from Hughes Hubbard & Reed LLP, counsel to PNT, an
opinion to the effect that the Merger will be treated for federal
income tax purposes as a "reorganization" within the meaning of
IRC Section 368(a), and that no gain or loss will be recognized
for federal income tax purposes by the shareholders of PNT upon
their receipt of the Merger Consideration, except that any
realized gain will be recognized to the extent of the amount of
cash received.
(g) Shareholder Approvals. The SUG Shareholders' Approval
---------------------
and the PNT Shareholders' Approval shall have been obtained.
(h) Registration Statement. The Registration Statement shall
----------------------
have become effective, no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no pro-
ceedings for that purpose shall have been initiated or threatened
by the SEC.
(i) Listing of SUG Common Stock. The shares of SUG Common
---------------------------
Stock constituting the Stock Consideration and any other shares
of SUG Common Stock required to be issued or reserved hereunder
to consummate the transactions contemplated by this Agreement
shall have been authorized for listing, upon official notice of
issuance, on the NYSE.
ARTICLE VIII
TERMINATION
Section 8.1 Termination Rights. This Agreement may be termi-
- -------------------------------
nated in its entirety at any time prior to the Closing:
(a) By the mutual written consent of SUG and PNT;
(b) By PNT, on the one hand, or SUG, on the other hand, in
writing if there shall be in effect a non-appealable order of a
court of competent jurisdiction prohibiting the consummation of
the Mergers in accordance with this Agreement;
(c) By PNT if there is a breach of any representation, war-
ranty, covenant or agreement of SUG, which breach cannot be cured
and would cause the conditions set forth in Section 7.2(a) to be
incapable of being satisfied;
(d) By SUG if there is a breach of any representation, war-
ranty, covenant or agreement of PNT, which breach cannot be cured
and would cause the conditions set forth in Section 7.1(a) to be
incapable of being satisfied;
(e) By PNT, by written notice to SUG in accordance with Sec-
tion 6.1(h)(2); provided, however, that the termination described
-------- -------
in this clause (e) shall not be effective unless and until PNT
shall have paid SUG the fee described in Section 8.3(a) and PNT
has substantially contemporaneously entered into a definitive
agreement with respect to a Business Combination Proposal;
(f) By PNT, in writing if the PNT Shareholders' Approval is
not obtained at the PNT Meeting or the SUG Shareholders' Approval
is not obtained at the SUG Meeting or by SUG in writing if the
PNT Shareholders' Approval is not obtained at the PNT Meeting
provided that there has not been a material misrepresentation or
- -------- ----
a material breach of covenant, warranty or agreement contained
herein on the part of the party asserting its right to terminate
pursuant to this Section 8.1(f);
(g) By PNT, if the Average Trading Price of the SUG Common
Stock as of the Closing is lower than $17.30000.
(h) By SUG, by written notice to PNT, if the Board of Direc-
tors of PNT or any committee thereof (i) withdraws or modifies,
or proposes publicly to withdraw or modify, in a manner adverse
to SUG, the approval or recommendation by the Board of Directors
or such committee of the Merger or this Agreement, (ii) approves
or recommends, or proposes publicly to approve or recommend, a
Business Combination, (iii) causes PNT to enter into a definitive
agreement related to any Business Combination, (iv) resolves to
take any of the actions specified in clause (i), (ii) and (iii)
above or (v) fails by the Effective Time to cause PG Energy to
redeem or repurchase all of the outstanding shares of PG
Preferred Stock;
(i) By SUG, by written notice to PNT, if a third party,
including a group (as defined under the Exchange Act) acquires
securities representing greater than 50% of the voting power of
the outstanding voting securities of PNT; or
(j) By either party in writing at any time after 5:00 p.m.,
Eastern Time on June 7, 2000, (the "Initial Termination Date") if
the Closing has not occurred prior thereto; provided, however,
-------- -------
that the right to terminate this Agreement under this Section
8.1(j) will not be available to any party that is in material
breach of its representations, warranties, covenants or agree-
ments contained herein; and provided, further, that if on the
-------- -------
Initial Termination Date (i) the conditions to closing set forth
in Sections 7.1(d) and 7.2(d) shall not have been fulfilled or
(ii) any approval or authorization of any Governmental Body
required in connection with the consummation of the Mergers shall
have not been obtained and such approval or authorizations shall
not have become a Final Order, but all other conditions to
Closing shall be fulfilled or shall be capable of being ful-
filled, then the Initial Termination Date will be extended to
December 7, 2000.
Section 8.2 Effect of Termination. If this Agreement is termi-
- ----------------------------------
nated pursuant to Section 8.1, this Agreement shall be of no
further force and effect and there shall be no further liability
hereunder on the part of any party or its affiliates, directors,
officers, shareholders, agents or other representatives;
provided, however, that no such termination shall relieve any
- -------- -------
party of liability for any claims, damages or losses suffered by
the other party as a result of the negligent or willful failure
of a party to perform any obligations required to be performed by
it hereunder on or prior to the date of termination. Notwith-
standing anything to the contrary contained herein, the provi-
sions of Section 8.2, Sections 10.1 through 10.6 and Sections
10.8 through 10.11 of this Agreement shall survive any termina-
tion of this Agreement. Notwithstanding anything to the contrary
contained herein, but subject to Section 7.1(i), Section 8.1(h)
and Section 8.2, the failure by PG Energy to obtain the approval
of the transactions contemplated by this Agreement by the holders
of either series of PG Preferred Stock in the event such approval
may be determined to be required shall not constitute a breach by
PNT of any of its representations, warranties or covenants con-
tained herein.
Section 8.3 Termination Fee; Expenses.
- --------------------------------------
(a) Termination Fee. If this Agreement is terminated pursu-
---------------
ant to Section 8.1(e), 8.1(h) or 8.1(i), then PNT shall pay to
SUG promptly (but not later than five business days after notice
is received from PNT) an amount equal to $10 million in cash.
(b) Expenses. The parties agree that the agreements con-
--------
tained in this Section 8.3 are an integral part of the transac-
tions contemplated by this Agreement and constitute liquidated
damages and not a penalty. Notwithstanding anything to the con-
trary contained in this Section 8.3, if PNT fails to pay promptly
to SUG the fee due under Section 8.3(a), in addition to any
amounts paid or payable pursuant to Section 8.3(a), PNT shall pay
the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit
or other legal action, taken to collect payment, together with
interest on the amount of any unpaid fee calculated using an
annual percentage rate of interest equal to the prime rate pub-
lished in the Wall Street Journal on the date (or preceding busi-
ness day if such date is not a business day) such fee was
required to be paid, compounded on a daily basis using a 360-day
year.
ARTICLE IX
INDEMNIFICATION; REMEDIES
Section 9.1 Directors' and Officer's Indemnification.
- -----------------------------------------------------
(a) Indemnification and Insurance. For a period of six years
-----------------------------
after the Effective Time, the Surviving Corporation will indem-
nify and hold harmless the present and former officers and direc-
tors of PNT and its Subsidiaries (the "Indemnified Parties") in
respect of acts or omissions occurring prior to the Effective
Time to the extent provided under PNT's certificate of incorpora-
tion and bylaws in effect on the date hereof; provided, however,
-------- -------
that if any claim or claims are asserted or made within such six-
ear period, all rights to indemnification in respect of such
claims shall continue until the final disposition of any and all
such claims. For six years after the Effective Time, the Sur-
viving Corporation will use its reasonable best efforts to pro-
vide officers' and directors' liability insurance in respect of
acts or omissions occurring prior to the Effective Time covering
each such person currently covered by PNT's officers' and direc-
tors' liability insurance policy on terms with respect to
coverage and amount no less favorable than those of such policy
in effect on the date hereof; provided that in satisfying its
-------- ----
obligation under this Section, if the annual premiums of such
insurance coverage exceed 200% of the previous year's premiums,
the Surviving Corporation will be obligated to obtain a policy
with the best coverage available, in the reasonable judgment of
the Board of Directors of the Surviving Corporation for a cost
not exceeding such amount.
(b) Successors. In the event the Surviving Corporation or
----------
any of its successors or assigns (i) consolidates with or merges
into any other Person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets
to any Person, then and in either such case, proper provisions
must be made so that the successors and assigns of the Surviving
Corporation will assume the obligations set forth in this Section
9.1.
(c) Survival of Indemnification. To the fullest extent per-
---------------------------
mitted by law, from and after the Effective Time, all rights to
indemnification as of the date hereof in favor of the employees,
agents, directors and officers of any Acquired Company with
respect to their activities as such prior to the Effective Time,
as provided in their respective Organizational Documents in
effect on the date hereof, or otherwise in effect on the date
hereof, will survive the Mergers and will continue in full force
and effect except for amendments to make changes permitted by law
that would enhance the rights of past or present officers and
directors to indemnification or advancement of expenses in
respect of acts or omissions occurring prior to the Effective
Time, for a period of not less than six years from the Effective
Time (or, in the case of matters occurring prior to the Effective
Time which have not been resolved prior to the sixth anniversary
of the Effective Time, until such matters are finally resolved).
Section 9.2 Representations and Warranties. Each and every
- -------------------------------------------
representation and warranty of either party shall expire at, and
be terminated and extinguished with, the Effective Time.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Expenses. Each of the parties will pay all costs
- ----------------------
and expenses of its performance of and compliance with this
Agreement, except (i) as provided in Section 8.3 and as expressly
provided otherwise herein, (ii) PNT shall pay all fees and
expenses of counsel for PNT, (iii) SUG will pay all real estate
transfer taxes and real estate recording fees, if any, including
expenses of counsel associated with real estate title, transfer
and recording issues in connection with the Mergers, and all
filing and application fees paid to Governmental Bodies in
connection with the Mergers and (iv) SUG and PNT will each pay
half of the combined costs of printing and mailing to the PNT
stockholders the prospectus that is a part of the Registration
Statement and the Proxy Statement.
Section 10.2 Notices. All notices, requests and other communi-
- ---------------------
cations hereunder shall be in writing and shall be deemed to have
been given upon receipt if either (a) personally delivered, (b)
sent by prepaid first class mail, and registered or certified and
a return receipt requested or (c) by facsimile telecopier with
completed transmission acknowledged:
if to SUG, to:
Southern Union Company
504 Lavaca Street, Suite 800
Austin, Texas 78701
Attention: Peter H. Kelley
President and Chief Operating Officer
Telecopier: (512) 477-3879
with a copy to:
Fleischman and Walsh, L.L.P.
Suite 600
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Attention: Stephen A. Bouchard, Esq.
Telecopier: (202) 265-5706
if to PNT, to:
Pennsylvania Enterprises, Inc.
One PEI Center
Wilkes-Barre, Pennsylvania 18711-0601
Attention: Thomas F. Karam
President and Chief Executive Officer
Telecopier: (570) 829-8900
with a copy to:
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004-1482
Attention: Garett J. Albert, Esq.
Telecopier: (212) 422-4726
or at such other address or number as shall be given in writing
by a party to the other parties.
Section 10.3 Assignment. This Agreement may not be assigned by
- ------------------------
any party hereto without the prior written consent of the other
parties hereto.
Section 10.4 Successor Bound. Subject to the provisions of Sec-
- -----------------------------
tion 10.3, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns.
Section 10.5 Governing Law; Forum; Consent to Jurisdiction.
- -----------------------------------------------------------
This Agreement shall be construed in accordance with and governed
by the laws of the State of New York except to the extent that
the terms and consummation of the Mergers are subject to the DGCL
or the PBCL. Each party to this Agreement hereby irrevocably and
unconditionally (i) consents to submit to the exclusive jurisdic-
tion of the federal courts of the Southern District of New York
in the county of New York and the borough of Manhattan for any
proceeding arising in connection with this Agreement (and each
such party agrees not to commence any such proceeding, except in
such courts), (ii) to the extent such party is not a resident of
the State of New York, agrees to appoint an agent in the State of
New York as such party's agent for acceptance of legal process in
any such proceeding against such party with the same legal force
and validity as if served upon such party personally within the
State of New York, and to notify promptly each other party hereto
of the name and address of such agent, (iii) waives any objection
to the laying of venue of any such proceeding in the federal
courts of the Southern District of New York in the county of New
York and the burrough of Manhattan, and (iv) waives, and agrees
not to plead or to make, any claim that any such proceeding
brought in any federal court of the Southern District of New York
has been brought in an improper or otherwise inconvenient forum.
Section 10.6 Waiver of Trial By Jury. EACH PARTY TO THIS AGREE-
- -------------------------------------
MENT HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH ANY SUCH PARTY MAY BE PARTIES ARISING OUT OF OR IN ANY WAY
PERTAINING TO (i) THIS AGREEMENT, (ii) THE MERGERS, (iii) THE
CONFIDENTIALITY AGREEMENT OR (iv) ANY RELATED DOCUMENTS. IT IS
AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF
TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES WHO ARE NOT
PARTIES TO THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY
AND VOLUNTARILY MADE BY EACH PARTY HERETO, AND EACH SUCH PARTY
HEREBY REPRESENTS AND WARRANTS THAT NO REPRESENTATIONS OF FACT OR
OPINION HAVE BEEN MADE BY ANY PERSON TO INDUCE THIS WAIVER OR
TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.
EACH PARTY TO THIS AGREEMENT FURTHER REPRESENTS AND WARRANTS THAT
EACH SUCH PARTY HAS BEEN REPRESENTED IN THE SIGNING OF THIS
AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF EACH SUCH PARTY'S OWN FREE WILL, AND THAT
EACH SUCH PARTY HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER
WITH COUNSEL.
Section 10.7 Cooperation; Further Documents.
- --------------------------------------------
(a) Each of the parties hereto agrees to use its reasonable
best 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, without limitation, the timely performance
of all actions and things contemplated by this Agreement to be
taken or done by each of the parties hereto.
(b) Each party shall cooperate with the other party in such
other party's discharge of the obligations hereunder, which shall
include making reasonably available to the other party such of
its personnel as have relevant information, with respect thereto.
Section 10.8 Construction of Agreement. The terms and provi-
- ---------------------------------------
sions of this Agreement represent the results of negotiations
between PNT and SUG, 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 PNT and SUG 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 con-
flicting terms or provisions contained in this Agreement shall be
interpreted or construed against the party whose attorney pre-
pared the executed draft or any earlier draft of this Agreement.
Section 10.9 Publicity; Organizational and Operational Announce-
- ----------------------------------------------------------------
ments. No party hereto shall issue, make or cause the publica-
- -----
tion of any press release or other announcement with respect to
this Agreement or the transactions contemplated hereby, or other-
wise 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 appli-
cable law or the rules or 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 10.10 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 10.11 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, except that the parties hereto agree and acknowledge
that the agreements and covenants contained in Section 6.2(g) are
intended for the direct and irrevocable benefit of each director
of PNT selected by SUG prior to the Closing Date pursuant there-
to, and that the agreements and covenants contained in Section
9.1 are intended for the direct and irrevocable benefit of the
Indemnified Parties described therein and their respective heirs
or legal representatives (each such director or Indemnified
Party, a "Third Party Beneficiary"), and that each such Third
Party Beneficiary, although not a party to this Agreement, shall
be and is a direct and irrevocable third party beneficiary of
such agreements and covenants and shall have the right to enforce
such agreements and covenants against the Surviving Corporation
in all respects fully and to the same extent as if such Third
Party Beneficiary were a party hereto.
Section 10.12 Specific Performance. The parties hereto agree
- -----------------------------------
that irreparable damage would occur to a party in the event that
any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.
It is accordingly agreed that any party shall be entitled to an
injunction or injunctions to prevent breaches of this agreement
by any other party and to enforce specifically, to the fullest
extent available, the terms and provisions hereof, including each
party's obligation to close, in any court of the United States or
any state having jurisdiction, this being in addition to any
other right or remedy to which any party is entitled at law or in
equity.
Section 10.13 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 interpreta-
tion of this Agreement.
Section 10.14 Amendment. This Agreement may be amended only by
- ------------------------
an instrument in writing executed by the parties hereto.
Section 10.15 Entire Agreement. This Agreement, the exhibits,
- -------------------------------
annexes and schedules hereto and the documents specifically
referred to herein and the Confidentiality Agreement constitute
the entire agreement, understanding, representations and war-
ranties of the parties hereto.
Section 10.16 Counterparts. This Agreement may be executed in
- ---------------------------
one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
SOUTHERN UNION COMPANY
By: PETER H. KELLEY
----------------------
Name: Peter H. Kelley
Title: President and Chief
Operating Officer
PENNSYLVANIA ENTERPRISES, INC.
By: THOMAS F. KARAM
----------------------
Name: Thomas F. Karam
Title: President and Chief
Executive Officer
<PAGE>
SOUTHERN UNION AND PENNSYLVANIA ENTERPRISES TO MERGE
AUSTIN, Texas (June 7, 1999) -- Southern Union Company (NYSE:SUG)
and Pennsylvania Enterprises, Inc. (NYSE:PNT) today announced
their boards of directors have unanimously approved a definitive
merger agreement. The agreement calls for Southern Union to
acquire Pennsylvania Enterprises (PEI) in a transaction valued at
approximately $500 million, including assumption of debt. This
transaction continues Southern Union's active strategy of growth
by acquisition.
Southern Union will exchange approximately 1.48 shares of its
common stock and $3.00 cash (for an aggregate value of $35.00
based on Friday's close), subject to adjustment for market
fluctuations, for each of the approximately 11 million out-
standing shares of PEI. The transaction is expected to qualify
as a tax-free reorganization.
Headquartered in Wilkes-Barre, PEI is a multifaceted energy com-
pany with natural gas distribution being its primary business.
PEI's principal subsidiary, PG Energy, together with Honesdale
Gas Company serve more than 153,000 gas customers in northeastern
and central Pennsylvania. In addition, the company also markets
electricity to more than 20,000 customers through PG Energy
PowerPlus. The combined company will have a market capitalization
of approximately $1 billion, serve 1.2 million gas and electric
customers in Pennsylvania, Texas, Missouri, Florida, and Piedras
Negras, Mexico.
According to Southern Union Chairman and CEO George Lindemann,
"The acquisition of Pennsylvania Enterprises gives Southern Union
weather and economic diversification, as well as valuable exper-
tise in the electric marketing business. Both companies share
the common philosophy of providing safe, reliable energy at com-
petitive prices with world-class customer service. PEI customers
will also benefit from Southern Union's experience as one of the
most cost-effective operators in the industry."
"This acquisition continues Southern Union's long-term strategy
of growth. Using primarily stock for this acquisition further
strengthens Southern Union's balance sheet, providing yet a
stronger base from which to continue to grow and meet the custo-
mers' needs in an increasingly competitive marketplace,"
according to Southern Union President Peter Kelley.
PEI President and CEO Thomas Karam said, "The financial strength
of the combined companies will enhance our ability to meet the
rapidly changing needs of our customers while creating new and
exciting opportunities for the employees of Pennsylvania
Enterprises."
Karam continued, "The merger with Southern Union provides
Pennsylvania Enterprises' shareholders the ability to realize
full value for their investment to date, as well as the
opportunity to exchange their shares for a company that has a
unique record of success in enhancing shareholder value."
Kelley went on to say, "Pennsylvania Enterprises will become an
autonomous division of Southern Union with the division head-
quarters remaining in Wilkes-Barre and there will be no material
changes to the operations of PEI. Southern Union will assume all
of PEI's union contracts. We look forward to expanding our
commitment to customers, employees and the communities we will
serve in the Pennsylvania market."
The transaction will require the approval of both companies'
shareholders, regulators in Pennsylvania as well as regulators in
Missouri and Florida, where Southern Union currently has opera-
tions. Southern Union's most recent acquisitions were approved
by the Missouri Public Service Commission (MPSC) in less than
five months.
This release and other Company reports and statements issued or
made from time to time contain certain "forward-looking
statements" concerning projected future financial performance,
expected plans or future operations. Southern Union Company
cautions that actual results and developments may differ
materially from such projections or expectations.
Investors should be aware of important factors that could cause
actual results to differ materially from the forward-looking
projections or expectations. These factors include, but are not
limited to: weather conditions in the Company's service terri-
tories; cost of gas; regulatory and court decisions; the receipt
of timely and adequate rate relief; the achievement of operating
efficiencies and the purchase and implementation of new tech-
nologies for attaining such efficiencies; impact of relations
with labor unions of bargaining-unit employees; and the effect of
strategic initiatives on earnings and cash flow. Most of these
factors are difficult to accurately predict and are generally
beyond the control of the Company.
For Further Information:
George Yankowski
Director of Investor Relations and Treasurer
(512) 370-8305
