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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) September 30, 1999
RANGE RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 0-9592 34-1312571
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation or organization) Identification Number)
500 THROCKMORTON STREET 76102
FORT WORTH, TEXAS (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (817) 870-2601
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The purpose of this report is to make the following disclosures pursuant to Item
5 Other Events and Item 7(b) Financial Statements and Exhibits:
ITEM 5. OTHER EVENTS.
On September 30, 1999 Range Resources Corporation ("Range") formed
Great Lakes Energy Partners, L.L.C. ("Great Lakes") with FirstEnergy Corp.
("FirstEnergy"). Range and FirstEnergy each contributed all of their Appalachian
oil and gas properties and associated gas gathering and transportation systems
to Great Lakes, and each party owns a 50% interest in Great Lakes. Great Lakes
has proved reserves of approximately 450 Bcfe, of which 90% is natural gas,
4,700 miles of gas gathering and transportation lines and a leasehold position
of nearly 1 million acres. Combining the assets and operations should allow for
cost efficiencies, enhanced productivity and a stronger position in pursuing
further consolidation in the region. For more information about this
transaction, see the news release dated September 30, 1999, a copy of which is
filed as Exhibit 2.2 hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information
Pro Forma combined balance sheet at June 30, 1999
Pro Forma combined statement of operations for the six months ended
June 30, 1999
Pro Forma combined statement of operations for the twelve months ended
December 31, 1998
Notes to pro forma combined financial statements
(c) Exhibits
2.1 Formation Agreement between Range Resources Corporation and
FirstEnergy Corp. dated September 30, 1999.
2.2 Range Resources Corporation news release dated September 30,
1999 announcing completion of the Range and FirstEnergy joint
venture.
2
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UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
On September 30, 1999 Range Resources Corporation ("Range" or "the
Company") formed Great Lakes Energy Partners, L.L.C. ("Great Lakes"), a joint
venture with FirstEnergy Corp. ("FirstEnergy"). Range and FirstEnergy each
contributed all of their Appalachian oil and gas properties and associated gas
gathering and transportation systems to Great Lakes, and each party owns a 50%
interest in Great Lakes. Great Lakes has proved reserves of approximately 450
Bcfe, of which 90% is natural gas, 4,700 miles of gas gathering and
transportation lines and a leasehold position of nearly 1 million acres. The
Company's 50% ownership in Great Lakes will be pro-rata consolidated into
Range's financial statements.
The accompanying unaudited pro forma condensed financial statements
give effect the formation of Great Lakes. The accompanying unaudited pro forma
combined balance sheet of Range as of June 30, 1999 has been prepared as if the
formation of Great Lakes had occurred as of that date. The unaudited pro forma
combined statements of operations for the six months ended June 30, 1999 and the
year ended December 31, 1998 were prepared as if the formation of Great Lakes
had occurred at the beginning of each period presented.
This information is not necessarily indicative of future consolidated
results of operations.
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RANGE RESOURCES CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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<CAPTION>
Great Lakes
Historical Pro Forma Pro Forma
Range Adjustments Range
----- ----------- -----
Assets
Current assets
<S> <C> <C> <C>
Cash and equivalents................................... $15,757 $15,757
Accounts receivable.................................... 27,701 27,701
IPF Program notes receivable, current portion.......... 8,600 8,600
Marketable securities.................................. 4,422 4,422
Assets held for sale................................... 48,687 (48,687)(a) -
Inventory and other.................................... 5,289 (675)(a) 4,614
----------- ---------
Total current assets............................. 110,456 61,094
----------- ---------
IPF Program notes receivable, net......................... 63,634 63,634
Oil and gas properties.................................... 945,372 (117,638)(a) 827,734
Accumulated depletion and amortization................. (302,302) 72,386 (a) (229,916)
----------- ---------
643,070 597,818
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Gas transportation and field services assets.............. 89,452 (15,976)(a) 73,476
Accumulated depreciation............................... (18,491) 9,451 (a) (9,040)
----------- ---------
70,961 64,436
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Other assets.............................................. 7,556 7,556
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$ 895,677 $ 794,538
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable........................................ $ 21,987 $ 21,987
Accrued liabilities..................................... 21,109 21,109
Accrued interest........................................ 9,245 9,245
Current portion of debt................................. 52,052 (52,015)(a) 37
----------- -----------
Total current liabilities........................ 104,393 52,378
----------- -----------
Senior debt............................................... 317,085 (49,124)(a) 267,961
Non-recourse debt of IPF.................................. 54,200 54,200
Subordinated notes........................................ 176,360 176,360
----------- -----------
547,645 498,521
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Company-obligated preferred securities of
subsidiary trust ....................................... 117,669 117,669
Stockholders' equity
$2.03 convertible preferred stock, $1 par value......... 1,150 1,150
Common stock, $.01 par value............................ 374 374
Capital in excess of par value.......................... 339,027 339,027
Retained earnings (deficit)............................. (216,364) (216,364)
Unrealized gain (loss) on marketable securities......... 1,783 1,783
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Total stockholders' equity....................... 125,970 125,970
----------- ----------
$ 895,677 $ 794,538
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</TABLE>
See notes to pro forma combined financial statements
4
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RANGE RESOURCES CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
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Great Lakes
Historical Pro Forma Pro Forma
Range Adjustments Range
----- ----------- -----
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Revenues
Oil and gas sales................. $ 71,082 $ (6,277) (b) $ 64,805
Transportation, marketing and
processing.................... 3,698 (408) (b) 3,290
IPF income, net................... 3,454 3,454
Interest and other................ 1,915 (191) (b) 1,724
---------- -----------
80,149 73,273
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Expenses
Direct operating.................. 22,085 (1,674) (b) 20,411
IPC expense....................... 2,976 2,976
Exploration....................... 1,362 (53) (b) 1,309
General and administrative........ 3,662 (168) (b) 3,494
Interest.......................... 24,453 (3,374) (b) 21,079
Depletion, depreciation and
amortization.................... 38,939 (2,408) (b) 36,531
---------- -----------
93,477 85,800
---------- -----------
Income (loss) before income taxes.. (13,328) (12,527)
Income taxes
Current........................... 170 170
Deferred.......................... - -
---------- -----------
Income (loss) before extraordinary
item.............................. (13,498) (12,697)
Extraordinary item
Gain on exchange of securities... 2,430 2,430
---------- -----------
Net income (loss)................... $ (11,068) $ (10,267)
========== ============
Comprehensive income (loss)........ $ (9,665) $ (8,866)
========== ============
Earnings (loss) per common share:
Basic............................. $ (0.34) $ (0.31)
========== ============
Diluted........................... $ (0.34) $ (0.31)
=========== ============
Weighted average shares outstanding
Basic............................. 36,442 36,442
=========== ===========
Diluted........................... 36,442 36,442
=========== ===========
</TABLE>
See notes to pro forma combined financial statements
5
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RANGE RESOURCES CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
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<CAPTION>
Great Lakes
Historical Pro Forma Pro Forma
Range Adjustments Range
----- ----------- -----
<S> <C> <C> <C>
Revenues
Oil and gas sales................. $ 135,593 $ (13,697) (c) $ 121,896
Transportation, marketing and
processing.................... 6,711 509 (c) 7,220
IPF income, net................... 4,370 4,370
Interest and other................ 2,255 (220) (c) 2,035
---------- ----------
148,929 135,521
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Expenses
Direct operating.................. 39,001 (6,352) (c) 32,649
IPF expense....................... 7,996 7,996
Exploration....................... 11,265 499 (c) 11,764
General and administrative........ 9,215 (564) (c) 8,651
Interest.......................... 40,642 (5,929) (c) 34,713
Depletion, depreciation and
amortization.................... 60,153 (3,994) (c) 56,159
Provision for impairment 207,128 (7,322) (c) 199,806
Business restructuring costs...... 3,147 3,147
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378,547 354,885
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Income (loss) before income taxes.. (229,618) (219,364)
Income taxes
Current........................... 278 278
Deferred.......................... (54,746) (54,746)
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Net income (loss)................... $ (175,150) $ (164,896)
=========== ===========
Comprehensive income (loss)........ $ (175,260) $ (165,006)
=========== ===========
Earnings (loss) per common share:
Basic............................. $ (6.82) $ (6.43)
========== ===========
Diluted........................... $ (6.82) $ (6.43)
========== ===========
Weighted average shares outstanding
Basic............................ 26,008 26,008
========== ===========
Diluted........................... 26,008 26,008
========== ===========
</TABLE>
See notes to pro forma combined financial statements
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RANGE RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE (1) BASIS OF PRESENTATION
On September 30, 1999 Range Resources Corporation ("Range" or "the
Company") formed Great Lakes Energy Partners, L.L.C. ("Great Lakes"), a
joint venture with FirstEnergy Corp. ("FirstEnergy"). Range and
FirstEnergy each contributed all of their Appalachian oil and gas
properties and associated gas gathering and transportation systems to
Great Lakes, and each party owns a 50% interest in Great Lakes. Great
Lakes has proved reserves of approximately 450 Bcfe, of which 90% is
natural gas, 4,700 miles of gas gathering and transportation lines and a
leasehold position of nearly 1 million acres. The Company's 50% ownership
in Great Lakes will be pro-rata consolidated into the financial statements
of Range. The Company anticipates it will recognize a non-recurring gain
and related income taxes as a result of the consummation of this
transaction. The gain and related income taxes have not been reflected in
the pro forma financial statements because they will be non-recurring. The
accompanying pro forma condensed financial statements give effect to the
formation of Great Lakes.
NOTE (2) GREAT LAKES PRO FORMA ADJUSTMENTS - AS OF JUNE 30, 1999
The accompanying unaudited pro forma combined balance sheet as of June
30, 1999 has been prepared as if Great Lakes was formed on June 30, 1999 and
reflects the following adjustments:
(a) To adjust the Company's assets and liabilities to reflect the
contribution of its Appalachian oil and gas properties and associated
gas gathering and transportation systems to Great Lakes and the
assumption by Great Lakes of $188 million of debt related to those
assets. This adjustment reflects the pro-rata consolidation of the
Company's 50% interest in Great Lakes.
NOTE (3) GREAT LAKES PRO FORMA ADJUSTMENTS - FOR THE SIX MONTHS ENDED JUNE 30,
1999
The accompanying unaudited pro forma combined statement of operations
for the six months ended June 30, 1999 has been prepared as if Great Lakes was
formed on January 1, 1999 and reflects the following adjustments:
(b) To adjust the Company's operations to reflect the contribution of its
Appalachian operations to Great Lakes and reflect the Company's 50%
interest in Great Lakes operations.
NOTE (4) GREAT LAKES PRO FORMA ADJUSTMENTS - FOR THE YEAR ENDED DECEMBER 31,
1998
The accompanying unaudited pro forma combined statement of operations
for the year ended December 31, 1998 has been prepared as if Great Lakes was
formed on January 1, 1998 and reflects the following adjustments:
(c) To adjust the Company's operations to reflect the contribution of its
Appalachian operations to Great Lakes and reflect the Company's 50%
interest in Great Lakes operations.
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SIGNATURE
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 hereunto duly authorized.
RANGE RESOURCES CORPORATION
By /s/ Thomas W. Stoelk
----------------------------
Thomas W. Stoelk
Senior Vice President
Finance & Administration
October 15, 1999
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EXHIBIT INDEX
Exhibit
Number Exhibit Title
------ -------------
2.1 Formation Agreement between Range Resources Corporation and
FirstEnergy Corp. dated September 30, 1999.
2.2 Range Resources Corporation news release dated September 30,
1999 announcing completion of the Range and FirstEnergy joint
venture.
9
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Exhibit 2.1
FORMATION AGREEMENT
between
RANGE RESOURCES CORPORATION
and
FIRSTENERGY CORP.
dated
September 30, 1999
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TABLE OF CONTENTS
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ARTICLE I FORMATION OF JOINT VENTURE
1.1 Formation and Contribution...................................................................... 2
1.1.1 Certification of Formation............................................................. 2
1.1.2 Execution and Delivery of Certain Agreements........................................... 2
1.1.3 Contribution by FirstEnergy............................................................ 2
1.1.4 Contribution by Range.................................................................. 3
1.1.5 Preparatory Transactions and Post-Contribution Transactions............................ 3
1.1.6 Closing................................................................................ 3
1.1.7 Retail Gas Contract Consideration...................................................... 4
1.1.8 Pre-Closing Allocations................................................................ 4
1.1.9 Financing for the Company............................................. 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF RANGE
2.1 Organization.......................................................................... 5
2.2 Financial Information.......................................................................... 6
2.3 Subsidiaries................................................................................... 6
2.4 Options........................................................................................ 6
2.5 Authority; Non-contravention................................................................... 6
2.6 Absence of Certain Changes or Events........................................................... 7
2.7 Brokers........................................................................................ 8
2.8 Litigation..................................................................................... 8
2.9 Employee Benefit Matters....................................................................... 8
2.10 Tax Matters.................................................................................... 9
2.11 No Excess Parachute Payments................................................................... 11
2.12 Environmental Matters.......................................................................... 11
2.13 Compliance with Laws........................................................................... 12
2.14 Material Contracts and Agreements.............................................................. 12
2.15 Title to Properties............................................................................ 14
2.16 Intellectual Property.......................................................................... 14
2.17 Labor Matters.................................................................................. 14
2.18 Insurance...................................................................................... 15
2.19 Year 2000 Compliance........................................................................... 15
2.20 Title to Oil and Gas Interests................................................................. 16
2.21 Hedging........................................................................................ 18
2.22.1 Recent Authorizations................................................................. 19
2.22.2 Specific Lease Terms.................................................................. 18
2.22 Oil and Gas Contracts.......................................................................... 20
2.23 Reserve Reports................................................................................ 20
2.24 Oil and Gas Wells, Proceeds and Sales; Equipment............................................... 21
2.24.1 Plugging and Abandonment Costs........................................................ 22
2.25 Necessary Assets............................................................................... 22
2.26 Full Disclosure................................................................................ 22
</TABLE>
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF FIRSTENERGY
3.1 Organization................................................................................... 22
3.2 Financial Information.......................................................................... 23
3.3 Subsidiaries................................................................................... 23
3.4 Options........................................................................................ 23
3.5 Authority; Non-contravention................................................................... 23
3.6 Absence of Certain Changes or Events........................................................... 24
3.7 Brokers........................................................................................ 25
3.8 Litigation..................................................................................... 25
3.9 Employee Benefit Matters....................................................................... 25
3.10 Tax Matters.................................................................................... 26
3.11 No Excess Parachute Payments................................................................... 28
3.12 Environmental Matters.......................................................................... 28
3.13 Compliance with Laws........................................................................... 29
3.14 Material Contracts and Agreements.............................................................. 29
3.15 Title to Properties............................................................................ 31
3.16 Intellectual Property.......................................................................... 31
3.17 Labor Matters.................................................................................. 31
3.18 Insurance...................................................................................... 32
3.19 Year 2000 Compliance........................................................................... 32
3.20 Title to Oil and Gas Interests................................................................. 32
3.21 Hedging........................................................................................ 34
3.22 Oil and Gas Contracts.......................................................................... 35
3.22.1 Recent Authorizations................................................................. 36
3.22.2 Specific Lease Terms.................................................................. 36
3.23 Reserve Reports................................................................................ 36
3.24 Oil and Gas Wells, Proceeds and Sales; Equipment............................................... 37
3.24.1 Plugging and Abandonment Costs............................................... 38
3.25 Necessary Assets............................................................................... 38
3.26 Full Disclosure....................................................................... 38
ARTICLE IV COVENANTS OF RANGE
4.1 Conduct of Business............................................................................ 39
4.1.1 Ordinary Course....................................................................... 39
4.1.2 Changes in Employment Arrangements.................................................... 41
4.2 Range Preparatory Actions...................................................................... 41
ARTICLE V COVENANTS OF FIRSTENERGY
5.1 Conduct of Business............................................................................ 41
5.1.1 Ordinary Course....................................................................... 41
5.1.2 Changes in Employment Arrangements.................................................... 43
5.2 FirstEnergy Preparatory Actions................................................................ 43
5.3 Gas Transport, Inc............................................................................. 43
</TABLE>
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ARTICLE VI CERTAIN OTHER COVENANTS
6.1 Further Assurances............................................................................. 44
6.2 Notice......................................................................................... 44
6.3 HSR Act........................................................................................ 45
6.4 Access......................................................................................... 45
6.5 Expenses....................................................................................... 46
6.6 [Intentionally omitted.] [Schedule 6.6 intentionally omitted.]................................. 46
6.7 Disclosure Schedules........................................................................... 46
6.8 Environmental Compliance Matters............................................................... 46
6.9 Additional and Substitute Leases............................................................... 46
6.9.1 FirstEnergy Unleased PUDs............................................................. 46
6.9.2 ............................................................................. 47
Unleased PUDs........................................................................................... 47
6.10 Contribution Upon Guaranty Payment.................................................... 49
ARTICLE VII CONDITIONS OF CLOSING
7.1 ...................................................................................... 49
7.1.1 HSR Act.............................................................. 49
7.1.2 No Injunctions or Restraints......................................... 49
7.1.3 Financing............................................................ 49
7.1.4 Other Deliveries..................................................... 49
7.2 Conditions Precedent to Obligations of FirstEnergy.................................... 50
7.2.1 Compliance........................................................... 50
7.2.2 Certification........................................................ 50
7.2.3 Representations and Warranties True.................................. 50
7.2.4 Consents, etc........................................................ 50
7.2.5 No Litigation........................................................ 51
7.2.6 No Material Adverse Change........................................... 51
7.3 Conditions Precedent to Obligations of Range.......................................... 51
7.3.1 Compliance........................................................... 51
7.3.2 Certification........................................................ 51
7.3.3 Representations and Warranties True.................................. 52
7.3.4 Consents, etc........................................................ 52
7.3.5 No Litigation........................................................ 52
7.3.6 No Material Adverse Change........................................... 52
ARTICLE VIII TAX MATTERS
8.1 Certain Tax Matters................................................................... 53
8.1.1 Access to Information................................................ 53
8.1.2 Indemnification Provisions for the Benefit of FirstEnergy
and the Company...................................................... 54
8.1.3 Indemnification Provisions for the Benefit of Range and the
Company.............................................................. 54
8.1.4 Indemnification Procedures........................................... 55
8.1.5 Filing of Returns.................................................... 56
</TABLE>
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8.1.6 Survival............................................................. 57
ARTICLE IX INDEMNIFICATION AND CERTAIN DISCLAIMERS
9.1 Survival.............................................................................. 57
9.2 Indemnification by Range.............................................................. 59
9.3 Indemnification by FirstEnergy........................................................ 60
9.4 Indemnification Procedures............................................................ 61
9.5 Indemnities by the Company............................................................ 63
9.6 Disregard of Materiality Qualifiers................................................... 64
9.7 Disclaimer of Representations and Warranties.......................................... 64
9.8 Damages............................................................................... 64
ARTICLE X TERMINATION
10.1 Termination........................................................................... 65
ARTICLE XI CONSTRUCTION AND MISCELLANEOUS
11.1 Dispute Resolution and Arbitration.................................................... 66
11.1.1 Dispute Resolution and Arbitration................................... 66
11.1.2 Choice of Forum...................................................... 68
11.2 Notices............................................................................... 68
11.3 Binding Effect........................................................................ 69
11.4 Headings; Language.................................................................... 69
11.5 Exhibits and Schedules................................................................ 69
11.6 Counterparts.......................................................................... 69
11.7 No Waiver of Rights................................................................... 70
11.8 Pronouns.............................................................................. 70
11.9 Time Periods.......................................................................... 70
11.10 Modification or Amendment............................................................. 70
11.11 Entire Agreement...................................................................... 70
11.12 No Assignment......................................................................... 70
11.13 Severability.......................................................................... 70
11.14 Construction.......................................................................... 70
</TABLE>
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FORMATION AGREEMENT
THIS FORMATION AGREEMENT, dated as of this 30th day of September, 1999,
is made between Range Resources Corporation ("Range"), a Delaware corporation,
with its principal office at 125 State Route 43, Hartville, Ohio 44632, and
FirstEnergy Corp. ("FirstEnergy"), an Ohio corporation, with its principal
office at 76 South Main Street, Akron, Ohio 44308. All capitalized terms used in
this Formation Agreement are used in this Formation Agreement with the meanings
assigned thereto in Annex I to this Formation Agreement:
RECITALS:
A. Range, through certain of its Subsidiaries, is in the business
(among other things) of oil and gas development, exploration, production,
transportation, processing, marketing, trading and acquisition in the
Appalachian Basin Area (such business, excluding the ownership or operation of
the Excluded Range Assets and the Retail Gas Contracts, is referred to herein as
the "Range Appalachian Business").
B. FirstEnergy, through certain of its Subsidiaries, is in the business
(among other things) of oil and gas development, exploration, production,
transportation, processing, marketing, trading and acquisition in the
Appalachian Basin Area (such business, excluding the ownership or operation of
the Excluded FirstEnergy Assets, is referred to herein as the "FirstEnergy
Appalachian Business").
C. Range and FirstEnergy desire to form or cause to be formed a joint
venture structured as a limited liability company organized under the laws of
the State of Delaware and to be known as Great Lakes Energy Partners, L.L.C.
(the "Company"), for the purpose of engaging in oil and gas development,
exploration, production, gathering, natural gas processing, marketing,
transportation, and acquisition in the Appalachian Basin Area and to contribute,
or cause to be contributed, their respective Appalachian Businesses to the
Company or its Subsidiaries in exchange for interests in the Company.
D. In connection with the formation of the Company, Range has agreed to
assign to an Affiliate of FirstEnergy its rights under the gas sales contracts
described in Exhibit A hereto representing all gas sales contracts with retail
customers that are used in connection with the Range Appalachian Business (the
"Retail Gas Contracts") for the Retail Gas Contracts Consideration.
NOW, THEREFORE, in consideration of the undertakings hereinafter set
forth, and for other good and valuable consideration, the mutual receipt and
sufficiency of which are hereby acknowledged, intending to be legally bound, the
parties hereto hereby agree as follows:
ARTICLE I
FORMATION OF JOINT VENTURE
I.1 Formation and Contribution. Subject to the terms and conditions of
this Formation Agreement (i) prior to the Closing Date, the Initial FirstEnergy
Members and the Initial Range Members shall form the Company, (ii) in return for
an aggregate fifty percent (50%) Membership Interest in the Company for the
Initial FirstEnergy Members, on the Closing Date, FirstEnergy shall cause the
contributions set forth in Section 1.1.3 below, (iii) in return for an aggregate
fifty percent (50%) Membership Interest in the Company for the Initial Range
Members, on the Closing Date, Range shall cause the contributions set forth in
Section 1.1.4 below, and (iv) the other transactions contemplated by this
Formation Agreement shall be effected, as follows:
I.1.1 Certification of Formation. Prior to the Closing Date,
the Initial FirstEnergy Members and the Initial Range Members shall jointly file
a Certificate of Formation for the Company with the Secretary of State of
Delaware.
<PAGE> 7
I.1.2 Execution and Delivery of Certain Agreements. On the
Closing Date, the following agreements and documents shall be executed and
delivered:
(a) LLC Agreement. The Members shall execute and deliver
the LLC Agreement, immediately following the actions taken in Sections 1.1.3,
1.1.4 and 1.1.5 below.
(b) Administrative Services and Lease Agreement.
FirstEnergy, Range, and the Company shall execute and deliver the Administrative
Services and Lease Agreement in the form attached hereto as Exhibit B.
(c) Master Gas Purchase Agreement. FirstEnergy and the
Company shall execute and deliver the Master Gas Purchase Agreement in the form
attached hereto as Exhibit C.
(d) [Intentionally Omitted.] [Exhibit D intentionally
omitted.]
(e) IDC Agreement. FirstEnergy and Range shall execute
and deliver the IDC Agreement in the form attached hereto as Exhibit E.
(f) Retail Gas Contract Assignment. FirstEnergy Trading
Service, Inc. and Range Energy Services, Inc. shall execute the Retail Gas
Contract Assignment in the form attached hereto as Exhibit F.
I.1.3 Contribution by FirstEnergy. On the Closing Date, in
exchange for an aggregate fifty percent (50%) Membership Interest in the
Company, the Initial FirstEnergy Members shall contribute:
(a) the FirstEnergy Appalachian Business to the Company
by FirstEnergy causing the following actions to occur in accordance with merger
agreements and/or transfer instruments (as applicable) mutually acceptable to
the parties hereto:
(i) J R Operating shall merge with and into
the Company;
(ii) MB Operating shall merge with and into
the Company; and
(iii) NOOCI shall transfer all of the shares
of Ohio Intrastate to the Company.
(b) an aggregate amount of $3,507,000 in cash, by wire
transfer to an account designated by the Company.
I.1.4 Contribution by Range. On the Closing Date, in exchange
for an aggregate fifty percent (50%) Membership Interest in the Company, the
Initial Range Members shall contribute the Range Appalachian Business to the
Company by Range causing the following actions to occur in accordance with
merger agreements and/or transfer instruments (as applicable) mutually
acceptable to the parties hereto:
(a) Buffalo Oilfield shall merge with and into the
Company;
(b) Range Operating shall merge with and into the
Company;
(c) Range Energy Ventures shall transfer all of the
membership interests of Oceana Exploration to the Company;
(d) Range Production shall transfer the Range Michigan
Assets to the Company; and
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(e) Range shall transfer the FFE Assets to the Company.
I.1.5 Preparatory Transactions and Post-Contribution
Transactions. Prior to the consummation of the transactions specified in
Sections 1.1.3 and 1.1.4, certain pre-closing transactions are to occur as
indicated in Sections 4.2 and 5.2. Immediately following the consummation of the
transactions described in Sections 1.1.3 and 1.1.4, (i) each of FirstEnergy and
NOOCI shall assign its Membership Interest in the Company to Marbel HoldCo, and
(ii) each of Range Production and Range Energy Ventures shall assign its
Membership Interest in the Company to Range HoldCo.
I.1.6 Closing. The closing (the "Closing") of the transactions
contemplated hereby shall occur on September 30, 1999 (the "Closing Date"). The
Closing shall take place at the offices of Brouse McDowell, 500 First National
Tower, Akron, Ohio 44308. The parties may agree to change the Closing Date and
the location of the Closing. The contributions contemplated in Sections 1.1.3
and 1.1.4 shall be mutually interdependent and regarded as occurring
simultaneously; and no such transfer or delivery shall become effective until
all other such transfers and deliveries have also been consummated. The
contributions contemplated in Section 1.1.3 and 1.1.4 shall be deemed to have
occurred and the Closing shall be effective as of 10:00 a.m., Eastern Standard
Time, on the Closing Date.
I.1.7 Retail Gas Contract Consideration. On the Closing Date,
in exchange for the Retail Gas Contract Assignment, FirstEnergy shall pay to
Range (or its designee) the Retail Gas Contract Consideration by wire transfer
to an account designated by Range in writing.
I.1.8 Pre-Closing Allocations. (a) Assets and liabilities
arising out of the conduct of the Appalachian Business prior to the Closing Date
shall be retained by each of Range and FirstEnergy (or their Affiliates) to the
extent set forth in the allocation schedules for each of Range and FirstEnergy
set forth on Schedule 1.1.8. Except as set forth on such Schedules, and except
for the Excluded FirstEnergy Assets and the Excluded Range Assets, all other
assets and liabilities shall belong to the Company, subject to the provisions of
Section 1.1.8 (c), Section 5.3 [Gas Transport, Inc.], Articles VIII [Tax
Matters] and IX [Indemnification and Certain Disclaimers].
(b) To the extent that the Company receives any funds to
which any of FirstEnergy or Range is entitled pursuant to Section 1.1.8(a), the
Company shall promptly deliver such funds to an account designated in writing by
such entity. To the extent that either of FirstEnergy or Range (or their
respective Affiliates) receives any funds to which the Company is entitled
pursuant to Section 1.1.8(a), such entity shall (or shall cause its Affiliates
to) promptly deliver such funds to the Company. If any party hereto pays any
cost or expense (or related account payable) arising in the ordinary course of
business or operations that are properly borne by any other party hereto
pursuant to Section 1.1.8(a), the party responsible for such cost or expense (or
related account payable) pursuant to Section 1.1.8(a) shall promptly reimburse
the party who made such payment; provided that if the Company pays any such cost
or expense (or related account payable) that are properly borne by either
FirstEnergy or Range, then the Company shall be entitled to offset any such
amounts paid against any funds that it receives that are payable to such party
pursuant to this Section 1.1.8.
(c) FirstEnergy shall be entitled to a payment by the
Company for the difference between the capital expenditures expended upon the
1999 Marbel drilling program and the 1999 Range drilling program in the amount
estimated by the parties as of the Closing Date to be $1,528,461. Following the
Closing Date, the parties shall determine the actual costs expended upon such
drilling programs in accordance with the following guidelines:
(i) The subject cost must have a service date
(actual service or work performed date) after December 31, 1998 and prior to the
Closing Date;
(ii) New wells - All drilling and completion costs
related to new wells spud after December 31, 1998. These costs shall include
title, permitting and surveying;
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(iii) Pipelines - All costs related to newly
constructed pipelines including compressors and metering. Upgrades, replacements
or repairs of existing pipelines shall be excluded;
(iv) Seismic - included; and
(v) Excluded costs - All lease costs including lease
rentals, landman time and landowner bonuses.
There shall be a post-Closing adjustment computation prepared by the parties
prior to December 31, 1999. To the extent the actual amounts differ from the
estimated amounts, then a final adjustment shall be made among the Company,
Range, and FirstEnergy, as the case may be.
I.1.9 Financing for the Company. As of the Closing Date,
FirstEnergy and Range agree that the Company shall enter into a revolving credit
facility with BankOne N.A. and other lenders, providing the Company with
revolving credit of up to $275,000,000. On the Closing Date, such parties agree
that the Company shall borrow, under such credit agreement, an amount equal to
$186,299,535 and that the Company shall use the proceeds of such borrowing and
cash contributions received by the Company to pay $188,278,074 to BankOne N.A.
for the repayment of $188,278,074 in debt owed by the Company to a bank group
for which BankOne N.A. is the agent (such debt was previously the debt of Range
and was assumed by the Company's predecessor, Range Operating, in connection
with the release of the Range Bank Liens encumbering the capital stock of the
Range Stock Parties) (the "Assumed Debt").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF RANGE
Range represents and warrants to FirstEnergy as follows, of which each
representation and warranty shall be deemed to be material and independently
relied upon by FirstEnergy without regard to any investigation undertaken by
FirstEnergy:
II.1 Organization. Range and each of the Range Participating Entities
is a corporation, partnership or limited liability company duly organized or
formed, validly existing and in good standing under the laws of its jurisdiction
of organization or formation. Range Operating, prior to the transactions
described in Section 4.2, owns all the outstanding equity interests in Range
Development, free and clear of all Liens, except the Range Bank Liens, and all
such interests have been validly issued and are fully paid and nonassessable.
Range, prior to the formation of Range HoldCo (as is contemplated in Section
4.2), owns all of the outstanding equity interests in Range Operating and
Buffalo Oilfield, free and clear of all Liens, except the Range Bank Liens, and
all such interests have been validly issued and are fully paid and
non-assessable. Range HoldCo, following the consummation of the transactions
described in Section 4.2, will own all the outstanding equity interests in each
of Range Operating and Buffalo Oilfield, in each case, free and clear of all
Liens, except the Range Bank Liens, and all such interests have been (or will be
as of the Closing) validly issued and are fully paid and non-assessable. Range
Energy Ventures owns all of the outstanding equity interests in Oceana
Exploration free and clear of all Liens, except the Range Bank Liens, and all
such interests have been validly issued and are fully paid and non-assessable.
The only jurisdictions in which Range and any Range Participating Entity are
required to qualify to transact business as a foreign entity are as set forth on
Schedule 2.1 attached hereto, and each of Range and the Range Participating
Entities is in good standing under the laws of each such jurisdiction, other
than in such jurisdictions where the failure to be so qualified, individually or
in the aggregate, would not have a Material Adverse Effect on the Range
Appalachian Business.
II.2 Financial Information. Range has delivered to FirstEnergy the
financial information regarding the Range Appalachian Business attached hereto
as Schedule 2.2. The financial information set forth in Schedule 2.2 is true and
correct in all material respects as of the date set forth in Schedule 2.2. The
information provided by Range, relating to the Range Appalachian Business and
employees, to prepare the pro forma and projected financial information of the
Company for the calendar years of 1999 and 2000 is true and correct in all
material respects as of the date provided to FirstEnergy.
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II.3 Subsidiaries. None of the Range Stock Parties owns, directly or
indirectly, any capital stock or other ownership interest in any Subsidiary,
except (i) as set forth in Schedule 2.3, (ii) for the Excluded Range Assets to
be transferred prior to the Closing by the Range Stock Parties to their
Affiliates, none of which will be Range Stock Parties, and (iii) prior to the
transactions contemplated by Section 4.2, Range Operating owns equity interests
in Range Development.
II.4 Options. Except as contemplated in Sections 1.1.4 and 4.2 hereof,
there are no outstanding or authorized securities, options, warrants, calls,
rights, commitments, preemptive rights, agreements, arrangements or undertakings
of any kind to which any of the Range Stock Parties is a party, or by which it
is bound, obligating any of the Range Stock Parties to issue, deliver or sell,
or cause to be issued, delivered or sold, any shares of capital stock or other
equity or voting securities of, or other ownership interests in, the Range Stock
Parties or obligating the Range Stock Parties to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking.
II.5 Authority; Non-contravention. (a) Range has the requisite
corporate power and authority to enter into this Formation Agreement and it and
Range and each Range Participating Entity has the requisite corporate,
partnership or limited liability company power and authority to consummate the
transactions contemplated hereby. The execution and delivery of this Formation
Agreement by Range and the consummation by Range and each Range Participating
Entity of the transactions contemplated hereby have been duly authorized by all
necessary corporate, partnership or limited liability company action on the part
of Range and each Range Participating Entity. This Formation Agreement has been
duly and validly executed and delivered by Range and constitutes a valid and
binding obligation of Range enforceable against Range in accordance with its
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar Laws or judicial
decisions now or hereafter in effect relating to creditors' rights generally,
(ii) such enforcement may be subject to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity), and (iii)
the remedy of specific performance and injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. As of the Closing, each Transaction Document
will be duly and validly executed and delivered by Range or the Range
Participating Entity that is a party thereto and each such document will
constitute a valid and binding obligation of such party enforceable against such
party in accordance with its terms, except that (i) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws or judicial decisions now or hereafter in effect relating to creditors'
rights generally, (ii) such enforcement may be subject to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity), and (iii) the remedy of specific performance and injunctive relief
may be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(b) The execution and delivery of this Formation Agreement by Range
does not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof by Range or any Range Participating Entity
will not, materially conflict with, or result in any material violation of, or
material default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of or a "put"
right with respect to any material obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any material Included Range
Assets under any provision of (i) the Certificate of Incorporation, Bylaws or
other organizational documents of Range or any Range Participating Entity, (ii)
any material loan or credit agreement, note, bond, mortgage, indenture, lease,
or other agreement, instrument, Permit, concession, franchise or license
applicable to Range or any Range Participating Entity or any of their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any Law applicable to Range or
any Range Participating Entity or their respective properties or assets. Except
as set forth in Schedule 2.5, and except with respect to environmental Permits
(which are subject to Section 2.12), no material consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority or third Person is required by or with respect to Range or the Range
Participating Entities in connection with the execution and delivery of this
Formation Agreement by Range or the consummation by
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Range or any Range Participating Entity of the transactions contemplated hereby,
except as required pursuant to the HSR Act, and Customary Post-Closing Consents.
II.6 Absence of Certain Changes or Events. Except as set forth on
Schedule 2.6 or as contemplated by this Formation Agreement, since December 31,
1998, there has not been:
(a) any event or occurrence with respect to the Range
Appalachian Business that could reasonably be expected to have a Material
Adverse Effect on such business;
(b) (i) any granting by Range or any Range
Participating Entity to any employee of the Range Participating Entities
employed in connection with the Range Appalachian Business (a "Range Appalachian
Employee") of any increase in compensation, except in the ordinary course of
business of such Range Participating Entity consistent with prior practice or as
was required under employment agreements in effect as of December 31, 1998;
(ii) any granting by Range or any Range
Participating Entity to any Range Appalachian Employee of any increase in
severance or termination pay, except as was required under employment, severance
or termination agreements in effect as of December 31, 1998; or
(iii) any entry by Range or any Range
Participating Entity into any employment, severance or termination agreement
with any Range Appalachian Employee not in the ordinary course of business;
(c) any damage, destruction or casualty loss, whether
or not covered by insurance, that has or could reasonably be expected to have a
Material Adverse Effect on the Range Appalachian Business, or
(d) any change in accounting methods, principles or
practices by Range or the Range Participating Entities relating to the Range
Appalachian Business that materially affected such business, except insofar as
may have been required by a change in GAAP.
II.7 Brokers. No broker, finder or investment banker (other than
McDonald Investments, Inc.) is entitled to any brokerage, finder's fee or other
fee or commission payable by Range or any of its Subsidiaries in connection with
the transactions contemplated by this Formation Agreement based upon
arrangements made by and on behalf of Range or any of its Subsidiaries.
II.8 Litigation. Except as set forth in Schedule 2.8 (the "Range
Existing Litigation") and except with respect to Environmental Matters (which
are subject to Section 2.12), there is no material claim, suit, action,
proceeding or investigation pending or, to the Knowledge of Range, threatened
against the Range Stock Parties, Range Production or otherwise affecting the
Range Appalachian Business.
II.9 Employee Benefit Matters.
(a) Set forth on Schedule 2.9 is a list of each of
the following that is currently sponsored, maintained or contributed to by Range
or any of its Subsidiaries for the benefit of the Range Appalachian Employees:
(i) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA ("Range Plans"); and
(ii) each stock option plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan or
arrangement, severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or supplemental income
arrangement, consulting and employment agreement ("Range Benefit Programs or
Agreements").
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(b) True, correct and complete copies of each of the
Range Plans, the Range Benefit Programs or Agreements and related trusts, as in
effect on the date hereof, have been made available to FirstEnergy.
(c) Neither Range nor its Subsidiaries sponsors,
maintains, contributes to or has an obligation to contribute to, or has at any
time within the past six years sponsored, maintained, contributed to or had an
obligation to contribute a multiemployer plan within the meaning of Section
3(37) of ERISA.
(d) As to any Range Plan subject to Title IV of
ERISA, there has been 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 Code has been
incurred, no reportable event within the meaning of Section 4043 of ERISA (for
which the disclosure requirements of Regulation Section 4043.1 et seq.,
promulgated by the Pension Benefit Guaranty Corporation ("PBGC"), have not been
waived) has occurred, no notice of intent to terminate such Range Plan has been
given under Section 4041 of ERISA, no proceeding has been instituted under
Section 4042 of ERISA to terminate such Range Plan, no liability to the PBGC has
been incurred, and the assets of such Range Plan equal or exceed the actuarial
present value of the benefit liabilities, within the meaning of Section 4041 of
ERISA, under such Range Plan, based upon reasonable actuarial assumptions and
the asset valuation principles established by the PBGC.
(e) With respect to any employee benefit plan, within
the meaning of Section 3(3) of ERISA, which is sponsored, maintained or
contributed to, or has been sponsored, maintained or contributed to within the
past six years, by any corporation, trade, business or entity under common
control with Range and its Subsidiaries, within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001 of ERISA ("Range Commonly Controlled
Entity"), (1) no withdrawal liability, within the meaning of Section 4201 of
ERISA, has been incurred, which withdrawal liability has not been satisfied, (2)
no liability to the PBGC has been incurred by any Range Commonly Controlled
Entity, which liability has not been satisfied, (3) no accumulated funding
deficiency, whether or not waived, within the meaning of Section 302 of ERISA or
Section 412 of the Code has been incurred, and (4) all contributions (including
installments) to such plan required by Section 302 of ERISA and Section 412 of
the Code have been timely made.
II.10 Tax Matters.
(a) Except as set forth on Schedule 2.10(a), (i) each
of the Range Stock Parties has duly filed on a timely basis all Returns of
income taxes and all material Returns of other Taxes required to be filed by it
or such income or other Returns have been included in a Return filed by a
consolidated or combined group of companies of which it and the other Range
Stock Parties is or has been a member; (ii) all items of income, gain, loss,
deduction and credit or other items required to be included in each such Return
have been or will be so included and all information provided in each such
Return is or will be true, correct and complete in all material respects, (iii)
all Taxes which have become or will become due with respect to the period
covered by each such Return whether or not reflected on the Returns, have been
or will be timely paid in full, (iv) all withholding requirements imposed on or
with respect to the Range Stock Parties have been or will be satisfied in full,
and (v) no penalty, interest or other charge is or will become due with respect
to the late filing of any such Return or late payment of any such Taxes.
(b) Except as set forth on Schedule 2.10(b), all
Returns of, or with respect to, the Range Stock Parties have been audited by the
applicable Governmental Authority or the applicable statute of limitations has
expired, for all periods up to and including the periods set forth in Schedule
2.10(b). Range has no Knowledge that an assertion has ever been made by a
Governmental Authority in a jurisdiction where any of the Range Stock Parties
does not currently file Returns that it is or may be subject to taxation in that
jurisdiction, nor is any such assertion pending or, to the Knowledge of Range,
threatened.
(c) There is no claim with respect to the Range Stock
Parties for any Taxes, and no assessment, deficiency or adjustment has been
asserted or proposed with respect to any Return of or with respect to the Range
Stock Parties, other than those disclosed (and to which are attached true and
complete copies of all audit or similar reports) on Schedule 2.10(c).
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(d) There is not in force any extension of time with
respect to the due date for the filing of any Return of or with respect to the
Range Stock Parties or any waiver or agreement for any extension of time for the
assessment or payment of any Taxes of or with respect to the Range Stock
Parties.
(e) Schedule 2.10(e) contains a true and complete
copy of each written tax allocation or sharing agreement and a true and complete
description of each unwritten tax allocation or sharing arrangement affecting
the Range Stock Parties. All such agreements shall be terminated prior to the
Closing Date, and no payments are due or will become due on or after the Closing
Date pursuant to any such agreement or arrangement.
(f) The Range Stock Parties will not be required to
include any amount in income for any taxable period beginning after the Closing
Date as a result of a change in accounting method for any taxable period ending
on or before the Closing Date or pursuant to any agreement with any Taxing
Authority with respect to any such taxable period.
(g) No Liens (whether filed or arising by operation
of law) have been imposed upon or asserted against the Range Stock Parties or
the Range Appalachian Business as a result of or in connection with the failure
or alleged failure to pay any Taxes.
(h) Except as provided under Treasury Regulations
Section 1.1502-6 (or any similar provision of state, local or foreign law), none
of the Range Stock Parties has any liabilities for the Taxes of any Person as a
transferee or successor, or by contract or otherwise.
II.11 No Excess Parachute Payments. No amount that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Formation Agreement by any employee,
officer or director of Range or any of its Subsidiaries who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any employment, severance or termination agreement, other
compensation arrangement or plan currently in effect would be characterized as
an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of
the Code) or would be non-deductible by reason of Code Section 162(m).
II.12 Environmental Matters. Except as set forth on Schedule 2.12 or as
could not reasonably be expected to have a Material Adverse Effect on the Range
Appalachian Business:
(a) The Range Appalachian Business, the Included
Range Assets, and each of the Range Stock Parties are in compliance with all
Environmental Laws, and there are no conditions existing on the Included Range
Assets or resulting from the operation of the Range Appalachian Business, the
Included Range Assets, and the Range Stock Parties that could reasonably be
expected to give rise to any on-site or off-site remedial obligations under any
Environmental Law;
(b) Without limitation of clause (a) above, the Range
Appalachian Business, the Included Range Assets, and the Range Stock Parties are
not subject to any existing, pending or threatened action, suit, investigation,
inquiry or proceeding by or before any Governmental Authority under any
Environmental Law;
(c) All Permits, if any, required to be obtained or
filed by the Range Stock Parties and Range Production relating to the Range
Appalachian Business or the Included Range Assets under any Environmental Law,
including without limitation those relating to the treatment, storage, disposal
or Release of any substance, material or waste regulated under Environmental
Laws into the Environment, have been duly obtained, and the Range Appalachian
Business, the Included Range Assets and such Persons are in compliance with the
terms and conditions of all such Permits. No actions or appeals are pending or,
to the Knowledge of Range, threatened, to revoke or materially alter the terms
and conditions of such Permits;
(d) Since the effective date of the relevant
requirements of RCRA or other applicable
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Environmental Laws, all substances, materials or wastes regulated under RCRA or
another applicable Environmental Law that are generated by the Range Appalachian
Business or at any of the Included Range Assets and require disposal or
treatment have been transported only by carriers maintaining valid
authorizations under RCRA or other applicable Environmental Law and treated and
disposed of only at treatment, storage and disposal facilities maintaining valid
authorizations under RCRA or other applicable Environmental Law, and, to the
Knowledge of Range, such carriers and facilities have been and are operating in
compliance with such authorizations and are not the subject of any existing,
pending or overtly threatened action, investigation or inquiry by any
Governmental Authority in connection with any Environmental Laws;
(e) There are no asbestos-containing materials or
naturally occurring radioactive materials on or in any of the Included Range
Assets, and there are no storage tanks, open or closed pits, sumps, or other
containers on or under any of the Included Range Assets from which any
substances, materials or wastes regulated under Environmental Laws have been
Released into the surrounding Environment; and
(f) Without limiting the foregoing, there is no
Liability to any non-governmental third party under Environmental Laws or under
common law in connection with any Release or Threat of Release of any
substances, materials or wastes regulated under Environmental Laws into the
Environment as a result of or with respect to the properties or businesses of
the Range Appalachian Business.
Without limiting the foregoing and subject to the matters set forth in Schedule
2.12, to the Knowledge of Range, the facts included in the Facilities Facts
Forms provided by Range to FirstEnergy were true and correct in all material
respects for the purposes of providing information for FirstEnergy's
environmental due diligence as of the date provided to FirstEnergy.
Notwithstanding anything in this Formation Agreement to the contrary, this
Section 2.12 and not Section 2.13 or any other Section in this Article II shall
apply with respect to any representation by Range regarding Environmental
Matters.
II.13 Compliance with Laws. The Range Stock Parties and Range
Production hold, and the Included Range Assets include, all material Permits
required, necessary or applicable for the ownership or operation of the Range
Appalachian Business. Such Persons are in material compliance with the terms of
such Permits. To the Knowledge of Range, none of the Range Participating
Entities have materially violated or failed to comply with any material Law
applicable to the Range Appalachian Business.
II.14 Material Contracts and Agreements.
(a) Schedule 2.14 lists the following contracts and
other agreements (written or oral) to which the Range Participating Entities are
a party or are subject and which are part of the Included Range Assets:
(i) any agreement (or group of related
agreements) for the purchase or sale of parts or other goods and services in an
amount in excess of $100,000;
(ii) any lease or rental of real or personal
property to or from any Person providing for lease payments in excess of
$100,000 per year or having a remaining term in excess of one year;
(iii) any agreement concerning a partnership or
joint venture or agency relationship;
(iv) any agreement (or group of related
agreements) involving the creation, incurrence, assumption or guarantee of any
Indebtedness except trade payables, in an amount in excess of $100,000, or for
which a security interest for any such obligations has been granted;
(v) any material agreement concerning
non-competition;
(vi) any collective bargaining agreement or other
contract with any labor union;
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(vii) any employment agreement which is not
terminable at will or any agreement providing severance benefits outside the
customary severance policy of Range or its Subsidiaries; and
(viii) any agreement under which any of the Range
Stock Parties has advanced or loaned any amount of money to its directors,
officers or employees outside the ordinary course of business.
Copies of all Range Material Contracts, together with all amendments thereto,
have been made available to FirstEnergy. For purposes of this provision, "Range
Material Contracts" shall be deemed to include all contracts described in this
Section 2.14(a) and, except for any Excluded Range Assets, all contracts that
would be required to be filed by the Range Stock Parties or Range Production (in
connection with the Range Michigan Assets) with the Securities and Exchange
Commission as exhibits to an annual report on Form 10-K if such Persons had
equity securities registered under the Securities Exchange Act of 1934, as
amended. Notwithstanding the foregoing, contracts included in the Range Oil and
Gas Interests relating to the Range Appalachian Business shall not be governed
by this Section 2.14 but shall be governed exclusively by Section 2.22.
(b) With respect to the Range Material Contracts:
(i) all Range Material Contracts are in full
force and effect and are the valid and legally binding obligations of Range or
any Range Participating Entity that is a party thereto, and to the Knowledge of
Range, the other parties thereto, and are enforceable in accordance with their
respective terms;
(ii) none of the Range Stock Parties or Range
Production is in material breach or default with respect to its obligations
under any Range Material Contract and, to the Knowledge of Range, no other party
to any Range Material Contract is in material breach or default with respect to
its obligations thereunder, including with respect to payments or otherwise;
(iii) none of the Range Stock Parties or Range
Production has given notice of any action to terminate, cancel, rescind or
procure a judicial reformation of any Range Material Contract nor have they
received any notice thereof from the other parties to such contract; and
(iv) no Range Material Contract contains any
provision that prevents a Range Stock Party or Range Production from owning,
managing and/or operating the Range Appalachian Business substantially in
accordance with historical practices.
II.15 Title to Properties.
(a) Except as set forth in Schedule 2.15(a), (i) the
Range Stock Parties have good and marketable title to, or valid leasehold
interests in, all of their respective real and personal tangible property, and
(ii) Range Production has good and marketable title to, or valid leasehold
interests in, all of the real and personal tangible property included in the
Range Michigan Assets, in each case, free and clear of all Liens except for
Permitted Liens and easements, rights of way, servitudes, permits, conditions,
covenants or other restrictions or encumbrances, which do not interfere
materially with the operation, value, or use of the property subject thereto (as
currently conducted).
(b) Each Range Stock Party and Range Production (with
respect to the Range Michigan Assets) has complied in all material respects with
the terms of all leases to which it is a party and under which it is in
occupancy, and all such leases are in full force and effect. Each such Person
enjoys peaceful and undisturbed possession under all such leases with respect to
which it is the lessee thereunder.
(c) Notwithstanding anything in this Formation
Agreement to the contrary, representations as to title to the Range Oil and Gas
Interests shall not be governed by this Section 2.15 but shall be governed by
Section 2.20.
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II.16 Intellectual Property. Range Production and the Range Stock
Parties own, or are licensed or otherwise have the right to use, and the
Included Range Assets include, all patents, patent rights, trademarks, rights,
trade names, trade name rights, service marks, service mark rights, copyrights,
technology, know-how, processes and other proprietary intellectual property
rights and computer programs ("Intellectual Property") currently used in the
conduct of the Range Appalachian Business. No Person has notified the Range
Stock Parties or Range Production that their use of such Intellectual Property
infringes on the rights of any Person and, to the Knowledge of Range, no Person
is infringing on any right of the Range Stock Parties or Range Production with
respect to any such Intellectual Property.
II.17 Labor Matters. Except as set forth on Schedule 2.17, there are no
collective bargaining agreements or other labor union agreements or
understandings to which any of the Range Stock Parties is a party or by which
any of them is bound, nor are any of the Range Stock Parties the subject of any
proceeding asserting that it has committed an unfair labor practice or seeking
to compel it to bargain with any labor organization as to wages or conditions.
Except as set forth on Schedule 2.17, there is no union organization activity
involving any of the employees of any of the Range Stock Parties pending or, to
the Knowledge of Range, threatened. There are no picketing, strikes or any
material slowdowns, work stoppages, other job actions, lockouts, arbitrations,
grievances or other labor disputes involving any of the employees of any of the
Range Stock Parties pending, or to the Knowledge of Range, threatened. Each of
Range (to the extent relating to the Range Appalachian Business) and the Range
Stock Parties is in material compliance with all laws, regulations and orders
relating to the employment of labor, including all such laws, regulations and
orders relating to wages, hours, the Worker Adjustment and Retraining
Notification Act ("WARN") and any similar state or local "mass layoff" or "plant
closing" law, collective bargaining, discrimination, civil rights, safety and
health, workers' compensation and the collection and payment of withholding
and/or social security Taxes and any similar Tax. There has been no "mass
layoff" or "plant closing" as defined by WARN with respect to any of the Range
Stock Parties or Range Production within the six (6) months prior to Closing.
II.18 Insurance. Schedule 2.18 sets forth information as of the date
hereof with respect to each insurance policy (including policies providing
property, casualty, liability and workers' compensation coverage, and bond and
surety arrangements) to which each of the Range Stock Parties is a party, a
named insured, or otherwise a named beneficiary of coverage (excluding policies
maintained by unaffiliated third parties for the benefit of any of the Range
Stock Parties). With respect to each such insurance policy, and except as set
forth on Schedule 2.18: (a) the policy is in full force and effect; (b) to the
Knowledge of Range, each of the Range Stock Parties is not in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification or
acceleration under the policy; and (c) no party to the policy has repudiated any
provision thereof. Each of the Range Stock Parties has not reached or exceeded
its policy limits for any insurance policies in effect at any time during the
past five years.
II.19 Year 2000 Compliance. Range (with respect to the FFE Assets), the
Range Stock Parties and Range Production (with respect to the Range Michigan
Assets) have initiated and diligently pursued a program or programs calculated
to cause their assets, components, systems, processes, controls, equipment, and
the Range Appalachian Business to be Year 2000 Compliant. Neither Range (with
respect to the FFE Assets), the Range Stock Parties nor Range Production (with
respect to the Range Michigan Assets) have, whether by contract, agreement or
otherwise, waived or otherwise limited any material right of recovery they might
have against their suppliers, contractors or subcontractors for losses arising
out of claims made against them by third parties arising out of the failure of
the assets, components, systems, processes, controls, equipment, or the Range
Appalachian Business, to be Year 2000 Complaint. For purposes of this Agreement,
"Year 2000 Compliant" means:
(a) the functions, calculations and computing
processes perform in a consistent manner and without interruptions, regardless
of the date in time on which processes are actually performed, and regardless of
the data input or output, whether before, on, during or after January 1, 2000,
and whether or not the data is affected by leap years;
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(b) date data is accepted, calculated, compared,
sorted, extracted, sequenced or otherwise processed, and returned and displayed,
in a consistent manner regardless of the dates used in such data, whether
before, on, during or after January 1, 2000; and
(c) the assets, products, components, systems,
processes, controls or other goods accept and respond to year-date input, and
store and display data in a manner that is unambiguous as to the century in a
defined, predetermined and appropriate manner.
II.20 Title to Oil and Gas Interests.
(a) Except as set forth in Schedule 2.20(a), the
Range Stock Parties and Range Production have Defensible Title to all of the
Range Oil and Gas Interests classified as proved developed producing, proved
developed non-producing and proved undeveloped in the Range Reserve Report
(each, a "Range Classified Property") except to the extent that such interests
have thereafter been disposed of in the ordinary course of business consistent
with past practice. For the purposes of this Section 2.20, "Defensible Title"
means, with respect to any Range Classified Property, such record and beneficial
title that (x) entitles the party named to receive, from its ownership of such
interest, a percentage of all Hydrocarbons produced, saved, and marketed from
the well or property constituting such Range Classified Property not less than
the net revenue interest set forth in the Range Reserve Report for such well or
property, without reduction, suspension or termination for the productive life
of such well or property, except as a result of elections not to participate in
an operation under an applicable operating, unit or other agreement, or
readjustments of interest provided for under the terms of the applicable
operating, unit or other agreement, in each case, after the date hereof; (y)
obligates the party named to bear a percentage of the costs and expenses
relating to operations on, and the maintenance and production of, such well or
property, not greater than the working or operating interest set forth in the
Range Reserve Report without increase for the productive life of such well or
property, except as a result of an election of other parties not to participate
in an operation under an applicable operating, unit or other agreement,
contribution requirements with respect to defaulting co-owners, or readjustments
of interest provided for under the terms of the applicable operating, unit or
other agreement, in each case, after the date hereof; and (z) is free and clear
of any Liens except Range Permitted Encumbrances. For the purposes of this
Formation Agreement, "Range Permitted Encumbrances" means:
(i) royalties, overriding royalties, reversionary
interests and similar burdens if the cumulative effect of such burdens does not
reduce the net revenue interest with respect to a well or property below the net
revenue interest shown therefor in the Range Reserve Report or increase the
working interest with respect to such well or property above the working
interest shown therefor in the Range Reserve Report without a proportionate
increase in the net revenue interest with respect to such well or property;
(ii) the terms and conditions of all leases,
servitudes, production sales contracts, division orders, contracts for sale,
purchase, exchange, refining or processing of Hydrocarbons, unitization and
pooling designations, declarations, orders and agreements, operating agreements,
agreements of development, area of mutual interest agreements, farmout
agreements, gas balancing or deferred production agreements, processing
agreements, plant agreements, pipeline, gathering and transportation agreements,
injection, repressuring and recycling agreements, salt water or other disposal
agreements, seismic or geophysical permits or agreements, and other agreements,
including the terms and conditions of any and all contracts and agreements set
forth in the Range Reserve Report covering production sales; provided that such
contracts and agreements do not reduce the net revenue interest of any well or
property included in the Range Classified Properties below the net revenue
interest shown therefor in the Range Reserve Report or increase the working
interest with respect to such well or property above the working interest shown
therefor in the Range Reserve Report without a proportionate increase in the net
revenue interest with respect to such well or property;
(iii) easements, rights of way, servitudes,
permits, surface leases and other rights with respect to surface obligations,
pipelines, grazing, canals, ditches, reservoirs, or the like, conditions,
covenants or other restrictions, and easements of streets, alleys, highways,
pipelines, telephone lines, power lines, railways and other easements and rights
of way on, over or in respect of any of the Range Classified Properties, in
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each case which do not interfere materially with the operation, value, or use of
the property subject thereto (as currently conducted);
(iv) any preferential purchase rights, required
third party consents to assignment and similar agreements and obligations not
applicable to the transactions contemplated hereby, or if applicable to the
transactions contemplated hereby, with respect to which prior to the Closing
Date (A) waivers or consents have been obtained from the appropriate Person, or
(B) the applicable period of time for asserting such rights has expired without
any exercise of such rights;
(v) Liens for Taxes or assessments not yet
delinquent;
(vi) materialmen's, mechanic's, repairman's,
employee's, contractor's, operator's, and other similar Liens arising in the
ordinary course of business (A) if they have not been filed pursuant to Law, (B)
if filed, they have not yet become due and payable or payment is being withheld
as provided by Law or (C) if their validity is being contested in good faith in
the ordinary course of business by appropriate action;
(vii) consents or approvals that are ministerial
in nature and are customarily obtained from Governmental Authorities after the
Closing Date in connection with transactions of the same nature as are
contemplated hereby ("Customary Post-Closing Consents");
(viii) conventional rights of reassignment
arising in respect of abandonment, cessation of production or expiration of
leases;
(ix) all rights reserved to or vested in any
Governmental Authority to control or regulate any of the Range Classified
Properties in any manner, and all applicable Laws; and
(x) any other Liens, contracts, agreements,
instruments, obligations, defects or irregularities of any kind whatsoever,
which do not interfere materially with the operation, value, or use of the
property subject thereto (as currently conducted), or that are set forth in
Schedule 2.20(a).
(b) Except as set forth in Schedule 2.20(b):
(i) each Range Leasehold Interest is valid,
binding and enforceable in accordance with its terms; and
(ii) none of the Range Stock Parties or
Range Production that is a party to each such Leasehold Interest, nor, to the
Knowledge of Range, any other party to any such Leasehold Interest, is in
material breach or default thereunder, no notice of default or termination
thereunder has been given or received by such Person, and no event has occurred
which would, with the giving of notice or passage of time or both, constitute a
material breach or default thereunder or permit termination, modification or
acceleration thereunder.
II.21 Hedging. Except under agreements that are Excluded Range Assets,
there are no obligations of the Range Stock Parties and Range Production (with
respect to the Range Michigan Assets) to deliver Hydrocarbons attributable to
any of their properties in the future on account of prepayment, advance payment,
take-or-pay or similar obligations (other than as a result of gas imbalances)
without then or thereafter being entitled to receive full value therefor. Except
(i) under agreements that are Excluded Range Assets, (ii) with respect to the
new hedges entered into by Range Operating Company described on Schedule 2.14,
and (iii) for fixed price gas contracts entered into by the Range Stock Parties
and Range Production (with respect to the Range Michigan Assets) in the ordinary
course of business on or before the date of this Formation Agreement, none of
such Persons is bound by futures, hedge, swap, collar, put, call, floor, cap,
option or other contracts that are intended to benefit from or reduce or
eliminate the risk of fluctuations in the price of commodities, including
Hydrocarbons, or securities relating to the Range Appalachian Business.
II.22 Oil and Gas Contracts.
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(a) Except as set forth in Schedule 2.22, the Range
Oil and Gas Interests are not subject to and do not include:
(i) any instrument or agreement evidencing
or related to Indebtedness for borrowed money (except any instrument evidencing
the Assumed Debt);
(ii) any agreement not entered into in the
ordinary course of business in which the amount involved is in excess of
$250,000, except life-of-well natural gas purchase contracts; or
(iii) any agreement concerning a drilling
and/or exploration program, partnership, joint venture or agency relationship
with a third Person other than a Range Stock Party.
(b) With respect to the Range Oil and Gas Contracts:
(i) all Range Oil and Gas Contracts are in
full force and effect and are the valid and legally binding obligations of the
Range Stock Parties and Range Production (to the extent any such Person is a
party thereto);
(ii) none of the Range Participating
Entities is in material breach or default with respect to its obligations under
any Range Oil and Gas Contract and, to the Knowledge of Range, no other party to
any Range Oil and Gas Contract is in material breach or default with respect to
its obligations thereunder, including with respect to payments or otherwise;
(iii) no party to any Range Oil and Gas
Contract has given notice of any action to terminate, cancel, rescind or procure
a judicial reformation thereof; and
(iv) no Range Oil and Gas Contract contains
any provision that prevents a Range Stock Party or Range Production from owning,
managing and operating the Range Oil and Gas Interests substantially in
accordance with historical practices.
For purposes of this Formation Agreement, "Range Oil and Gas Contracts" shall be
deemed to include all contracts described in Section 2.22(a) and all contracts
relating to, or included in, the Range Oil and Gas Interests that would be
required to be filed by the Range Stock Parties or Range Production (in
connection with the Range Michigan Assets) with the Securities and Exchange
Commission as exhibits to an annual report on Form 10-K if such Persons had
equity securities registered under the Securities Exchange Act of 1934, as
amended.
II.22.1 Recent Authorizations. As of the date of this
Formation Agreement, except as set forth in Schedule 2.22.1, with respect to
authorizations for expenditure executed on or after January 1, 1999:
(a) there are no material outstanding calls
for payments that are due or that any of the Range Stock Parties or Range
Production is committed to make that have not been made with respect to the
Range Oil and Gas Interests;
(b) there are no material operations in
connection with the Range Oil and Gas Interests with respect to which any Range
Stock Parties or Range Production has become a nonconsenting party; and
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(c) there are no commitments for the
material expenditure of funds for drilling or other capital projects with
respect to the Range Oil and Gas Interests, other than projects with respect to
which the operator is not required under the applicable operating agreement to
seek consent.
II.22.2 Specific Lease Terms. Except as set forth in Schedule
2.22.2 or as would not have a Material Adverse Effect on the Range Appalachian
Business:
(a) there are no express contractual
obligations to engage in continuous development operations in order to maintain
any producing Range Leasehold Interest in force and effect;
(b) there are no provisions applicable to
the Range Leasehold Interests that increase the royalty percentage of the lessor
thereunder; and
(c) none of the Range Leasehold Interests
are limited by terms fixed by a certain number of years (other than primary
terms under oil and gas leases).
II.23 Reserve Reports.
(a) Except as set forth in Schedule 2.23(a),
all information supplied to Wright & Company, Inc. by or on behalf of Range and
the Range Participating Entities that was material to such firm's estimates of
proved oil and gas reserves attributable to the Range Oil and Gas Interests set
forth in the proved oil and gas reserve reports concerning the Range Oil and Gas
Interests dated as of December 31, 1998 (such reserve report, the "Range Reserve
Report"), was (at the time supplied or as modified or amended prior to the
issuance of the Range Reserve Report) true and correct in all material respects,
and Range has no Knowledge of any material errors in such information that
existed at the time of such issuance. For purposes of this Formation Agreement,
"Range Oil and Gas Interests" means, to the extent relating to or constituting a
part of the Included Range Assets, (i) all direct and indirect interests in and
rights with respect to working, leasehold and mineral interests, and operating
rights, royalties, overriding royalties, production payments, net profit
interests and other non working interests and nonoperating interests, including
reversionary interests (collectively, "Range Leasehold Interests"); (ii) all
interests in rights with respect to oil, condensate, gas, casing head gas and
other liquid or gaseous hydrocarbons (collectively, "Hydrocarbons") and other
minerals or revenues therefrom; (iii) all contracts in connection therewith and
claims and rights thereto (including all operating agreements, unitization and
pooling agreements and orders, division orders, transfer orders, oil and gas
sales, exchange and processing contracts and agreements, and in each case,
interests thereunder); (iv) all interests in surface estates, easements, rights
of way, licenses, permits, leases, and other interests associated with,
appurtenant to, or necessary for the operation of any of the foregoing; and (v)
all interests in equipment and machinery (including wells, well equipment and
machinery), oil and gas production, gathering, transmission, treating,
processing, and storage facilities (including tanks, tank batteries, pipelines,
and gathering systems), pumps, water plants, electric plants, gasoline and gas
processing plants, refineries, and other tangible personal property and fixtures
associated with, appurtenant to, or necessary for the operation of any of the
foregoing. Except as set forth in Schedules 2.23(a) and 2.23(b) and except for
changes (including changes in commodity prices) generally affecting the oil and
gas industry, there has been no change in respect of the information supplied to
Wright & Company, Inc. for the Range Reserve Report that, individually or in the
aggregate, would have a Material Adverse Effect on the Range Appalachian
Business.
(b) Set forth in Schedule 2.23(b) is a list
of all material Range Oil and Gas Interests that were included in the Range
Reserve Report that have been disposed of prior to the date of this Formation
Agreement.
II.24 Oil and Gas Wells, Proceeds and Sales; Equipment. Except as
otherwise set forth in Schedule 2.24 or as could not reasonably be expected to
have a Material Adverse Effect on the Range Appalachian Business:
(a) none of the wells included in the Range
Oil and Gas Interests are currently underproduced or overproduced;
(b) there have been no changes proposed in
the production allowables for any wells included in the Range Oil and Gas
Interests;
(c) all wells included in the Range Oil and
Gas Interests have been drilled and, if completed, operated and produced in
accordance with good oil and gas field practices and in compliance in all
respects with applicable oil and gas leases and applicable Laws;
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(d) there are no wells included in the Range
Oil and Gas Interests that:
(i) the Range Stock Parties or Range
Production (with respect to the Range Michigan Assets) are currently obligated
by law or contract to plug and abandon or will be obligated by law or contract
to plug and abandon with the lapse of time or notice or both because such wells
are not currently capable of producing in commercial quantities (other than as a
result of a temporary cessation of production);
(ii) are subject to exceptions to a
requirement to plug and abandon issued by a Governmental Authority having
jurisdiction over such wells; or
(iii) have been plugged and abandoned
but have not been plugged or reclaimed in accordance with all applicable
requirements of each Governmental Authority having jurisdiction over such wells;
(e) proceeds from the sale of Hydrocarbons
produced from the Range Oil and Gas Interests are being received by the Range
Stock Parties or Range Production in a timely manner and are not being held by
third parties in suspense for any reason;
(f) no Person has any call on, option to
purchase or similar rights with respect to the production of Hydrocarbons
attributable to the Range Oil and Gas Interests, except for any such call,
option or similar right at market prices; and
(g) all equipment and machinery (including
without limitation, the FFE Assets) currently in use and material to the
operation of the Range Oil and Gas Interests as conducted prior to the date
hereof is in reasonable working condition, ordinary wear and tear excepted.
II.24.1 Plugging and Abandonment Costs. Based upon past
industry practices and applicable Law in the Appalachian Basin Area, to Range's
Knowledge, the aggregate plugging and abandonment costs attributable to the
wells included in the Range Included Assets (after deducting all revenues
received from sales of non-producing wells or equipment associated therewith)
will not exceed $100,000 in each of the next two years.
II.25 Necessary Assets. The Included Range Assets and the assets set
forth in Schedule 2.25 constitute all of the assets utilized by Range and the
Range Participating Entities for the ownership and operation of the Range
Appalachian Business (as currently conducted).
II.26 Full Disclosure. No representation or warranty by Range in this
Formation Agreement and no statement of Range contained in any Schedule to this
Formation Agreement contains any untrue statement of a material fact, or omits
to state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading.
To the Knowledge of Range, there is no event or circumstance which Range has not
disclosed to FirstEnergy in writing which would or could reasonably be expected
to have a Material Adverse Effect on the business, prospects or condition
(financial or other) of the Range Stock Parties or the Company or the ability of
Range or the Range Participating Entities to perform this Formation Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FIRSTENERGY
FirstEnergy represents and warrants to Range as follows, of which each
representation and warranty shall be deemed to be material and independently
relied upon by Range without regard to any investigation undertaken by Range:
III.1 Organization. FirstEnergy and each of the FirstEnergy
Participating Entities is a corporation, partnership or limited liability
company duly organized or formed, validly existing and in good standing under
the laws of its jurisdiction of organization or formation. MB Operating, prior
to the transactions described in Section
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5.2, owns all of the outstanding equity interests in Natural Gas Brokerage, J R
Nominee Corp., and J R Nominee Corp.-II, in each case free and clear of all
Liens, and all such interests have been validly issued and are fully paid and
nonassessable. NOOCI owns all of the outstanding equity interests in Ohio
Intrastate and Gas Transport free and clear of all Liens, and all such interests
have been validly issued and are fully paid and non-assessable. Marbel Energy
owns all the outstanding equity interests in MB Operating, and FirstEnergy owns
all the outstanding equity interests in J R Operating, in each case, free and
clear of all Liens, and all such interests have been validly issued and are
fully paid and nonassessable. The only jurisdictions in which FirstEnergy and
any of the FirstEnergy Participating Entities are required to qualify to
transact business as a foreign entity are as set forth on Schedule 3.1 attached
hereto, and each of FirstEnergy and the FirstEnergy Participating Entities is in
good standing under the laws of each such jurisdiction, other than in such
jurisdictions where the failure to be so qualified, individually or in the
aggregate, would not have a Material Adverse Effect on the FirstEnergy
Appalachian Business.
III.2 Financial Information. FirstEnergy has delivered to Range the
financial information regarding the FirstEnergy Appalachian Business attached
hereto as Schedule 3.2. The financial information set forth in Schedule 3.2 is
true and correct in all material respects as of the date set forth in Schedule
3.2. The information provided by FirstEnergy, relating to the FirstEnergy
Appalachian Business and employees, to prepare the pro forma and projected
financial information of the Company for the calendar years of 1999 and 2000 is
true and correct in all material respects as of the date provided to Range.
III.3 Subsidiaries. None of the FirstEnergy Stock Parties owns,
directly or indirectly, any capital stock or other ownership interest in any
Subsidiary, except (i) as set forth in Schedule 3.3 and (ii) prior to the
transactions described in Section 5.2, MB Operating owns equity interests in J R
Nominee Corp., Natural Gas Brokerage and J R Nominee Corp.-II and NOOCI owns
equity interests in Ohio Intrastate and Gas Transport.
III.4 Options. Except as is contemplated by Sections 1.1.3 and 5.2
hereof, there are no outstanding or authorized securities, options, warrants,
calls, rights, commitments, preemptive rights, agreements, arrangements or
undertakings of any kind to which any of the FirstEnergy Stock Parties is a
party, or by which it is bound, obligating any of the FirstEnergy Stock Parties
to issue, deliver or sell, or cause to be issued, delivered or sold, any shares
of capital stock or other equity or voting securities of, or other ownership
interests in, the FirstEnergy Stock Parties or obligating the FirstEnergy Stock
Parties to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking.
III.5 Authority; Non-contravention. (a) FirstEnergy has the requisite
corporate power and authority to enter into this Formation Agreement and it and
FirstEnergy and each FirstEnergy Participating Entity has the requisite
corporate, partnership or limited liability company power and authority to
consummate the transactions contemplated hereby. The execution and delivery of
this Formation Agreement by FirstEnergy and the consummation by FirstEnergy and
each FirstEnergy Participating Entity of the transactions contemplated hereby
have been duly authorized by all necessary corporate, partnership or limited
liability company action on the part of FirstEnergy and each FirstEnergy
Participating Entity. This Formation Agreement has been duly and validly
executed and delivered by FirstEnergy and constitutes a valid and binding
obligation of FirstEnergy enforceable against FirstEnergy in accordance with its
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar Laws or judicial
decisions now or hereafter in effect relating to creditors' rights generally,
(ii) such enforcement may be subject to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity), and (iii)
the remedy of specific performance and injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. As of the Closing, each Transaction Document
will be duly and validly executed and delivered by FirstEnergy or the
FirstEnergy Participating Entity that is a party thereto and each such document
will constitute a valid and binding obligation of such party enforceable against
such party in accordance with its terms, except that (i) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws or judicial decisions now or hereafter in effect relating to creditors'
rights generally, (ii) such enforcement may be subject to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity), and (iii) the remedy of specific performance and
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injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(b) The execution and delivery of this Formation Agreement by
FirstEnergy does not, and the consummation of the transactions contemplated
hereby and compliance with the provisions hereof by FirstEnergy or any
FirstEnergy Participating Entity will not, materially conflict with, or result
in any material violation of, or material default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of or a "put" right with respect to any material
obligation or to loss of a material benefit under, or result in the creation of
any Lien upon any material Included FirstEnergy Assets under any provision of
(i) the Certificate of Incorporation, Bylaws or other organizational documents
of FirstEnergy or any FirstEnergy Participating Entity, (ii) any material loan
or credit agreement, note, bond, mortgage, indenture, lease, or other agreement,
instrument, Permit, concession, franchise or license applicable to FirstEnergy
or any FirstEnergy Participating Entity or any of their respective properties or
assets or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any Law applicable to FirstEnergy or any
FirstEnergy Participating Entity or their respective properties or assets.
Except as set forth in Schedule 3.5, and except with respect to environmental
Permits (which are subject to Section 3.12), no material consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Authority or third Person is required by or with respect to
FirstEnergy or the FirstEnergy Participating Entities in connection with the
execution and delivery of this Formation Agreement by FirstEnergy or the
consummation by FirstEnergy or any FirstEnergy Participating Entity of the
transactions contemplated hereby, except as required pursuant to the HSR Act,
and Customary Post-Closing Consents.
III.6 Absence of Certain Changes or Events. Except as set forth on
Schedule 3.6 or as contemplated by this Formation Agreement, since December 31,
1998, there has not been:
(a) any event or occurrence with respect to the
FirstEnergy Appalachian Business that could reasonably be expected to have a
Material Adverse Effect on such business;
(b) (i) any granting by FirstEnergy or any FirstEnergy
Participating Entity to any employee of the FirstEnergy Participating Entities
employed in connection with the FirstEnergy Appalachian Business (a "FirstEnergy
Appalachian Employee") of any increase in compensation, except in the ordinary
course of business of such FirstEnergy Participating Entity consistent with
prior practice or as was required under employment agreements in effect as of
December 31, 1998;
(ii) any granting by FirstEnergy or any FirstEnergy
Participating Entity to any FirstEnergy Appalachian Employee of any increase in
severance or termination pay, except as was required under employment, severance
or termination agreements in effect as of December 31, 1998; or
(iii) any entry by FirstEnergy or any FirstEnergy
Participating Entity into any employment, severance or termination agreement
with any FirstEnergy Appalachian Employee not in the ordinary course of
business;
(c) any damage, destruction or casualty loss, whether or
not covered by insurance, that has or could reasonably be expected to have a
Material Adverse Effect on the FirstEnergy Appalachian Business; or
(d) any change in accounting methods, principles or
practices by FirstEnergy or the FirstEnergy Participating Entities relating to
the FirstEnergy Appalachian Business that materially affected such business,
except insofar as may have been required by a change in GAAP.
III.7 Brokers. No broker, finder or investment banker (other than
McDonald Investments, Inc.) is entitled to any brokerage, finder's fee or other
fee or commission payable by FirstEnergy or any of its Subsidiaries in
connection with the transactions contemplated by this Formation Agreement based
upon arrangements made by and on behalf of FirstEnergy or any of its
Subsidiaries.
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III.8 Litigation. Except as set forth in Schedule 3.8 (the "FirstEnergy
Existing Litigation") and except with respect to Environmental Matters (which
are subject to Section 3.12), there is no material claim, suit, action,
proceeding or investigation pending or, to the Knowledge of FirstEnergy,
threatened against the FirstEnergy Stock Parties or otherwise affecting the
FirstEnergy Appalachian Business.
III.9 Employee Benefit Matters.
(a) Set forth on Schedule 3.9 is a list of each of the
following that is currently sponsored, maintained or contributed to by
FirstEnergy or any of its Subsidiaries for the benefit of the FirstEnergy
Appalachian Employees:
(i) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA ("FirstEnergy Plans"); and
(ii) each stock option plan, collective bargaining
agreement, bonus plan or arrangement, incentive award plan or arrangement,
severance pay plan, policy or agreement, deferred compensation agreement or
arrangement, executive compensation or supplemental income arrangement,
consulting and employment agreement ("FirstEnergy Benefit Programs or
Agreements").
(b) True, correct and complete copies of each of
the FirstEnergy Plans, the FirstEnergy Benefit Programs or Agreements and
related trusts, as in effect on the date hereof, have been made available to
Range.
(c) Neither FirstEnergy nor its Subsidiaries
sponsors, maintains, contributes to or has an obligation to contribute to, or
has at any time within the past six years sponsored, maintained, contributed to
or had an obligation to contribute a multiemployer plan within the meaning of
Section 3(37) of ERISA.
(d) As to any FirstEnergy Plan subject to Title
IV of ERISA, there has been 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 Code
has been incurred, no reportable event within the meaning of Section 4043 of
ERISA (for which the disclosure requirements of Regulation section 4043.1 et
seq., promulgated by PBGC, have not been waived) has occurred, no notice of
intent to terminate such FirstEnergy Plan has been given under Section 4041 of
ERISA, no proceeding has been instituted under Section 4042 of ERISA to
terminate such FirstEnergy Plan, no liability to the PBGC has been incurred, and
the assets of such FirstEnergy Plan equal or exceed the actuarial present value
of the benefit liabilities, within the meaning of Section 4041 of ERISA, under
such FirstEnergy Plan, based upon reasonable actuarial assumptions and the asset
valuation principles established by the PBGC.
(e) With respect to any employee benefit plan,
within the meaning of Section 3(3) of ERISA, which is sponsored, maintained or
contributed to, or has been sponsored, maintained or contributed to within the
past six years, by any corporation, trade, business or entity under common
control with FirstEnergy and its Subsidiaries, within the meaning of Section
414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA ("FirstEnergy
Commonly Controlled Entity"), (1) no withdrawal liability, within the meaning of
Section 4201 of ERISA, has been incurred, which withdrawal liability has not
been satisfied, (2) no liability to the PBGC has been incurred by any
FirstEnergy Commonly Controlled Entity, which liability has not been satisfied,
(3) no accumulated funding deficiency, whether or not waived, within the meaning
of Section 302 of ERISA or Section 412 of the Code has been incurred, and (4)
all contributions (including installments) to such plan required by Section 302
of ERISA and Section 412 of the Code have been timely made.
III.10 Tax Matters.
(a) Except as set forth on Schedule 3.10(a), (i)
each of the FirstEnergy Stock Parties has duly filed on a timely basis all
Returns of income taxes and all material Returns of other Taxes required to be
filed by it or such income or other Returns have been included in a Return filed
by a consolidated or combined
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group of companies of which it and the other FirstEnergy Stock Parties is or has
been a member; (ii) all items of income, gain, loss, deduction and credit or
other items required to be included in each such Return have been or will be so
included and all information provided in each such Return is or will be true,
correct and complete in all material respects, (iii) all Taxes which have become
or will become due with respect to the period covered by each such Return
whether or not reflected on the Return, have been or will be timely paid in
full, (iv) all withholding requirements imposed on or with respect to the
FirstEnergy Stock Parties have been or will be satisfied in full, and (v) no
penalty, interest or other charge is or will become due with respect to the late
filing of any such Return or late payment of any such Taxes.
(b) Except as set forth on Schedule 3.10(b), all
Returns of, or with respect to, the FirstEnergy Stock Parties have been audited
by the applicable Governmental Authority or the applicable statute of
limitations has expired, for all periods up to and including the periods set
forth in Schedule 3.10(b). FirstEnergy has no Knowledge that an assertion has
ever been made by a Governmental Authority in a jurisdiction where any of the
FirstEnergy Stock Parties does not currently file Returns that it is or may be
subject to taxation in that jurisdiction, nor is any such assertion pending or,
to the Knowledge of FirstEnergy, threatened.
(c) There is no claim with respect to the
FirstEnergy Stock Parties for any Taxes, and no assessment, deficiency or
adjustment has been asserted or proposed with respect to any Return of or with
respect to the FirstEnergy Stock Parties, other than those disclosed (and to
which are attached true and complete copies of all audit or similar reports) on
Schedule 3.10(c).
(d) There is not in force any extension of time
with respect to the due date for the filing of any Return of or with respect to
the FirstEnergy Stock Parties or any waiver or agreement for any extension of
time for the assessment or payment of any Taxes of or with respect to the
FirstEnergy Stock Parties.
(e) Schedule 3.10(e) contains a true and
complete copy of each written tax allocation or sharing agreement and a true and
complete description of each unwritten tax allocation or sharing arrangement
affecting the FirstEnergy Stock Parties. All such agreements shall be terminated
prior to the Closing Date, and no payments are due or will become due on or
after the Closing Date pursuant to any such agreement or arrangement.
(f) The FirstEnergy Stock Parties will not be
required to include any amount in income for any taxable period beginning after
the Closing Date as a result of a change in accounting method for any taxable
period ending on or before the Closing Date or pursuant to any agreement with
any Taxing Authority with respect to any such taxable period.
(g) No Liens (whether filed or arising by
operation of law) have been imposed upon or asserted against the FirstEnergy
Stock Parties or the FirstEnergy Appalachian Business as a result of or in
connection with the failure or alleged failure to pay any Taxes.
(h) Except as provided under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local or
foreign law), none of the FirstEnergy Stock Parties has any liabilities for the
Taxes of any Person as a transferee or successor, or by contract or otherwise.
III.11 No Excess Parachute Payments. No amount that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Formation Agreement by any employee,
officer or director of FirstEnergy or any of its Subsidiaries who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or plan currently in effect would be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code) or would be non-deductible by reason of Code
Section 162(m).
III.12 Environmental Matters. Except as set forth on Schedule 3.12 or
as could not reasonably be expected to have a Material Adverse Effect on the
FirstEnergy Appalachian Business:
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(a) The FirstEnergy Appalachian Business, the
Included FirstEnergy Assets and each of the FirstEnergy Stock Parties are in
compliance with all Environmental Laws and there are no conditions existing on
the Included FirstEnergy Assets or resulting from the operation of the
FirstEnergy Appalachian Business, the Included FirstEnergy Assets and the
FirstEnergy Stock Parties that could reasonably be expected to give rise to any
on-site or off-site remedial obligations under any Environmental Law;
(b) Without limitation of clause (a) above, the
FirstEnergy Appalachian Business, the Included FirstEnergy Assets and the
FirstEnergy Stock Parties are not subject to any existing, pending or threatened
action, suit, investigation, inquiry or proceeding by or before any Governmental
Authority under any Environmental Law;
(c) All Permits, if any, required to be obtained
or filed by the FirstEnergy Stock Parties relating to the FirstEnergy
Appalachian Business or the Included FirstEnergy Assets under any Environmental
Law, including without limitation those relating to the treatment, storage,
disposal or Release of any substance, material or waste regulated under
Environmental Laws into the Environment, have been duly obtained, and the
FirstEnergy Appalachian Business, the Included FirstEnergy Assets and such
Persons are in compliance with the terms and conditions of all such Permits. No
actions or appeals are pending or, to the Knowledge of FirstEnergy, threatened,
to revoke or materially alter the terms and conditions of such Permits;
(d) Since the effective date of the relevant
requirements of RCRA or other applicable Environmental Laws, all substances,
materials or wastes regulated under RCRA or another applicable Environmental Law
that are generated by the FirstEnergy Appalachian Business or at any of the
Included FirstEnergy Assets and require disposal or treatment have been
transported only by carriers maintaining valid authorizations under RCRA or
other applicable Environmental Law and treated and disposed of only at
treatment, storage and disposal facilities maintaining valid authorizations
under RCRA or other applicable Environmental Law, and, to the Knowledge of
FirstEnergy, such carriers and facilities have been and are operating in
compliance with such authorizations and are not the subject of any existing,
pending or overtly threatened action, investigation or inquiry by any
Governmental Authority in connection with any Environmental Laws;
(e) There are no asbestos-containing materials
or naturally occurring radioactive materials on or in any of the Included
FirstEnergy Assets, and there are no storage tanks, open or closed pits, sumps,
or other containers on or under any of the Included FirstEnergy Assets from
which any substances, materials or wastes regulated under Environmental Laws
have been Released into the surrounding Environment; and
(f) Without limiting the foregoing, there is no
Liability to any non-governmental third party under Environmental Laws or under
common law in connection with any Release or Threat of Release of any
substances, materials or wastes regulated under Environmental Laws into the
Environment as a result of or with respect to the properties or businesses of
the FirstEnergy Appalachian Business.
Notwithstanding anything in this Formation Agreement to the contrary, this
Section 3.12 and not Section 3.13 or any other Section in this Article II shall
apply with respect to any representation by FirstEnergy regarding Environmental
Matters.
III.13 Compliance with Laws. The FirstEnergy Stock Parties hold, and
the Included FirstEnergy Assets include, all material Permits required,
necessary or applicable for the ownership or operation of the FirstEnergy
Appalachian Business. Such Persons are in material compliance with the terms of
such Permits. To the Knowledge of FirstEnergy, none of the FirstEnergy
Participating Entities have materially violated or failed to comply with any
material Law applicable to the FirstEnergy Appalachian Business.
III.14 Material Contracts and Agreements.
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(a) Schedule 3.14 lists the following contracts and
other agreements (written or oral) to which the FirstEnergy Participating
Entities are a party or are subject and which are part of the Included
FirstEnergy Assets:
(i) any agreement (or group of related
agreements) for the purchase or sale of parts or other goods and services in an
amount in excess of $100,000;
(ii) any lease or rental of real or personal
property to or from any Person providing for lease payments in excess of
$100,000 per year or having a remaining term in excess of one year;
(iii) any agreement concerning a partnership or
joint venture or agency relationship;
(iv) any agreement (or group of related
agreements) involving the creation, incurrence, assumption or guarantee of any
Indebtedness except trade payables, in an amount in excess of $100,000, or for
which a security interest for any such obligations has been granted;
(v) any material agreement concerning
non-competition;
(vi) any collective bargaining agreement or other
contract with any labor union;
(vii) any employment agreement which is not
terminable at will or any agreement providing severance benefits outside the
customary severance policy of FirstEnergy or its Subsidiaries; and
(viii) any agreement under which any of the
FirstEnergy Stock Parties has advanced or loaned any amount of money to its
directors, officers or employees outside the ordinary course of business.
Copies of all FirstEnergy Material Contracts, together with all amendments
thereto, have been made available to Range. For purposes of this provision, "
FirstEnergy Material Contracts" shall be deemed to include all contracts
described in this Section 3.14(a) and, except for any Excluded FirstEnergy
Assets, all contracts that would be required to be filed by the FirstEnergy
Stock Parties with the Securities and Exchange Commission as exhibits to an
annual report on Form 10-K if such Persons had equity securities registered
under the Securities Exchange Act of 1934, as amended. Notwithstanding the
foregoing, contracts included in the FirstEnergy Oil and Gas Interests relating
to the FirstEnergy Appalachian Business shall not be governed by this Section
3.14 but shall be governed exclusively by Section 3.22.
(b) With respect to the FirstEnergy Material
Contracts:
(i) all FirstEnergy Material Contracts are in
full force and effect and are the valid and legally binding obligations of
FirstEnergy or any FirstEnergy Participating Entity that is a party thereto, and
to the Knowledge of FirstEnergy, the other parties thereto, and are enforceable
in accordance with their respective terms;
(ii) none of the FirstEnergy Stock Parties is in
material breach or default with respect to its obligations under any FirstEnergy
Material Contract and, to the Knowledge of FirstEnergy, no other party to any
FirstEnergy Material Contract is in material breach or default with respect to
its obligations thereunder, including with respect to payments or otherwise;
(iii) none of the FirstEnergy Stock Parties has
given notice of any action to terminate, cancel, rescind or procure a judicial
reformation of any FirstEnergy Material Contract nor have they received any
notice thereof from the other parties to such contract; and
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(iv) no FirstEnergy Material Contract contains
any provision that prevents a FirstEnergy Stock Party from owning, managing
and/or operating the FirstEnergy Appalachian Business substantially in
accordance with historical practices.
III.15 Title to Properties.
(a) Except as set forth in Schedule 3.15(a), the
FirstEnergy Stock Parties have good and marketable title to, or valid leasehold
interests in, all of their respective real and personal tangible property, free
and clear of all Liens except for Permitted Liens and easements, rights of way,
servitudes, permits, conditions, covenants or other restrictions or
encumbrances, which do not interfere materially with the operation, value, or
use of the property subject thereto (as currently conducted).
(b) Each FirstEnergy Stock Party has complied in all
material respects with the terms of all leases to which it is a party and under
which it is in occupancy, and all such leases are in full force and effect. Each
such Person enjoys peaceful and undisturbed possession under all such leases
with respect to which it is the lessee thereunder.
(c) Notwithstanding anything in this Formation
Agreement to the contrary, representations as to title to the FirstEnergy Oil
and Gas Interests shall not be governed by this Section 3.15 but shall be
governed by Section 3.20.
III.16 Intellectual Property. The FirstEnergy Stock Parties own, or are
licensed or otherwise have the right to use, and the Included FirstEnergy Assets
include, all Intellectual Property currently used in the conduct of the
FirstEnergy Appalachian Business. No Person has notified the FirstEnergy Stock
Parties that their use of such Intellectual Property infringes on the rights of
any Person and, to the Knowledge of FirstEnergy, no Person is infringing on any
right of the FirstEnergy Stock Parties with respect to any such Intellectual
Property.
III.17 Labor Matters. Except as set forth on Schedule 3.17, there are
no collective bargaining agreements or other labor union agreements or
understandings to which any of the FirstEnergy Stock Parties is a party or by
which any of them is bound, nor are any of the FirstEnergy Stock Parties the
subject of any proceeding asserting that it has committed an unfair labor
practice or seeking to compel it to bargain with any labor organization as to
wages or conditions. Except as set forth on Schedule 3.17, there is no union
organization activity involving any of the employees of any of the FirstEnergy
Stock Parties pending or, to the Knowledge of FirstEnergy, threatened. There are
no picketing, strikes or any material slowdowns, work stoppages, other job
actions, lockouts, arbitrations, grievances or other labor disputes involving
any of the employees of any of the FirstEnergy Stock Parties pending, or to the
Knowledge of FirstEnergy, threatened. Each of FirstEnergy (to the extent
relating to the FirstEnergy Appalachian Business) and the FirstEnergy Stock
Parties is in material compliance with all laws, regulations and orders relating
to the employment of labor, including all such laws, regulations and orders
relating to wages, hours, WARN and any similar state or local "mass layoff" or
"plant closing" law, collective bargaining, discrimination, civil rights, safety
and health, workers' compensation and the collection and payment of withholding
and/or social security Taxes and any similar Tax. There has been no "mass
layoff" or "plant closing" as defined by WARN with respect to any of the
FirstEnergy Stock Parties within the six (6) months prior to Closing.
III.18 Insurance. Schedule 3.18 sets forth information as of the date
hereof with respect to each insurance policy (including policies providing
property, casualty, liability and workers' compensation coverage, and bond and
surety arrangements) to which each of the FirstEnergy Stock Parties is a party,
a named insured, or otherwise a named beneficiary of coverage (excluding
policies maintained by unaffiliated third parties for the benefit of any of the
FirstEnergy Stock Parties). With respect to each such insurance policy, and
except as set forth on Schedule 3.18: (a) the policy is in full force and
effect; (b) to the Knowledge of FirstEnergy, each of the FirstEnergy Stock
Parties is not in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification or acceleration under the policy; and (c) no party to
the policy has
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repudiated any provision thereof. Each of the FirstEnergy Stock Parties has not
reached or exceeded its policy limits for any insurance policies in effect at
any time during the past five years.
III.19 Year 2000 Compliance. The FirstEnergy Stock Parties have
initiated and diligently pursued a program or programs calculated to cause their
assets, components, systems, processes, controls, equipment, and the FirstEnergy
Appalachian Business to be Year 2000 Compliant. The FirstEnergy Stock Parties
have not, whether by contract, agreement or otherwise, waived or otherwise
limited any material right of recovery they might have against their suppliers,
contractors or subcontractors for losses arising out of claims made against them
by third parties arising out of the failure of the assets, components, systems,
processes, controls, equipment, or the FirstEnergy Appalachian Business, to be
Year 2000 Complaint. For purposes of this Agreement, "Year 2000 Compliant"
means:
(a) the functions, calculations and computing
processes perform in a consistent manner and without interruptions, regardless
of the date in time on which processes are actually performed, and regardless of
the data input or output, whether before, on, during or after January 1, 2000,
and whether or not the data is affected by leap years;
(b) date data is accepted, calculated, compared,
sorted, extracted, sequenced or otherwise processed, and returned and displayed,
in a consistent manner regardless of the dates used in such data, whether
before, on, during or after January 1, 2000; and
(c) the assets, products, components, systems,
processes, controls or other goods accept and respond to year-date input, and
store and display data in a manner that is unambiguous as to the century in a
defined, predetermined and appropriate manner.
III.20 Title to Oil and Gas Interests.
(a) Except as set forth in Schedule 3.20(a), the
FirstEnergy Stock Parties have Defensible Title to all of the FirstEnergy Oil
and Gas Interests classified as proved developed producing, proved developed
non-producing and proved undeveloped in the FirstEnergy Reserve Report (each, a
"FirstEnergy Classified Property") except to the extent that such interests have
thereafter been disposed of in the ordinary course of business consistent with
past practice. For the purposes of this Section 3.20, "Defensible Title" means,
with respect to any FirstEnergy Classified Property, such record and beneficial
title that (x) entitles the party named to receive, from its ownership of such
interest, a percentage of all Hydrocarbons produced, saved, and marketed from
the well or property constituting such FirstEnergy Classified Property not less
than the net revenue interest set forth in the FirstEnergy Reserve Report for
such well or property, without reduction, suspension or termination for the
productive life of such well or property, except as a result of elections not to
participate in an operation under an applicable operating, unit or other
agreement, or readjustments of interest provided for under the terms of the
applicable operating, unit or other agreement, in each case, after the date
hereof; (y) obligates the party named to bear a percentage of the costs and
expenses relating to operations on, and the maintenance and production of, such
well or property, not greater than the working or operating interest set forth
in the FirstEnergy Reserve Report without increase for the productive life of
such well or property, except as a result of an election of other parties not to
participate in an operation under an applicable operating, unit or other
agreement, contribution requirements with respect to defaulting co-owners, or
readjustments of interest provided for under the terms of the applicable
operating, unit or other agreement, in each case, after the date hereof; and (z)
is free and clear of any Liens except FirstEnergy Permitted Encumbrances. For
the purposes of this Formation Agreement, "FirstEnergy Permitted Encumbrances"
means:
(i) royalties, overriding royalties, reversionary
interests and similar burdens if the cumulative effect of such burdens does not
reduce the net revenue interest with respect to a well or property below the net
revenue interest shown therefor in the FirstEnergy Reserve Report or increase
the working interest with respect to such well or property above the working
interest shown therefor in the FirstEnergy Reserve Report without a
proportionate increase in the net revenue interest with respect to such well or
property;
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(ii) the terms and conditions of all leases,
servitudes, production sales contracts, division orders, contracts for sale,
purchase, exchange, refining or processing of Hydrocarbons, unitization and
pooling designations, declarations, orders and agreements, operating agreements,
agreements of development, area of mutual interest agreements, farmout
agreements, gas balancing or deferred production agreements, processing
agreements, plant agreements, pipeline, gathering and transportation agreements,
injection, repressuring and recycling agreements, salt water or other disposal
agreements, seismic or geophysical permits or agreements, and other agreements,
including the terms and conditions of any and all contracts and agreements set
forth in the FirstEnergy Reserve Report covering production sales; provided that
such contracts and agreements do not reduce the net revenue interest of any well
or property included in the FirstEnergy Classified Properties below the net
revenue interest shown therefor in the FirstEnergy Reserve Report or increase
the working interest with respect to such well or property above the working
interest shown therefor in the FirstEnergy Reserve Report without a
proportionate increase in the net revenue interest with respect to such well or
property;
(iii) easements, rights of way, servitudes,
permits, surface leases and other rights with respect to surface obligations,
pipelines, grazing, canals, ditches, reservoirs, or the like, conditions,
covenants or other restrictions, and easements of streets, alleys, highways,
pipelines, telephone lines, power lines, railways and other easements and rights
of way on, over or in respect of any of the FirstEnergy Classified Properties,
in each case which do not interfere materially with the operation, value, or use
of the property subject thereto (as currently conducted);
(iv) any preferential purchase rights, required
third party consents to assignment and similar agreements and obligations not
applicable to the transactions contemplated hereby, or if applicable to the
transactions contemplated hereby, with respect to which prior to the Closing
Date (A) waivers or consents have been obtained from the appropriate Person, or
(B) the applicable period of time for asserting such rights has expired without
any exercise of such rights;
(v) Liens for Taxes or assessments not yet
delinquent;
(vi) materialmen's, mechanic's, repairman's,
employee's, contractor's, operator's, and other similar Liens arising in the
ordinary course of business (A) if they have not been filed pursuant to Law, (B)
if filed, they have not yet become due and payable or payment is being withheld
as provided by Law or (C) if their validity is being contested in good faith in
the ordinary course of business by appropriate action;
(vii) Customary Post-Closing Consents;
(viii) conventional rights of reassignment
arising in respect of abandonment, cessation of production or expiration of
leases;
(ix) all rights reserved to or vested in any
Governmental Authority to control or regulate any of the FirstEnergy Classified
Properties in any manner, and all applicable Laws; and
(x) any other Liens, contracts, agreements,
instruments, obligations, defects or irregularities of any kind whatsoever,
which do not interfere materially with the operation, value, or use of the
property subject thereto (as currently conducted), or that are set forth in
Schedule 3.20(a).
(b) Except as set forth in Schedule 3.20(b):
(i) each FirstEnergy Leasehold Interest is valid,
binding and enforceable in accordance with its terms; and
(ii) none of the FirstEnergy Stock Parties that
is a party to each such Leasehold Interest, nor, to the Knowledge of
FirstEnergy, any other party to any such Leasehold Interest, is in material
breach or default thereunder, no notice of default or termination thereunder has
been given or received by
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such Person, and no event has occurred which would, with the giving of notice or
passage of time or both, constitute a material breach or default thereunder.
III.21 Hedging. Except under agreements that are Excluded FirstEnergy
Assets, there are no obligations of the FirstEnergy Stock Parties to deliver
Hydrocarbons attributable to any of their properties in the future on account of
prepayment, advance payment, take-or-pay or similar obligations (other than as a
result of gas imbalances) without then or thereafter being entitled to receive
full value therefor. Except (i) under agreements that are Excluded FirstEnergy
Assets, (ii) with respect to the new hedges entered into by FirstEnergy Trading
Services, Inc. described on Schedule 3.5, and (iii) for fixed price gas
contracts entered into by the FirstEnergy Stock Parties in the ordinary course
of business on or before the date of this Formation Agreement, none of such
Persons is bound by futures, hedge, swap, collar, put, call, floor, cap, option
or other contracts that are intended to benefit from or reduce or eliminate the
risk of fluctuations in the price of commodities, including Hydrocarbons, or
securities relating to the FirstEnergy Appalachian Business.
III.22 Oil and Gas Contracts.
(a) Except as set forth in Schedule 3.22, the
FirstEnergy Oil and Gas Interests are not subject to and do not include:
(i) any instrument or agreement evidencing
or related to Indebtedness for borrowed money;
(ii) any agreement not entered into in the
ordinary course of business in which the amount involved is in excess of
$250,000, except life-of-well natural gas purchase contracts; or
(iii) any agreement concerning a drilling
and/or exploration program, partnership, joint venture or agency relationship
with a third Person other than a FirstEnergy Stock Party.
(b) With respect to the FirstEnergy Oil and Gas
Contracts:
(i) all FirstEnergy Oil and Gas Contracts
are in full force and effect and are the valid and legally binding obligations
of the FirstEnergy Stock Parties (to the extent any such Person is a party
thereto);
(ii) none of the FirstEnergy Participating
Entities is in material breach or default with respect to its obligations under
any FirstEnergy Oil and Gas Contract and, to the Knowledge of FirstEnergy, no
other party to any FirstEnergy Oil and Gas Contract is in material breach or
default with respect to its obligations thereunder, including with respect to
payments or otherwise;
(iii) no party to any FirstEnergy Oil and
Gas Contract has given notice of any action to terminate, cancel, rescind or
procure a judicial reformation thereof; and
(iv) no FirstEnergy Oil and Gas Contract
contains any provision that prevents a FirstEnergy Stock Party from owning,
managing and operating the FirstEnergy Oil and Gas Interests substantially in
accordance with historical practices.
For purposes of this Formation Agreement, "FirstEnergy Oil and Gas Contracts"
shall be deemed to include all contracts described in Section 3.22(a) and all
contracts relating to the FirstEnergy Oil and Gas Interests that would be
required to be filed by the FirstEnergy Stock Parties with the Securities and
Exchange Commission as exhibits to an annual report on Form 10-K if such Persons
had equity securities registered under the Securities Exchange Act of 1934, as
amended.
III.22.1 Recent Authorizations. As of the date of this
Formation Agreement, except as set forth in Schedule 3.22.1, with respect to
authorizations for expenditure executed on or after January 1, 1999:
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(a) there are no material outstanding calls for
payments that are due or that any of the FirstEnergy Stock Parties is committed
to make that have not been made with respect to the FirstEnergy Oil and Gas
Interests;
(b) there are no material operations in connection
with the FirstEnergy Oil and Gas Interests with respect to which any FirstEnergy
Stock Parties has become a nonconsenting party; and
(c) there are no commitments for the material
expenditure of funds for drilling or other capital projects with respect to the
FirstEnergy Oil and Gas Interests, other than projects with respect to which the
operator is not required under the applicable operating agreement to seek
consent.
III.22.2 Specific Lease Terms. Except as set forth in Schedule 3.22.2
or as would not have a Material Adverse Effect on the FirstEnergy Appalachian
Business:
(a) there are no express contractual obligations to
engage in continuous development operations in order to maintain any producing
FirstEnergy Leasehold Interest in force and effect;
(b) there are no provisions applicable to the
FirstEnergy Leasehold Interests that increase the royalty percentage of the
lessor thereunder; and
(c) none of the FirstEnergy Leasehold Interests are
limited by terms fixed by a certain number of years (other than primary terms
under oil and gas leases).
III.23 Reserve Reports.
(a) Except as set forth in Schedule 3.23(a), all
information supplied to Wright & Company, Inc. by or on behalf of FirstEnergy
and the FirstEnergy Participating Entities that was material to such firm's
estimates of proved oil and gas reserves attributable to the FirstEnergy Oil and
Gas Interests set forth in the proved oil and gas reserve reports concerning the
FirstEnergy Oil and Gas Interests dated as of December 31, 1998 (such reserve
report, the "FirstEnergy Reserve Report"), was (at the time supplied or as
modified or amended prior to the issuance of the FirstEnergy Reserve Report)
true and correct in all material respects, and FirstEnergy has no Knowledge of
any material errors in such information that existed at the time of such
issuance. For purposes of this Formation Agreement, "FirstEnergy Oil and Gas
Interests" means, to the extent relating to or constituting a part of the
Included FirstEnergy Assets, (i) all direct and indirect interests in and rights
with respect to working, leasehold and mineral interests, and operating rights,
royalties, overriding royalties, production payments, net profit interests and
other non working interests and nonoperating interests, including reversionary
interests (collectively, "FirstEnergy Leasehold Interests"); (ii) all interests
in rights with respect to oil, condensate, gas, casing head gas and other liquid
or gaseous hydrocarbons (collectively, "Hydrocarbons") and other minerals or
revenues therefrom; (iii) all contracts in connection therewith and claims and
rights thereto (including all operating agreements, unitization and pooling
agreements and orders, division orders, transfer orders, oil and gas sales,
exchange and processing contracts and agreements, and in each case, interests
thereunder); (iv) all interests in surface estates, easements, rights of way,
licenses, permits, leases, and other interests associated with, appurtenant to,
or necessary for the operation of any of the foregoing; and (v) all interests in
equipment and machinery (including wells, well equipment and machinery), oil and
gas production, gathering, transmission, treating, processing, and storage
facilities (including tanks, tank batteries, pipelines, and gathering systems),
pumps, water plants, electric plants, gasoline and gas processing plants,
refineries, and other tangible personal property and fixtures associated with,
appurtenant to, or necessary for the operation of any of the foregoing. Except
as set forth in Schedules 3.23(a) and 3.23(b) and except for changes (including
changes in commodity prices) generally affecting the oil and gas industry, there
has been no change in respect of the information supplied to Wright & Company,
Inc. for the FirstEnergy Reserve Report that would, individually or in the
aggregate, have a Material Adverse Effect on the FirstEnergy Appalachian
Business.
(b) Set forth in Schedule 3.23(b) is a list of all
material FirstEnergy Oil and Gas Interests that were included in the FirstEnergy
Reserve Report that have been disposed of prior to the date of this Formation
Agreement.
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III.24 Oil and Gas Wells, Proceeds and Sales; Equipment. Except as
otherwise set forth in Schedule 3.24 or as could not reasonably be expected to
have a Material Adverse Effect on the FirstEnergy Appalachian Business:
(a) none of the wells included in the FirstEnergy Oil
and Gas Interests are currently underproduced or overproduced;
(b) there have been no changes proposed in the
production allowables for any wells included in the FirstEnergy Oil and Gas
Interests;
(c) all wells included in the FirstEnergy Oil and Gas
Interests have been drilled and, if completed, operated and produced in
accordance with good oil and gas field practices and in compliance in all
respects with applicable oil and gas leases and applicable Laws;
(d) there are no wells included in the FirstEnergy
Oil and Gas Interests that:
(i) the FirstEnergy Stock Parties are
currently obligated by law or contract to plug and abandon or will be obligated
by law or contract to plug and abandon with the lapse of time or notice or both
because such wells are not currently capable of producing in commercial
quantities (other than as a result of a temporary cessation of production);
(ii) are subject to exceptions to a
requirement to plug and abandon issued by a Governmental Authority having
jurisdiction over such wells; or
(iii) have been plugged and abandoned but
have not been plugged or reclaimed in accordance with all applicable
requirements of each Governmental Authority having jurisdiction over such wells;
(e) proceeds from the sale of Hydrocarbons produced
from the FirstEnergy Oil and Gas Interests are being received by the FirstEnergy
Stock Parties in a timely manner and are not being held by third parties in
suspense for any reason;
(f) no Person has any call on, option to purchase or
similar rights with respect to the production of Hydrocarbons attributable to
the FirstEnergy Oil and Gas Interests, except for any such call, option or
similar right at market prices; and
(g) all equipment and machinery currently in use and
material to the operation of the FirstEnergy Oil and Gas Interests as conducted
prior to the date hereof is in reasonable working condition, ordinary wear and
tear excepted.
III.24.1 Plugging and Abandonment Costs. Based upon past
industry practices and applicable Law in the Appalachian Basin Area, to
FirstEnergy's Knowledge, the aggregate plugging and abandonment costs
attributable to the wells included in the FirstEnergy Included Assets (after
deducting all revenues received from sales of non-producing wells or equipment
associated therewith) will not exceed $100,000 in each of the next two years.
III.25 Necessary Assets. The Included FirstEnergy Assets and the
assets set forth in Schedule 3.25 constitute all of the assets utilized by
FirstEnergy and the FirstEnergy Participating Entities for the ownership and
operation of the FirstEnergy Appalachian Business (as currently conducted).
III.26 Full Disclosure. No representation or warranty by FirstEnergy
in this Formation Agreement and no statement of FirstEnergy contained in any
Schedule to this Formation Agreement contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements
contained herein or therein, in
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light of the circumstances in which they are made, not misleading. To the
Knowledge of FirstEnergy, there is no event or circumstance which FirstEnergy
has not disclosed to Range in writing which would or could reasonably be
expected to have a Material Adverse Effect on the business, prospects or
condition (financial or other) of the FirstEnergy Stock Parties or the Company
or the ability of FirstEnergy or the FirstEnergy Participating Entities to
perform this Formation Agreement.
ARTICLE IV
COVENANTS OF RANGE
------------------
Unless FirstEnergy otherwise agrees in writing, Range covenants as
follows:
IV.1 Conduct of Business. During the period from the date of this
Formation Agreement to the Closing Date (except as otherwise specifically
contemplated by the terms of this Formation Agreement, including to comply with
the provisions of Section 4.2):
IV.1.1 Ordinary Course.
(a) Range will cause each of the Range Stock Parties
and Range Production (with respect to the Range Michigan Assets) to, and each
such Person will, carry on its business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and, to the
extent consistent therewith, use all reasonable efforts to preserve intact its
current business organizations, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with it,
in each case consistent with past practice, to the end that its goodwill and
ongoing business shall be unimpaired to the fullest extent possible at the
Closing Date.
(b) Without limiting the generality of Section
4.1.1(a), and except as otherwise expressly contemplated by this Formation
Agreement (including to comply with the provisions of Section 4.2), no Range
Stock Party shall, and Range shall not permit any Range Stock Party to:
(i) except for dividends of cash in bank
accounts immediately prior to the Closing Date (other than Suspense Funds) and
except for dividends of cash from revenues, proceeds and receivables
attributable to the period of time prior to the Closing Date, declare, set aside
or pay any dividends on, or make any other distributions in respect of, any of
its equity securities or interests, or split, combine or reclassify any of its
capital stock or other equity interests or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock;
(ii) issue, deliver, sell, pledge or
otherwise encumber any shares of its capital stock or other equity interests,
any other voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, equity interests or securities,
voting securities or convertible securities;
(iii) amend its certificate or articles of
incorporation, articles of organization, or similar charter documents, its
bylaws, code of regulations, operating agreement, or limited partnership
agreement;
(iv) acquire or agree to acquire any
business, corporation, partnership, association, joint venture, limited
liability company or other entity or division thereof without the written
consent of FirstEnergy, which consent shall not be unreasonably withheld;
(v) incur any Indebtedness for borrowed
money, whether or not evidenced by a note, bond, debenture or similar
instrument, except for such borrowings that would be repaid in full at or prior
to Closing;
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(vi) sell, lease, mortgage, pledge or grant
a Lien on or otherwise encumber or dispose of any of the Included Range Assets,
except (A) sales, leases or encumbrances in the ordinary course of business
consistent with past practice, (B) with respect to purchase money security
interests, and (C) other immaterial transactions not in excess of $500,000 in
the aggregate (with respect to all such transactions by all Range Stock Parties
and, to the extent relating to the Range Michigan Assets, Range Production);
(vii) make any change in any election
relating to Taxes or settle or compromise any Tax audit or controversy relating
to any Range Stock Party or the Range Appalachian Business;
(viii) except for those transactions
contemplated hereby, adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or reorganization;
(ix) change any material accounting
principle used by it, except as required by GAAP;
(x) authorize any of, or commit or agree to
take any of, the foregoing actions; or
(xi) waive, compromise or settle any right
or claim that would adversely affect the ownership, operation or value of any of
the Included Range Assets.
(c) Without limiting the generality of the Section
4.1.1(a), and except as otherwise expressly contemplated by this Formation
Agreement (including to comply with the provisions of Section 4.2), Range
Production shall not, and Range shall not permit Range Production to:
(i) sell, lease, mortgage, pledge or grant a
Lien on or otherwise encumber or dispose of any of the Range Michigan Assets,
except: (A) sales, leases or encumbrances in the ordinary course of business
consistent with past practice, (B) as may be required under Range's credit and
debt facilities, (C) with respect to purchase money security interests, and (D)
other immaterial transactions not in excess of $500,000 in the aggregate (with
respect to all such transactions by all Range Stock Parties and, to the extent
relating to the Range Michigan Assets, Range Production); or
(ii) waive, compromise or settle any right
or claim that would adversely affect the ownership, operation or value of any of
the Range Michigan Assets.
IV.1.2 Changes in Employment Arrangements. Without the prior
written consent of FirstEnergy (which consent shall not be unreasonably
withheld) (a) Range shall not, and shall not permit the Range Stock Parties to,
adopt or amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee benefit plan,
agreement, trust, fund or other arrangement for the benefit or welfare of any
employee, director or former director or employee of the Range Stock Parties,
increase the compensation or fringe benefits of any officer of the Range Stock
Parties, or, except as provided in an existing employment agreement or in the
ordinary course of business consistent with past practice, increase the
compensation or fringe benefits of any employee or former employee of the Range
Stock Parties or pay any benefit not required by any existing plan, arrangement
or agreement of the Range Stock Parties, and (b) Range shall not, and shall not
permit any Range Stock Party to, grant any new or modified severance or
termination arrangement or increase or accelerate any benefits payable under its
severance or termination pay policies in effect on the date hereof.
IV.2 Range Preparatory Actions. Prior to the Closing, Range shall: (a)
form Range HoldCo, (b) cause Range Operating and Range Development to transfer
all of their interests in the Excluded Range Assets to Range HoldCo, and Range
HoldCo shall assume the obligations and liabilities associated with such assets,
and (c) cause Range Development to merge into Range Operating (and Range
Operating shall be the surviving corporation). Prior to the Closing, Range
Operating shall assume the Assumed Debt.
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ARTICLE V
COVENANTS OF FIRSTENERGY
------------------------
Unless Range otherwise agrees in writing, FirstEnergy covenants as
follows:
V.1 Conduct of Business. During the period from the date of this
Formation Agreement to the Closing Date (except as otherwise specifically
contemplated by the terms of this Formation Agreement, including to comply with
the provisions of Section 5.2):
V.1.1 Ordinary Course.
(a) FirstEnergy will cause each FirstEnergy Stock
Party to, and each FirstEnergy Stock Party will, carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent therewith, use all reasonable
efforts to preserve intact its current business organizations, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with it, in each case consistent with past
practice, to the end that its goodwill and ongoing business shall be unimpaired
to the fullest extent possible at the Closing Date.
(b) Without limiting the generality of Section
5.1.1(a), and except as otherwise expressly contemplated by this Formation
Agreement (including to comply with the provisions of Section 5.2), no
FirstEnergy Stock Party shall, and FirstEnergy shall not permit any FirstEnergy
Stock Party to:
(i) except for dividends of cash in bank
accounts immediately prior to the Closing Date (other than Suspense Funds) and
except for dividends of cash from revenues, proceeds and receivables
attributable to the period of time prior to the Closing Date, declare, set aside
or pay any dividends on, or make any other distributions in respect of, any of
its equity securities or interests, or split, combine or reclassify any of its
capital stock or other equity interests or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock;
(ii) issue, deliver, sell, pledge or
otherwise encumber any shares of its capital stock or other equity interests,
any other voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, equity interests or securities,
voting securities or convertible securities;
(iii) amend its certificate or articles of
incorporation, articles of organization, or similar charter documents, its
bylaws, code of regulations, operating agreement, or limited partnership
agreement;
(iv) acquire or agree to acquire any
business, corporation, partnership, association, joint venture, limited
liability company or other entity or division thereof without the written
consent of Range, which consent shall not be unreasonably withheld;
(v) incur any Indebtedness for borrowed
money, whether or not evidenced by a note, bond, debenture or similar
instrument, except for such borrowings that would be repaid in full at or prior
to Closing;
(vi) sell, lease, mortgage, pledge or grant
a Lien on or otherwise encumber or dispose of any of the Included FirstEnergy
Assets, except (A) sales, leases or encumbrances in the ordinary course of
business consistent with past practice, (B) with respect to purchase money
security interests, and (C) other immaterial transactions not in excess of
$500,000 in the aggregate (with respect to all such transactions by all
FirstEnergy Stock Parties);
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(vii) make any change in any election
relating to Taxes or settle or compromise any Tax audit or controversy relating
to any FirstEnergy Stock Party or the FirstEnergy Appalachian Business;
(viii) except for those transactions
contemplated hereby, adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or reorganization;
(ix) change any material accounting
principle used by it, except as required by GAAP;
(x) authorize any of, or commit or agree to
take any of, the foregoing actions; or
(xi) waive, compromise or settle any right
or claim that would adversely affect the ownership, operation or value of any of
the Included FirstEnergy Assets.
V.1.2 Changes in Employment Arrangements. Without the prior
written consent of Range (which consent shall not be unreasonably withheld) (a)
FirstEnergy shall not, and shall not permit the FirstEnergy Stock Parties to,
adopt or amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee benefit plan,
agreement, trust, fund or other arrangement for the benefit or welfare of any
employee, director or former director or employee of the FirstEnergy Stock
Parties, increase the compensation or fringe benefits of any officer of the
FirstEnergy Stock Parties, or, except as provided in an existing employment
agreement or in the ordinary course of business consistent with past practice,
increase the compensation or fringe benefits of any employee or former employee
of the FirstEnergy Stock Parties or pay any benefit not required by any existing
plan, arrangement or agreement of the FirstEnergy Stock Parties, and (b)
FirstEnergy shall not, and shall not permit any FirstEnergy Stock Party to,
grant any new or modified severance or termination arrangement or increase or
accelerate any benefits payable under its severance or termination pay policies
in effect on the date hereof.
V.2 FirstEnergy Preparatory Actions. Prior to the Closing, FirstEnergy
shall: (a) form Marbel HoldCo, (b) cause J R Nominee Corp., J R Nominee
Corp.-II, and Natural Gas Brokerage to merge into MB Operating (and MB Operating
shall be the surviving corporation), and (c) cause J R Operating to transfer to
FirstEnergy all of its shares of Marbel Energy.
V.3 Gas Transport, Inc. (a) Within one hundred twenty (120) days after
Closing, or such longer period as is acceptable to the lenders under the credit
facility described under Section 1.1.9 (the "Regulatory Period"), in order to
allow for certain regulatory approvals for the transfer of Gas Transport,
FirstEnergy shall cause Gas Transport to be contributed to the Company by
merger, stock transfer, asset transfer, or other arrangement reasonably
acceptable to Range; provided, however, that FirstEnergy shall retain the assets
of the local distribution company division of Gas Transport prior to such
contribution. An adjustment shall be made as between the Company and FirstEnergy
for items of income (or loss) of Gas Transport (other than items of income or
loss attributable to its local distribution company division) for the period
from the Closing Date to the date of such contribution, notwithstanding the
provisions of Section 1.1.8(a).
(b) During the Regulatory Period, FirstEnergy shall
cause Gas Transport to comply with all of the covenants applicable to Gas
Transport and the FirstEnergy Appalachian Business owned by Gas Transport as are
set forth in Section 5.1. As of the date of the contribution of Gas Transport to
the Company, FirstEnergy shall be deemed to have remade as of such date all of
the representations and warranties set forth in Article III that are applicable
to Gas Transport and the FirstEnergy Appalachian Business owned by Gas Transport
and shall deliver an officer's certificate to this effect.
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(c) If the representations and warranties of
FirstEnergy under Article III applicable to Gas Transport and the FirstEnergy
Appalachian Business owned by Gas Transport are not true and correct in all
material respects on and as of the date of the contribution of Gas Transport to
the Company, and any such inaccuracy cannot be cured by FirstEnergy during the
Regulatory Period, then FirstEnergy shall retain Gas Transport as an Excluded
FirstEnergy Asset, and pay to the Company the amount of $4,632,500.
ARTICLE VI
CERTAIN OTHER COVENANTS
-----------------------
VI.1 Further Assurances. Upon the terms and subject to the conditions
set forth in this Formation Agreement, each of the parties agrees to use
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this
Formation Agreement, including (a) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Authorities and
the making of all necessary registrations and filings (including filings with
Governmental Authorities, if any) and the taking of all reasonable steps as may
be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Authority, (b) the obtaining of all necessary
consents, approvals or waivers from third Persons, (c) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Formation Agreement or the consummation of the transactions
contemplated hereby, including seeking to have any stay or temporary restraining
order entered by any court or other Governmental Authority vacated or reversed
and (d) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by this Formation Agreement.
Notwithstanding the foregoing, no party shall be required to agree to any
consent, approval or waiver that would require such party to take an action that
would impair the value that such party reasonably attributes to the transactions
contemplated hereby.
VI.2 Notice. FirstEnergy shall give prompt written notice to Range,
and Range shall give prompt written notice to FirstEnergy, of: (a) any
representation or warranty made by it contained in this Formation Agreement
becoming untrue or inaccurate in any respect, or (b) the failure by it to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Formation Agreement.
VI.3 HSR Act.
(a) If required, each of the parties hereto shall
file a premerger notification and report form under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), with respect to
the transactions contemplated hereby as promptly as reasonably possible
following execution and delivery of this Formation Agreement. Each of the
parties agrees to use reasonable efforts to promptly respond to any request for
additional information pursuant to Section (e)(1) of the HSR Act or pursuant to
any such other applicable laws.
(b) The obligations of each party under Section 6.1
to use reasonable efforts with respect to antitrust matters shall be limited to
compliance with the reporting provisions of the HSR Act and with its obligations
under this Section 6.3.
VI.4 Access. After the Closing, FirstEnergy will provide the Company
with access to such historical accounting and other records relating to the
FirstEnergy Stock Parties and the FirstEnergy Appalachian Business prior to
Closing as reasonably requested by the Company. After the Closing, Range will
provide the Company with access to such historical accounting and other records
relating to the Range Stock Parties and Range Production (with respect to the
Range Michigan Assets) and the Range Appalachian Business prior to Closing as
reasonably requested by the Company. After Closing, each of FirstEnergy and
Range will, and will cause its counsel and independent public accountants to,
afford to representatives of each other, including their respective counsel and
accountants, reasonable access to all books, records, files and documents
related to the Appalachian Business of the Company in order to permit each such
party to prepare and file its tax returns and to prepare for and participate in
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any investigation with respect thereto, to prepare for and participate in any
other investigation and defend any litigation relating to or involving the
Appalachian Business for which such party may be responsible, to discharge its
obligations under this Formation Agreement and for other reasonable purposes and
will cause the Company to afford such party reasonable assistance in connection
therewith. Following the Closing Date, and to the extent reasonably necessary to
permit each of FirstEnergy and Range or any of their respective Affiliates to
defend (including, without limitation, any related investigation, appeal or
settlement) any lawsuit, mediation, enforcement action, arbitration,
administrative hearing or other adjudicative proceeding relating to the
Appalachian Business, each of FirstEnergy and Range agrees to cause the Company
to afford to the other party and its Affiliates and their respective accountants
and counsel, during normal business hours, at no cost to such party other than
reasonable out-of-pocket expenses, (i) reasonable access to all employees of the
Company or any of its Affiliates and all witnesses subject to the control or
direction of the Company or any of its Affiliates and (ii) reasonable access to
all documents and records within the custody or subject to the control of the
Company or any of its Affiliates; provided, however, that in the event of any
litigation nothing herein shall limit either party's rights of discovery under
applicable law.
VI.5 Expenses. Except to the extent otherwise specifically provided
herein, FirstEnergy shall pay all of the expenses incident to the transactions
contemplated by this Formation Agreement which are incurred by FirstEnergy, its
Affiliates or its representatives, and Range shall pay all of the expenses
incident to the transactions contemplated by this Formation Agreement which are
incurred by Range, its Affiliates or its representatives.
VI.6 [Intentionally omitted.] [Schedule 6.6 intentionally omitted.]
VI.7 Disclosure Schedules. With respect to the disclosure Schedules
attached to this Formation Agreement, the disclosures made on any Schedule with
respect to any representation or warranty shall be deemed to be made with
respect to any other representation or warranty requiring the same or similar
disclosure only if the relevance of such disclosure to other representations and
warranties is evident from the face of the applicable schedule. The inclusion of
any matter on any disclosure Schedule will not be deemed an admission by any
party that such listed matter is material or that such listed matter has or
would have Material Adverse Effect or constitutes a material liability or
material contract, as the case may be.
VI.8 Environmental Compliance Matters.
(a) As soon as possible following the Closing, Range
and FirstEnergy agree to cause the Company to diligently identify any conditions
and operations that existed prior to the Closing that may require remedial
actions or Permits, in order to cause the Range Appalachian Business, the
Included Range Assets, and each of the Range Stock Parties to comply with
applicable Environmental Laws (such conditions and operations so identified, the
"Range Environmental Compliance Matters").
(b) As soon as possible following the Closing,
FirstEnergy and Range agree to cause the Company to diligently identify any
conditions and operations that existed prior to the Closing that may require
remedial actions or Permits, in order to cause the FirstEnergy Appalachian
Business, the Included FirstEnergy Assets, and each of the FirstEnergy Stock
Parties to comply with applicable Environmental Laws (such conditions and
operations so identified, the "FirstEnergy Environmental Compliance Matters").
VI.9 Additional and Substitute Leases.
VI.9.1 FirstEnergy Unleased PUDs.
(a) FirstEnergy shall use its commercially reasonable
efforts to obtain, at its sole cost and expense, oil and gas leases in the name
of the Company, for the properties set forth on Schedule 6.9(a) (the
"FirstEnergy PUDs") that will: (i) entitle the Company to receive from its
ownership of such oil and gas interest a percentage of all hydrocarbons
produced, saved and marketed from such oil and gas interest of not less than the
net revenue interest for such property as set forth on the FirstEnergy Reserve
Report, without reduction, suspension, or termination for the productive life of
the well(s) associated with such oil and gas interest, (ii) obligate Company to
bear a percentage of the costs and expenses relating to operations on, and the
maintenance and production of, such
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oil and gas interest, not greater than the working or operating interest set
forth on the FirstEnergy Reserve Report for such oil and gas interest without
increase for the productive life of any well(s) associated with such oil and gas
interests; and (iii) is free and clear of any Liens except FirstEnergy Permitted
Encumbrances (the "FirstEnergy Additional Leases").
(b) Notwithstanding the foregoing, during the 180 day
period following the Closing, FirstEnergy shall have the right to:
(i) obtain oil and gas leases in the name of
the Company for the FirstEnergy PUDs for which a FirstEnergy Additional Lease
cannot be obtained, which leases shall cover the site of the FirstEnergy PUDs
and shall be upon commercially reasonable terms but may entitle the Company to a
net revenue interest less than or a working interest greater than the applicable
net revenue interest or working interest for such property as set forth on the
FirstEnergy Reserve Report, which leases shall be valued in accordance with
Section 6.9.1(d), and/or
(ii) obtain oil and gas leases in the name
of the Company with substitute PUD location(s) for the FirstEnergy PUDs on
acreage for which leases were not owned by one of the FirstEnergy Stock Parties
prior to the Closing Date, the value of which shall be certified by Wright &
Company based on valuation methodology comparable to that used in the
FirstEnergy Reserve Report (the "Substitute Leases").
(c) Upon the expiration of such 180 day period,
FirstEnergy shall pay to the Company an amount, if any, equal to the total
Allocated Value for all FirstEnergy PUDs for which a FirstEnergy Additional
Lease was not obtained, less (1) the aggregate value of the oil and gas leases
obtained pursuant to the preceding subsection (i), and less (2) the aggregate
value of all Substitute Leases obtained for the Company pursuant to the
preceding subsection (ii).
(d) If FirstEnergy acquires an oil and gas lease
pursuant to Section 6.9.1(b)(i) for any FirstEnergy PUD, but such oil and gas
lease entitles the Company to a net revenue interest less than or a working
interest greater than the applicable net revenue interest or working interest
for such property as set forth on the FirstEnergy Reserve Report, then such oil
and gas lease shall be valued at an amount equal to the Allocated Value for such
property, proportionately reduced based on the actual net revenue interest and
working interest obtained for the Company with respect to such property.
(e) FirstEnergy Additional Leases, oil and gas leases
obtained pursuant to Section 6.9.1(b)(i), and Substitute FirstEnergy Leases when
obtained for the Company shall be deemed for all purposes of this Agreement to
be part of the FirstEnergy Appalachian Business and the Included FirstEnergy
Assets, and FirstEnergy shall have been deemed to have made the representations
and warranties in Article 3 with respect to such leases as of the date such
leases were obtained for the Company.
VI.9.2 Range Unleased PUDs.
(a) Range shall use its commercially reasonable
efforts to obtain, at its sole cost and expense, oil and gas leases in the name
of the Company, for the properties set forth on Schedule 6.9(b) (the "Range
PUDs") that will: (i) entitle the Company to receive from its ownership of such
oil and gas interest a percentage of all hydrocarbons produced, saved and
marketed from such oil and gas interest of not less than the net revenue
interest for such property as set forth on the Range Reserve Report, without
reduction, suspension, or termination for the productive life of the well(s)
associated with such oil and gas interest, (ii) obligate Company to bear a
percentage of the costs and expenses relating to operations on, and the
maintenance and production of, such oil and gas interest, not greater than the
working or operating interest set forth on the Range Reserve Report for such oil
and gas interest without increase for the productive life of any well(s)
associated with such oil and gas interests; and (iii) is free and clear of any
Liens except Range Permitted Encumbrances (the "Range Additional Leases").
(b) Notwithstanding the foregoing, during the 180 day
period following the Closing, Range shall have the right to:
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(i) obtain oil and gas leases in the name of
the Company for the Range PUDs for which a Range Additional Lease cannot be
obtained, which leases shall cover the site of the Range PUDs and shall be upon
commercially reasonable terms but may entitle the Company to a net revenue
interest less than or a working interest greater than the applicable net revenue
interest or working interest for such property as set forth on the Range Reserve
Report, which leases shall be valued in accordance with Section 6.9.2(d), and/or
(ii) obtain oil and gas leases in the name
of the Company with substitute PUD location(s) for the Range PUDs on acreage for
which leases were not owned by one of the Range Stock Parties prior to the
Closing Date, the value of which shall be certified by Wright & Company based on
valuation methodology comparable to that used in the Range Reserve Report (the
"Substitute Leases").
(c) Upon the expiration of such 180 day period, Range
shall pay to the Company an amount, if any, equal to the total Allocated Value
for all Range PUDs for which a Range Additional Lease was not obtained, less (1)
the aggregate value of the oil and gas leases obtained pursuant to the preceding
subsection (i), and less (2) the aggregate value of all Substitute Leases
obtained for the Company pursuant to the preceding subsection (ii).
(d) If Range acquires an oil and gas lease pursuant
to Section 6.9.2(b)(i) for any Range PUD, but such oil and gas lease entitles
the Company to a net revenue interest less than or a working interest greater
than the applicable net revenue interest or working interest for such property
as set forth on the Range Reserve Report, then such oil and gas lease shall be
valued at an amount equal to the Allocated Value for such property,
proportionately reduced based on the actual net revenue interest and working
interest obtained for the Company with respect to such property.
(e) Range Additional Leases, and oil and gas leases
obtained pursuant to Section 6.9.2(b)(i), and Substitute Range Leases when
obtained for the Company shall be deemed for all purposes of this Agreement to
be part of the Range Appalachian Business and the Included Range Assets, and
Range shall have been deemed to have made the representations and warranties in
Article 2 with respect to such leases as of the date such leases were obtained
for the Company.
VI.10 Contribution Upon Guaranty Payment. If Range is required to make
payment upon any guaranty given by Range to secure the performance or payment of
any hedging agreement which is an Included Range Asset, then FirstEnergy shall
pay to Range an amount equal to one half of such guaranty payment. If
FirstEnergy is required to make payment upon any guaranty given by FirstEnergy
to secure the performance or payment of any hedging agreement which is an
Included FirstEnergy Asset, then Range shall pay to FirstEnergy an amount equal
to one half of such guaranty payment.
ARTICLE VII
CONDITIONS OF CLOSING
---------------------
VII.1 Conditions Precedent to Each Party's Obligations. The respective
obligations of FirstEnergy and Range to consummate the transactions contemplated
by this Formation Agreement are subject to the satisfaction or waiver on or
prior to the Closing Date of each of the following conditions:
VII.1.1 HSR Act. The waiting period (and any extension
thereof) under the HSR Act, if applicable to the transactions contemplated by
this Formation Agreement, shall have been terminated or shall have expired.
VII.1.2 No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated by this Formation
Agreement shall be in effect.
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VII.1.3 Financing. The Company shall have obtained financing
in the minimum amount of $186,299,535, and such financing shall have closed and
funds in the foregoing minimum amount shall be immediately available to the
Company for the payments described in Section 1.1.9.
VII.1.4 Other Deliveries. On or before the Closing Date,
there shall have been delivered the following:
(a) evidence of the filing of the Certificate of
Formation of the Company in the State of Delaware and foreign qualification in
the States of Ohio, New York, Louisiana, West Virginia, Texas, and Michigan, and
in the Commonwealth of Pennsylvania
(b) merger agreements filed with the applicable
Governmental Authorities relating to the mergers described in Section 1.1.3 and
1.1.4, and mutually agreeable transfer instruments relating to the transfer of
the equity interests in Oceana Exploration and the Range Michigan Assets as
described in Section 1.1.4;
(c) evidence that the preparatory transactions set
forth in Sections 4.2 and 5.2 have occurred;
(d) the agreements and documents described in Section
1.1.2, executed by the parties thereto;
(e) payment by FirstEnergy to Range of the Retail Gas
Contract Consideration;
(f) releases of all Range Bank Liens on any capital
stock of the Range Stock Parties; and
(g) releases of liens for borrowed money on any
Included First Energy Assets and releases of all FirstEnergy Stock Parties from
existing credit agreements.
VII.2 Conditions Precedent to Obligations of FirstEnergy. The
obligations of FirstEnergy to consummate the transactions contemplated by this
Formation Agreement are further subject to the satisfaction or waiver on or
prior to the Closing Date, of each of the following conditions:
VII.2.1 Compliance. The agreements and covenants of Range to
be complied with or performed on or before the Closing Date pursuant to the
terms hereof shall have been duly complied with or performed in all material
respects, and FirstEnergy shall have received a certificate to that effect dated
the Closing Date and executed on behalf of Range by an authorized executive
officer of Range.
VII.2.2 Certification. Range shall have furnished FirstEnergy
with a certified copy of a resolution or resolutions duly adopted by the Board
of Directors of each of Range and the Range Participating Entities approving the
Transaction Documents to which it is a party and consummation of the
transactions contemplated hereby.
VII.2.3 Representations and Warranties True. The
representations and warranties of Range contained in this Formation Agreement
(other than any representations and warranties made as of a specific date) shall
be true in all material respects (except to the extent the representation or
warranty is already qualified by materiality, in which case it shall be true in
all respects) on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, except as
contemplated or permitted by this Formation Agreement, and FirstEnergy shall
have received a certificate to that effect dated the Closing Date and executed
on behalf of Range by an authorized executive officer of Range.
VII.2.4 Consents, etc. FirstEnergy shall have received
evidence, in form and substance reasonably satisfactory to it, that such
licenses, Permits, consents, approvals, authorizations, qualifications and
orders of Governmental Authorities and other third parties as are necessary in
connection with the transactions
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contemplated hereby have been obtained, except for Customary Post-Closing
Consents. FirstEnergy's satisfaction or waiver of this condition shall not be
subject to reasonableness but shall be subject to its sole and unfettered
discretion to the extent any of the aforementioned shall contain a condition,
term, or waiting period which would have the effect of:
(a) interfering with the business, operations,
properties, or assets of FirstEnergy; or
(b) precluding or impairing the ability of
FirstEnergy or any of its Affiliates to engage in any line of business conducted
or proposed to be conducted by any of them.
VII.2.5 No Litigation. There shall not be pending or
threatened by any Governmental Authority any suit, action or proceeding (or by
any other Person any pending suit, action or proceeding which has a reasonable
likelihood of success), (i) challenging or seeking to restrain or prohibit the
consummation of the transactions contemplated by this Formation Agreement or
seeking to obtain from FirstEnergy or any of the FirstEnergy Participating
Entities any damages that are material in relation to the FirstEnergy
Participating Entities, (ii) seeking to prohibit or limit the ownership or
operation by the Company or any of its Subsidiaries of any material portion of
the Appalachian Business or to dispose of or hold separate any material portion
of the Included Range Assets or Included FirstEnergy Assets, as a result of the
transactions contemplated by this Formation Agreement or (iii) seeking to
prohibit the Company or any of its Subsidiaries from effectively controlling in
any material respect the Appalachian Business.
VII.2.6 No Material Adverse Change. There shall not have
occurred any change that may constitute a Material Adverse Effect with respect
to the Range Appalachian Business since the date hereof.
VII.3 Conditions Precedent to Obligations of Range. The obligations of
Range to consummate the transactions contemplated by this Formation Agreement
are further subject to the satisfaction or waiver on or prior to the Closing
Date, of each of the following conditions:
VII.3.1 Compliance. The agreements and covenants of
FirstEnergy to be complied with or performed on or before the Closing Date
pursuant to the terms hereof shall have been duly complied with or performed in
all material respects and Range shall have received a certificate to that effect
dated the Closing Date executed on behalf of FirstEnergy by an authorized
executive officer of FirstEnergy.
VII.3.2 Certification. FirstEnergy shall have furnished Range
with a certified copy of a resolution or resolutions duly adopted by the Board
of Directors of each of FirstEnergy and the FirstEnergy Participating Entities
approving the Transaction Documents to which it is a party and consummation of
the transactions contemplated hereby.
VII.3.3 Representations and Warranties True. The
representations and warranties of FirstEnergy contained in this Formation
Agreement (other than any representations and warranties made as of a specific
date) shall be true in all material respects (except to the extent the
representation or warranty is already qualified by materiality, in which case it
shall be true in all respects) on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, except as contemplated or permitted by this Formation Agreement, and
Range shall have received a certificate to that effect dated the Closing Date
and executed on behalf of FirstEnergy by an authorized executive officer of
FirstEnergy.
VII.3.4 Consents, etc. Range shall have received evidence, in
form and substance reasonably satisfactory to it, that such licenses, Permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Authorities and other third parties as are necessary in connection with the
transactions contemplated hereby have been obtained, except for Customary
Post-Closing Consents. Range's satisfaction or waiver of this condition shall
not be subject to reasonableness but shall be subject to its sole and unfettered
discretion to the extent any of the aforementioned shall contain a condition,
term, or waiting period which would have the effect of:
(a) interfering with the business, operations,
properties, or assets of Range; or
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(b) precluding or impairing the ability of Range or
any of its Affiliates to engage in any line of business conducted or proposed to
be conducted by any of them.
VII.3.5 No Litigation. There shall not be pending or
threatened by any Governmental Authority any suit, action or proceeding (or by
any other Person any pending suit, action or proceeding which has a reasonable
likelihood of success), (i) challenging or seeking to restrain or prohibit the
consummation of the transactions contemplated by this Formation Agreement or
seeking to obtain from Range or any of the Range Participating Entities any
damages that are material in relation to the Range Participating Entities, (ii)
seeking to prohibit or limit the ownership or operation by the Company or any of
its Subsidiaries of any material portion of the Appalachian Business or to
dispose of or hold separate any material portion of the Included Range Assets or
the Included FirstEnergy Assets, as a result of the transactions contemplated by
this Formation Agreement or (iii) seeking to prohibit the Company or any of its
Subsidiaries from effectively controlling in any material respect the
Appalachian Business.
VII.3.6 No Material Adverse Change. There shall not have
occurred any change that may constitute a Material Adverse Effect with respect
to the FirstEnergy Appalachian Business since the date hereof.
ARTICLE VIII
TAX MATTERS
-----------
VIII.1 Certain Tax Matters. The parties agree as follows with respect
to the period following the Closing:
VIII.1.1 Access to Information.
(a) FirstEnergy shall grant or cause to be granted to
the Company (or its designees) access at all reasonable times to all of the
information, Books and Records relating to the FirstEnergy Appalachian Business
within the possession or control of FirstEnergy or any Affiliate of FirstEnergy
(including workpapers and correspondence with any Taxing Authority), and shall
afford the Company (or its designees) the right (at their expense) to take
extracts therefrom and make copies thereof, to the extent reasonably necessary
to permit the Company (or its designees) to prepare Returns, to conduct
negotiations with any Taxing Authority and to implement the provisions of, or to
investigate or defend any claims between the parties arising under, this
Formation Agreement.
(b) Range shall grant or cause to be granted to the
Company (or its designees) access at all reasonable times to all of the
information, Books and Records relating to the Range Appalachian Business within
the possession or control of Range or any Affiliate of Range (including
workpapers and correspondence with any Taxing Authority), and shall afford the
Company (or its designees) the right (at their expense) to take extracts
therefrom and make copies thereof, to the extent reasonably necessary to permit
the Company (or its designees) to prepare Returns, to conduct negotiations with
any Taxing Authority and to implement the provisions of, or to investigate or
defend any claims between the parties arising under, this Formation Agreement.
(c) The Company shall grant to FirstEnergy (or its
designees) access at all reasonable times to all of the information, Books and
Records relating to the FirstEnergy Appalachian Business within the possession
of the Company or its Subsidiaries (including workpapers and correspondence with
any Taxing Authority), and shall afford FirstEnergy (or its designees) the right
(at FirstEnergy's expense) to take extracts therefrom and to make copies
thereof, to the extent reasonably necessary to permit FirstEnergy (or its
designees) to prepare Returns, to conduct negotiations with any Taxing Authority
and to implement the provisions of, or to investigate or defend any claims
between the parties arising under, this Formation Agreement.
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(d) The Company shall grant to Range (or its
designees) access at all reasonable times to all of the information, Books and
Records relating to the Range Appalachian Business within the possession of the
Company or its Subsidiaries (including workpapers and correspondence with any
Taxing Authority), and shall afford Range (or its designees) the right (at
Range's expense) to take extracts therefrom and to make copies thereof, to the
extent reasonably necessary to permit Range (or its designees) to prepare
Returns, to conduct negotiations with Tax authorities and to implement the
provisions of, or to investigate or defend any claims between the parties
arising under this Formation Agreement.
(e) Each of the parties will preserve and retain all
schedules, workpapers and other documents relating to any Returns of or with
respect to the Range Appalachian Business, in the case of the Range Stock
Parties and the Company, and the FirstEnergy Appalachian Business, in the case
of the FirstEnergy Stock Parties and the Company, or to any claims, audits or
other proceedings affecting such businesses until the expiration of the statute
of limitations (including extensions) applicable to the taxable period to which
such documents relate or until the final determination of any controversy with
respect to such taxable period, and until the final determination of any
payments that may be required with respect to such taxable period under this
Formation Agreement.
VIII.1.2 Indemnification Provisions for the Benefit of
FirstEnergy and the Company. Range hereby agrees to defend, indemnify and hold
harmless the Range Indemnity Parties from and against, and agrees to pay, all
losses, liabilities, claims, damages and reasonable expenses of defense thereof
(including expenses of investigation and defense and fees and disbursements of
counsel and court costs), as a result of:
(a) a claim, notice of deficiency or assessment or
proposed assessment by, or any obligation owing to, any Taxing Authority for:
(i) any Taxes of any of the Range Stock
Parties for any taxable period ending on or before the Closing Date;
(ii) any Taxes of any of the Range Stock
Parties for any taxable period commencing before the Closing Date and ending
after the Closing Date, but only with respect to the portion of such period up
to and including the Closing Date ("Pre-Closing Period"). Taxes attributable to
a Pre-Closing Period shall be based, in the case of real and personal property
taxes, on a per diem basis and, in the case of other Taxes, on the actual
activities, taxable income or taxable loss of the particular Range Stock Party,
as the case may be, during such Pre-Closing Period as if such taxable period
ended as of the close of business on the Closing Date[; and
(iii) any liability for Taxes of any Person
that is or was a member of a consolidated, combined or unitary group of which
any Range Stock Party (or any predecessor) is or was a member on or prior to the
Closing Date (whether such liability is pursuant to Treasury Regulation Section
1.1502-6 or otherwise), and any liability for Taxes of any Person which arises
by virtue of a Range Stock Party being a transferee or successor, by contract or
otherwise.
(b) any breach of any representation, warranty or
obligation of Range under Sections 2.10 or 2.11.
VIII.1.3 Indemnification Provisions for the Benefit of Range
and the Company. FirstEnergy hereby agrees to defend, indemnify and hold
harmless the FirstEnergy Indemnity Parties from and against, and agrees to pay,
all losses, liabilities, claims, damages and reasonable expenses of defense
thereof (including expenses of investigation and defense and fees and
disbursements of counsel and court costs) as a result of:
(a) a claim, notice of deficiency or assessment or
proposed assessment by, or any obligation owing to, any Taxing Authority for:
(i) any Taxes of any of the FirstEnergy
Stock Parties for any taxable period ending on or before the Closing Date;
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(ii) any Taxes of any of the FirstEnergy
Stock Parties for any taxable period commencing before the Closing Date and
ending after the Closing Date, but only with respect to the Pre-Closing Period.
Taxes attributable to a Pre-Closing Period shall be based, in the case of real
and personal property taxes, on a per diem basis and, in the case of other
Taxes, on the actual activities, taxable income or taxable loss of the
particular FirstEnergy Stock Party, as the case may be, during such Pre-Closing
Period as if such taxable period ended as of the close of business on the
Closing Date[; and
(iii) any liability for Taxes of any Person
that is or was a member of a consolidated, combined or unitary group of which
any FirstEnergy Stock Party (or any predecessor) is or was a member on or prior
to the Closing Date (whether such liability is pursuant to Treasury Regulation
Section 1.1502-6 or otherwise), and any liability for Taxes of any Person which
arises by virtue of a FirstEnergy Stock Party being a transferee or successor,
by contract or otherwise.
(b) any breach of any representation, warranty or
obligation of FirstEnergy under Sections 3.10 or 3.11.
VIII.1.4 Indemnification Procedures.
(a) If a claim shall be made by any Governmental
Authority that, if successful, would result in the indemnification of a party
under Article VIII of this Formation Agreement (referred to herein as the "Tax
Indemnified Party"), the Tax Indemnified Party shall promptly notify in writing
the party obligated to indemnify under this Article VIII (referred to herein as
the "Tax Indemnifying Party") in writing; provided, however, that no delay on
the part of the Tax Indemnified Party in notifying the Tax Indemnifying Party
shall relieve the Tax Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Tax Indemnifying Party is materially
prejudiced thereby.
(b) The Tax Indemnified Party shall take such action
in connection with contesting such claim as the Tax Indemnifying Party shall
reasonably request in writing from time to time, including the selection of
counsel and experts and the execution of powers of attorney, provided that (A)
within 30 days after the notice described in Section 8.1.4(a) has been delivered
(or such earlier date that any payment of Taxes is due by the Tax Indemnified
Party but in no event sooner than five Business Days after the Tax Indemnifying
Party's receipt of such notice), the Tax Indemnifying Party requests that such
claim be contested, (B) the Tax Indemnifying Party shall have agreed to pay to
the Tax Indemnified Party all costs and expenses that the Tax Indemnified Party
incurs in connection with contesting such claim, including reasonable attorneys'
and accountants' fees and disbursements, and (C) if the Tax Indemnified Party is
requested by the Tax Indemnifying Party to pay the Tax claimed and sue for a
refund, the Tax Indemnifying Party shall have advanced to the Tax Indemnified
Party, on an interest-free basis, the amount of such claim. The Tax Indemnified
Party shall not make any payment of such claim for at least 30 days (or such
shorter period as may be required by applicable law) after the giving of the
notice required by Section 8.1.4(a), shall give to the Tax Indemnifying Party
any information reasonably requested relating to such claim, and otherwise shall
cooperate with the Tax Indemnifying Party in good faith in order to contest
effectively any such claim.
(c) Subject to the provisions of Section 8.1.4(b),
the Tax Indemnified Party shall enter into a settlement of such contest with the
applicable Governmental Authority or prosecute such contest to a determination
in a court or other tribunal of initial or appellate jurisdiction, all as the
Tax Indemnifying Party may request.
(d) If, after actual receipt by the Tax Indemnified
Party of an amount advanced by the Tax Indemnifying Party pursuant to Section
8.1.4(b), the extent of the Liability of the Tax Indemnified Party with respect
to the claim shall be established by the final judgment or decree of court or
other tribunal or final and binding settlement with an administrative agency
having jurisdiction thereof, the Tax Indemnified Party shall promptly repay to
the Tax Indemnifying Party the amount advanced to the extent of any refund
received by the Tax Indemnified Party with respect to the claim together with
any interest received thereon from the applicable Governmental Authority and any
recovery of legal fees from such taxing authority, net of any Taxes as are
required to be paid by the Tax Indemnified Party with respect to such refund,
interest or legal fees (calculated at the
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maximum applicable statutory rate of Tax without regard to any other Tax
attributes of such party. Notwithstanding the foregoing, the Tax Indemnified
Party shall not be required to make any payment hereunder before such time as
the Tax Indemnifying Party shall have made all payments or indemnities then due
with respect to the Tax Indemnified Party pursuant to this Formation Agreement.
(e) Promptly after a final determination, the Tax
Indemnifying Party shall pay to the Tax Indemnified Party the amount of any Tax
Losses to which the Tax Indemnified Party may become entitled by reason of the
provisions of this Section 8.1.
VIII.1.5 Filing of Returns.
(a) Range shall prepare and file or cause to be filed
all Returns for the Range Stock Parties that (i) are required to be filed on or
before the Closing Date, or (ii) are required to be filed after the Closing Date
that (A) are required to include, on a consolidated or combined basis, the
operations of any of the Range Stock Parties for any tax period ending on or
before the Closing Date, or (B) are required to be filed on a separate return
basis for any tax period ending on or before the Closing Date.
(b) FirstEnergy shall prepare and file or cause to be
filed all Returns for the FirstEnergy Stock Parties that (i) are required to be
filed on or before the Closing Date, or (ii) are required to be filed after the
Closing Date that (A) are required to include, on a consolidated or combined
basis, the operations of any of the FirstEnergy Stock Parties for any tax period
ending on or before the Closing Date, or (B) are required to be filed on a
separate return basis for any tax period ending on or before the Closing Date.
(c) The Company shall prepare and file or cause to be
filed all Returns required of the Range Stock Parties or the FirstEnergy Stock
Parties, or in respect of their activities, for any taxable period ending after
the Closing Date that includes the operations of the Range Stock Parties or the
FirstEnergy Stock Parties prior to the Closing Date. To the extent possible, all
such Returns shall be prepared in a manner consistent with the prior practices
of the Range Stock Parties or the FirstEnergy Stock Parties, as the case may be,
except for changes necessary to comply with changes in the law.
VIII.1.6 Survival. The terms of this Article VIII shall
survive in accordance with the applicable statute of limitations.
ARTICLE IX
INDEMNIFICATION AND CERTAIN DISCLAIMERS
---------------------------------------
IX.1 Survival.
IX.1.1 The representations and warranties in this Formation
Agreement, and in any certificate to be delivered by Range pursuant to Section
7.2.3 and by FirstEnergy pursuant to Sections 5.3(b) and 7.3.3 (the "Officer's
Certificates"), shall survive the Closing for a period of two (2) years
following the Closing Date, except as follows:
(a) the representations and warranties set forth in
Sections 2.1 [Organization], 2.5(a) [Authority], 3.1 and 3.5(a) shall survive
indefinitely notwithstanding any otherwise applicable statute of limitations,
(b) the representations and warranties set forth in
Sections 2.9 [Employee Benefit Matters], 2.10 [Tax Matters], 2.11 [No Excess
Parachute Payments], 3.9, 3.10 and 3.11 shall survive until the expiration of
the applicable statute of limitations,
(c) the representations and warranties set forth in
Sections 2.12 [Environmental], 2.15 [Title to Properties], 2.20(a) [Title to Oil
and Gas Interests], 3.12, 3.15 and 3.20(a) shall survive for a period of four
(4) years after the Closing Date, and
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(d) the representation and warranty set forth in
Section 2.24(g) [Equipment] and 3.24(g) shall survive for a period of one year
after the Closing Date.
No action can be brought with respect to any breach of any representation and
warranty made under this Formation Agreement or any Officer's Certificate unless
a Claim Notice or Indemnity Notice specifying the breach of the representation
or warranty forming the basis of such claim has been delivered to the party
alleged to have breached such representation or warranty prior to the
termination date of such representation or warranty as described in this Section
9.1.1.
IX.1.2 Any claim for indemnity for a breach of a covenant
herein shall be effective only as to matters with respect to which a Claim
Notice or Indemnity Notice has been delivered pursuant hereto on or before the
second anniversary of the Closing Date, except as follows:
(a) Any claim for indemnity pursuant to Sections
9.2(a)(i) [Representations or Warranties] or 9.3(a)(i) shall survive for the
applicable survival period of the representation or warranty as described in
Section 9.1.1;
(b) Any claim for indemnity pursuant to Sections
9.2(a)(iii) [Environmental Compliance Costs] or 9.3(a)(iii) shall survive
indefinitely with respect to Environmental Compliance Matters arising out of
conditions or operations investigated by the Company in accordance with the
provisions of Section 6.8 where on or before the fourth (4th) anniversary of the
Closing Date: (i) the decision to remediate or otherwise cure such conditions or
operations has been made by the Management Committee pursuant to Section
6.02(i)(O) of the LLC Agreement, or (ii) a request for arbitration with respect
to the investigation, remediation, or other cure of any such conditions or
operations is pending pursuant to Section 6.02(f)(iv) of the LLC Agreement;
(c) Any claim for indemnity pursuant to Sections
9.2(a)(iv) [Scheduled Matters for Title to Properties and Title to Oil and Gas
Interests], 9.2(a)(v) [Excluded Liabilities], 9.2(a)(vi) [Fines and Penalties],
9.3(a)(iv), 9.3(a)(v) or 9.3(a)(vi) shall survive indefinitely.
IX.1.3 Notwithstanding anything to the contrary herein, any
right to indemnity under Articles VIII or IX herein shall expire, terminate and
be of no further force or effect on the date that: (a) FirstEnergy (and/or its
Affiliates) purchases all of the Membership Interests of Range and its
Affiliates in the Company, or (b) Range (and/or its Affiliates) purchases all of
the Membership Interests of FirstEnergy and its Affiliates in the Company;
provided that this Section 9.1.3 shall not apply to any indemnity claim for
which a Claim Notice or an Indemnity Notice has been timely delivered in
accordance with the provisions of this Article IX, or a notice of indemnity
rights has been timely delivered in accordance with the provisions of Article
VIII, prior to the date of such purchase of such Membership Interests. In
connection with any such purchase of Membership Interests, FirstEnergy, Range
and their respective Affiliates shall execute, and shall cause the Company to
execute, a waiver and release of the provisions of Article VIII and this Article
IX, consistent with the terms hereof.
IX.1.4 For purposes of determining any indemnity survival
period pursuant to Sections 9.1.1 and 9.1.2, solely with respect to Gas
Transport, the "Closing Date" shall be deemed to be the effective date of
contribution of Gas Transport to the Company.
IX.2 Indemnification by Range.
(a) Subject to the terms and conditions set forth in
this Section 9.2, Range shall hold harmless, defend and indemnify each of the
Company, its Subsidiaries, FirstEnergy and any Affiliate of FirstEnergy and each
of their respective directors, officers, employees and agents (each, a "Range
Indemnity Party"), from and against and in respect of any and all losses, costs,
Liabilities, damages, expenses (including, without limitation, reasonable
expenses of investigation and defense, reasonable fees and disbursements of
counsel and court costs, but excluding ordinary course compensation paid to
employees of a Range Indemnity Party), Liens or other obligations of any nature
whatsoever (collectively, "FirstEnergy Losses"), other than FirstEnergy Losses
to
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the extent recovered by the applicable Range Indemnity Party under any
applicable insurance policy, which may be incurred by a Range Indemnity Party
and which relates to or results from:
(i) any breach by Range of any
representation or warranty of Range contained in this Formation Agreement or in
any Officer's Certificate:
(ii) any breach by Range of any covenant or
agreement of Range contained in this Formation Agreement;
(iii) the Environmental Compliance Costs
relating to the Range Environmental Compliance Matters;
(iv) any matters described in Schedules 2.15
[Scheduled Matters for Title to Properties] or 2.20 [Scheduled Matters for Title
to Oil and Gas Interests];
(v) any Excluded Range Liability;
(vi) fines and penalties of any Governmental
Authority arising out of or relating to the Environmental Laws to the extent
attributable to periods prior to the Closing Date; or
(vii) Third Party Claims arising out of the
matters scheduled on Schedule 2.12.
(b) Notwithstanding anything to the contrary herein
but subject to the following sentence, in no event shall Range indemnify any
Range Indemnity Parties for any FirstEnergy Loss pursuant to Sections 9.2(a)(i),
9.2(a)(ii), 9.2(a)(iii), 9.2(a)(iv), 9.2(a)(vi) or 9.2(a)(vii) unless: (i) the
amount of such FirstEnergy Loss arising out of any single item, event, breach,
circumstance, or occurrence exceeds $10,000 (the "Threshold Amount"), and (ii)
the aggregate amount of all such FirstEnergy Losses which individually exceed
the Threshold Amount is greater than $1,000,000 (the "Range Basket Amount"),
after which Range will be obligated to pay the entire amount of all FirstEnergy
Losses which exceed the Threshold Amount, without deduction of the Range Basket
Amount; provided that the foregoing provisions of this Section 9.2(b) shall not
apply to the obligations of Range to indemnify the Range Indemnified Parties for
a breach of its covenants contained in Sections 1.1.8 [Pre-Closing Allocations],
6.5 [Expenses], and 6.9(b) [Additional Leases]. Range's payment obligation under
Section 6.9.2(c) [Additional Leases] (x) shall not be subject to the provisions
of Section 9.2(b)(i), and (y) at Range's option, shall not be subject to the
provisions of Section 9.2(b)(ii).
(c) Except as provided in Article VIII with respect
to Tax Matters (which as to all indemnity matters shall be governed by the terms
of such Article and not this Article IX notwithstanding anything herein to the
contrary except as provided in Section 9.1.3), the rights of the Range Indemnity
Parties under this Article IX shall be the exclusive remedy of the Range
Indemnity Parties with respect to the transactions contemplated by this
Formation Agreement, including, without limitation, breaches of representations,
warranties, covenants and agreements by Range contained in or made pursuant to
this Formation Agreement (other than claims for fraud).
(d) In the event that Range shall be obligated to
indemnify any Range Indemnity Party pursuant to this Article IX, upon payment of
such indemnity, Range shall be subrogated to all rights of the Range Indemnity
Party with respect to claims to which such indemnification relates.
IX.3 Indemnification by FirstEnergy.
(a) Subject to the terms and conditions set forth in
this Section 9.3, FirstEnergy shall hold harmless, defend and indemnify each of
the Company, its Subsidiaries, Range and any Affiliate of Range, and each of
their respective directors, officers, employees and agents (each, a "FirstEnergy
Indemnity Party"), from and against and in respect of any and all losses, costs,
Liabilities, damages, expenses (including, without limitation, reasonable
expenses of investigation and defense, reasonable fees and disbursements of
counsel and court costs, but
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excluding ordinary course compensation paid to employees of a FirstEnergy
Indemnity Party), Liens or other obligations of any nature whatsoever
(collectively, "Range Losses"), other than Range Losses to the extent recovered
by the applicable FirstEnergy Indemnity Party under any applicable insurance
policy, which may be incurred by a FirstEnergy Indemnity Party and which relates
to or results from:
(i) any breach by FirstEnergy of any
representation or warranty of FirstEnergy contained in this Formation Agreement
or in any Officer's Certificate:
(ii) any breach by FirstEnergy of any
covenant or agreement of FirstEnergy contained in this Formation Agreement;
(iii) the Environmental Compliance Costs
relating to the FirstEnergy Environmental Compliance Matters;
(iv) any matters described in Schedules 3.15
[Scheduled Matters for Title to Properties] or 3.20 [Scheduled Matters for Title
to Oil and Gas Interests];
(v) any Excluded FirstEnergy Liability;
(vi) fines and penalties of any Governmental
Authority arising out of or relating to the Environmental Laws to the extent
attributable to periods prior to the Closing Date; or
(vii) Third Party Claims arising out of the
matters scheduled on Schedule 3.12.
(b) Notwithstanding anything to the contrary herein
but subject to the following sentence, in no event shall FirstEnergy indemnify
any FirstEnergy Indemnity Parties for any Range Loss pursuant to Sections
9.3(a)(i), 9.3(a)(ii), 9.3(a)(iii), 9.3(a)(iv), 9.3(a)(vi) or 9.3(a)(vii)
unless: (i) the amount of such Range Loss arising out of any single item, event,
breach, circumstance, or occurrence exceeds the Threshold Amount, and (ii) the
aggregate amount of all such Range Losses which individually exceed the
Threshold Amount is greater than $1,000,000 (the "FirstEnergy Basket Amount"),
after which FirstEnergy will be obligated to pay the entire amount of all Range
Losses which exceed the Threshold Amount, without deduction of the FirstEnergy
Basket Amount; provided that the foregoing provisions of this Section 9.3(b)
shall not apply to the obligations of FirstEnergy to indemnify the FirstEnergy
Indemnified Parties for a breach of its covenants contained in Sections 1.1.8
[Pre-Closing Allocations], 5.3 [Gas Transport] and 6.5 [Expenses]. FirstEnergy's
payment obligation under Section 6.9.1(c) [Additional Leases] (x) shall not be
subject to the provisions of Section 9.3(b)(i), and (y) at FirstEnergy's option,
shall not be subject to the provisions of Section 9.3(b)(ii).
(c) Except as provided in Article VIII with respect
to Tax Matters (which as to all indemnity matters shall be governed by the terms
of such Article and not this Article IX notwithstanding anything herein to the
contrary, except as provided in Section 9.1.3), the rights of the FirstEnergy
Indemnity Parties under this Article IX shall be the exclusive remedy of the
FirstEnergy Indemnity Parties with respect to the transactions contemplated by
this Formation Agreement, including, without limitation, breaches of
representations, warranties, covenants and agreements by FirstEnergy contained
in or made pursuant to this Formation Agreement (other than claims for fraud).
(d) In the event that FirstEnergy shall be obligated
to indemnify any FirstEnergy Indemnity Party pursuant to this Article IX, upon
payment of such indemnity, FirstEnergy shall be subrogated to all rights of the
FirstEnergy Indemnity Party with respect to claims to which such indemnification
relates.
IX.4 Indemnification Procedures. All claims for indemnification under
this Formation Agreement shall be asserted and resolved as follows:
(a) A party claiming indemnification under this
Formation Agreement (an "Indemnified Party") with respect to any claim asserted
by a Person other than a party hereto or its Affiliates or the Company ("Third
Party Claim") against the Indemnified Party that could give rise to a right of
indemnification
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under this Formation Agreement shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of the Third Party Claim
and (ii) transmit to the Indemnifying Party a written notice ("Claim Notice")
describing in reasonable detail the nature of the Third Party Claim, a copy of
all papers served with respect to such claim (if any), the Indemnified Party's
best estimate of the amount of damages attributable to the Third Party Claim and
the basis of the Indemnified Party's request for indemnification under this
Agreement. Subject to the time limitations for giving a Claim Notice or an
Indemnity Notice as is set forth in Section 9.1, failure to promptly provide a
Claim Notice in accordance with the foregoing sentence shall not affect the
right of the Indemnified Party's indemnification hereunder except to the extent
the Indemnifying Party is prejudiced thereby. Within 30 days after receipt of
any Claim Notice (the "Election Period"), the Indemnifying Party shall notify
the Indemnified Party (A) whether the Indemnifying Party disputes its potential
liability to the Indemnified Party under this Article IX with respect to such
Third Party Claim and (B) whether the Indemnifying Party desires to defend the
Indemnified Party against such Third Party Claim; provided that if the
Indemnifying Party fails to so notify the Indemnified Party during the Election
Period, the Indemnifying Party shall be deemed to have elected to dispute such
liability.
(b) If the Indemnifying Party notifies the
Indemnified Party within the Election Period that the Indemnifying Party does
not dispute its potential liability to the Indemnified Party under this Article
IX and that the Indemnifying Party elects to assume the defense of the Third
Party Claim, then the Indemnifying Party shall have the right to defend, at its
sole cost and expense, such Third Party Claim by all appropriate proceedings,
which proceedings shall be prosecuted diligently by the Indemnifying Party to a
final conclusion or settled at the discretion of the Indemnifying Party in
accordance with this Section 9.4(b). The Indemnifying Party shall have full
control of such defense and proceedings, including any compromise or settlement
thereof; provided that the Indemnifying Party shall not enter into any
settlement agreement providing for a finding of responsibility or liability on
the part of the Indemnified Party or providing any material sanction or material
restriction upon the conduct of any business by the Indemnified Party without
the Indemnified Party's consent, which consent shall not be unreasonably
withheld. The Indemnified Party is hereby authorized, at the sole cost and
expense of the Indemnifying Party (but only if pursuant to Section 9.4(b) or
9.4(d) the Indemnified Party is actually entitled to indemnification hereunder),
to file, during the Election Period, any motion, answer or other pleadings which
the Indemnified Party shall deem necessary or appropriate to protect its
interests or those of the Indemnifying Party and not prejudicial to the
Indemnifying Party. If requested by the Indemnifying Party, the Indemnified
Party agrees, at the sole cost and expense of the Indemnifying Party, to
cooperate with the Indemnifying Party and its counsel in contesting any Third
Party Claim which the Indemnifying Party elects to contest, including the making
of any related counterclaim against the Person asserting the Third Party Claim
or any cross-complaint against any Person (other than an (i) Affiliate of the
Indemnified Party or (ii) the Company). The Indemnified Party may participate
in, but not control, any defense or settlement or any Third Party Claim
controlled by the Indemnifying Party pursuant to this Section 9.4, and the
Indemnified Party shall bear its own costs and expenses with respect to such
participation.
(c) If the Indemnifying Party fails to notify the
Indemnified Party within the Election Period that the Indemnifying Party elects
to defend the Indemnified Party pursuant to Section 9.4(b), or if the
Indemnifying Party elects to defend the Indemnified Party pursuant to Section
9.4(b) but fails to diligently prosecute or settle the Third Party Claim, then
the Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party (but only if pursuant to Section 9.4(b) or
9.4(d) the Indemnified Party is actually entitled to indemnification hereunder),
the Third Party Claim by all appropriate proceedings, which proceedings shall be
promptly and vigorously prosecuted by the Indemnified Party to a final
conclusion or settled. The Indemnified Party shall have full control of such
defense and proceedings; provided, however, that the Indemnified Party may not
enter into, without the Indemnifying Party's consent, which shall not be
unreasonably withheld, any compromise or settlement of such Third Party Claim.
The Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section 9.4(c),
and the Indemnifying Party shall bear its own costs and expenses with respect to
such participation.
(d) If the Indemnifying Party elects not to assume
the defense of a Third Party Claim, or elects to assume the defense of a Third
Party Claim, but reserves the right to dispute whether such claim is an
indemnifiable loss under this Agreement, the determination of whether the
Indemnified Party is entitled to indemnification hereunder shall be resolved
pursuant to the arbitration provisions of this Formation Agreement.
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(e) If any Indemnified Party has a claim against any
Indemnifying Party hereunder which does not involve a Third Party Claim, the
Indemnified Party shall promptly transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, the Indemnified Party's best estimate of the amount of damages
attributable to such claim and the basis of the Indemnified Party's request for
indemnification under this Agreement. Subject to the time limitations for giving
a Claim Notice or an Indemnity Notice as is set forth in Section 9.1, failure to
provide such Indemnity Notice shall not affect the right of the Indemnified
Party's indemnification hereunder except to the extent the Indemnifying Party is
prejudiced thereby. If the Indemnifying Party does not notify the Indemnified
Party within 60 days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes such claim, the Indemnifying Party shall be deemed
to have disputed such claim. If the Indemnifying Party has disputed such claim,
such dispute shall be resolved pursuant to the arbitration provisions of this
Formation Agreement.
IX.5 Indemnities by the Company. Subject to the indemnities of
FirstEnergy and Range set forth in this Article IX, the parties agree that the
Company shall assume all obligations and liabilities that are attributable to
the ownership and/or operation of Appalachian Business (including the Included
Range Assets and the Included FirstEnergy Assets) and that they shall cause the
Company to defend, indemnify and hold harmless each of the FirstEnergy Indemnity
Parties and the Range Indemnity Parties from and against and in respect of any
and all Range Losses and FirstEnergy Losses which may be incurred by a
FirstEnergy Indemnity Party or Range Indemnity Party (as applicable) and which
relates to or results from the ownership or operation of the Appalachian
Business, the Included FirstEnergy Assets or the Included Range Assets from and
after the Closing Date. For purposes of this Section 9.5, solely with respect to
Gas Transport, the "Closing Date" shall be deemed to be the effective date of
contribution of Gas Transport to the Company.
IX.6 Disregard of Materiality Qualifiers. For purposes of the
indemnification provisions of Articles VIII and IX, in determining whether there
has occurred a breach of a representation or warranty of Range or FirstEnergy
contained in or made pursuant to this Agreement, as well as the amount of any
FirstEnergy Losses or Range Losses resulting therefrom, the provisions of
Articles III and IV that are qualified by a Material Adverse Effect or other
materiality qualification shall be read and interpreted as if such qualification
was not included therein; provided, however, that this Section 9.6 shall not
cause a party to be deemed in breach of Sections 2.14(a), 2.22(a), 3.14(a) or
3.22(a), as the case may be, for the failure to disclose agreements which do not
exceed the dollar or materiality qualifications set forth in such sections.
IX.7 Disclaimer of Representations and Warranties. NOTWITHSTANDING
ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER PROVISION OF THIS FORMATION
AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT NEITHER PARTY
HERETO IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE, WITH RESPECT TO THE RANGE APPALACHIAN BUSINESS AND
INCLUDED RANGE ASSETS OR THE FIRSTENERGY APPALACHIAN BUSINESS OR INCLUDED
FIRSTENERGY ASSETS, AS APPLICABLE, BEYOND THOSE REPRESENTATIONS OR WARRANTIES
EXPRESSLY GIVEN IN THIS AGREEMENT, AND, SUBJECT TO SUCH EXPRESS REPRESENTATIONS
AND WARRANTIES, IT IS UNDERSTOOD THAT THE COMPANY TAKES THE ASSETS AS IS AND
WHERE IS. WITHOUT LIMITING THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE,
EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES MADE BY THE PARTIES HEREOF
IN THIS FORMATION AGREEMENT, AND EXCEPT FOR ALL FRAUDULENT MATTERS BY EITHER
PARTY, EACH PARTY HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE, RELATING
TO (A) THE CONDITION OF THE INCLUDED RANGE ASSETS OR INCLUDED FIRSTENERGY
ASSETS, AS APPLICABLE (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS) OR (B) ANY INFRINGEMENT BY THE
OWNERS OF THE INCLUDED RANGE ASSETS OR INCLUDED FIRSTENERGY ASSETS, AS
APPLICABLE, OR ANY OF THEIR RESPECTIVE AFFILIATES, OF ANY PATENT, LICENSE OR
PROPRIETARY RIGHT OF ANY THIRD PARTY, IT BEING THE INTENTION OF THE PARTIES
HERETO THAT EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES MADE HEREIN BY
SUCH PARTIES THE INCLUDED RANGE
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ASSETS AND THE INCLUDED FIRSTENERGY ASSETS ARE TO BE ACCEPTED IN THEIR PRESENT
CONDITION AND STATE OF REPAIR.
IX.8 Damages. NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN
ANY OTHER PROVISION OF THIS FORMATION AGREEMENT, THE PARTIES HERETO AGREE THAT
THE RECOVERY (EITHER DIRECTLY OR INDIRECTLY) BY EITHER PARTY HERETO, THE COMPANY
OR ANY OF THE PARTIES' AFFILIATES OF ANY DAMAGES SUFFERED OR INCURRED BY ANY OF
THEM AS A RESULT OF ANY BREACH BY A PARTY OF ANY OF ITS REPRESENTATIONS,
WARRANTIES, COVENANTS OR AGREEMENTS UNDER THIS FORMATION AGREEMENT SHALL BE
LIMITED TO THE ACTUAL DAMAGES SUFFERED OR INCURRED BY THE NON-BREACHING PARTY OR
ITS AFFILIATES AS A RESULT OF THE BREACH BY THE BREACHING PARTY OF ITS
REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS HEREUNDER AND IN NO EVENT
SHALL THE BREACHING PARTY BE LIABLE TO THE NON-BREACHING PARTY OR ITS AFFILIATES
FOR ANY INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES SUFFERED OR
INCURRED BY THE NON-BREACHING PARTY OR ITS AFFILIATES AS A RESULT OF THE BREACH
BY THE BREACHING PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES, COVENANTS OR
AGREEMENTS HEREUNDER.
ARTICLE X
TERMINATION
X.1 Termination.
(a) This Formation Agreement may be terminated at any
time prior to the Closing Date:
(i) by mutual written consent of the parties
hereto; or
(ii) by either FirstEnergy or Range:
(A) if any court of competent
jurisdiction or any Governmental Authority shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the transactions contemplated hereby;
(B) if the transactions
contemplated hereby shall not have been consummated on or before October 31,
1999, unless the failure to consummate the transactions contemplated hereby is
the result of a material breach of this Formation Agreement by the party seeking
to terminate this Formation Agreement; or
(iii) by FirstEnergy, if Range has
negligently or wilfully failed to perform in any material respect any of its
covenants, agreements or obligations under this Formation Agreement; or
(iv) by Range, if FirstEnergy has
negligently or wilfully failed to perform in any material respect any of its
covenants, agreements or obligations under this Formation Agreement.
(b) In the event of termination of this Formation
Agreement as provided in Section 10.1(a), this Formation Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of FirstEnergy, any FirstEnergy Participating Entity or Range or any
Range Participating Entity, other than (i) the provisions of Sections 6.5
(expenses), 11.1(arbitration) and 11.15 (governing law) and (ii) such
termination shall not relieve any party hereto for any breach of this Formation
Agreement prior to such termination by a party of any of its representations or
warranties or any of its covenants, agreements or obligations set forth in this
Formation Agreement. Each party's right of termination under Section 10.1 is in
addition to any
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other rights it may have under this Formation Agreement or otherwise, and the
exercise of a right of termination will not be an election of remedies.
ARTICLE XI
CONSTRUCTION AND MISCELLANEOUS
------------------------------
XI.1 Dispute Resolution and Arbitration.
XI.1.1 Dispute Resolution and Arbitration.
(a) In the event of any controversy or claim between
the parties hereto or their respective Affiliates, whether based in contract,
tort or otherwise, arising out of or relating to any Transaction Document
(excluding, however, any Transaction Document containing its own arbitration
provision) or the scope, breach, termination or validity of any Transaction
Document (a "Claim"), the parties involved in such Claim shall promptly seek to
resolve any such Claim by negotiations between senior executives of such parties
who have authority to settle the Claim. When a party to a Transaction Document
believes there is a Claim thereunder, that party will give all other parties to
such Transaction Document written notice of the Claim. Within 30 days after
receipt of such notice, the receiving parties shall submit to all other parties
thereto a written response. Both the notice and response shall include (A) a
statement of each party's position and a summary of the evidence and arguments
supporting its position, and (B) the name, title, fax number and telephone
number of the executive who will represent that party. In the event the Claim
involves a claim arising out of the actions of any Person not a signatory to the
relevant Transaction Document, the receiving parties shall have such additional
time as necessary, not to exceed an additional 60 days, to investigate the Claim
before submitting a written response. The executives shall meet at a mutually
acceptable time and place within 15 days after the date of the response and
thereafter as often as they reasonably deem necessary to exchange relevant
information and to attempt to resolve the Claim. If one of the executives
intends to be accompanied at a meeting by an attorney, the other executive shall
be given at least five Business Days' notice of such intention and may also be
accompanied by an attorney. All negotiations and communications pursuant to this
Section 11.1.1 shall be treated and maintained by such parties as confidential
information and shall be treated as compromise and settlement negotiations for
the purposes of the federal rules of evidence and state rules of evidence.
(b) If the Claim has not been resolved within 60 days
after the date of the response given pursuant to Section 11.1.1(a) above, or
such additional time, if any, that the parties mutually agree to in writing, or
if a party receiving such notice denies the applicability of the provisions of
Section 11.1.1(a) above or otherwise refuses to participate under the provisions
of Section 11.1.1(a) above, any party may initiate binding arbitration pursuant
to the provisions of Section 11.1.1(c) below.
(c) Any Claims not settled pursuant to the foregoing
provisions shall be submitted to binding arbitration in accordance with the
following provisions.
(i) The party desiring to initiate
arbitration in connection with any Claim shall notify all other parties in
writing, which notice shall demand arbitration, and include a statement of the
matter in controversy.
(ii) Within 15 days after receipt of such
demand, the receiving parties and the sending party shall attempt to jointly
agree on three arbitrators from the panel made available by the American
Arbitration Association. If the parties are unable to so agree within such
period, such arbitrators shall be appointed, upon request of the party demanding
arbitration, by the Chief U.S. District Court Judge for the Northern District of
Ohio or such other person designated by such judge. In the event the judge
declines to appoint such arbitrators, appointment shall be made, upon
application of the party demanding arbitration, pursuant to the Commercial
Arbitration Rules of the American Arbitration Association.
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(iii) The parties to the Transaction
Documents hereby request and consent to the three arbitrators conducting a
hearing in Cleveland, Ohio, no later than 60 days following their selection or
30 days after all prehearing discovery has been completed, whichever is later,
at which the parties to the relevant Transaction Documents shall present such
evidence and witnesses as they may choose, with or without counsel.
(iv) Arbitration shall be conducted in
accordance with the Commercial Arbitration Rules and procedures of the American
Arbitration Association.
(v) The federal rules of civil procedure, as
modified or supplemented by the local rules of civil procedure for the U.S.
District Court, Northern District of Ohio, shall apply in the arbitration. The
parties to the relevant Transaction Documents shall make their witnesses
available in a timely manner for discovery pursuant to such rules. If a party
fails to comply with this discovery agreement within the time established by the
arbitrators, after resolving any discovery disputes, the arbitrators may take
such failure to comply into consideration in reaching their decision. All
discovery disputes shall be resolved by the arbitrators pursuant to the
procedures set forth in the federal rules of civil procedure. Discovery shall be
limited to a 60-day period.
(vi) Adherence to formal rules of evidence
shall not be required. The arbitrators shall consider any evidence and testimony
that they determine to be relevant.
(vii) The parties to the Transaction
Documents hereby request that the arbitrators render their decision within 30
calendar days following conclusion of the hearing.
(viii) Any decision by a majority of the
arbitration panel shall be set forth in a written opinion thereof which shall
set forth the reasons for such decision and shall be final, binding and
non-appealable. Any such decision may be filed in any court of competent
jurisdiction and may be enforced by any party to the relevant Transaction
Documents as a final judgment in such court. There shall be no grounds for
appeal of any arbitration award hereunder.
(ix) The defenses of statute of limitations
and laches shall be tolled with respect to a Claim of which a party to the
relevant Transaction Documents gives the other parties thereto written notice,
from the date of notice as provided in Section 11.1.1(a) above until such time
as the Claim has been resolved pursuant to Section 11.1.1(a) or an arbitration
award has been entered pursuant to this Section 11.1.1(c).
(x) The arbitrators shall have no authority
to award special, exemplary or consequential damages.
XI.1.2 Choice of Forum. If, despite the agreement of the
parties to the Transaction Documents to submit any Claims to binding
arbitration, there are any court proceedings arising out of or relating to any
Transaction Document or the transactions contemplated hereby, such proceedings
shall be brought and tried exclusively in the federal or state courts situated
in Cuyahoga County, Ohio. THE PARTIES TO THE TRANSACTION DOCUMENTS HEREBY WAIVE
IRREVOCABLY ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY.
XI.2 Notices. All notices given under this Formation Agreement shall
be in writing and shall be addressed to the parties at their respective
addresses set forth below:
(a) If to FirstEnergy, to:
FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Attn: Mark Clark
With a copy to:
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FirstEnergy Corp.
76 South Main Street
Akron, Ohio 44308
Attn: David L. Feltner, Esq.
and
Brouse McDowell
500 First National Tower
Akron, OH 44308
Attn: Robert P. Reffner, Esq.
(b) If to Range, to:
Range Resources Corporation
125 State Route 43
Hartville, OH 44632
Attn: John H. Pinkerton
With a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
Houston, TX 77002-6760
Attn: Robin S. Fredrickson
Either party may change its address for purposes of this Formation Agreement by
giving the other party written notice thereof. Notices sent by registered or
certified mail, postage prepaid, return receipt requested, shall be deemed to
have been given two Business Days after being mailed, and notices sent by
overnight courier shall be deemed to have been given when received, and
otherwise notices shall be deemed to have been given when received.
XI.3 Binding Effect. Except as may be otherwise provided herein, this
Formation Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns.
XI.4 Headings; Language. The headings in this Formation Agreement are
intended solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Formation Agreement. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Formation Agreement. All references to "Schedule" or "Schedules" refer to the
Schedule or Schedules attached to this Formation Agreement. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
XI.5 Exhibits and Schedules. The Exhibits and Schedules referred to in
this Formation Agreement shall be deemed to be a part of this Formation
Agreement.
XI.6 Counterparts. This Formation Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same document.
XI.7 No Waiver of Rights. The rights and remedies of the parties to
this Formation Agreement are cumulative and not alternative. None of the
conditions or provisions of this Formation Agreement shall be held to have been
waived by any act or Knowledge on the part of either party, except by an
instrument in writing signed by an authorized representative of such party.
Neither the failure nor delay by either party in the exercise of any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or
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right preclude other or further exercise thereof or of any other right or power.
No waiver by either party of any breach hereof shall be deemed a waiver of any
preceding, continuing or succeeding breach of the same or any other term hereof.
XI.8 Pronouns. The use of a particular pronoun herein shall not be
restrictive as to gender or number but shall be interpreted in all cases as the
context may require.
XI.9 Time Periods. Unless otherwise specified herein, any action
required hereunder to be taken within a certain number of days shall be taken
within that number of calendar days; provided, however, that if the last day for
taking such action falls on a weekend or a holiday, the period during which such
action may be taken shall be automatically extended to the next Business Day.
XI.10 Modification or Amendment. No supplement, modification or
amendment of this Formation Agreement shall be binding unless made in a written
instrument which is signed by all of the parties and which specifically refers
to this Formation Agreement.
XI.11 Entire Agreement. This Formation Agreement (including all
exhibits and schedules and Annex I) and the agreements and documents referred to
in this Formation Agreement or delivered hereunder and the Confidentiality
Agreement dated December 22, 1998, between Range and FirstEnergy are the
exclusive statement of the agreement among the parties and their Affiliates
concerning the subject matter hereof. All negotiations among the parties and
their Affiliates are merged into this Formation Agreement, and there are no
representations, warranties, covenants, understandings, or agreements, oral or
otherwise, in relation thereto among the parties or their Affiliates other than
those incorporated herein and to be delivered hereunder.
XI.12 No Assignment. Neither this Formation Agreement nor any interest
herein may be assigned, or any obligation delegated, by either party hereto
without the prior written consent of the other party except as expressly
provided in this Formation Agreement or to an Affiliate of a party.
XI.13 Severability. If any one or more of the provisions contained in
this Formation Agreement or in any document executed in connection herewith
shall be invalid, illegal or unenforceable in any respect under any applicable
law, the validity, legality, and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired, provided,
however, that in such case the parties shall use their best efforts to achieve
the purpose of the invalid provision.
XI.14 Construction. This Formation Agreement shall be interpreted in
accordance with the commonly understood meaning of the words and phrases, and it
and the performance of the parties hereto shall be construed and governed
according to the laws of the State of Delaware, without reference to conflicts
of law principles. No provision of this Formation Agreement shall be construed
in favor of or against any party on the ground that such party or its counsel
drafted the provision.
INTENDING TO BE LEGALLY BOUND, the parties hereto have caused this
Formation Agreement to be duly executed as of the date and year first above
written.
FIRSTENERGY CORP. ("FirstEnergy")
By: ________________________________
(Title)
RANGE RESOURCES CORPORATION ("Range")
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By: ________________________________
(Title)
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ANNEX I
Glossary of Terms
As used in the Formation Agreement, unless specified to the contrary in
such agreement, the terms set forth below shall (i) be used with the meanings
assigned below, (ii) apply equally to both the singular and plural forms of such
terms, and (iii) with respect to any such term that is a pronoun, whenever the
context may require, include the corresponding masculine, feminine and neuter
forms. Accounting terms used in the Formation Agreement and not otherwise
defined herein shall have the meanings attributed to them under GAAP.
Definitions. When used in this Agreement, the following terms in all of their
tenses and cases shall have the meanings assigned to them below or elsewhere in
this Agreement as indicated below:
"Act" means the Delaware Revised Limited Liability Company Act, as the
same may be amended from time to time.
"Administrative Services and Lease Agreement" shall have the meaning
set forth in Section 1.1.2(b).
"Affiliate" of any Person means any Person directly or indirectly
Controlling, Controlled by, or under common Control with, such Person and any
officer, director or Controlling Person of such Person, excluding (in any case)
the Company.
"Allocated Value" shall mean, with respect to the FirstEnergy PUDs and
the Range PUDs, the value identified for each such property on Schedule 6.9(a)
and Schedule 6.9(b), respectively.
"Appalachian Basin Area" shall mean the States of Ohio, Pennsylvania,
New York, West Virginia, Michigan, Illinois, Indiana, Virginia, Tennessee and
Maryland.
"Appalachian Business" shall mean the FirstEnergy Appalachian Business
and the Range Appalachian Business.
"Assumed Debt" shall have the meaning set forth in Section 1.1.9.
"Books and Records" means all books and records of any Person relating
to such Person's business and properties, including (i) all books and records
relating to the purchase of materials and supplies, sales of products, dealings
with customers, invoices, suppliers' lists and personnel records, (ii) all
contracts, reports, opinions, maps and other documents affecting the title to or
the value of its properties, (iii) Tax returns, and (iv) all financial and
operating data, files and other information with respect to its business and
properties.
"Buffalo Oilfield" shall mean Buffalo Oilfield Services, Inc., an Ohio
corporation.
"Business Day" shall mean Monday through Friday, except for a legal or
bank holiday in the States of Ohio or Texas.
"Claim" shall have the meaning set forth in Section 11.1.1(a).
"Claim Notice" shall have the meaning set forth in Section 9.4(a).
"Closing Date" or "Closing" shall have the meaning set forth in Section
1.1.6.
"Code" shall mean the Internal Revenue Code on 1986, as amended from
time to time.
"Company" shall have the meaning set forth in the recitals and from and
after the Closing shall be the governed by the LLC Agreement.
ANNEX I - Page 1
<PAGE> 60
"Control" shall mean the possession, directly or indirectly, through
one or more intermediaries, of either of the following:
(a) (i) in the case of a corporation, more than 50% of the
outstanding voting securities thereof; (ii) in the case of a limited
liability company, partnership, limited partnership or venture, the
right to more than 50% of the distributions therefrom (including
liquidating distributions); (iii) in the case of a trust or estate,
including a business trust, more than 50% of the beneficial interest
therein; and (iv) in the case of any other entity, more than 50% of the
economic or beneficial interest therein; or
(b) in the case of any entity, the power or authority, through
ownership of voting securities, by contract or otherwise, to exercise a
controlling influence over the management of the entity.
"Customary Post-Closing Consents" shall have the meaning set forth in
Section 2.20(a)(vii).
"Defensible Title" shall have the meaning given in Section 2.20, with
respect to the Range Oil and Gas Interests and Section 3.20, with respect to the
FirstEnergy Oil and Gas Interests.
"Election Period" shall have the meaning set forth in Section 9.4(a).
"Environment" shall mean soil, surface waters, groundwaters, stream
sediments, ambient air and any other environmental medium.
"Environmental Compliance Costs" shall mean all costs paid by the
Company to non-affiliated third parties in connection with remedying (but not
investigating) the Environmental Compliance Matters (including costs of fines,
penalties and other third party costs).
"Environmental Compliance Matters" shall mean FirstEnergy Environmental
Compliance Matters and Range Environmental Compliance Matters.
"Environmental Law" shall mean any national, regional or local
environmental or health and safety-related Law (including common Law), existing
as of the date hereof.
"Environmental Matters" shall mean those matters covered by or
described in Section 2.12 for Range, and Section 3.12 for FirstEnergy.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Excluded FirstEnergy Assets" shall mean the assets and properties
described in Exhibit G hereto; provided, however, that any property described on
Exhibit G comprising an Other Facility (as defined in the Administrative
Services Agreement) shall become an Included FirstEnergy Asset for all purposes
under this Agreement if and when such Other Facility is contributed to the
Company pursuant to the terms of the Administrative Services and Lease Agreement
effective upon the date of such contribution.
"Excluded FirstEnergy Liabilities" shall mean:
(a) Any Liability (i) relating to the Excluded FirstEnergy Assets, (ii)
relating to the FirstEnergy Existing Litigation, (iii) on account of the
employment, failure to employ or termination of employment, including
constructive termination, by any FirstEnergy Stock Party of any individual,
including an employee of a FirstEnergy Stock Party, and (iv) relating to the
FirstEnergy Plans or FirstEnergy Benefit Programs and Agreements and all other
Liabilities under ERISA or the Code in connection with any employee benefit plan
as defined in Section 3(3) of ERISA or any other employee benefit plan,
agreement or arrangement, maintained, sponsored by or contributed to by any
corporation, trade, business or entity under common control with FirstEnergy
within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section
4001 of ERISA;
ANNEX I - Page 2
<PAGE> 61
(b) Any Liability of or relating to the business, assets or operations
of any FirstEnergy Stock Party relating to any FirstEnergy Non-Appalachian
Business;
(c) The legal, accounting and investment banking fees and expenses
incurred by FirstEnergy or its Subsidiaries or the FirstEnergy Appalachian
Business relating to the formation of the Company and the other transactions
contemplated by the Formation Agreement; and
(d) Any obligation under any capital lease, sale lease back arrangement
or note, bond or other obligation for borrowed money to which any FirstEnergy
Stock Party or the FirstEnergy Appalachian Business is subject.
All references to the FirstEnergy Appalachian Business or any FirstEnergy Stock
Party contained in this definition of "Excluded FirstEnergy Liabilities" include
all predecessors in interest or title to the FirstEnergy Appalachian Business or
any FirstEnergy Stock Party.
"Excluded Range Assets" shall mean the assets and properties described
in Exhibit H hereto; provided, however, that any property described on Exhibit H
comprising an Other Facility (as defined in the Administrative Services
Agreement) shall become an Included Range Asset for all purposes under this
Agreement if and when such Other Facility is contributed to the Company pursuant
to the terms of the Administrative Services and Lease Agreement effective upon
the date of such contribution.
"Excluded Range Liabilities" shall mean:
(a) Any Liability (i) relating to the Excluded Range Assets,
(ii) relating to the Range Existing Litigation, (iii) on account of the
employment, failure to employ or termination of employment, including
constructive termination, by any Range Stock Party of any individual, including
an employee of a Range Stock Party, and (iv) relating to the Range Plans or
Range Benefit Programs and Agreements and all other Liabilities under ERISA or
the Code in connection with any employee benefit plan as defined in Section 3(3)
of ERISA or any other employee benefit plan, agreement or arrangement,
maintained, sponsored by or contributed to by any corporation, trade, business
or entity under common control with Range within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001 of ERISA;
(b) Any Liability of or relating to the business, assets or
operations of a Range Stock Party relating to any Non-Appalachian Business;
(c) The legal, accounting and investment banking fees and
expenses incurred by Range or its Subsidiaries or the Range Appalachian Business
relating to the formation of the Company and the other transactions contemplated
by the Formation Agreement; and
(d) Any obligation under any capital lease, sale lease back
arrangement or note, bond or other obligation for borrowed money to which any
Range Stock Party or the Range Appalachian Business is subject, excluding the
Assumed Debt.
All references to the Range Appalachian Business or any Range Stock Party
contained in this definition of "Excluded Range Liabilities" include all
predecessors in interest or title to the Range Appalachian Business or any Range
Stock Party.
"FFE Assets" shall mean the furniture, fixtures, equipment, and
computer systems described in Schedule 1.1.4(e).
"FirstEnergy Appalachian Business" shall have the meaning set forth in
the recitals.
"FirstEnergy Appalachian Employees" shall have the meaning set forth in
Section 3.6(b).
ANNEX I - Page 3
<PAGE> 62
"FirstEnergy Basket Amount" shall have the meaning set forth in Section
9.3(b).
"FirstEnergy Benefit Programs or Agreements" shall have the meaning set
forth in Section 3.9(a)(ii).
"FirstEnergy Classified Property" shall have the meaning set forth in
Section 3.20.
"FirstEnergy Commonly Controlled Entity" shall have the meaning set
forth in Section 3.9(e).
"FirstEnergy Environmental Compliance Matters" shall have the meaning
set forth in Section 6.8(b).
"FirstEnergy Existing Litigation" shall have the meaning set forth in
Section 3.8.
"FirstEnergy Indemnity Parties" shall have the meaning set forth in
Section 9.3(a).
"FirstEnergy Leasehold Interests" shall have the meaning set forth in
Section 3.23(a).
"FirstEnergy Losses" shall have the meaning set forth in Section
9.2(a).
"FirstEnergy Material Contracts" shall have the meaning set forth in
Section 3.14(a).
"FirstEnergy Non-Appalachian Business" shall mean the business, assets
or operations of FirstEnergy and its Subsidiaries, other than the FirstEnergy
Appalachian Business.
"FirstEnergy Oil and Gas Contracts" shall have the meaning set forth in
Section 3.22(b).
"FirstEnergy Oil and Gas Interests" shall have the meaning set forth in
Section 3.23(a).
"FirstEnergy Participating Entities" shall mean Marbel Energy, Marbel
HoldCo, NOOCI, J R Operating, MB Operating, Gas Transport, and Ohio Intrastate,
and prior to the consummation of the transactions described in Section 5.2
hereof, JR Nominee Corp., Natural Gas Brokerage, and JR Nominee Corp.-II.
"FirstEnergy Permitted Encumbrances" shall have the meaning set forth
in Section 3.20(a).
"FirstEnergy Plans" shall have the meaning set forth in Section
3.9(a)(i).
"FirstEnergy PUD" shall have the meaning set forth in Section 6.9.1.
"FirstEnergy Reserve Report" shall have the meaning set forth in
Section 3.23(a).
"FirstEnergy Stock Parties" shall mean J R Operating, MB Operating, Gas
Transport, and Ohio Intrastate, and prior to the consummation of the
transactions described in Section 5.2 hereof, J R Nominee Corp., Natural Gas
Brokerage, and J R Nominee Corp.-II.
"Formation Agreement" shall mean this Formation Agreement, as the same
may be amended, modified or supplemented from time to time.
"GAAP" means generally accepted accounting principles.
"Gas Transport" shall mean Gas Transport, Inc., an Ohio corporation.
"Governmental Authority" means any federal, state, regional or local
authority, agency, body, court or instrumentality, regulatory or otherwise,
which, in whole or in part, was formed by or operates under the auspices of any
federal, state, regional or local government.
ANNEX I - Page 4
<PAGE> 63
"HSR Act" shall have the meaning set forth in Section 6.3(a).
"Hydrocarbons" shall have the meaning set forth in Section 2.23(a) with
respect to the Range Appalachian Business and Section 3.23(a) with respect to
the FirstEnergy Appalachian Business.
"Included FirstEnergy Assets" shall mean all of the respective real and
personal property of the FirstEnergy Stock Parties, including (without
limitation) Suspense Funds relating to the FirstEnergy Appalachian Business, but
excluding the Excluded FirstEnergy Assets.
"Included Range Assets" shall mean all the respective real and personal
property of the Range Stock Parties, the FFE Assets, and the Range Michigan
Assets, including (without limitation) Suspense Funds relating to the Range
Appalachian Business, but excluding the Excluded Range Assets.
"IDC Agreement" shall mean the agreement described in Section 1.1.2(e).
"Indebtedness" of a Person shall mean any (a) indebtedness or liability
for borrowed money; (b) obligations evidenced by bonds, debentures, notes or
other similar instruments; (c) obligations for the deferred purchase price of
property or services (including trade obligations); (d) obligations under
letters of credit; (e) obligations under acceptance facilities; (f) guaranties,
endorsements (other than for collection or deposit in the ordinary course of
business) and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person, or otherwise to assure a
creditor against loss; (g) obligations under any lease which have been or should
be capitalized under GAAP; and (h) obligations secured by any mortgage, deed of
trust or security instrument, whether or not the obligations have been assumed.
"Indemnity Notice" shall have the meaning set forth in Section 9.4(e).
"Indemnified Party" shall have the meaning set forth in Section 9.4(a).
"Indemnifying Party" shall have the meaning set forth in Section
9.4(a).
"Intellectual Property" shall have the meaning set forth in Section
2.16.
"Initial FirstEnergy Members" shall mean Marbel Energy, FirstEnergy,
and NOOCI.
"Initial Range Members" shall mean Range HoldCo, Range Production and
Range Energy Ventures.
"J R Operating" shall mean J R Operating Co., Inc., an Ohio
corporation.
"Knowledge" with respect to Range, shall mean the knowledge of: Thomas
J. Edelman, Michael V. Ronca, Mark Butta, Thomas W. Stoelk, Steven L. Grose,
Jeffery A. Bynum, John H. Pinkerton, and Mark Acree, and with respect to
FirstEnergy, shall mean the knowledge of: Kathryn W. Dindo, Lawrence P. Haren,
Mark T. Clark, Dean K. Cobbs, Benjamin H. Thomas, Jonathan G. Mitchell, Thomas
G. Booth and Richard C. Sponaugle. An individual will be deemed to have
Knowledge of a particular fact or matter if a reasonable business person in such
position would be aware of such fact or matter in the ordinary course of
business.
"Law" shall mean any national, regional or local law, statute,
regulation, decree, ordinance, rule or order, or arbitration award whether
existing previously or as of the date hereof.
"Liabilities" means responsibilities, obligations, duties, commitments,
claims and liabilities of any and every kind, whether known or unknown, accrued,
absolute, contingent or otherwise.
"Lien" means any lien, charge, covenant, condition, easement, adverse
claim, demand, encumbrance, limitation, security interest, option, pledge or any
other title defect or restriction of any kind.
ANNEX I - Page 5
<PAGE> 64
"LLC Agreement" shall mean the Amended and Restated Limited Liability
Company Agreement of the Company dated as of the Closing Date between Range
HoldCo and Marbel HoldCo, in the form attached hereto as Exhibit I.
"Marbel Energy" shall mean Marbel Energy Corporation, an Ohio
corporation.
"Marbel HoldCo" shall mean Marbel HoldCo, Inc., an Ohio corporation.
"Master Gas Purchase Agreement" shall mean the agreement described in
Section 1.1.2(c).
"Material Adverse Effect" shall mean, when used in connection with any
Person, the Range Appalachian Business or the FirstEnergy Appalachian Business,
any change or effect (or any development that, insofar as can reasonably be
foreseen, is likely to result in any change or effect) that is materially
adverse to the business, properties, assets, condition (financial or otherwise)
or results of operations of that Person and its Subsidiaries, taken as a whole,
or of the Range Appalachian Business or the FirstEnergy Appalachian Business, as
the case may be; provided, however, a Material Adverse Effect or material
adverse change with respect to any Person or the Range Appalachian Business or
the FirstEnergy Appalachian Business shall not include (i) any effect or change
relating to or affecting the oil and gas industry as a whole, (ii) changes in
national or international economic conditions or industry conditions generally,
(iii) changes, or possible changes, in Laws applicable to such Person or the
Range Appalachian Business or the FirstEnergy Appalachian Business, as the case
may be, or (iv) the loss of employees, customers or suppliers thereby as a
direct or indirect consequence of any announcement or expectation of the
transactions contemplated hereby.
"MB Operating" shall mean MB Operating Co., Inc., an Ohio corporation.
"Members" shall mean Marbel HoldCo and Range HoldCo.
"Membership Interest" shall mean an interest as a member in the
Company.
"NOOCI" shall mean The Northeast Ohio Operating Companies, Inc., an
Ohio corporation.
"Oceana Exploration" shall mean Oceana Exploration Company, L.C., a
Texas limited liability company.
"Officer's Certificates" shall have the meaning set forth in Section
9.1.1.
"Ohio Intrastate" shall mean Ohio Intrastate Gas Transmission Company,
an Ohio corporation.
"PBGC" shall have the meaning set forth in Section 2.9(d).
"Pension Plan" means any employee pension benefit plan within the
meaning of Section 3(2) of ERISA, other than a Multiemployer Plan.
"Permit" shall mean any permit, license, approval, consent or
authorization issued by a Governmental Authority.
"Permitted Liens" shall mean:
(a) any preferential purchase rights, required third party consents to
assignment and similar agreements and obligations not applicable to the
transactions contemplated hereby, or if applicable to the transactions
contemplated hereby, with respect to which prior to the Closing Date (A) waivers
or consents have been obtained from the appropriate Person, or (B) the
applicable period of time for asserting such rights has expired without any
exercise of such rights;
ANNEX I - Page 6
<PAGE> 65
(b) Liens for Taxes or assessments not yet delinquent or, if
delinquent, that are being contested in good faith in the ordinary course of
business;
(c) materialmen's, mechanic's, repairman's, employee's, contractor's,
operator's, and other similar Liens arising in the ordinary course of business
(A) if they have not been filed pursuant to Law, (B) if filed, they have not yet
become due and payable or payment is being withheld as provided by Law or (C) if
their validity is being contested in good faith in the ordinary course of
business by appropriate action;
(d) Customary Post-Closing Consents; and
(e) all rights reserved to or vested in any Governmental Authority to
control or regulate any of the applicable properties or assets in any manner,
and all applicable Laws.
"Person" means any individual, corporation, partnership, association or
any other entity or organization.
"Range Appalachian Business" shall have the meaning set forth in the
recitals.
"Range Appalachian Employees" shall have the meaning set forth in
Section 2.6(b).
"Range Bank Liens" shall mean the liens held by BankOne N.A., as agent
for certain banks on the stock of the Range Stock Parties.
"Range Basket Amount" shall have the meaning set forth in Section
9.2(b).
"Range Benefit Programs or Agreements" shall have the meaning set forth
in Section 2.9(a)(ii).
"Range Classified Property" shall have the meaning set forth in Section
2.20.
"Range Commonly Controlled Entity" shall have the meaning set forth in
Section 2.9(e).
"Range Development" shall mean Range Resources Development Company, a
Delaware corporation.
"Range Energy I" means Range Energy I, Inc., a Delaware corporation.
"Range Energy Ventures" shall mean Range Energy Ventures Corporation, a
Delaware corporation.
"Range Environmental Compliance Matters" shall have the meaning set
forth in Section 6.8(a).
"Range Existing Litigation" shall have the meaning set forth in Section
2.8.
"Range HoldCo" mean Range HoldCo, Inc., a Delaware corporation,
"Range Indemnity Parties" shall have the meaning set forth in Section
9.2(a).
"Range Leasehold Interests" shall have the meaning set forth in Section
2.23(a).
"Range Losses" shall have the meaning set forth in Section 9.3(a).
"Range Material Contracts" shall have the meaning set forth in Section
2.14.
"Range Michigan Assets" shall mean the assets and properties described
in Exhibit J hereto excluding any Excluded Range Assets.
ANNEX I - Page 7
<PAGE> 66
"Range Non-Appalachian Business" shall mean the business, assets or
operations of Range and its Subsidiaries, other than the Range Appalachian
Business.
"Range Oil and Gas Contracts" shall have the meaning set forth in
Section 2.22(b).
"Range Oil and Gas Interests" shall have the meaning set forth in
Section 2.23(a).
"Range Operating" shall mean Range Operating Company, an Ohio
corporation.
"Range Participating Entities" shall mean Range Production, Range
HoldCo, Range Energy Ventures, Range Energy I, Range Operating, Buffalo Oilfield
and Oceana Exploration and prior to the consummation of the actions described in
Section 4.2 hereof, Range Development.
"Range Permitted Encumbrances" shall have the meaning set forth in
Section 2.20(a).
"Range Plans" shall have the meaning set forth in Section 2.9(a)(i).
"Range Production" shall mean Range Production I, L.P., a Delaware
limited partnership.
"Range PUD" shall have the meaning set forth in Section 6.9.2.
"Range Reserve Report" shall have the meaning set forth in Section
2.23(a).
"Range Stock Parties" shall mean Range Operating, Buffalo Oilfield, and
Oceana Exploration and, prior to the consummation of the transactions described
in Section 4.2 hereof, Range Development.
"RCRA" shall mean the Resource Conservation and Recovery Act of 1976,
as amended.
"Regulatory Period" shall have the meaning set forth in Section 5.3.
"Release" shall mean any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
migrating, disposing or dumping into the Environment.
"Retail Gas Contract Assignment" shall mean the assignment described in
Section 1.1.2(f).
"Retail Gas Contracts" shall have the meaning set forth in the
recitals.
"Retail Gas Contracts Consideration" shall mean the amount of
$7,000,000.
"Retail Gas Sales Contracts" shall have the mean set forth in the
recitals.
"Returns" means any and all returns, declarations of estimated tax,
reports, statements and other documents relating to or required to be filed in
respect of Taxes, including information returns or reports with respect to
backup withholding and other payments to third parties.
"Subsidiary" shall mean a corporation, limited partnership, limited
liability company or other entity which is under the Control of a corporation,
limited partnership, limited liability company or other entity.
"Suspense Funds" shall mean the amounts payable to Third Parties but
held in suspense by a Person on account of title discrepancies, unknown
ownership or similar reasons, or as authorized by applicable Law.
"Taxes" means all federal, state, local, foreign or provincial net or
gross income, profits, franchise, unincorporated business, withholding, capital,
general corporate, customs duties, environmental (including taxes under Section
59A of the Code), disability, registration, alternative, add-on, minimum,
estimated, sales, goods and services, use, occupation, property, severance,
production, payroll, employment, excise, recording, ad valorem,
ANNEX I - Page 8
<PAGE> 67
gains, transfer, value-added, unemployment compensation, social security
premium, privilege and any and all other taxes (including interest, additions to
tax and penalties thereon, and interest on such additions to tax and penalties).
"Taxing Authority" means any Governmental Authority having jurisdiction
over the assessment, determination, collection, or other imposition of Tax.
"Tax Indemnified Party" shall have the meaning set forth in Section
8.1.4(a).
"Tax Indemnifying Party" shall have the meaning set forth in Section
8.1.4(a).
"Threat of Release" shall mean a substantial likelihood of a Release
that requires action to prevent or mitigate damage to the Environment that may
result from such Release.
"Third Party Claim" shall have the meaning set forth in Section 9.4(a).
"Threshold Amount" shall have the meaning set forth in Section 9.2(b).
ANNEX I - Page 9
<PAGE> 68
"Transaction Documents" shall mean, collectively, the Formation
Agreement, the LLC Agreement, the Administrative Services and Lease Agreement,
the Master Gas Purchase Agreement, the IDC Agreement and each of the instruments
to be executed and delivered by the parties to the Formation Agreement in
connection with the consummation of the transactions contemplated by the
Formation Agreement.
"WARN" shall have the meaning set forth in Section 2.17.
x
<PAGE> 69
SCHEDULES
- ---------
<TABLE>
<CAPTION>
<S> <C> <C>
1.1.4(e) - FFE Assets
1.1.8 - Contributed/Retained Assets and Liabilities
Range
2.1 - Business as foreign entity
2.2 - Financial Information
2.3 - Ownership in Subsidiaries
2.5 - Exceptions to Approvals
2.6 - Absence of Certain Changes or Events
2.8 - Existing Litigation
2.9 - Employee Benefit Matters
2.10(a), 2.10(b), - Tax Matters
2.10(c), and 2.10(e)
2.12 - Environmental Matters
2.14 - Contracts and other agreements
2.15(a) - Title to Property
2.17 - Labor Matters
2.18 - Insurance
2.20(a) - Exceptions to Defensible Title
2.20(b) - Matters regarding Leasehold Interests
2.22 - Oil and Gas Contracts
2.22.1 - Recent Authorizations
2.22.2 - Specific Lease Terms
2.23(a) - Exceptions to Information for Reserve Report
2.23(b) - List of Oil and Gas Interests included in Reserve Report
2.24 - Exceptions to Oil and Gas Wells, Proceeds and Sales; Equipment
2.25 - Necessary Assets
FirstEnergy
3.1 - Business as Foreign Entity
3.2 - Financial Information
3.3 - Ownership in Subsidiaries
3.5 - Exceptions to Approvals
3.6 - Absence of Certain Changes or Events
3.8 - Existing Litigation
3.9 - Employee Benefit Matters
3.10(a), 3.10(b), - Tax Matters
3.10(c), and 3.10(e)
3.12 - Environmental Matters
3.14 - Material Contracts and Agreements
3.15(a) - Title to Properties
3.17 - Labor Matters
3.18 - Insurance
3.20(a) - Exceptions to Defensible Title
3.20(b) - Matters regarding Leasehold Interests
3.22 - Oil and Gas Contracts
3.22.1 - Recent Authorizations
3.22.2 - Specific Lease Terms
3.23(a) - Exceptions to Information for Reserve Report
3.23(b) - Oil and Gas Interests included in Reserve Report
</TABLE>
xi
<PAGE> 70
<TABLE>
<S> <C> <C>
3.24 - Exceptions to Oil and Gas Wells, Proceeds and Sales; Equipment
3.25 - Necessary Assets
Other
6.6 - [Intentionally omitted.]
6.9(a) - FirstEnergy Additional Leases
6.9(b) - Range Additional Leases
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C> <C>
A - Retail Gas Contracts
B - Administrative Services and Lease Agreement
C - Master Gas Purchase Agreement
D - [Intentionally Omitted]
E - IDC Agreement
F - Retail Gas Contract Assignment
G - Excluded FirstEnergy Assets
H - Excluded Range Assets
I - LLC Agreement
J - Range Michigan Assets
</TABLE>
xii
<PAGE> 1
Exhibit 2.2
NEWS RELEASE
RANGE AND FIRSTENERGY COMPLETE JOINT VENTURE
FORT WORTH, TX, SEPTEMBER 30, 1999...RANGE RESOURCES CORPORATION (NYSE: RRC)
today announced the formation of Great Lakes Energy Partners, L.L.C. with
FirstEnergy Corp. (NYSE: FE). The joint venture creates one of the largest oil
and gas producers in the Appalachian Basin. Range and FirstEnergy each
contributed all of their Appalachian oil and gas properties and associated gas
gathering and transportation systems to Great Lakes, which is owned equally by
the two parties.
The transaction combines Range's drilling and operating strengths with
FirstEnergy's marketing and distribution capabilities. Combining the assets and
operations should allow for cost efficiencies, enhanced productivity and a
stronger position in pursuing further consolidation in the region. Great Lakes
has proved reserves of approximately 450 Bcfe, of which 90 percent is natural
gas, 4,700 miles of gas gathering and transportation lines and a leasehold
position of nearly 1 million gross acres. With over 1,000 proved drilling
locations within existing fields and a reserve life of 18 years, Great Lakes
expects to increase production by active development of existing fields and
exploitation of deeper formations. In addition, Great Lakes intends to pursue
acquisition opportunities within its core area of operations.
Commenting on the announcement, John H. Pinkerton, President and Chief Executive
Officer of Range, noted, "This unique transaction combines the assets and
talents of the contributing companies. With a long-life reserve base, strong
cash flow and an experienced management team, Great Lakes is well positioned to
pursue development and acquisition opportunities in the Appalachian Basin. Great
Lakes extensive gathering and transportation systems, coupled with FirstEnergy's
bundled energy service concept, are expected to provide the ability to fully
integrate the natural gas chain from the wellhead all the way to the end user.
The Appalachia Basin is particularly suited for this strategy and we are
delighted to have aligned ourselves with FirstEnergy, an entrepreneurial leader
in delivering energy products and services in the region."
RANGE RESOURCES CORPORATION is an independent oil and gas company operating in
the Permian, Midcontinent, Gulf Coast and Appalachia regions of the United
States.
This release contains certain forward looking statements that are based on
assumptions the Company believes are reasonable, but which are subject to a wide
range of uncertainties and business risks. Factors that could cause actual
results to differ from those anticipated include commodity prices, levels of
capital expenditures, hydrocarbon production rates, results of exploration and
development drilling, completion of production and gathering facilities in a
timely manner, the market for oil and gas properties and the Company's ability
to complete asset sales and/or strategic alliances on acceptable terms.
Additional factors are discussed in the Company's periodic filings with the
Securities and Exchange Commission, including its Annual Report on Form 10-K for
the year ended December 31, 1998.
<TABLE>
<S> <C> <C> <C>
CONTACTS: Analysts: Rodney Waller, Senior Vice President
Investor Relations: Jennifer Hensley 99-14
(817) 870-2601 www.rangeresources.com
</TABLE>
