FIRST AMENDMENT AGREEMENT
[EXECUTION
COPY]
This
First Amendment Agreement, dated as of August 24, 2006 (this “First Amendment
Agreement” or this “Agreement”), amends the Employee Agreement, dated as of
January 26, 2006 (the “Employee Agreement”), by and between SOUTHERN UNION
COMPANY, a Delaware corporation (“Seller”), and UGI CORPORATION, a Pennsylvania
corporation (“Buyer”), and the Purchase and Sale Agreement, dated as of January
26, 2006 (the “Sale Agreement”), between Seller and Buyer.
RECITALS
WHEREAS,
the parties desire to make certain amendments to the Employee Agreement and
the
Sale Agreement to the extent and in the manner hereinafter set forth;
and
WHEREAS,
Section 10.1 of the Sale Agreement incorporates the terms and provisions of
the
Employee Agreement, and Section 13.12 of the Sale Agreement permits the
amendment of the Sale Agreement only by an instrument in writing executed by
Seller and Buyer.
NOW,
THEREFORE, in consideration of the premises and agreements contained herein,
and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
1.
Defined
Terms. All
capitalized terms used, but not defined, in this Agreement shall have the
meanings ascribed or given to them under the terms of the Employee Agreement
or
the Sale Agreement.
2.
Amendments
to the Employee Agreement.
The
parties hereby agree to the following amendments to the Employee
Agreement:
(a) Section
1.1. Section
1.1 of the Employee Agreement shall be amended to add the following
definition:
“Unfunded
ABO under Seller’s Pension Plan” shall
mean the unfunded accumulated benefit obligation under Seller’s Pension Plan,
determined by Seller’s actuaries in accordance with Statement of Financial
Accounting Standard No. 87 as of the last day of the month preceding the Closing
Date, based on (1) the most recently available January 1st
census
data projected to such last day of the month preceding the Closing Date, (2)
asset values determined as of such last day of the month preceding the Closing
Date, and (3) the discount rate, determined using the Citigroup Pension Discount
Curve, determined as of the end of the month preceding the Closing Date, as
posted on the Society of Actuaries’ website; provided, however, that such
determination by Seller’s actuaries shall be subject to confirmation of such
calculation by Buyer’s actuaries.”
(b) Section
1.2. Section
1.2 of the Employee Agreement shall be amended to delete the reference to
“Buyer’s Pension Plan,” which was defined in Section 3.1 of the Employee
Agreement.
(c)
Section
2.6. Section
2.6 of the Employee Agreement shall be amended to delete the final sentence
of
Section 2.6.
(d) Section
3.1. Section
3.1 of the Employee Agreement shall be amended and restated in its entirety
to
read as follows:
Section
3.1 Pension
Plans. Seller
has no defined benefit plan that covers the Employees and that is intended
to be
a qualified plan other than the Employees’ Retirement Plan of Southern Union
Company Pennsylvania Division (“Seller’s Pension Plan”). No later than the
Closing Date, Seller shall contribute, in cash, to Seller’s Pension Plan an
amount equal to the Unfunded ABO under Seller’s Pension Plan, plus interest, at
the discount rate as of the end of the month preceding the Closing Date used
to
determine the Unfunded ABO under Seller’s Pension Plan, for the period beginning
on the last day of the month preceding the Closing Date until the Closing Date.
Effective as of the Closing Date, Buyer shall assume sponsorship of, and all
assets (held in trust), liabilities and obligations under, Seller’s Pension
Plan, including liability for any contributions due after the Closing Date.
Seller acknowledges and confirms to Buyer that, as a result of Seller’s
contribution of an amount equal to the Unfunded ABO under Seller’s Pension Plan
no later than the Closing Date, no further contributions with respect to
Seller’s Pension Plan will be required for the 2005 plan year. Seller also
acknowledges and confirms to Buyer that Seller has made, on a timely basis,
the
first two required quarterly contributions with respect to Seller’s Pension Plan
for the 2006 plan year. On the Closing Date, or as soon as administratively
feasible following the Closing Date, but in no event later than five business
days after the Closing Date, the assets held in trust under Seller’s Pension
Plan shall be transferred, in accordance with the letter agreement between
the
parties relating to such transfer of assets, to
a
trust designated by Buyer to fund Seller’s Pension Plan following the Closing
Date. Seller and Buyer shall take all action necessary and appropriate to
establish Buyer, effective as of the Closing Date, as successor to Seller as
to
all rights, assets (held in trust), duties, liabilities and obligations under
or
with respect to Seller’s Pension Plan. Buyer shall be responsible for the
preparation and filing of any annual reports relating to plan years that include
the Closing Date; provided, however, that Seller shall furnish Buyer with such
information concerning Seller’s Pension Plan as is necessary to prepare such
forms, specifically including an executed Schedule B attachment for the 2006
Form 5500, which Buyer may choose to use in connection with such filing.
Seller
shall be responsible for the preparation and filing of any annual reports
relating to all plan years ending prior to the Closing Date.
3.
Amendments to the Sale Agreement.
The
parties hereby agree to the following amendments to the Sale
Agreement:
(a)
Section 1.1. Section
1.1 of the Sale Agreement shall be amended by (i) amending clause (i) of the
definition “Excluded Assets” by inserting at the beginning
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thereof
the phrase “Except as otherwise provided in Section 6.9,” and (ii) deleting the
figure “$67,500,000” appearing in the definition “Working Capital Target” and
substituting therefor the figure “$68,100,000”.
(b)
Section 2.2(c).
Section
2.2(c) shall be amended to read in its entirety: “(c) obligations and
liabilities of Buyer and its Affiliates under the Employee Agreement and all
liabilities or obligations relating to the matter set forth on Schedule
2.2(c).
(c)
Section 2.3.
Section
2.3 shall be amended by deleting from clause (e) thereof the phrase “, and all
liabilities or obligations relating to the matter set forth on Schedule
2.3(b)”.
(d)
Schedule 2.3(b).
Schedule 2.3(b) shall be redesignated as Schedule 2.2(c).
(e)
Section 5.13. Section
5.13 of the Sale Agreement shall be amended and restated in its entirety to
read
as follows:
Section
5.13 Employee Benefit Matters.
(a)
Schedule
5.13
lists
(i) each “Employee Benefit Plan,” as such term is defined in Section 3(3) of
ERISA, that is covered by any provision of ERISA and that is maintained by
Seller for the benefit of the Employees and each other material fringe benefit
plan, policy or arrangement currently maintained by Seller for the benefit
of
the Employees that provides for pension, deferred compensation, bonuses,
severance, employee insurance coverage or similar employee benefits
(collectively, the “Employee Plans”); and (ii) each collective bargaining, union
or other employee association agreement, employment agreement and other material
agreement, policy or arrangement maintained by Seller for the Employees. Seller
has made available to Buyer copies of all documents setting forth the terms
of
such plans, policies, agreements and arrangements, or summaries of any such
plans, policies, agreements and arrangements not otherwise in
writing.
(b)
Seller’s Pension Plan and Seller’s 401(k) Plan are the only Employee Plans that
are intended to be qualified under Section 401(a) of the IRC.
(c)
The
Subsidiary does not employ any Employees or any other individuals and does
not
currently maintain any Employee Plan.
(d)
To
the Seller’s Knowledge, each Employee Benefit Plan maintained by Seller for the
benefit of the Employees has been established and administered in all material
respects in accordance with its terms and the applicable provisions of ERISA
and
the IRC.
(e) Seller
has delivered to Buyer true, correct and complete copies of (i) all current
documents governing Seller’s Pension Plan, and all amendments thereto, and to
the extent that Seller has possession of same, any predecessor or prior versions
of Seller’s Pension Plan, (ii) all reports filed on or after November 4, 1999 by
Seller, a
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Benefits
Affiliate or a Plan official with the United States Department of Labor, the
IRS
or any other federal or state regulatory agency with respect to Seller’s Pension
Plan, (iii) all summary plan descriptions, notices and other reporting and
disclosure material furnished to participants in Seller’s Pension Plan, (iv) all
actuarial, accounting and financial reports, if any, prepared with respect
to
Seller’s Pension Plan on or after November 4, 1999, (v) all current manuals,
procedures, guidelines, forms, files and data pertaining to the administration
of Seller’s Pension Plan, (vi) all post-November 4, 1999 minutes, resolutions,
determinations of any committee, person or other entity serving as plan
administrator or otherwise acting in a fiduciary capacity with respect to the
administration or management of Seller’s Pension Plan, and (vii) all currently
effective IRS ruling or determination letters on Seller’s Pension Plan. The term
“Benefits Affiliate” shall include (i) any corporation which is a member of a
controlled group of corporations (as defined in section 414(b) of the IRC)
which
includes Seller, (ii) any trade or business (whether or not incorporated) which
is under common control (as defined in section 414(c) of IRC) with Seller,
(iii)
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in section 414(m) of the IRC) which
includes Seller and (iv) any other entity required to be aggregated with Seller
pursuant to the regulations issued under section 414(o) of the IRC.
(f) Seller’s
Pension Plan and provisions thereof, any trusts created thereby and the
operation of Seller’s Pension Plan are (and at all times have been) in
compliance in all material respects with the terms of Seller’s Pension Plan and
conform (and at all times have been in compliance with and conformed) in all
material respects to the applicable provisions of the IRC, ERISA and all other
applicable statutes and governmental rules and regulations.
(g)
Seller’s Pension Plan has been determined by the IRS to be qualified in form
under section 401(a) of the IRC and exempt from tax under section 501(a) of
the
IRC, and each such determination remains in effect and has not been revoked.
To
the Seller’s Knowledge, nothing has occurred with respect to the design or
operation of Seller’s Pension Plan that could cause the loss of such
qualification or exemption or the imposition of any liability, lien, penalty
or
tax under ERISA or the IRC. Any amendment to Seller’s Pension Plan to comply
with current law and regulations that is required to be made on or before the
Closing Date has been timely made.
(h)
With
respect to Seller’s Pension Plan, there has occurred no non-exempt “prohibited
transaction” (within the meaning of section 4975 of the IRC or section 406 of
ERISA) or breach of any fiduciary duty described in section 404 of ERISA that
could result in any liability, direct or indirect, for Seller or a Benefits
Affiliate or any shareholder, officer, director or employee of Seller or a
Benefits Affiliate. Seller and its Benefits Affiliates have paid all amounts
that Seller and its Benefits Affiliates are required to pay as contributions
to
Seller’s Pension Plan as of the Closing Date.
(i)
Seller and its Benefits Affiliates have not incurred any liability for any
excise, income or other taxes or penalties with respect to Seller’s Pension
Plan, and to the Seller’s Knowledge, no event has occurred and no circumstance
exists or has existed that could give rise to any such liability. There are
no
pending or, to the Knowledge of Seller,
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threatened
claims by or on behalf of Seller’s Pension Plan, or by or on behalf of any
participants in or beneficiaries of Seller’s Pension Plan or other persons,
alleging any breach of fiduciary duty on the part of Seller or any Benefits
Affiliate or any of their officers, directors or employees under ERISA or any
applicable law, or except as set forth in Schedule
5.13(i),
claiming benefit payments other than those made in the ordinary operation of
Seller’s Pension Plan, nor is there any basis for any such claim. Seller’s
Pension Plan is not presently under audit or examination (nor has notice been
received of a potential audit or examination) by the IRS, the Department of
Labor or any other governmental entity, and no matters are pending with respect
to Seller’s Pension Plan under any IRS program. Seller has delivered to Buyer
any memorandum pertaining to self-correction of any operational defects with
regard to Seller’s Pension Plan.
(j)
Neither Seller nor any Benefits Affiliate has made any plan or commitment,
whether or not legally binding, to modify or change the terms of Seller’s
Pension Plan. Seller’s Pension Plan may be amended or terminated without penalty
by Buyer or its Benefits Affiliates at any time on or after the Closing, subject
to any requirements under the collective bargaining agreements referred to
in
Section 2.2 of the Employee Agreement and subject to applicable legal
requirements, specifically including the anti-cutback requirements under section
411(d)(6) of the IRC.
(k)
The
only representations and warranties given in respect of employee benefit matters
are those contained in this Section 5.13 and none of the other representations
and warranties contained in this Agreement shall be deemed to constitute,
directly or indirectly, a representation or warranty in respect of employee
benefit matters.
(f)
Schedule 5.13. The
attached revised Schedule
5.13
to the
Sale Agreement is hereby substituted for the original Schedule 5.13 to the
Sale
Agreement. The original Schedule 5.13 incorrectly listed the Southern Union
Company Severance Pay Plan as the Southern Union Company Severance Plan, and
it
failed to list collective bargaining agreements. The Schedules to the Sale
Agreement are further amended by the addition of new Schedule 5.13(i) in the
form attached hereto.
(g)
Section 6.9. Section
6.9 of the Sale Agreement shall be amended in its entirety to read as
follows:
Section
6.9. Insurance.
(a)
At
Buyer’s request and expense, Seller agrees to use commercially reasonable
efforts to assert and diligently pursue all rights to insurance coverage under
the Policies (other than with respect to Xxxxxxx’x Compensation and punitive
damage policies) and any other past insurance policies of Seller relating to
the
Business or the Assets (such insurance policies shall collectively be referred
to herein as the “Insurance Policies”) with respect to claims arising from the
Business or Assets relating to Assumed Liabilities, whether asserted prior
to or
after the Closing Date. Seller shall advise Buyer of material developments
in
respect of such claims and shall not settle or otherwise resolve any claims
so
asserted without the prior consent of Buyer, such consent not to be unreasonably
withheld, provided, however, that Seller may settle claims or policies
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relating
to the Business or the Assets relating to Assumed Liabilities (other than claims
under or policies constituting AEGIS Policies, as defined in clause (b) below)
without the prior consent of Buyer in connection with a settlement of policies
of Seller relating to the Excluded Assets or Retained Liabilities, including
Seller’s businesses other than the Business, subject to remittance by Seller to
Buyer of an allocable portion of the proceeds of such settlement (net of
Seller’s costs and expenses), as determined by the insurers with whom such
claims are settled (or in the absence of such allocation by the insurers, by
Seller in proportion to the claims attributable to the Assumed Liabilities
to
the totality of Seller’s claims to such insurers). Seller shall remit to Buyer
all insurance proceeds obtained after Closing in respect of claims arising
from
the Business or Assets relating to Assumed Liabilities. Seller agrees to use
commercially reasonable efforts to negotiate with each of its insurance
companies in order to provide Buyer the benefit of the coverage under the
policies for all claims arising prior to the Closing from the Business or Assets
related to the Assumed Liabilities whether asserted before or after the Closing
Date and to cooperate with Buyer with any efforts to obtain “tail” coverage, at
Buyer’s sole cost, with respect to any “claims made policies.” Notwithstanding
anything herein to the contrary, any recovery of insurance proceeds by Buyer
shall be net of all Seller’s cost and expenses. Seller shall give access to
Buyer to all of the non-privileged information relating to these matters and
shall consult with Buyer on the progress thereof from time to time. Nothing
set
forth in this Section 6.9 shall limit Seller’s right to assert claims under any
Insurance Policies in respect of Retained Liabilities.
(b)
Upon
Buyer’s request, except as otherwise provided herein, to the maximum extent
permitted by the terms of the Insurance Policies listed on Part I of Schedule
6.9(b) (the “AEGIS Policies”), Seller shall transfer, assign, convey and deliver
to Buyer all Seller’s rights, if any, under the AEGIS Policies solely to the
extent of coverage arising from the Business or Assets relating to Assumed
Liabilities. Anything in this Agreement to the contrary notwithstanding, this
Section 6.9(b) shall not be construed to operate as an assignment of any rights
under any such AEGIS Policy if an attempted assignment thereof, without the
Consent of a third party thereto, would render such AEGIS Policy null and void
or otherwise adversely affect the aggregate amount or terms of coverage
available thereunder. In addition, Seller shall use commercially reasonable
efforts to cause the insurer in respect of Policy No. X0012A1A06 (constituting
one of the AEGIS Policies) to issue an endorsement substantially in the form
attached hereto as Part II of Schedule 6.9(b), and Buyer acknowledges that
issuance of such endorsement shall satisfy Seller’s obligations under the fourth
sentence of Section 6.9(a) with respect to such AEGIS Policy. In the event
that
the insurer under the AEGIS Policies shall fail to pay a claim arising from
the
Business or Assets relating to the Assumed Liabilities, Seller agrees that,
at
Buyer’s request, Seller shall use commercially reasonable efforts to pursue such
claim against the insurer, including through litigation, at the sole expense
of
Buyer. Seller shall advise Buyer of material developments in respect of such
claims and shall not settle or otherwise resolve any such claim without the
prior consent of Buyer, such consent not to be unreasonably withheld. Buyer
hereby acknowledges that Seller has asserted, and there are currently
outstanding, claims under certain of the AEGIS Policies in an aggregate amount
equal to $2.3 million in respect of environmental costs and expenses incurred
by
Seller prior to the Closing (“Seller’s Environmental Claim”). Except as provided
in this Section 6.9(b), Seller shall keep the
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AEGIS
Policies in full force and effect, take no action with respect to the AEGIS
Policies to terminate or reduce the coverage available thereunder and make
all
required payments thereunder. Notwithstanding anything herein to the contrary,
Seller shall not be obligated, in respect of any policy period after the Closing
Date, to continue to purchase insurance coverage from AEGIS. To the extent
that
the AEGIS Policies provide coverage for the benefit of both Buyer and Seller,
both parties reserve the right to submit claims under those policies and to
use
commercially reasonably efforts to prosecute such claims provided the resolution
of the claim does not reduce the amount of coverage available to the other
party
by more than the amount of proceeds recovered by such party.
(c)
Except as provided in this Section 6.9(c), after the Closing, Buyer shall be
responsible for, and neither Seller nor any of its Affiliates shall have any
responsibility for, the payment of any deductible amounts, underlying limits
or
excess or excluded amounts attributable to the Insurance Policies, provided
that
Seller shall retain such responsibility for claims that relate to the Retained
Liabilities and Seller’s Environmental Claim. Buyer acknowledges that certain of
the Insurance Policies may require Seller or any of its Affiliates to provide
an
indemnity to the insurer for deductible amounts and to provide collateral to
secure such indemnity obligations. Buyer shall enter into an indemnification
agreement in form mutually acceptable to Buyer and Seller wherein Buyer agrees
to indemnify and hold harmless Seller or any of its Affiliates (as applicable)
for any and all of the costs of maintaining such collateral and for any charges
made against such collateral or indemnification payments or for any expenses
reasonably incurred by Seller in connection with claims arising or alleged
to
arise from the operations of the Business under or with respect to such
Insurance Policies from and after the Closing Date. If there is a retrospective
adjustment in respect of any of the Insurance Policies, Buyer shall pay to
Seller its allocable portion of such adjustment.
(d)
Seller makes no representation or warranty with respect to the applicability,
validity or adequacy of any Insurance Policies, and Seller shall not be
responsible to Buyer or any of its Affiliates for the failure of any insurer
to
pay under such Insurance Policy.
(e)
Nothing in this Agreement is intended to provide or shall be construed as
providing a benefit or release to any insurer or claims service organization
of
any obligation under any Insurance Policy. Nothing herein shall be construed
as
creating or permitting any insurer or claims service organization the right
of
subrogation against Seller or Buyer or any of their Affiliates in respect of
payments made by one to the other under any Insurance Policy.
(h)
Schedule 6.9.
The Sale
Agreement shall be amended by adding thereto new Schedules 6.9(a) and 6.9(b)
in
the forms attached hereto.
(i)
Section 6.13.
Section
6.13 of the Sale Agreement shall be amended by amending the second sentence
thereof to read in its entirety as follows: “Seller shall deliver the Audited
Financials to Buyer not later than five (5) Business Days after the
Closing.”
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(j)
Section 6.15. The
Sale
Agreement shall be amended by inserting therein a new Section 6.15 to read
in
its entirety as follows:
Section
6.15. Further Assurances; Cooperation.
From
time to time after the Closing Date, without further consideration, Seller
will
execute and deliver such documents to Buyer as Buyer may reasonably request
in
order to more effectively consummate the sale and purchase of the Assets or
to
more effectively vest in Buyer good and indefeasible title to the Assets subject
to the Permitted Encumbrances. Seller shall cooperate with Buyer, at Buyer’s
expense, in Buyer’s efforts to cure or remove any Permitted Encumbrances that
Buyer reasonably deems objectionable. From time to time after the Closing Date,
without further consideration, Buyer will execute and deliver such documents
to
Seller as Seller may reasonably request in order to evidence Buyer’s assumption
of the Assumed Liabilities.
(k)
Section 12.3. The first
sentence of Section 12.3(b) shall be amended in its entirety to read as
follows:
Except
as
provided below, the representations and warranties of Seller set forth in this
Agreement shall survive the Closing until the first anniversary of the Closing
Date; provided,
however,
that (i)
the representations and warranties set forth in Section 5.2 (Authority Relative
to this Agreement and Binding Effect), Section 5.5 (Title to Assets;
Encumbrances), and Section 5.17 (Brokers) shall survive indefinitely, (ii)
representations and warranties set forth in Section 5.9 (Taxes) shall survive
for a period equal to the applicable statute of limitations for the taxable
year
for each Tax, and (iii) representations and warranties set forth in clauses
(e)
through (j) of Section 5.13 shall survive until the second anniversary of the
Closing Date.
(l)
Section 12.4.
Section
12.4 shall be amended by adding at the end thereof the following sentence:
“Buyer shall have no liability for any claim or Loss to the extent of insurance
proceeds actually received by Seller in respect thereof under insurance
maintained by or for the benefit of Seller or any Affiliate of
Seller.”
4.
No
Other Modification.
This
First Amendment Agreement amends the Sale Agreement and the Employee Agreement
only to the extent and in the manner herein set forth. In all other respects,
the terms and conditions of the Sale Agreement and the Employee Agreement shall
remain in full force and effect.
5.
Counterparts.
This
Agreement may be executed in any number of counterparts, each of which will
be
deemed an original, but all of which together will constitute one and the same
instrument.
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IN
WITNESS WHEREOF, the
parties have caused this Agreement to be executed and delivered by their duly
authorized officers as of the date first written above.
SOUTHERN
UNION COMPANY
By:
/s/
XXXXXX X. XXXXXXXX III
Name:
Xxxxxx
X. Xxxxxxxx III
Title:
Vice
President - Assistant General
Counsel
and Secretary
UGI
CORPORATION
By:
/s/
XXXXXX X. XXXXXX
Name:
Xxxxxx
X. Xxxxxx
Title:
Vice
President and General Counsel
[Signature
page to First Amendment Agreement
between
Southern Union Company and UGI Corporation]
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9
Schedule
6.9(b)
Part
I
AEGIS
Policies:
168
168A
168NJ
X0168A1A89
X0168A1A90
X0168A1A91
X0168A1A92
X0168A1A93
X0168A1A94
X0168A1A95
X0168A1A96
X0012A1A06
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10
Schedule
6.9(b)
Part
II
Effective
"Date of Sale"
["In
consideration of the return premium of $xxxxxx it is herein agreed that this
POLICY shall no longer provide coverage for CLAIMS arising out of the "assets
sold to UGI" which occur on or after the date of Closing . In
accordance with Definition P(3), CLAIMS arising out of the "assets sold to
UGI"
which occurred prior to the date of Closing will be covered by this POLICY
subject to the terms and conditions herein."]
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