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): December 28,
1999
ALLEGHENY ENERGY, INC.
(Exact name of registrant as specified in its charter)
Maryland 1-267 13-5531602
(State or other (Commission File (IRS Employer
jurisdiction of Number)
Identification
incorporation) Number)
10435 Downsville Pike
Hagerstown, MD 21740
(Address of principal executive offices)
Registrant's telephone number,
including area code: (301) 790-3400
<PAGE>
Item 5. Other Events.
On December 20, 1999, Allegeheny Energy, Inc.
(Allegheny) announced that it has entered into a stock
purchase agreement pursuant to which Allegheny intends
to purchase Mountaineer Gas Company, a wholly-owned
subsidiary of Energy Corporation of America (ECA), for
$323 million (which includes the assumption of
approximately $100 million in debt), subject to certain
adjustments. Allegheny anticipates assigning all of
its rights and obligations under the stock purchase
agreement to its wholly-owned subsidiary, Monongahela
Power Company, prior to the closing contemplated by the
stock purchase agreement. A subsidiary of Allegheny
has also executed a gas sale and purchase agreement
pursuant to which such subsidiary intends to purchase
natural gas from ECA beginning on or after July 1,
2001. In addition, Allegheny and ECA have entered into
a five-year participation agreement pursuant to which
ECA may elect to purchase a 10% to 20% interest
in certain gas-related assets and businesses which
Allegheny acquires. The transactions contemplated by
the stock purchase agreement are conditioned upon the
prior receipt of regulatory approvals, including but
not limited to the approval of the Securities and
Exchange Commission pursuant to the Public Utility
Holding Company Act of 1935. The effectiveness of the
participation agreement is conditioned upon the prior
occurrence of the closing contemplated by the stock
purchase agreement and upon receiving required
regulatory approvals prior to any transaction. The
foregoing text is qualified in its entirety by the
press release dated December 20, 1999, the stock
purchase agreement, the gas sale and purchase agreement
and the participation agreement, which are attached as
Exhibits 99.1 through 99.4 respectively and are
incorporated herein by reference.
Item 7 Exhibits
Ex. 99.1 Press release dated December 20, 1999.
Ex. 99.2 Stock Purchase Agreement
Ex. 99.3 Gas Sale and Purchase Agreement
Ex. 99.4 Participation Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Allegheny Energy, Inc.
Dated: December 28, 1999 By: /S/THOMAS K. HENDERSON
Name: Thomas K. Henderson
Title: Vice President
<PAGE>
EXHIBIT INDEX
Item No. 7 Exhibits
Ex. 99.1 Press release dated
December 20, 1999.
Ex. 99.2 Stock Purchase Agreement
Ex. 99.3 Gas Sale and Purchase
Agreement
Ex. 99.4 Participation Agreement
u:\legal]common\8k\ae\12-20-99 Form 8K Press Release.doc
Exhibit 99.1
Contacts for Allegheny Power: Contacts for Energy
Corporation
of America:
Media: Media:
Allen Staggers John Mork
(304) 367-3110 (303) 694-2667
Investors: Investors:
Greg Fries Martin Wade
(301) 665-2713 (212) 778-2805
FOR IMMEDIATE RELEASE
ALLEGHENY ENERGY TO ACQUIRE MOUNTAINEER GAS COMPANY
FOR $323 MILLION
Hagerstown, Md., December 20, 1999 - Allegheny Energy, Inc.
(NYSE: AYE) and Energy Corporation of America (ECA) today
announced that they have signed a definitive agreement under
which Allegheny Energy's delivery business, Allegheny Power, will
acquire Mountaineer Gas Company (MGC), a wholly owned subsidiary
of ECA, for $323 million (which includes the assumption of
approximately $100 million in debt). The combination is expected
to be accounted for as a purchase and is anticipated to be
accretive to Allegheny Energy's earnings in the first full year
of the combination, excluding transaction costs and other costs
related to the transition.
The acquisition of Mountaineer Gas Company--West Virginia's
largest natural gas provider-- will provide Allegheny Energy with
11.7 billion cubic feet of gas storage and 200,000 new natural
gas customers in a region where Allegheny Energy already provides
energy services. This acquisition will grow Allegheny Energy's
service territory to more than 30,000 square miles and its
customer base to 1.6 million customers. Allegheny Energy expects
to manage the Mountaineer Gas operations out of Charleston, West
Virginia.
Alan J. Noia, Chairman, President, and Chief Executive Officer of
Allegheny Energy, said, "We are very excited about today's
announcement. One component of Allegheny Energy's growth
strategy is the expansion of our energy delivery business. While
we will continue to grow our generation and supply assets, we
believe that adding delivery operations increases our customer
base and provides stable cash flow while at the same time
diversifying our asset portfolio. As always, we remain focused
on growing our earnings and providing consistent, attractive
returns to our shareholders."
-more-
<PAGE>
-2-
Mr. Noia continued, "Allegheny Energy is recognized for its low-
cost, reliable service, and customer satisfaction. Mountaineer
Gas has a similar reputation as one of the lowest-cost natural
gas distribution companies in the state. This powerful
combination will deliver increased services to our expanding
customer base while maintaining our reputation for superior
customer service. Allegheny Energy has been an active member of
the West Virginia business community for more than 100 years, and
we welcome Mountaineer Gas employees into our growing family."
John Mork, Chief Executive Officer of ECA, said, "We are
delighted by Allegheny Energy's purchase of Mountaineer Gas.
Allegheny Energy has strong ties to West Virginia and we are
confident that it will use its expertise and resources to provide
the kind of quality service customers have come to expect from
Mountaineer Gas."
As a result of this acquisition, Allegheny Energy expects to
realize cost savings primarily from the integration of
administrative functions. Mountaineer Gas Company's service
territory is contiguous to Allegheny Energy's service territory
and adjoins the service territory of its most recent acquisition,
West Virginia Power.
The completion of the transaction is conditioned upon, among
other things, the approvals of the Public Service Commission of
West Virginia and the Securities and Exchange Commission. The
companies anticipate that regulatory procedures can be completed
in approximately six months.
Goldman, Sachs & Co. acted as financial advisor and Sullivan &
Cromwell acted as legal counsel for Allegheny Energy, Inc.
Prudential Securities acted as financial advisor and Goodwin &
Goodwin acted as legal counsel for ECA.
Allegheny Energy, Inc. is a diversified energy company headquartered
in Hagerstown, Md. The Allegheny Energy family includes Allegheny
Power, which delivers electric energy to about three million people
in parts of Maryland, Ohio, Pennsylvania, Virginia, and West
Virginia; Allegheny Energy Supply Company, LLC, which operates and
markets competitive retail and wholesale electric generation and
operates regulated electric generation for its affiliates; and
Allegheny Ventures, which actively invests in and develops energy-
related and telecommunications projects. For more information, visit
our web site at www.alleghenyenergy.com.
Certain statements above constitute forward-looking statements
with respect to Allegheny Energy, Inc. Such forward-looking
statements involve known and unknown risks, uncertainties, and
other factors that may cause the actual results, performance, or
achievements of Allegheny Energy to be materially different from
any future results, performance, or achievements expressed or
implied by such forward-looking statements. Such factors may
affect Allegheny Energy's operations, markets, products,
services, and prices. Such factors include, among others, the
following: general and economic and business conditions; industry
capacity; changes in technology; changes in political, social,
and economic conditions; regulatory matters; integration of the
operations of Allegheny Energy; regulatory conditions applicable
to the transaction; the loss of any significant customers; and
changes in business strategy or business plans.
# # #
GAS SALE AND PURCHASE AGREEMENT
between,
ENERGY CORPORATION OF AMERICA
and
ALLEGHENY ENERGY SERVICE CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
ARTICLE II VOLUMES AND PRICE 3
ARTICLE III CLOSING AND CONSIDERATION 6
ARTICLE IV POINT(S) OF DELIVERY 8
ARTICLE V TERM 8
ARTICLE VI TERMINATION 8
ARTICLE VII LIMITATION OF LIABILITY/REMEDIES 10
ARTICLE VIII TAXES 11
ARTICLE IX MEASUREMENT 11
ARTICLE X QUALITY 12
ARTICLE XI DELIVERY PRESSURE 12
ARTICLE XII REFUSAL 12
ARTICLE XIII POSSESSION OF GAS AND WARRANTY OF TITLE 13
ARTICLE XIV FORCE MAJEURE 13
ARTICLE XV SUCCESSORS AND ASSIGNS 15
ARTICLE XVI WAIVER OF DEFAULT 15
ARTICLE XVII RULES AND REGULATIONS 15
ARTICLE XVIII GOVERNING LAW 16
ARTICLE XIX COMPLETE AGREEMENT 16
ARTICLE XX HEADINGS 16
ARTICLE XXI NOTICES 16
ii
<PAGE>
GAS SALE AND PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into as of the 20th
day of December, 1999, by and between Energy Corporation of
America, a West Virginia corporation, or its designated
affiliate, (hereinafter referred to as "Seller"), and Allegheny
Energy Service Corporation, a Maryland corporation, (hereinafter
referred to as "Buyer").
WHEREAS, Seller is a natural gas producer and has
available to it, either through its own production or through
contracts with other producers, natural gas in volumes adequate
to meet the volumes requested by Buyer as hereinafter specified;
and
WHEREAS, Buyer wishes to purchase gas and have it
delivered to its operations in West Virginia; and
WHEREAS, Seller is willing to sell and deliver to Buyer
and Buyer desires to purchase from Seller natural gas in the
volumes and at the Contract Price specified in this Agreement.
NOW, THEREFORE, in consideration of the covenants and
agreements herein set forth, Seller and Buyer agree as follows,
to-wit:
ARTICLE I
DEFINITIONS
1.1 The terms "Additional Prepayments" shall mean the First
Additional Prepayment and the Second Additional Prepayment
1.2 The term "Basis Quote" shall mean the quoted difference
between the price for gas at the Henry Hub in Louisiana and the
price quoted for gas at locations where Columbia Gas Transmission
Corporation delivers gas to the "Connecting Party" points set
forth on Schedule "A" for a specified Month.
1.3 The term "Btu" shall mean one (1) British thermal unit.
1.4 The term "Contract Annual Volume" shall mean 3,990,180
Dth.
1
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1.5 The term "Contract Price" shall have the meaning
assigned in Article II.
1.6 The term "Contract Year" shall mean a period of one (1)
year commencing on the Date of First Delivery, as specified
herein, and each succeeding one (1) year period thereafter.
1.7 The term "Date of First Delivery" shall be the date on
which gas is first delivered by the Seller to the Buyer which
date shall be no earlier than July 1, 2001.
1.8 The term "day" shall mean a period of twenty-four (24)
consecutive hours, ending at 10:00 a.m., Charleston, West
Virginia Time.
1.9 The term "Dth" shall mean one MMBtu.
1.10 The term "Event of Default" shall have the meaning
ascribed to it in Article 6.5.
1.11 The term "First Additional Prepayment" shall mean
the first $10 million Prepayment for Volume B Gas provided for in
Article 3.2(i).
1.12 The term "First Delivery Notice" shall mean the
written notice specifying the Date of First Delivery which shall
be sent by the Buyer to the Seller at least sixty days before the
Date of First Delivery; provided that such notice shall not
identify a Date of First Delivery prior to July 1, 2001.
1.13 The term "Force Majeure" shall have the meaning
ascribed to it in Article XIV.
1.14 The term "gas" shall mean natural gas which
conforms to the quality specifications set forth in Article X
hereof.
1.15 The term "Initial Prepayment" shall mean the $10
million payment made by Buyer to Seller at Closing for Volume A
Gas, as described in Article 3.1.
1.16 The term "Interstate Pipeline" shall mean a
natural gas company that is subject to regulation by and has a
tariff on file with and approved by the Federal Energy Regulatory
Commission.
1.17 The term "Letters of Credit" shall mean the two or
more Letters of Credit as described in Article 3.2.
1.18 The term "Mcf" shall mean one thousand (1,000)
cubic feet of gas.
1.19 The term "MMBtu" shall mean one million
(1,000,000) Btu.
2
<PAGE>
1.20 The term "Month" shall mean the period commencing
at 10:00 a.m. Charleston, West Virginia time on the first day of
the calendar month and ending at 10:00 a.m. Charleston, West
Virginia time on the first day of the next calendar month.
1.21 The term "Nationally Recognized Natural Gas
Marketer" shall mean marketing and/or trading companies none of
whom are affiliated with either Buyer or Seller and who transport
at least 1,000,000 Dth per Day in total on Interstate Pipelines
and who certify that they transport at least 2% of their total
transported gas on Columbia Gas Transmission.
1.22 The term "Point(s) of Delivery" shall have the
meaning assigned in Article IV.
1.23 The term "Second Additional Prepayment" shall mean
the second $10 million prepayment for Volume B Gas as provided
for in Article 3.2(ii).
1.24 The term "Transporter" or "Transporting
Pipeline(s)" shall mean any third-party pipeline, gathering line
or system, or local distribution company transporting and/or
delivering gas to the Point(s) of Delivery under this Agreement.
ARTICLE II
VOLUMES AND PRICE
2.1 Commencing on the Date of First Delivery indicated in
the First Delivery Notice, Seller agrees to deliver to the Buyer
at the Point(s) of Delivery the Contract Annual Volume, as
follows: 3,644 Dth per day with respect to Volume A Gas and
7,288 Dth per day with respect to Volume B Gas unless mutually
agreed otherwise.
2.2 (a) Contract Annual Volume. The Contract Annual Volume
is comprised of the following volume designations:
(1) 1,330,060 Dth is designated as the Volume A Gas; and
(2) 2,660,120 Dth is designated as the Volume B Gas.
(b) Nominations. Except as provided in Article 2.1(c)
each day from and after the Date of First Delivery, Buyer is
permitted and Seller shall honor Buyer's nominations to Seller to
deliver (or cause to be delivered) to the Point(s) of Delivery
the gas as follows:
3
<PAGE>
(i) at a minimum, Buyer shall
nominate from Seller and Seller shall deliver
(or cause to be delivered) at the Point(s) of
Delivery no less than 2,500 MMBtu per day of
Volume A Gas;
(ii) at a maximum, Buyer may
nominate from Seller up to 3,644 MMBtu per
day of Volume A Gas and Seller shall, subject
only to Force Majeure, deliver (or cause to
be delivered) Buyer's nominated quantities at
the Point(s) of Delivery;
(iii) at a minimum, Buyer shall
nominate from Seller and Seller shall deliver
(or cause to be delivered) at the Point(s) of
Delivery no less than 5,000 MMBtu per day of
Volume B Gas; and,
(iv) at a maximum, Buyer may
nominate from Seller up to 7,288 MMBtu per
day of Volume B Gas and Seller shall, subject
only to Force Majeure, deliver (or cause to
be delivered) Buyer's nominated quantities at
the Point(s) of Delivery.
(c) Notwithstanding the minimum and maximum volumes
set forth in Article 2.1 (b) (i)-(iv) above, Buyer shall, on or
before November 1st of each Contract Year provide Seller with a
schedule identifying the minimum and maximum daily and monthly
nominations on an operating or market area basis on the Columbia
Gas Transportation Corporation system for the next ensuing months
of December, January and February ("Buyer's Schedule"). Buyer
may revise its nominations during such months, provided however
that any such revised nominations for any operating or market
area specified in Buyer's Schedule shall not be less than the
minimum nor more than the maximum for any day as set forth in
Buyer's Schedule, except as mutually agreed in writing by the
parties.
2.3 The Contract Price for gas delivered hereunder shall be
as follows:
4
<PAGE>
(1) The Contract Price for Volume
A Gas shall be at an Index monthly
variable price which shall be equal to
the settlement prices for the NYMEX Gas
futures contract for deliveries during
each Month of such Contract Year, as
quoted for each such Month in the issues
of The Wall Street Journal published on
the last trading day prior to the
beginning of such Month plus an amount
in cents per Dth equal to the arithmetic
average Basis Quote as received by Buyer
from three (3) Nationally Recognized
Natural Gas Marketers for the
differential between the NYMEX
settlement location at the Henry Hub
Louisiana, and Columbia Gas Transmission
City Gates in West Virginia, which Basis
Quotes are provided to Buyer within the
last four business days prior to the
start of such Month.
(2) The Contract Price for Volume B Gas
shall be at an Index monthly variable
price which shall be equal to the
settlement prices for the NYMEX Gas
futures contract for deliveries during
each Month of such contract year, as
quoted for each such Month in the issues
of The Wall Street Journal published on
the last trading day prior to the
beginning of such Month plus an amount
in cents per Dth equal to the average
Basis Quote as received by Buyer from
three (3) Nationally Recognized Natural
Gas Marketers for the differential
between the NYMEX settlement location at
the Henry Hub Louisiana, and Columbia
Gas Transmission City Gates in West
Virginia, which Basis Quotes are
provided to Buyer within the last four
business days prior to the start of such
Month minus $0.15 (fifteen cents) per
Dth.
5
<PAGE>
2.4 Volume A Gas will be invoiced and credited against the
Initial Prepayment. If Seller elects to obtain the Additional
Prepayments as provided in Article 3.2, then Volume B Gas will be
invoiced and credited against the Additional Prepayments. From
and after Seller's receipt of the Additional Prepayments, the
deliveries of Volume A Gas and Volume B Gas on each day will be
allocated for the purpose of Contract Pricing as follows: the
daily nominated quantities of Volume B Gas will be deemed to have
been delivered in their entirety prior to delivery of any Volume
A Gas quantities. Provided, however, that if there is any
shortage in total deliveries by Seller (as compared to
nominations by Buyer to Seller) the deliveries of Volume A Gas
and Volume B Gas on each day will be allocated for the purpose of
Contract Pricing as follows: the daily nominated quantities of
Volume A Gas will be deemed to have been delivered in their
entirety prior to delivery of any Volume B Gas quantities.
2.5 Unless and until Seller exercises its right to receive
the Additional Prepayments by posting the Letter(s) of Credit as
provided in Article 3.2, Seller shall have no obligation to
deliver the Volume B Gas.
2.6 Seller shall furnish Buyer a statement within fifteen
(15) days after the last day of each month in which gas is
delivered pursuant to this Agreement showing the volumes so
delivered during the preceding Calendar Month and reflecting the
Contract Price due for such deliveries and showing proper credit
of all Initial and Additional Prepayments made by Buyer.
ARTICLE III
CLOSING AND CONSIDERATION
3.1 Upon execution and delivery of this Agreement, the
Buyer shall pay to the Seller in immediately available funds the
sum of Ten Million Dollars ($10,000,000.00) as consideration for
the purchase and delivery of the Volume A Gas over the term of
this Agreement (the "Initial Prepayment").
6
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3.2 At Seller's sole discretion, Seller may, at any time
after execution of this Agreement, upon two (2) business days
written notice to Buyer, require Additional Prepayments from
Buyer by posting a letter or letters of credit as described below
and in a form acceptable to Buyer, and Buyer shall pay to Seller
in immediately available funds, within ten (10) business days of
the posting of such letter or Letters of Credit, the amounts so
designated as Additional Prepayments for the gas to be delivered
pursuant to this Agreement:
(1) Seller may post an irrevocable letter of credit in
the amount of Ten Million Dollars ($10,000,000.00),
at Seller's sole expense and Buyer will prepay Ten
Million Dollars ($10,000,000.00) to Seller (the
"First Additional Prepayment"). At Seller's option,
the First Additional Prepayment may be secured by
two (2) letters of credit in the amount of Five
Million Dollars ($5,000,000) each.
(2) At any time after the making of the First Additional
Prepayment, or simultaneously therewith, Seller may post
an additional Ten Million Dollars ($10,000,000.00)
irrevocable letter of credit, the reasonable cost of which
shall be reimbursed to Seller by Buyer, and Buyer will prepay
an additional Ten Million Dollars ($10,000,000.00) to Seller
(the "Second Additional Prepayment").
The letters of credit referenced in Section 3.2(i) and (ii) above
are sometimes collectively referred to herein as the "Letters of
Credit." The Letters of Credit (or any of them) shall be
proportionately reduced by an amount equal to the Contract Price
for the volumes of gas delivered by Seller to Buyer hereunder, as
such deliveries are made.
7
<PAGE>
ARTICLE IV
POINT(S) OF DELIVERY
4.1 The Point(s) of Delivery for all gas to be delivered
hereunder shall be the point(s) designated as the "Connecting
Party" points within the Columbia Gas Transmission Corporation
operating areas on Schedule A attached hereto. The Point(s) of
Delivery may be changed only by mutual agreement.
ARTICLE V
TERM
5.1 This Agreement shall be effective from the date hereof.
Deliveries of gas shall commence on or after July 1, 2001 and
shall terminate (subject to the provisions of Article VI) when
the aggregate Contract Price with respect to Volume A and Volume
B gas, if any, delivered to Buyer during the term of this
Agreement equals or exceeds the Initial Prepayment and Advance
Prepayments.
ARTICLE VI
TERMINATION
6.1 In the event that the Contract Price, calculated in
accordance with Article 2.2(i) with respect to Volume A Gas
delivered to Buyer during the term of this Agreement equals or
exceeds Ten Million Dollars ($10,000,000.00), Seller's
obligations hereunder with respect to Volume A Gas shall
automatically terminate.
6.2 In the event that the Contract Price, calculated in
accordance with Article 2.2(ii), with respect to Volume B Gas
delivered to Buyer during the term of this Agreement, equals or
exceeds, the total amount of any Additional Prepayments elected
to be received by Seller, Seller's obligations hereunder with
respect to Volume B Gas shall automatically terminate.
6.3 Seller shall have the right, at its sole discretion and
upon fifteen (15) days prior notice, to terminate this Agreement
at any time during the term hereof by paying to Buyer an amount
8
<PAGE>
equal to the difference between the Contract Price for all
volumes delivered to Buyer and credited against the Initial
Prepayment and any Additional Prepayment pursuant to this
Agreement and the original prepayments paid by Buyer to Seller.
6.4 Seller shall have the right to terminate this Agreement
upon the occurrence and continuation for thirty (30) business
days or longer of any default by Buyer in making any payment due
under this Agreement.
6.5 Buyer shall have the right to terminate this Agreement
upon the occurrence and continuation for thirty (30) days or
longer of any of the following specified Events of Default. In
addition, Buyer shall have such rights as Buyer shall have been
granted pursuant to the Letters of Credit referred to in Article
III hereof and the rights specified in Article VII. For purposes
of this Article VI, the following events shall constitute "Events
of Default" by Seller: (i) failure of the Seller to pay any
amount due hereunder within thirty (30) days after the same
becomes due, and (ii) failure of the Seller to supply natural gas
to the Buyer or pay the price of replacement gas as required in
Article VII, each in accordance with the terms of this Agreement,
when due.
6.6 Buyer shall have the right to terminate this Agreement
if Seller is unable to deliver gas in accordance with the
provisions hereof for a period of 60 days as a result of a
continuing event of force majeure.
6.7 If Buyer terminates this Agreement in accordance with
Articles 6.5 and 6.6, Seller shall pay to Buyer, no later than 15
days after the date of termination, an amount equal to the
difference between the Contract Price for all volumes delivered
to Buyer and credited against the Initial Prepayment and any
Additional Prepayment pursuant to this Agreement and the original
prepayments paid by Buyer to Seller.
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ARTICLE VII
LIMITATION OF LIABILITY/ REMEDIES
7.1 If Seller fails to deliver any quantity of gas that it
is required to deliver under this Agreement, Buyer may purchase
replacement gas. When Buyer purchases replacement gas, Buyer
will use commercially reasonable efforts to purchase for delivery
a quantity of gas not to exceed the quantity of gas which Seller
failed to deliver and Buyer shall make such purchases at fair
market prices on a spot basis. Upon such event, Buyer shall
invoice Seller and Seller shall pay Buyer on a monthly basis an
amount equal to the cost of such replacement gas plus any
discounts applicable to such gas as Volume B Gas plus all
transportation costs incurred by Buyer in connection with
purchasing such replacement gas and having it delivered to the
Point(s) of Delivery. Upon payment of the aforesaid amount, said
sums will constitute liquidated damages for Seller's failure to
perform its obligations hereunder and shall be Buyer's sole
remedy for Seller's failure to so perform. In the event Seller
fails to pay such damages within thirty days, Buyer may exercise
its rights under the Letters of Credit.
7.2 If Buyer fails to accept delivery of the Contract
Annual Volume (other than (i) as a result of an event of Force
Majeure, or (ii) as a result of a default or an Event of Default
by Seller hereunder or (iii) as permitted under Article XII),
Buyer shall reimburse Seller for the actual damages, if any,
incurred by Seller as a result of its failure to use the firm
capacity reserved by Seller for the transportation of gas
pursuant to this Agreement, and for all other costs or losses
incurred by Seller as a result of Buyer's failure to accept
delivery of such volumes.
7.3 Other than as expressly provided herein, neither Seller
nor Buyer shall be responsible or liable for any lost profits, or
special, incidental, indirect or consequential damages of any
kind, whether grounded in contract, breach of warranty, or tort
(including, but not limited to, negligence and strict liability)
or arising from any other legal theory.
7.4 THE WARRANTIES SET FORTH IN THIS AGREEMENT ARE
EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER
STATUTORY, EXPRESS OR IMPLIED (INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND
WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.)
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ARTICLE VIII
TAXES
8.1 The Contract Price described in Article II hereof
includes all taxes, duties and inspection fees presently imposed
by any federal, state or local government in respect to or
measured by the gas delivered hereunder, which taxes, duties and
fees shall be paid by Seller insofar as they pertain to Seller's
operations prior to Seller's delivery of gas to Buyer at the
Point(s) of Delivery. Except for state severance taxes,
corporate income taxes, franchise taxes and ad valorem taxes
applicable to Seller, all new taxes, duties and inspection fees,
which may at any time in the future be imposed by federal, state
or local government, in respect to or measured by the gas
delivered hereunder or the delivery, receipt or usage thereof, at
or after the Point(s) of Delivery, shall be paid by Buyer. If
Buyer is entitled to purchase gas free of any tax, fee or charge,
the Buyer shall furnish to Seller proper exemption certificates
to cover such purchases.
ARTICLE IX
MEASUREMENT
9.1 As stated herein, the gas to be sold hereunder shall be
delivered to the Point(s) of Delivery and Seller shall cause the
Transporter, or its duly appointed agents, to read the meter,
furnish, place and remove any and all recording gauge charts,
calculate the deliveries and perform any other service pertaining
to the routine operation of the meter.
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ARTICLE X
QUALITY
10.1 The gas shall be sold and delivered in its natural
state, without the previous extraction of any valuable substance.
The applicable Transporter's rules, guidelines, and policies, as
may be changed from time to time, shall define the quality and
heating value of the gas to be delivered hereunder. Any quality
and heating value standards of Transporter's contracts are hereby
expressly incorporated herein by reference as if completely set
out, and shall be applicable to and binding upon Seller and upon
all natural gas sold by Seller to Buyer. The heating value in
Btus of gas at the Point(s) of Delivery shall not be less than
one thousand (1,000) Btus per standard cubic foot.
ARTICLE XI
DELIVERY PRESSURE
11.1 Seller shall cause Transporter to deliver gas to Buyer
at the varying line pressures available from time to time in
Transporter's pipeline adjoining the Point(s) of Delivery.
ARTICLE XII
REFUSAL
12.1 Buyer, at its option, may refuse to accept delivery of
any natural gas (a) not meeting the quality specifications set
out in Article X, or (b) not meeting the delivery pressure
specifications set out in Article XI. If Buyer notifies Seller
of such refusal, Seller shall promptly use its best efforts to
cause such natural gas to satisfy such specifications, and if
such specifications are not promptly (and in any event within 10
days) satisfied, Seller shall use its best efforts to locate,
purchase and transport, at Seller's expense, replacement natural
gas of a quality at least equal to the natural gas intended to be
delivered hereunder. If Seller is unable to provide replacement
gas under this Article XII, Seller's obligations to provide
replacement gas or pay under Article VII hereof shall apply.
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ARTICLE XIII
POSSESSION OF GAS AND WARRANTY OF TITLE
13.1 Control of Gas. Seller shall be deemed to be the owner
and in control and possession of the gas to be delivered
hereunder until it shall have been physically delivered to Buyer
at the Point(s) of Delivery specified in Article IV above, after
which Buyer shall be deemed to be the owner and in control and
possession thereof.
13.2 Division of Responsibility. Buyer shall have no
responsibility with respect to any gas delivered hereunder until
it is physically delivered to Buyer at the Point(s) of Delivery,
or on account of anything which may be done, happen or arise with
respect to said gas before such delivery; and Seller shall have
no responsibility with respect to said gas after such delivery to
Buyer, or on account of anything which may be done, happen, or
arise with respect to said gas after such delivery.
13.3 Warranty of Title. Seller warrants specifically the
title to the gas delivered to the Buyer hereunder against the
claims of all persons claiming by, through or under the Seller,
and the Seller further warrants the right to sell and deliver
such gas free and clear of all liens, encumbrances and claims
created by the Seller. In addition, Seller agrees that it will
indemnify Buyer and save Buyer harmless from all suits, actions,
debts, accounts, damages, costs, losses and expenses arising from
or out of (i) adverse claims of any or all persons to the gas to
be delivered hereunder, or (ii) any liens, encumbrances, or other
title defects relating to the gas to be delivered hereunder.
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ARTICLE XIV
FORCE MAJEURE
14.1 Neither Seller nor Buyer shall be deemed in breach
hereof for nonperformance hereunder (except nonperformance of any
obligation to make payment of amounts payable hereunder when due)
when such nonperformance is due to any act, omission or
circumstance occasioned by or in consequence of any acts of God,
strikes, lockouts, acts of the public enemy, war, blockades,
insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, storms, floods, washouts, arrests and
restraints of rulers and peoples, civil disturbances, explosions,
breakage or accident to machinery or lines of pipe, the binding
order of any court or governmental authority which has been
resisted in good faith by all reasonable legal means, and any
other cause, whether of the kind herein enumerated or otherwise,
in each case not reasonably within the control of the party
claiming an event of Force Majeure and which, by the exercise of
due diligence, such party is unable to prevent or overcome, in
each case with respect to the Seller, to the extent affecting the
Seller's owned or operated gas reserves or the Seller's ability
to transport its gas to the Buyer. Failure to prevent or settle
any strike or strikes shall not be considered to be a matter
within the control of the party claiming suspension.
14.2 Such causes or contingencies affecting the performance
hereunder by either Seller or Buyer, however, shall not relieve
it of liability in the event of its concurring negligence or in
the event of the failure to use best efforts by the party
claiming Force Majeure to remedy the situation and to remove the
cause in an adequate manner and with all reasonable dispatch, nor
shall causes or contingencies affecting such performance relieve
either party from its other obligations under this Agreement,
even should it cause this Agreement to be extended beyond the
termination date.
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ARTICLE XV
SUCCESSORS AND ASSIGNS
15.1 This Agreement shall extend to and be binding upon the
parties hereto, their successors and assigns. The Seller shall
not assign this Agreement or any of its rights or obligations
hereunder unless it first shall have obtained the consent thereto
in writing of the Buyer, provided, however, that Buyer shall not
unreasonably withhold such consent, and provided further that
Seller may assign its rights under this Agreement to any
affiliate of Seller without Buyer's consent and further, may
mortgage, pledge or assign for financing purposes its right to
receive payments hereunder without Buyer's consent. The Buyer
may not assign its rights hereunder without Seller's consent
which shall not be unreasonably withheld; provided, however, that
in no event shall any such assignment expand the obligations of
Seller hereunder; and provided, further, that the Buyer may
assign its rights and obligations under this Agreement to any
wholly owned subsidiary of Allegheny Energy, Inc. without the
consent of the Seller.
ARTICLE XVI
WAIVER OF DEFAULT
16.1 No waiver by either party of any one or more defaults
by the other in the performance of any provision of this
Agreement shall operate or be construed as a waiver of any future
default or defaults, whether of a like or of a different
character. No single or partial exercise of any right, remedy,
power or privilege hereunder shall in any way preclude any other
or farther exercise thereof or the exercise of any other right,
remedy, power or privilege.
ARTICLE XVII
RULES AND REGULATIONS
17.1 If any valid future laws, orders, rules or regulations
of duly constituted authorities having jurisdiction have the
effect of altering or amending the provisions of this Agreement,
the parties shall continue the performance of this Agreement as
so altered or amended; provided, however, that such alterations
15
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or amendments shall not alter or change the consideration paid by
Buyer to Seller, the term of this agreement, or the volumes of
gas to be delivered hereunder.
ARTICLE XVIII
GOVERNING LAW
18.1 All questions concerning the validity or the meaning of
this Agreement or relating to the rights and obligations of the
parties with respect to performance under this Agreement shall be
construed and resolved under the laws of the State of West
Virginia, except to the extent specifically required by federal
law.
ARTICLE XIX
COMPLETE AGREEMENT
19.1 This document contains the entire agreement between the
parties and supersedes all prior or contradictory discussions or
negotiations, representations or agreements relating to the
subject matter of this Agreement. No changes to this Agreement
shall be made or be binding on either party unless made in
writing and signed by each party to this Agreement.
ARTICLE XX
HEADINGS
20.1 The captions or headings preceding the various parts of
this Agreement are inserted solely for the convenience of the
parties hereto and shall not be considered or given effect in
construing this Agreement, or in connection with the intent,
rights, duties or liabilities of the parties.
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ARTICLE XXI
NOTICES
21.1 Any notice, request, consent, waiver or other
communication required or permitted to be given hereunder shall
be effective only if in writing and shall be deemed sufficiently
given only if delivered in person or sent by facsimile or by
certified or registered mail, postage prepaid, return receipt
requested, addressed as follows:
If to Energy Corporation of America
Energy Corporation of America
Attn: John Mork
4643 S. Ulster
Suite 1100
Denver, CO 30237
With copies to:
Goodwin & Goodwin, LLP
Attn: Thomas R. Goodwin
1500 One Valley Square
P.O. Box 2107
Charleston, WV 25328-2107
If to Allegheny:
Allegheny Energy, Inc.
Attn: Peter Dailey, Director
800 Cabin Hill Drive
Greensburg, PA 15601-1689
and:
Allegheny Power
Tom Henderson, General Counsel
1310 Fairmont Avenue
Fairmont, WV 26554
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With copies to:
Baker Botts, LLP
Attn: Sarah Dietrich
One Shell Plaza
910 Louisiana, 38th Floor
Houston, Texas 77002
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
SELLER: ENERGY CORPORATION OF AMERICA
By: /S/ JOHN MORK
John Mork
Its: President and Chief Executive
Officer
BUYER: ALLEGHENY ENERGY SERVICE CORPORATION
By: /S/ JAY PIFER
Jay Pifer
Its: Senior Vice President
18
STOCK PURCHASE AGREEMENT
between
ALLEGHENY ENERGY, INC.,
ENERGY CORPORATION OF AMERICA
and
EASTERN SYSTEMS CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - Definitions 3
ARTICLE II - Agreements of Purchase and Sale 11
ARTICLE III - Purchase Price 12
ARTICLE IV - Representations and Warranties of the Seller 16
ARTICLE V - Representations and Warranties of the Buyer 36
ARTICLE VI - Assumption of Liabilities, Survival and
Indemnification 38
ARTICLE VII - Covenants and Certain Actions of the Parties 44
ARTICLE VIII - Conditions Precedent 53
ARTICLE IX - Closing and Settlement 57
ARTICLE X- Termination 58
ARTICLE XI - Taxes 60
ARTICLE XII - Miscellaneous 66
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT, dated as of the 20th day of December, 1999,
by and between ALLEGHENY ENERGY, INC., a Maryland corporation,
(such corporation or, as and from the date of any assignment made
pursuant to Section 7.03(c), the assignee thereof, the "Buyer"),
and ENERGY CORPORATION OF AMERICA, a West Virginia corporation
("ECA") and EASTERN SYSTEMS CORPORATION, a West Virginia
corporation ("ESC"), (hereinafter ECA and ESC are sometimes
collectively referred to as the "Sellers" and referred to
individually as a "Seller").
W I T N E S S E T H:
WHEREAS, the Buyer is a public utility holding company whose
subsidiaries generate, distribute and provide electric service to
customers in the State of West Virginia and elsewhere; and
WHEREAS, ESC owns one hundred percent (100%) of the
outstanding stock of Mountaineer Gas Company, a West Virginia
corporation ("Mountaineer Gas" and, collectively with the
subsidiaries of Mountaineer Gas, "Mountaineer",) and,
WHEREAS, Mountaineer is engaged in the distribution and
sale of natural gas in West Virginia, and
WHEREAS, ESC desires to sell, and the Buyer desires to
purchase, all of the outstanding stock of Mountaineer Gas (the
"Shares") upon the terms and conditions hereinafter set forth,
and
WHEREAS, contemporaneously with the execution and delivery
of this Agreement, ECA and Buyer have executed and delivered,
each to the other, a Management Agreement, in the form set forth
in Exhibit A and at Closing shall execute the Lease and
Development Agreement substantially in the form of Exhibit B
hereto (such agreements collectively, including all schedules and
exhibits thereto, the "Ancillary Agreements").
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NOW, THEREFORE, in consideration of the respective
representations, warranties and covenants contained herein, the
Buyer and the Sellers hereby agree as follows:
2
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ARTICLE I - DEFINITIONS
1.01 Actual Long Term Debt
The principal outstanding amount of the Long Term Debt
identified on Schedule 1.26 as of the Closing Date.
1.02 Adjustment Date
The last day of the calendar month in which the Closing
occurs.
1.03 Adjustment Period
The period commencing on the Effective Date and ending on
the Adjustment Date.
1.04 Adjustment Working Capital
The difference between the total current assets of
Mountaineer as reflected on the unaudited consolidated financial
statements of Mountaineer as of the close of business on the
Adjustment Date and the total current liabilities of Mountaineer
as reflected on the unaudited consolidated financial statements
of Mountaineer as of the close of business on the Adjustment
Date.
1.05 Agreed Capital Expenditures
Six Million Dollars ($6,000,000.00).
1.06 Affiliate
As applied to any Person, means any other Person directly or
indirectly controlling, controlled by or under common control
with such Person.
1.07 Agreement
This Stock Purchase Agreement, including all Schedules and
Exhibits hereto and the Seller's Disclosure Schedule.
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1.08 Base Financial Statements
The audited balance sheet of Mountaineer Gas and its
consolidated subsidiaries as of June 30, 1999 and the audited
income statement and cash flow statement of Mountaineer Gas and
its consolidated subsidiaries for the year then ended, which
balance sheet, income statement and cash flow statement are
attached hereto as Schedule 1.08.
1.09 Benefit Plans
All benefit and compensation plans, contracts, policies or
arrangements covering current or former Employees, including, but
not limited to, "employee benefit plans" within the meaning of
Section 3(3) of ERISA, and deferred compensation, stock option,
stock purchase, stock appreciation rights, stock based, incentive
and bonus plans.
1.10 Business Day
Any day other than a Saturday, a Sunday or a day on which
banks in any of Denver, Colorado, Hagerstown, Maryland or New
York, New York are authorized or obligated by law or executive
order to close.
1.11 Buyer
Allegheny Energy, Inc., or any subsidiary or affiliate
existing or hereafter created to purchase the Shares.
1.12 Closing
The consummation of the transactions described in Section
9.01(b).
1.13 Closing Date
The fifth Business Day after the conditions precedent set
forth in Sections 8.02(d) and (e) and Sections 8.03 (d) and (e)
have been satisfied, or such later date as the Parties may agree
upon.
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1.14 Code
The Internal Revenue Code of 1986, as amended and the rules
and regulations promulgated thereunder.
1.15 Effective Date
November 30, 1999.
1.16 Employee(s)
Those persons actively employed by Mountaineer who are
participants in any plans and not laid off.
1.17 ERISA
The Employee Retirement Income Security Act of 1974, as
amended.
1.18 Environmental Law
Any federal, state, local or foreign statute, law,
regulation, order, decree, permit, authorization, opinion, common
law or agency requirement relating to: (A) the protection,
investigation or restoration of the environment, health, safety,
or natural resources, (B) the handling, use, presence, disposal,
release or threatened release of or exposure to any Hazardous
Substance or (C) noise, odor, indoor air, employee exposure,
wetlands, pollution, contamination or (D) any injury or threat of
injury to persons or property relating to any Hazardous
Substance.
1.19 GAAP
Generally accepted accounting principles in the United
States as of the date of this Agreement, without reference to
changes therein as may otherwise be applicable to subsequent
periods, consistently applied.
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1.20 Governmental Entity
Any court, tribunal, arbitrator, arbitration panel, or any
governmental, administrative, or regulatory authority, agency,
commission, or body or similar entity.
1.21 Hazardous Substance
(A) Any substance that is listed, classified or regulated
pursuant to any Environmental Law; (B) any petroleum or coal
product or by-product, any waste or ash, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated
biphenyls, radioactive material or radon; and (C) any other
substance which is regulated by any government entity in
connection with any Environmental Law.
1.22 Intellectual Property
The trade names and other intellectual property set forth on
Schedule 1.22.
1.23 Interest Rate
The then current prime or base lending rate of Citibank,
N.A. as established from time to time.
1.24 Interim Period
The period from the date of this Agreement until and
including the Closing Date.
1.25 Legal Requirements
Any and all applicable (i) federal, state, local and foreign
laws, statutes, ordinances, requirements, awards, processes,
rules and regulations, (ii) judgments, orders, writs,
injunctions, decrees, administrative rulings and (iii) contracts
or agreements, with any Governmental Entity relating to
compliance with matters described in (i) and (ii).
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1.26 Long Term Debt
The principal amount of the indebtedness identified on
Schedule 1.26 as of November 30, 1999.
1.27 Material Adverse Effect or Material Adverse Change
With respect to any person or persons, a material adverse
effect on, or a material adverse change in, the financial
condition, properties, business, results of operations or
prospects of such person or persons, other than effects or
changes resulting directly from (i) changes in the volume of
natural gas purchased by customers from Mountaineer that are
attributable to weather conditions, (ii) any general suspension
of trading in, or limitations on prices for, or material change
in prices of, securities generally on any national securities
exchange or in the over-the-counter markets, (iii) the
declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States, (iv) the commencement
or continuation of a war, armed hostilities or similar
international or national calamity directly or indirectly
involving the United States; (v) any limitation (whether or not
mandatory) by any U.S. governmental authority or agency on the
extension of credit by banks or other financial institutions;
(vi) any general decline in economic conditions in the United
States gas utility industry as a whole or in general economic
conditions in any geographic region of the United States; and
(vii) in the case of any of the events described in the foregoing
clauses (i) through (vi), a material acceleration or worsening
thereof.
1.28 November Financial Statements
The unaudited balance sheet of Mountaineer and its
consolidated Subsidiaries dated as of November 30, 1999 and the
unaudited income statement and cash flow statement of Mountaineer
and its consolidated Subsidiaries for the five months then ended,
which balance sheet, income statement and cash flow statement are
attached hereto as Schedule 1.28.
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1.29 Parties
The Buyer and the Sellers.
1.30 Party
The Buyer or a Seller, as the case may be.
1.31 Permits
Any and all permits, authorizations, certificates,
approvals, registrations, variances, rights of way, franchises,
orders or other approvals and licenses relating to the operations
of Mountaineer (i) under any (x) federal, state, local or foreign
laws, statutes, ordinances, rules or regulations or (y) judgment
or contract with any federal, state, local or foreign court,
arbitrator or administrative or governmental authority, bureau or
agency relating to compliance with matters described in clause
(i)(x), or (ii) granted by any federal, state, local or foreign
administrative or governmental authority, bureau or agency.
1.32 Person
Any individual, corporation, partnership, firm, joint
venture, association, joint stock company, trust, unincorporated
organization, governmental or regulatory body or other entity.
1.33 Purchase Price
Shall have the meaning assigned to it in Article III.
1.34 Seller's Disclosure Schedule
That schedule attached hereto as Exhibit 1.34.
1.35 Seller's Group
Any "affiliated group" (as defined in Section 1504(a) of the
Code without regard to the limitations contained in section
1504(b) of the Code) that includes ECA, ESC or Mountaineer or any
predecessor of or successor to ECA, ESC or Mountaineer (or
another such predecessor or successor).
8
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1.36 Short Term Debt
Any indebtedness of Mountaineer which does not constitute
Long Term Debt.
1.37 Subsidiary
With respect to any Person, any other Person, whether
incorporated or unincorporated, of which at least a majority of
the securities or ownership interest having by their terms
ordinary voting power to elect a majority of the Board of
Directors or other Persons performing similar functions is
directly or indirectly owned or controlled by such Person or by
one or more of the direct or indirect Subsidiaries of such Person
or by such Person and any one or more of its respective
Subsidiaries.
1.38 Taxes
All federal, state, local or foreign taxes, including
income, gross receipts, windfall profits, customs duties, value
added, severance, property, trade, consumption, solidarity
surcharge, capital, production, estimated sales, use, license,
excise, franchise, employment, withholding or other taxes of any
kind, together with any interest, additions or penalties with
respect thereto and any interest in respect of such additions or
penalties.
1.39 Tax Returns
All reports and returns required to be filed with respect to
Taxes.
1.40 West Virginia PSC
The Public Service Commission of West Virginia.
9
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1.41 Working Capital
The difference between the total current assets of
Mountaineer as reflected on the unaudited consolidated financial
statements of Mountaineer as of November 30, 1999 and the total
current liabilities of Mountaineer as reflected on the unaudited
consolidated financial statements of Mountaineer as of November
30, 1999.
1.42 Year 2000 Problem
The material inability of any hardware, software or process
to recognize and correctly calculate dates on and after January
1, 2000, or the failure of computer systems, products or services
to perform any of their intended functions in a proper manner in
connection with data containing any date on or after January 1,
2000.
10
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ARTICLE II - AGREEMENTS OF PURCHASE AND SALE
2.01 Sale and Purchase of Shares
On the terms and subject to the conditions set forth in this
Agreement, the Buyer agrees to purchase the Shares and ESC agrees
to sell, transfer, assign, convey and deliver the Shares to the
Buyer in consideration for the Adjusted Purchase Price paid in
accordance with Article III hereof.
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ARTICLE III - PURCHASE PRICE
3.01 Purchase Price
On the Closing Date Buyer agrees to pay and deliver to ECA
the sum of Three Hundred Twenty-Three Million Dollars
($323,000,000), less the sum of Mountaineer's Long Term Debt, as
set forth on Schedule 1.26, existing on the Closing Date, and
$200,000 (the "Purchase Price").
3.02 Post Closing Adjustments to Purchase Price
(a) Calculation of Adjustments of Purchase Price
(1) Working Capital Adjustment
(A) if Adjustment Working Capital is greater
than the sum of Working Capital plus $100,000, Buyer shall pay to
ECA the amount by which Adjustment Working Capital exceeds
Working Capital,
(B) if Adjustment Working Capital is less
than Working Capital minus $100,000, ECA shall pay to Buyer the
amount by which Working Capital exceeds Adjustment Working
Capital,
(2) Capital Expenditure Adjustment
(A) if the actual capital expenditures made
by Mountaineer during the Adjustment Period is less than the
Agreed Capital Expenditures, ECA shall pay such difference to
Buyer,
(B) if the actual capital expenditures made
by Mountaineer during the Adjustment Period is more than the
Agreed Capital Expenditures, Buyer shall pay such difference to
ECA.
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(3) Long Term Debt Adjustment
(A) if Actual Long Term Debt exceeds Long
Term Debt, ECA shall pay to Buyer the amount of the excess, and
(B) if Long Term Debt exceeds Actual Long
Term Debt, Buyer shall pay to ECA the amount of the excess.
Any payments required pursuant to this Section 3.02(a)
are referred to collectively as "Post-Closing
Adjustments".
(b) As soon as practicable, but in no event later than 60
calendar days following the Closing Date, ECA shall prepare a
calculation of Adjustment Working Capital (the "Working Capital
Statement"), a calculation of Adjustment Capital Amounts (the
"Capital Amount Statement") and a calculation of Actual Long Term
Debt (the "Long Term Debt Statement") and, collectively with the
Working Capital Statement and the Capital Amount Statement, the
"Closing Statements"), each of which shall be prepared in good
faith in accordance with GAAP on a basis consistent with the
preparation of the Base Financial Statements.
(c) After receipt of the Closing Statements, Buyer shall
have 30 calendar days to review the Closing Statements, together
with the workpapers used in the preparation thereof. Buyer and
its accountants shall have full access to (i) all relevant books,
records and employees of ECA and (ii) ECA's accountants and their
relevant supporting workpapers. Unless Buyer delivers written
notice to ECA on or prior to the thirtieth calendar day after the
preparation of the Closing Statements, stating that Buyer has
objections to the Closing Statements and describing any such
objections, Buyer shall be deemed to have accepted and agreed to
the Closing Statements. If, on or prior to the thirtieth
calendar day after the preparation of the Closing Statements,
Buyer shall give such notice to ECA, Buyer shall, within 10
calendar days (or such longer period as the Parties may agree)
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<PAGE>
following the giving of such notice (the "Resolution Period"),
attempt in good faith to resolve their differences, and any
resolution by them as to any disputed amounts shall be final,
binding and conclusive.
(d) Any amounts remaining in dispute at the conclusion of
the Resolution Period ("Unresolved Changes") shall be submitted
to a nationally recognized public accounting firm, independent of
Buyer and the Sellers, mutually acceptable to Buyer and ECA (such
firm being referred to as the "Auditing Firm"), within 10
calendar days after the expiration of the Resolution Period.
Each party agrees to execute, if requested by the Auditing Firm,
an engagement letter containing reasonable terms. All fees and
expenses relating to the work, if any, to be performed by the
Auditing Firm in accordance with this Section 3.02 shall be borne
equally by Buyer and ECA. The Auditing Firm shall be instructed
to use a materiality standard as such firm may determine to be
reasonable under the circumstances, in light of the cost to be
incurred and the amount in issue. The Auditing Firm shall be
instructed to make such determination in accordance with the
provision of this Agreement. The Auditing Firm's determination
of the Unresolved Changes shall be made within 30 days of the
submission of the Unresolved Changes thereto, shall be set forth
in a written statement delivered to Buyer and ECA and shall be
final, binding and conclusive on the parties for all purposes.
(e) In the event that there are Unresolved Changes at the
end of the Resolution Period, (i) if Buyer and ECA agree that a
Post-Closing Adjustment is owed to Buyer or ECA, as the case may
be, regardless of the ultimate resolution of any Unresolved
Changes, then the minimum amount which Buyer and ECA agree is
owed to Buyer, or ECA, as the case may be, shall be paid within
five Business Days after the end of the Resolution Period and any
additional amounts owing to Buyer, or ECA, as the case may be,
with respect to the Unresolved Changes shall be paid within five
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Business Days after resolution thereof by the Auditing Firm and
(ii) in all other cases, any and all payments shall be made
within five Business Days after resolution of the Unresolved
Changes by the Auditing Firm.
(f) Any payments made in respect of the Post-Closing
Adjustment or Unresolved Changes shall be deemed to be
adjustments to the Purchase Price for all Tax purposes.
(g) The Purchase Price, as adjusted by the Post-Closing
Adjustments, constitutes the "Adjusted Purchase Price".
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ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Sellers jointly and severally, represent and warrant to
the Buyer that, as of the date hereof, and as of the Closing
Date, except as set forth in the corresponding sections or
subsections of the Seller's Disclosure Schedule:
4.01 Corporate Status and Authority
Each of ECA, ESC and Mountaineer Gas is a corporation duly
organized, validly existing and in good standing under the laws
of the State of West Virginia. Each of Mountaineer Gas'
Subsidiaries is duly organized, validly existing and in good
standing under the laws of the respective state of its
incorporation. Each of Mountaineer Gas and its Subsidiaries has
all the requisite corporate power and authority under all Legal
Requirements to carry on its business as it now is being
conducted and to own or lease and to operate its assets as the
case may be, as and in the places where Mountaineer's business is
now conducted or where its assets are now owned or leased and now
operated. Each of ECA and ESC has all requisite corporate power
and authority and has taken all corporate action necessary in
order to execute and deliver this Agreement and the Ancillary
Agreements and, subject only to the governmental authorizations
specified in Section 7.03(a), to perform its obligations
hereunder and thereunder. The Seller's Disclosure Schedule lists
all Subsidiaries of Mountaineer Gas.
4.02 Power to Transfer; Duly Executed
(a) Subject to any required governmental authorization
referred to in Section 7.03(a) hereof, each Seller has full
right, power and authority to enter into this Agreement and the
Ancillary Agreements and to perform its obligations hereunder and
thereunder.
(b) This Agreement and each Ancillary Agreement have been
duly executed and delivered on behalf of each Seller party
thereto and subject only to governmental authorizations specified
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to in Section 7.03(a) hereof, constitute the legal, valid and
binding obligations of the Sellers enforceable in accordance with
their terms.
4.03 Qualification
Each of ECA, ESC and Mountaineer Gas and each of Mountaineer
Gas' Subsidiaries is duly qualified, and is in good standing, to
do business in West Virginia as a corporation.
4.04 Authorized Capital of Mountaineer.
The authorized capital stock of Mountaineer Gas consists of
2,200,000 shares, $25.00 par value, of which 1,831,687 shares are
outstanding and no shares are held in treasury. All of the
Shares have been duly authorized, and are validly issued, fully
paid and nonassessable and are owned, either directly or
indirectly by ECA, free and clear of all mortgages, liens,
pledges, charges, title retention or security agreements, claims,
restrictions, leases, options, rights of first offer or refusal,
or other encumbrances or rights of others. Each of the
outstanding shares of capital stock of each of Mountaineer Gas'
Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and owned, either directly or indirectly, by
Mountaineer Gas, free and clear of all liens, pledges, security
interests, claims or other encumbrances. Except as set forth
above, there are no shares of capital stock of Mountaineer Gas or
any of its Subsidiaries authorized, issued or outstanding and
there are no preemptive rights nor any outstanding subscriptions,
options, warrants, rights, convertible or exchangeable securities
or other agreements or commitments of any character relating to
the issued or unissued capital stock or other securities of
Mountaineer Gas or any of its Subsidiaries.
Seller has good and marketable title to the Shares and on
the Closing Date will transfer and convey the Shares to Buyer
free and clear of all mortgages, liens, pledges, charges, title
retention or security agreements, claims, restrictions, leases,
options, rights of first offer or first refusal, or other
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encumbrances or rights of others. Each of Mountaineer Gas and
its Subsidiaries has good and marketable title to its properties
and assets except for such defects in title that, individually or
in the aggregate, have not and are not reasonably likely to
affect the ownership, operation or marketability thereof.
4.05 Noncontravention
The execution, delivery and performance of this Agreement
and the Ancillary Agreements by ECA and any of its Subsidiaries
party thereto, and the consummation by the Sellers, Mountaineer
Gas and any of their respective Subsidiaries of the transactions
contemplated in this Agreement and therein, do not and will not
(a) violate or conflict with, or constitute a default under, any
provision of the certificate of incorporation, by-laws or
comparable governing instruments of the Sellers, Mountaineer Gas
or any of their respective Subsidiaries, (b) violate any
provision of, or constitute (or with notice or lapse of time or
both would constitute) a default under, or accelerate or permit
the acceleration of the performance required by, any agreement,
lease, contract, note, mortgage, indenture, instrument,
arrangement or other obligation (collectively, "Contracts") to
which the Sellers, Mountaineer Gas or any of their respective
Subsidiaries is a party or by which any of them or any of their
respective assets or properties are bound or subject
(collectively, the "Seller Contracts"), (c) entitle any party to
cancel or terminate, or result in any change in the rights or
obligations of any party under, or require a consent or waiver by
any party to, any Seller Contract, (d) result in the creation of
a lien, pledge, security interest, voting trust arrangement,
charge, option, restriction, claim, or other encumbrance on the
equity securities, ownership interests or on the assets of any
Seller, Mountaineer or any of their respective Subsidiaries, (e)
violate any law, statute, rule, regulation, ordinance,
requirement, administrative ruling, order, judgment, injunction,
award, decree or process of any Governmental Entity
(collectively, "Laws") by which or to which any of their
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respective assets or properties are bound or subject, or (f)
result in the loss or impairment of any approval, authorization,
comment, license, franchise, order or permit of or by, or filing
with a Person of or benefiting any Seller, Mountaineer or any of
their respective Subsidiaries; except (i) in the case of clauses
(b), (d), (e), and (f) of this Section, for such violations,
defaults, accelerations, losses or impairments as, when taken
together with all other such violations, defaults, accelerations,
losses and impairments, could not adversely impair Mountaineer's
business or operations, and (ii) in the case of clauses (b) and
(c), for violations, defaults, accelerations, cancellations,
terminations of and changes in rights listed in Seller's
Disclosure Schedule.
4.06 Seller's Disclosure Schedule
Seller is obligated to, and represents that it has, fully
and completely included all information required under the
Seller's Disclosure Schedule and that it is true and accurate to
the best of its knowledge and belief, and that the Seller's
Disclosure Schedule is hereby incorporated as part of this
Agreement.
4.07 Changes, Etc.
Since June 30, 1999,
(a) there has been no Material Adverse Change with respect
to Mountaineer nor any material damage, destruction or loss
adversely affecting Mountaineer's assets (whether or not covered
by insurance);
(b) Mountaineer has conducted its business in the ordinary
course of business consistent with past practice;
(c) Mountaineer's assets have not been mortgaged, pledged,
or subjected to any lien, security interest, or to either
Seller's knowledge, any other encumbrance, which mortgage,
pledge, lien, security interest or encumbrance shall be released
on or before the Closing Date;
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(d) except as incurred in the ordinary course of
Mountaineer's business consistent with past practice, no
liability, contractual, or otherwise, has been incurred (whether
absolute, accrued, contingent or otherwise) by either Seller or
Mountaineer in connection with Mountaineer's business that has
not been fully paid, released or otherwise provided for; and
(e) there has not been any incurrence, assumption or
guarantee by either Seller of any indebtedness for borrowed money
by Mountaineer, other than in the ordinary course of business
consistent with past practice.
4.08 Compliance with Laws; Governmental Authorizations
(a) Each of the Sellers and Mountaineer is in compliance in
all material respects with all Legal Requirements and Permits
applicable to Mountaineer's business. Mountaineer has not
received any written notice or communication of any material
noncompliance with any Legal Requirement or Permit that has not
been cured as of the date hereof.
(b) To Sellers' or Mountaineer's knowledge, Mountaineer
has, all Permits necessary to own, operate, use and maintain
Mountaineer's assets, in the manner in which they are now being
maintained and operated and to conduct Mountaineer's business as
now being conducted. All Permits of Mountaineer relating to its
business are in full force and effect and there are no
proceedings pending or, to the knowledge of the Seller or
Mountaineer, threatened that seek the revocation, cancellation,
suspension or any adverse modification of any such Permits.
Subject to obtaining the consents and approvals specified in
Section 7.03(a), the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not
result in any such revocation, cancellation, suspension or
modification of such Permits.
(c) To Seller's and Mountaineer's knowledge (i)
Mountaineer's business is and has been in material compliance
with all applicable Environmental Laws; (ii) no property
currently or formerly owned or operated by Mountaineer (including
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soils, groundwater, surface water, buildings or other structures)
is contaminated with any Hazardous Substance which could
reasonably be expected to result in any investigation,
remediation or material liability to Mountaineer under any
Environmental Law; (iii) Mountaineer's business has not been
involved in any disposal, release or threat of release of any
Hazardous Substance which could reasonably be expected to result
in material liability under any Environmental Law; (iv)
Mountaineer has not received any written notice, demand, letter,
claim or request for information indicating that Mountaineer may
be in violation of or subject to liability under any
Environmental Law; (v) Mountaineer is not subject to any order,
decree, injunction or other arrangement with any governmental
entity or any indemnity or other agreement with any third party
relating to liability under any Environmental Law or relating to
Hazardous Substances in connection with its business; (vi) there
are no other circumstances or conditions involving Mountaineer
that could reasonably be expected to result in any material
claim, liability, investigation, cost or restriction on the
ownership, use, or transfer of any property pursuant to any
Environmental Law; and (vii) Seller has delivered to Buyer copies
of all environmental reports, studies, assessments, sampling data
and other environmental information in its possession relating to
Mountaineer's business.
4.09 Permits; Public Service Commission of West Virginia
(a) The Seller's Disclosure Schedule includes all currently
effective Permits issued or entered into by any Governmental
Entity, including the West Virginia PSC to Mountaineer and
presently in effect in connection with Mountaineer's business.
(b) The Seller's Disclosure Schedule lists all of the
currently operative rules, regulations and tariffs heretofore
authorized and approved by the West Virginia PSC applicable to
Mountaineer's business and all of the currently pending rate,
certificate or other filings heretofore made by Mountaineer
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before the West Virginia PSC and the status of each such filing
on the date hereof.
(c) All currently effective filings heretofore made by
Mountaineer with the West Virginia PSC were made in substantial
compliance with Legal Requirements then applicable thereto and
the information contained therein was true and correct in all
material respects as of the respective dates of such filings.
4.10 Contracts
(a) The Seller's Disclosure Schedule contains a complete
and correct list of all Mountaineer's material contracts relating
to Mountaineer's business as of the date hereof. There are no
defaults under any such contracts which, individually or in the
aggregate, could adversely impair Mountaineer's business or
operations. Based upon reasonable inquiry, Mountaineer has no
knowledge of any facts which would suggest that any such contract
may be cancelled.
(b) Each contract required to be disclosed pursuant to this
Section is a valid and binding agreement of Mountaineer and is in
full force and effect, and enforceable by Mountaineer in
accordance with its terms, except to the extent such contract has
expired by its own terms without penalty, and none of Mountaineer
or, to the knowledge of Mountaineer, any other party thereto is
in default or breach under the terms of any such contracts and,
to the knowledge of Mountaineer, no event or circumstance has
occurred that, with notice or lapse of time or both, would
constitute any event of default thereunder other than in each
case defaults or breaches which, individually or in the
aggregate, could not adversely impair Mountaineer's business or
operations.
4.11 Rights-of-Way and Real Property
(a) Schedule 4.11(a) of the Seller's Disclosure Schedule
contains a complete and correct legal description of all the real
property (other than rights-of-way and oil and gas leases) owned
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directly or indirectly, by Mountaineer and its Subsidiaries,
necessary for the conduct of, or otherwise material to, the
business of Mountaineer and its Subsidiaries as it is currently
conducted (the "Owned Real Property"). Mountaineer and its
Subsidiaries have good, marketable and insurable fee simple title
to the Owned Real Property, free and clear of all liens other
than Permitted Liens. The current use and operation of the Owned
Real Property does not violate any instrument of record affecting
the Owned Real Property. To the best of Sellers' and
Mountaineer's knowledge, except as set forth in Schedule 4.11(a),
no Owned Real Property is located in a special flood hazard area
designated by any state or federal authority. The Owned Real
Property is in compliance with all Laws and all licenses,
building permits, certificates of occupancy and other approvals
and authorizations required by governmental authorities.
(b) Schedule 4.11(b) of the Seller's Disclosure Schedule
contains a complete and correct list of all interests of
Mountaineer Gas and its Subsidiaries in real property (the
"Leased Real Property") pursuant to leases, licenses or other
occupancy or use agreements (collectively, the "Leases"), except
that such Schedule excludes rights of way and oil and gas leases.
Mountaineer Gas and its Subsidiaries have good, valid and
marketable title to, and is in peaceful undisturbed possession
of, the leasehold estates created under the Leases, free and
clear of all liens other than Permitted Liens. Mountaineer has
previously allowed Buyer to examine true, correct and complete
copies of the Leases, together with all amendments and
modifications thereof and supplements thereto. Except as set
forth on Schedule 4.11(b) of the Seller's Disclosure Schedule,
(i) each of the Leases is valid and binding and in full force and
effect and (ii) neither Mountaineer Gas nor any of its
Subsidiaries is in default under any Lease. Each of the Leases
either (x) may be assigned by Mountaineer Gas and its
Subsidiaries without the consent or approval of any other person
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or entity, or (y) if any such consent or approval shall be
required, such consent or approval shall be obtained prior to
Closing.
(c) Neither Mountaineer Gas nor any of its Subsidiaries has
any interest in real property except the Owned Real Property and
the Leased Real Property.
(d) For purposes of this Agreement, "Permitted Liens" shall
mean (i) liens for taxes or assessments not yet delinquent or, if
delinquent, that are being contested in good faith in the
ordinary course of business, (ii) materialman's, mechanic's,
repairman's, employee's, contractor's, operator's and other
similar liens or charges arising in the course of business (x) if
they have not been filed pursuant to law, (y) if filed, they have
not yet become due and payable or payment is being withheld as
provided by law, or (z) if their validity is being contested in
good faith by appropriate action and (iii) that certain deed of
trust on Mountaineer Gas' office in Elkins, West Virginia.
(e) Except as set forth on Schedule 4.11(e), there are no
pending, and Seller has no knowledge of any threatened,
condemnation proceeding or similar proceeding affecting any Owned
Real Property.
(f) Except as set forth on Schedule 4.11 (f), no Person has
any option, right to acquire any portion of the Owned Real
Property or any interest therein, or a right of first offer or
right of refusal to do so (whether exercisable now or upon any
subsequent resale of any Owned Real Property or any portion
thereof).
(g) No casualty has occurred with respect to any Owned Real
Property within the last 24 months which has not been materially
restored or repaired.
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(h) Neither Mountaineer Gas nor any of its Subsidiaries is
a "foreign person" as defined in Section 1445 of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated
thereunder.
4.12 Employment Agreements and Benefits, Etc.
(a) Employment Agreements
The Seller's Disclosure Schedule lists all currently
effective employment, management, consultant or similar
agreements and all currently effective labor contracts and
collective bargaining agreements heretofore entered into by
Mountaineer with respect to its business. Except as disclosed
therein, Mountaineer has no employment, management, severance,
consultant or other similar agreement with any Employees.
(b) Employee Relations
There are not occurring any slow downs, pickets, work
stoppages, labor strikes or disputes, walk-outs, lock-outs or
other similar disruptive labor activities on the part of the
Employees. To Mountaineer's knowledge, no grievance, unfair
labor practice charge or any arbitration proceeding exists, is
pending or is threatened on the date hereof, nor does Mountaineer
have any knowledge of any organized effort presently being made
or threatened by or on behalf of any labor union to represent
Mountaineer's employees except under existing collective
bargaining agreements.
(c) Employment Benefit Plans
As applicable to Mountaineer
(i) All Benefit Plans are listed in Seller's Disclosure
Schedule. True and complete copies of all such Benefit Plans,
including, but not limited to, any trust instruments and
insurance contracts forming a part of any Benefit Plans, and all
amendments thereto have been provided or made available to Buyer.
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(ii) All Benefit Plans covering Employees, to the extent
subject to ERISA, are in substantial compliance with ERISA. Each
Benefit Plan which is an "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA ("Pension Plan") and which
is intended to be qualified under Section 401 (a) of the Code,
has received a favorable determination letter from the Internal
Revenue Service with respect to "TRA" (as defined in Section 1 of
Rev. Proc. 93-39), and Mountaineer is not aware of any
circumstances likely to result in revocation of any such
favorable determination letter. There is no material pending or,
to the knowledge of Mountaineer, threatened litigation relating
to the Benefit Plans. Neither Mountaineer Gas nor any of its
Subsidiaries has engaged in a transaction with respect to any
Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject
Mountaineer to a tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA in an amount which would be
material.
(iii) No liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by Mountaineer with
respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001 (a)(15) of ERISA,
currently or formerly maintained by any of them, or the single-
employer plan of any entity which is considered one employer with
the Seller under Section 4001 of ERISA or Section 414 of the Code
(an "ERISA Affiliate"). Neither Mountaineer Gas, any of its
Subsidiaries nor any ERISA Affiliate has contributed to a "multi-
employer plan", within the meaning of Section 3(37) of ERISA, at
any time on or after September 26, 1980. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date
hereof (or will be required to be filed in connection with the
transactions contemplated by this Agreement).
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(iv) All contributions required to be made under the terms
of any Benefit Plan have been timely made or have been reflected
on the Base Financial Statements or the November Financial
Statements. Neither any Pension Plan nor any single employer
plan of an ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section
412 of the Code or Section 302 of ERISA and no ERISA Affiliate
has an outstanding funding waiver. Mountaineer has not provided,
nor is required to provide, security to any Pension Plan or to
any single-employer plan of an ERISA Affiliate pursuant to
Section 401 (a)(29) of the Code.
(v) Under each Pension Plan which is a single-employer plan
and which is subject to Title IV or ERISA, as of the July 1, 1998
Actuarial Valuation Report prepared by William M. Mercer,
Incorporated, the present value of all "benefits liabilities",
within the meaning of Section 4001 (a)(16) of ERISA, did not
exceed the then current value of the assets of such Plan by more
than $6 Million Dollars, and there has been no material adverse
change in the financial condition of such Plan subsequent to such
report.
(vi) Mountaineer provides the medical and life insurance
benefits to retirees set forth on Seller's Disclosure Schedule.
(vii) Neither the execution of this Agreement nor the
consummation of the transactions contemplated by this Agreement
will (w) entitle any Employees to severance pay or any increase
in severance pay upon any termination of employment prior to or
after the date hereof, (x) accelerate the time of payment or
vesting or trigger any payment or funding (through a grantor
trust or otherwise) of compensation or benefits under, increase
the amount payable or trigger any other material obligation to
any Employee under any of the Benefit Plans, (y) cause
Mountaineer or any of its Subsidiaries to record additional
compensation expense on its income statement with respect to any
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outstanding stock option or other equity-based award or (z)
result in any payments to any Employee under any of the Benefit
Plans which would not be deductible under Section 162(m) or
Section 280G of the Code.
4.13 Insurance
The Seller's Disclosure Schedule contains a true and
accurate summary of the insurance coverage of the property,
assets or business liabilities of Mountaineer as a whole
specifying with respect to each such type of coverage, the term
of the policies or bonds, the limits and layers of liability and
the annual premiums, and (ii) lists any agreements, arrangements
or commitments under which Mountaineer indemnifies any other
Person or is required to carry insurance for the benefit of any
other Person in an amount in excess of $1,000,000 in the
aggregate. The policies and bonds summarized in Seller's
Disclosure Schedule are in full force and effect, all premiums
due and payable thereon have been paid, no notice of cancellation
or termination has been received with respect to any cash policy,
and the Sellers and Mountaineer have complied with such policies
and bonds. Such policies and bonds will remain in full force and
effect through the respective dates set forth in the Seller's
Disclosure Schedule without the payment of additional premiums,
except in the ordinary course of business, and will not in any
way be affected by, terminate, or lapse by reason of the
transactions contemplated by this Agreement or any Ancillary
Agreement.
4.14 Intellectual Property
(a) Mapcom Systems, Inc., a wholly-owned subsidiary of
Mountaineer Gas, owns (free and clear of any and all liens,
claims or encumbrances), or is licensed or otherwise possesses
sufficient legally enforceable rights to use, the Intellectual
Property. The Intellectual Property is sufficient for the
continued conduct of Mountaineer's business after the Closing in
substantially the same manner as conducted prior to the Closing.
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(b) To Mountaineer's knowledge, Mountaineer's use of the
Intellectual Property does not conflict with, infringe upon, or
violate any intellectual property right of any other person.
Mountaineer has not received written notice of any material claim
that any Intellectual Property Right is invalid or conflicts with
the asserted right of any other person.
4.15 Litigation; Claims; Citations
(a) The Seller's Disclosure Schedule lists all material
actions, suits, workers compensation claims, proceedings or
governmental investigations pending, or to the knowledge of
Mountaineer, threatened in writing against or affecting
Mountaineer's business or its assets. None of Mountaineer's
assets is subject to any order, writ, judgment, award,
injunction, or decree of any governmental or regulatory
authority, any court of competent jurisdiction or any arbitrator
or arbitrators.
(b) To Mountaineer's knowledge, no citations, fines or
penalties have been assessed, threatened or asserted against in
connection with the conduct of Mountaineer's business under any
Environmental Law which have not been fully resolved as of the
date of this Agreement.
(c) There are no actions, suits, proceedings or
governmental investigations pending or threatened against any
Seller, Mountaineer or any of their respective Subsidiaries that
challenge the validity of this Agreement or any Ancillary
Agreement or seek to enjoin or otherwise prohibit or limit the
transactions contemplated herein or therein.
4.16 Brokers
All negotiations relating to this Agreement and the
transactions contemplated hereby
have been carried out without the intervention of any person
acting on behalf of the Seller or any of its affiliates in such
manner as to give rise to any valid claim against the Buyer for
any broker's or finder's commission, fee or similar compensation.
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4.17 Property and Assets
Mountaineer's buildings, plants, structures, and
equipment are structurally sound, are in good operating condition
and repair, and are adequate for the uses to which they are being
put, and none of such buildings, plants, structures, or equipment
is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.
Mountaineer's property (real and personal) and assets (tangible
and intangible) are sufficient for the continued conduct of
Mountaineer's businesses after the Closing in substantially the
same manner as conducted prior to the Closing.
4.18 Material Facts
No representation or warranty by Sellers or Mountaineer in
this Agreement, any Ancillary Agreement, or any statement or
certificate furnished or to be furnished to the Buyer by Sellers
or Mountaineer pursuant to this Agreement or any Ancillary
Agreement, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact
necessary to make the statements contained therein not materially
misleading.
4.19 Y2K (Year 2000)
Mountaineer has initiated a review and assessment of the
Year 2000 Problem, has developed a plan for addressing the Year
2000 Problem on a timely basis and has to date implemented such
plan, except where Mountaineer's failure to do so is not
reasonably likely to adversely impair Mountaineer's business or
operations. To the knowledge of Mountaineer, none of the system-
critical assets or equipment owned or utilized by Mountaineer in
its business will fail to perform because of, or due in any way
to, a Year 2000 Problem. To the knowledge of Mountaineer, no
vendor, supplier or customer of Mountaineer will experience a
Year 2000 Problem that, individually or in the aggregate, could
reasonably be expected to adversely impair Mountaineer's business
or operations.
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4.20 Financial Statements.
Each of the Base Financial Statements and the November
Financial Statements fairly presents the financial condition and
the results of operations, changes in stockholders' equity, and
cash flow of Mountaineer as of the respective dates of and for
the periods referred to in such respective financial statements,
all in accordance with GAAP consistently applied throughout the
periods involved. No financial statements of any Person other
than the entities specified in the Base Financial Statements and
the November Financial Statements are required by GAAP to be
included in the consolidated financial statements of Mountaineer.
4.21 Taxes
(a) All Tax Returns that are required to be filed on or
before the Closing Date (taking into account applicable
extensions) by or with respect to the Seller's Group, including
Mountaineer have been filed;
(b) All Taxes of the Seller's Group and of Mountaineer that
are due and payable have been timely paid, other than Taxes which
are not yet due or which, if due, are not delinquent, are being
contested in good faith, or have not been finally determined and
for which appropriate reserves therefore have been established;
(c) There are no pending or, to the knowledge of Seller or
Mountaineer, threatened actions or proceedings for the assessment
or collection of Taxes against Mountaineer;
(d) All Taxes required to be withheld from payments to
employees have been withheld and paid to the proper taxing
authority in a timely fashion;
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(e) To the knowledge of Sellers or Mountaineer, no taxing
authorities are presently conducting any audits or other
examinations of any Tax Returns referred to in clause (a) or
Taxes referred to in clause (b);
(f) There are no liens for unpaid Taxes on Mountaineer's
assets.
(g) No waivers of statutes of limitations have been given
by or requested with respect to any Taxes of the Seller's Group;
(h) No tax is required to be withheld pursuant to Section
1445 of the Code as a result of the transfer contemplated by this
Agreement.
4.22 Conduct of Business
The Sellers and their respective Subsidiaries are engaged in
the gas utility business in the State of West Virginia only
through Mountaineer, and neither the Sellers, nor any of their
respective Subsidiaries conducts any operation associated with,
or owns any assets or properties used in, or holds any permits or
licenses used in, the gas utility business in the state of West
Virginia. Mountaineer Gas is not, nor (to Seller's knowledge)
has been, engaged in any material business other than the gas
utility business in the State of West Virginia or owns or has
owned any material assets or properties which are used in any
business other than the gas utility business in the State of West
Virginia.
4.23 Customers
Since June 30, 1999, to ECA's knowledge, no customer of
Mountaineer accounting for 2% or more of the consolidated annual
revenue of Mountaineer has canceled or otherwise terminated its
relationship with Mountaineer and there has been no material
adverse change in the business relationship of Mountaineer with
any such customer, as the case may be. To ECA's knowledge, no
such customer intends to cancel or otherwise terminate its
relationship with Mountaineer or to decrease significantly its
purchases of natural gas from Mountaineer.
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4.24 Affiliate Interests
(a) Neither ECA, any of ECA's Affiliates (excluding
Mountaineer) nor to the knowledge of ECA (after reasonable
investigation) any director or officer or employee of ECA or any
of ECA's Affiliates (including Mountaineer) (i) has any interest
in any property, real or personal, tangible or intangible, of
Mountaineer, except for interests with a value of not greater
than $200,000 in the aggregate, (ii) has any cause of action or
other claim whatsoever against Mountaineer or its assets or
properties, or owes any amount to, or is owed any amount by, any
of them, except for claims and indebtedness not in excess of
$200,000 in the aggregate or (iii) owns, directly or indirectly,
any debt, equity or other interest or investment in any person
which is a competitor, lessor, lessee, or supplier of
Mountaineer, except securities of any publicly-held corporation
which do not exceed 1% of the outstanding voting securities of
such corporation.
(b) There are no agreements, indebtedness, arrangements,
understandings, obligations or other rights or obligations
between Mountaineer, on the one hand, and ECA, any of ECA's
Affiliates (excluding Mountaineer), or to the knowledge of ECA
(after reasonable investigation) any director or officer or
employee of ECA or any of ECA's Affiliates (including
Mountaineer), on the other hand, other than agreements,
indebtedness, arrangements, understandings, obligations and other
rights which will not survive the Closing.
4.25 Personal Property Leases
(a) Seller's Disclosure Schedule sets forth a true and
complete list of all of the leases of personal property to which
Mountaineer is a party which provides for payments in excess of
$2,000,000 per year (collectively, the "Mountaineer Personal
Property Leases"). ECA has caused to be delivered or made
available to Buyer a true and complete copy of each Mountaineer
Personal Property Lease.
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(b) Except as set forth in Seller's Disclosure Schedule,
(i) each Mountaineer Personal Property Lease is a valid and
binding obligation of each party thereto and is enforceable
against each such party in accordance with its terms, (ii) there
is no default or claim of default under any Mountaineer Personal
Property Lease, and (iii) no event has occurred that, with the
passage of time or the giving of notice or both, would constitute
a default by any party to any Mountaineer Personal Property
Lease, or would permit unilateral modification, acceleration, or
termination of any Mountaineer Personal Property Lease.
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ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that as of
the date hereof and as of the Closing Date:
5.01 Corporate Status and Authority
The Buyer is a corporation duly organized, validly existing
in Maryland and in good
standing under the laws of the State of West Virginia. Buyer has
all requisite corporate power and authority and has taken all
corporate action necessary in order to execute and deliver this
Agreement and the Ancillary Agreements, and subject only to the
governmental authorizations specified in Section 7.03(a), to
perform its obligations hereunder.
5.02 Duly Executed
This Agreement and each Ancillary Agreement has been duly
executed and delivered on behalf of the Buyer thereto and,
subject only to the governmental authorization specified to in
Section 7.03(a) hereof, constitutes a legal, valid and binding
obligation of the Buyer enforceable in accordance with its terms.
5.03 [RESERVED]
5.04 Power; Governmental Consent
Subject to the obtaining of any governmental approvals
necessary for the Agreement, and the Ancillary Agreements, as
more fully explained under Section 7.03(a), no consent, waiver,
approval or authorization of or designation, declaration or
filing with any governmental authority is or has, been required
on the part of the Buyer in connection with the execution and
delivery of this Agreement and each Ancillary Agreement or the
consummation of the transactions contemplated hereby.
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5.05 Brokers
All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried out without
the intervention of any person acting on behalf of the Buyer in
such manner as to give rise to any valid claim against the Seller
or any of its affiliates for any brokerage or finder's
commission, fee or similar compensation.
5.06 Litigation
There are no actions, suits, proceedings or governmental
investigations pending, or to the knowledge of the Buyer,
threatened against the Buyer or any of its subsidiaries that
challenge the validity of this Agreement or any Ancillary
Agreement or seek to enjoin or otherwise prohibit or limit the
transactions contemplated herein or therein.
5.07 Noncontravention
The execution, delivery and performance of this Agreement
and the Ancillary Agreements by Buyer, and the consummation by
the Buyer of the transactions contemplated in this Agreement and
therein, do not and will not (a) violate or conflict with, or
constitute a default under, any provision of the certificate of
incorporation, by-laws or comparable governing instruments of
Buyer, (b) violate any provision of, or constitute (or with
notice or lapse of time or both would constitute) a default
under, or accelerate or permit the acceleration of the
performance required by, any Contract to which Buyer is a party
or by which any of them or any of its assets or properties are
bound or subject (collectively, the "Buyer Contracts"),
(c) entitle any party to cancel or terminate, or result in any
change in the rights or obligations of any party under, or
require a consent or waiver by any party to, any Buyer Contract,
(d) result in the creation of a lien, pledge, security interest,
voting trust arrangement, charge, option, restriction, claim or
other encumbrance on the equity securities, ownership interests
or on the assets of Buyer, (e) violate any Law by which or to
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which any of its assets or properties are bound or subject, or
(f) result in the loss or impairment of any approval,
authorization, comment, license, franchise, order or permit of or
by, or filing with a Person of or benefiting Buyer; except (i) in
the case of clauses (b), (d), (e) and (f) of this Section, for
such violations, defaults, accelerations, losses or impairments
as, when taken together with all other such violations, defaults,
accelerations, losses and impairments, could not adversely impair
Buyer's business or operations.
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ARTICLE VI - ASSUMPTION OF LIABILITIES, SURVIVAL AND
INDEMNIFICATION
6.01 The Buyer's Assumption of Liabilities
Buyer shall, from and after the Closing Date, indemnify and
hold Seller harmless against all obligations of Mountaineer;
provided that Buyer shall have no obligation hereunder in respect
of any Losses for which ECA is otherwise obligated to indemnify
any Buyer Indemnified Party pursuant to Section 6.04..
6.02 Survival of Representations, Warranties, Covenants and
Agreements; Knowledge of Breach.
Notwithstanding any otherwise applicable statute of
limitations, the representations and warranties included or
provided for in this Agreement shall survive the Closing until
eighteen month after the Closing Date; provided, however, that
(i) any representations and warranties contained in
Sections 4.08(c), 4.12 and 4.21 hereof shall survive the Closing
until the expiration of the applicable statute of limitations
(including any waivers or extensions thereof) with respect to
such matters; and (ii) the representations and warranties
contained in Sections 4.01, 4.02, 4.03, 4.04, 5.01 and 5.02 shall
survive the Closing for a period of 10 years. The covenants and
agreements contained in this Agreement shall survive the Closing
until the date or dates specified therein or the expiration of
the applicable statute of limitations (including any waivers or
extensions thereof) with respect to such matters, whichever is
later. Except with respect to the representations, warranties,
covenants and agreements contained in Articles II and XI, in no
event shall Buyer be liable to the ECA Indemnified Parties (as
hereinafter defined) or ECA be liable to the Buyer Indemnified
Parties (as hereinafter defined), as the case may be, for any
breach of the representations, warranties, covenants and
agreements included or provided for herein or in any schedule or
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certificate or other document delivered pursuant to this
Agreement, unless and until all claims for which damages are
recoverable hereunder by Buyer or ECA, as the case may be, exceed
$5,000,000 in the aggregate, in which case Buyer or ECA, as the
case may be, shall be entitled to recover $2,500,000 and all such
damages in excess of $5,000,000; provided, however, that for
purposes of calculating the amount of claims for which damages
are recoverable hereunder by Buyer or ECA, as the case may be,
the representations and warranties shall be deemed not to be
modified by any materiality standard, materiality exception or
materiality qualification using the phrases "material," "Material
Adverse Effect" or similar terminology.
6.03 Indemnification by Buyer
For the period commencing on the Closing Date and ending, as
the case may be, upon the expiration of the periods specified in
Section 6.02, Buyer shall, subject to the limitations set forth
in Section 6.02, indemnify, defend and hold harmless ECA and its
Affiliates, and its and their directors, officers, employees and
shareholders, attorneys, accountants and agents (collectively,
the "Seller Indemnified Parties") against and in respect of all
losses, damages, liabilities, costs and expenses (including
reasonable attorneys' fees and disbursements incurred in
investigating, preparing or defending any claims covered hereby)
(collectively, "Losses") sustained or incurred arising out of any
breaches of Buyer's representations, warranties, covenants and
agreements set forth in this Agreement (other than
representations, warranties, covenants and agreements set forth
in Article XI, as to which the indemnification provisions set
forth in Article XI shall govern).
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6.04 Indemnification by ECA
(a) For the period commencing on the Closing Date and
ending, as the case may be, upon the expiration of the periods
specified in Section 6.02, ECA shall, subject to the limitations
set forth in Section 6.02, indemnify, defend and hold harmless
Buyer and its Affiliates, including, after the Closing,
Mountaineer Gas and its Subsidiaries, and its and their
respective directors, officers, employees, shareholders,
attorneys, accountants and agents (collectively, the "Buyer
Indemnified Parties") against and in respect of all Losses
sustained or incurred arising out of any breaches of the Sellers'
representations, warranties, covenants and agreements set forth
in this Agreement (other than representations, warranties,
covenants and agreements set forth in Article XI, as to which the
indemnification provisions set forth in Article XI shall govern).
(b) Any payments pursuant to this Section 6.04 or Article
XI shall be treated as an adjustment to the Purchase Price for
all Tax purposes.
6.05 Other Limitations
No claim for indemnification pursuant to this Article VI may
be brought with respect to a breach of a representation,
warranty, covenant or agreement after the applicable expiration
date set forth in Section 6.02.
6.06 Notice and Payment of Claims
(a) Notice
An Indemnified Party shall notify the Indemnifying Party
within a reasonable period of time after it becomes aware of
facts tending to support a claim for indemnification under this
Article VI, and shall provide the Indemnifying Party as soon as
practicable thereafter all information and documentation
necessary to support and verify any Loss associated with such
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claim. The failure by an Indemnified Party so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of
any liability that it may have to any Indemnified Party, except
to the extent that the Indemnifying Party demonstrates that it
has been prejudiced by the Indemnified Party's failure to give
such notice in a timely manner or failure to provide such
information or documentation, as the case may be.
(b) Payment
In the event a claim for indemnification under this
Article VI shall have been finally determined, the amount of the
related Loss shall be paid by the Indemnifying Party to the
Indemnified Party, in immediately available funds, within two
Business Days after such final determination.
(c) Third Party Claims
In the event that an Indemnifying Party may be required
to indemnify an Indemnified Party against any claim or legal
action made or brought by a third party, indemnification shall be
provided in accordance with the following procedures:
(i) Upon receipt by an Indemnified Party of notice of
the commencement of any action by a third party (a "Third Party
Claim") against it, such Indemnified Party shall, if a claim is
to be made against an Indemnifying Party under this Article VI,
give notice to the Indemnifying Party of the commencement of such
Third Party Claim as soon as practicable, but in no event later
than thirty calendar days after the Indemnified Party shall have
been served with process, but the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of
any liability that it may have to any Indemnified Party, except
to the extent that the Indemnifying Party demonstrates that its
defense of such Third Party Claim has been prejudiced by the
Indemnified Party's failure to give such notice in a timely
manner.
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(ii) If a Third Party Claim is brought against an
Indemnified Party and proper notice of the commencement of such
Third Party Claim is provided to the Indemnifying Party, the
Indemnifying Party will be entitled, to the extent permitted by
applicable law, to participate in the defense of such Third Party
Claim and, to the extent that the Indemnifying Party wishes, to
assume the defense of such Third Party Claim with counsel
satisfactory to the Indemnified Party. Following notice from the
Indemnifying Party to the Indemnified Party of its election to
assume the defense of such Third Party Claim, the Indemnifying
Party shall not, as long as the Indemnifying Party zealously
conducts such defense, be liable to the Indemnified Party under
this Article VI for any fees of other counsel or any other
expenses with respect to the defense of such Third Party Claim,
in each case subsequently incurred by the Indemnified Party in
connection with the defense of such Third Party Claim.
(iii) If the Indemnifying Party assumes the defense
of a Third Party Claim, (A) it will be conclusively established
for purposes of this Agreement that the claims made in the Third
Party Claim are within the scope of and subject to
indemnification under this Article VI, (B) no compromise or
settlement of such Third Party Claim may be effected by the
Indemnifying Party without the Indemnified Party's consent unless
(I) there is no finding or admission of any violation of laws,
statutes, regulations or any violation of the rights of any
Person, and (II) the sole relief provided is monetary damages
that are paid in full by the Indemnifying Party.
(iv) In the event that the Indemnifying Party timely
defends, contests or otherwise protects the Indemnified Party
against an action by a third party, the Indemnified Party shall
nevertheless have the right to, but shall not be obligated to,
participate at its own expense in the defense of the action by a
third party with counsel of its own choosing.
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(v) In the event the Indemnifying Party fails
zealously to defend, contest or otherwise protect against any
action by a third party in a timely matter, the Indemnified Party
may, but shall not be obligated to, defend, contest or otherwise
protect against the same, and make any compromise or settlement
thereof and shall be entitled to recover the entire cost thereof
from the Indemnifying Party, including reasonable attorneys'
fees, disbursements and all amounts paid as a result of such
claim or suit or the compromise or settlement thereof; provided,
however, that if the Indemnifying Party subsequently undertakes
the defense of such matter, the Indemnified Party shall not be
entitled to recover from the Indemnifying Party its costs
thereafter incurred in the defense thereof other than the
reasonable cost of investigation undertaken by the Indemnified
Party and reasonable cost of providing assistance.
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ARTICLE VII - COVENANTS AND CERTAIN ACTIONS OF THE PARTIES
7.01 Obligations of the Seller
(a) Conduct of Mountaineer business, Etc.
Except as permitted by this Agreement and any of the
Ancillary Agreements and except as the Buyer may otherwise
consent in writing, during the Interim Period the Seller shall:
(i) carry on Mountaineer's business in the ordinary
course, in substantially the same manner in which it is presently
being conducted, and to the extent consistent with such business
and with Mountaineer's employment policies and practices, use
reasonable best efforts to preserve the present business
organization, keep available the services of the Employees on
terms and conditions no less favorable to Mountaineer than those
on which such employees are presently employed, and preserve its
relationship with customers, suppliers and others having business
dealings with Mountaineer;
(ii) to the extent within the control of Mountaineer,
maintain all of Mountaineer's existing Permits and all other
Permits required for Mountaineer to carry on its business as set
forth in clause (i) above;
(iii) maintain Mountaineer's assets in accordance
with its normal repair and maintenance practices,
(iv) not enter into or amend in any material respect
(A) any bonus, incentive compensation, deferred compensation,
profit sharing, retirement, pension, group insurance, death
benefit or other fringe benefit plan, trust agreement, or
arrangement applicable to the Employees or (B) any compensation,
severance or consulting agreement with any such Employee, other
than in the ordinary and usual course of business consistent with
past practice or as required by law;
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(v) refrain from disposing, leasing, making any
contract, or subject to lien any material portion of
Mountaineer's assets;
(vi) maintain the insurance coverage shown on Seller's
Disclosure Schedule;
(vii) to the extent within the control of
Mountaineer, refrain from doing any act or omitting to do any act
that is (A) reasonably likely to cause a breach of any contract
or material Permit held by Mountaineer, or (B) which is
reasonably likely to cause any of the representations and
warranties of the Seller or Mountaineer contained herein not to
be true and correct in any material respect;
(viii) advise and consult with the Buyer in advance
of any material actions (including, without limitation, rate
filings) to be taken with respect to regulatory matters or other
contested matters;
(ix) not make or authorize (A) any capital expenditures
which individually are in excess of $600,000 or (B) any
commitments for expenditures beyond fiscal year 2000 which,
individually are in excess of $600,000 (excluding therefrom those
arising as a result of an emergency and necessary to insure the
safety of the public or as may be ordered by regulatory
authorities);
(x) use best efforts to comply in all respects with
all Legal Requirements applicable to Mountaineer;
(xi) maintain with respect to Mountaineer's business,
books of account and records in the usual, regular and ordinary
manner, on a consistent basis and in accordance with all
applicable accounting and legal requirements including GAAP;
(xii) use reasonable best efforts to obtain any
consent of third parties necessary to complete the transactions
contemplated by this Agreement;
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(xiii) except (A) as permitted by this Agreement, or
(B) as required by applicable
Legal Requirements, not (I) enter into any material contract
relating to Mountaineer's business or assets, (II) modify, amend,
or terminate any material contract, (III) waive, release,
relinquish or assign any material contract, right or claim,
provided that, in each case, Mountaineer may do any of the
foregoing in the ordinary course of business consistent with past
practice;
(xiv) not knowingly acknowledge the validity of any
material claim asserted against the Seller or Mountaineer by a
third party adverse to the interests of the Seller or Mountaineer
with respect to the Shares or Mountaineer's business unless
required by applicable Legal Requirements or settle any material
claim relating thereto;
(xv) maintain and administer the employee benefits in
the ordinary and usual course of business consistent with past
practices, including but not limited to complying with all Legal
Requirements related to the Plans;
(xvii) refrain from incurring any liability for
borrowed money, mortgage, pledge or encumber any of Mountaineer's
assets, enter into any agreements relating to the incurrence of
additional debt, except in the ordinary course of business, or
alter terms or extend the maturity of any existing indebtedness;
(b) Access and Information
During the Interim Period and after the Closing Date,
the Seller shall (i) give, or shall cause to be given, to the
Buyer and its employees, agents and representatives full access
at all reasonable times to specified officers of Mountaineer and
to the portions of the Sellers' and Mountaineer's financial and
operating data, properties, books, files, records, and property
records of the Seller or Mountaineer relating to Mountaineer's
assets and business and will furnish or shall cause to be
furnished, all information and documents relating to
Mountaineer's business as the Buyer may reasonably request, (ii)
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permit the Buyer to contact and meet with the employees of
Mountaineer and others having business relations with such, at
such place or places and at such times as reasonably designated
by the Buyer and acceptable to the Seller, and (iii) allow Buyer
to conduct environmental assessments of Mountaineer's properties
provided, that such investigation shall not interfere in any
material respect with Mountaineer's business, or relationships
with Employees, and provided further, that such investigation
shall not affect the representations and warranties hereunder of
the Seller or Mountaineer. The Seller shall permit the Buyer to
make copies of such information relating to Mountaineer's
business contained in the books, files and records of the Seller
or Mountaineer and to enter such information as Buyer may deem
appropriate into Buyer's accounting records.
(c) Material Change
If, during the Interim Period, the Seller shall become
aware of the occurrence, change or event (other than one
generally known to the public or to those in the gas utility
industry and other than general economic or weather conditions)
which is reasonably likely to have a Material Adverse Effect on
Mountaineer or materially and adversely affect the ability of any
Seller to consummate the transaction contemplated herein, ECA
shall promptly advise the Buyer of such occurrence, change or
event. ECA shall give prompt notice to Buyer of the occurrence or
non-occurrence of any fact or event which is reasonably likely to
cause any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect or any
covenant, condition or agreement under this Agreement not to be
complied with or satisfied in any material respect.
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7.02 Obligations of the Buyer
(a) Material Change
If during the Interim Period, the Buyer shall become
aware of the occurrence of any change in the financial condition
of the Buyer and its subsidiaries, taken as a whole, or any
development, occurrence or event (other than one generally known
to the public or known generally to those in the electric or gas
utility industry and other than general economic or weather
conditions) which is reasonably likely to materially and aversely
affect the ability of the Buyer to consummate the transactions
contemplated herein, the Buyer shall promptly advise the Seller
of such change, development, occurrence or event. Buyer shall
give prompt notice to Seller of the occurrence or non-occurrence
of any fact or event which is reasonably likely to cause any
representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect or any covenant,
condition or agreement under this Agreement not to be complied
with or satisfied in any material respect.
(b) Other Obligations of the Buyer
(i) During the Interim Period and to the extent within
its control, the Buyer shall refrain from doing any act or
omitting to do any act which is reasonably likely to cause any of
the representations and warranties of the Buyer contained herein
not to be true and correct in any material respect.
(ii) During the Interim Period, the Buyer shall use
reasonable best efforts to obtain any consent of third parties
necessary to complete the transactions contemplated by this
Agreement.
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7.03 Joint Obligations
(a) Regulatory Filings
The Parties agree to cooperate and diligently prosecute
all applications for, and use their reasonable efforts promptly
to obtain, such approvals or forbearances from all applicable
federal, state and local authorities, including, without
limitation, the West Virginia PSC, the Securities and Exchange
Commission, the Federal Trade Commission, and such other
governmental authorities as shall be necessary to permit the
consummation of the transactions contemplated by this Agreement
and the Ancillary Agreements and shall use reasonable efforts to
bring about the satisfaction as soon as practicable of all the
conditions contained in Article VIII and otherwise to effect the
consummation as soon as practicable of the transactions
contemplated by this Agreement and the Ancillary Agreements;
provided, however, that nothing in this Section 7.03(a) shall
require, or be construed to require Buyer or any of its
Affiliates to proffer to, or agree to sell or hold separate and
agree to sell, before or after the Closing Date any assets,
businesses, or interest in any assets or businesses of Buyer,
Mountaineer or any of their respective Affiliates (or to consent
to any sale, or agreement to sell, by Mountaineer of any of its
assets or businesses) or to agree to any material changes or
restriction in the operations of Mountaineer's assets or
businesses. Subject to applicable Laws relating to the exchange
of information, each Party shall have the right to review in
advance, and to the extent practicable each will consult the
other on, all the information relating to such Party and its
Affiliates that appear in any filing made with, or written
materials submitted to, any third party and/or any Governmental
Entity in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements. In exercising the
foregoing right, each Party shall act reasonably and as promptly
as practicable. Each Party shall, upon request by the other,
furnish the other with all information concerning itself, its
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Affiliates, directors, officers and stockholders and such other
matters as may be reasonably necessary or advisable in connection
with the applications specified in this Section 7.03(a). Each
Party shall keep the other apprised of the status of matters
relating to completion of the transactions contemplated by this
Agreement, including promptly furnishing the other with copies of
notice or other communications received by such Party, or any of
its Affiliates, from any third party and/or any Governmental
Entity with respect to the transactions contemplated by this
Agreement and the Ancillary Agreements.
In the event such authorizations, approvals, orders, permits
or decrees related to this Agreement shall contain any material
condition or requirement that would have a Material Adverse
Effect on the Seller or the Buyer, then such Party shall have the
right, at its expense, to seek administrative or judicial
rehearing or review of such authorizations, approvals, orders,
permits or decrees. Should either the Seller or the Buyer elect
to seek such administrative or judicial rehearing or review, then
the Buyer and the Seller will diligently pursue such rehearing or
review and will cooperate with each other in connection with such
rehearing or review.
(b) Public Disclosure
During the Interim Period, neither the Buyer nor the
Seller shall make, nor permit any of their respective Affiliates
or representatives to make, any news release or other public
disclosure pertaining to this Agreement or the transactions
contemplated hereby without the prior approval, unless
impracticable to obtain under the circumstances, of the other as
to both form and content, which approval shall not be
unreasonably withheld, delayed or conditioned. Notwithstanding
the foregoing, either Party may make such news release or other
public disclosure which, in the opinion of such Party's counsel,
is required to be made by such Party pursuant to applicable law,
including the federal securities laws, or as may be required by
any national securities exchange.
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(c) Purchase by Buyer's Subsidiary or Affiliate
The parties acknowledge that Buyer itself may not
purchase the Shares, but that a subsidiary or an Affiliate of
Buyer may purchase the Shares. It shall be Buyer's obligation
and cost to so establish and/or designate the corporate entity to
purchase the Shares. ESC agrees to sell the Shares to said
corporate entity. Allegheny Energy, Inc. may assign its rights
and obligations pursuant to this Agreement to any of its wholly
owned Subsidiaries without the consent of any other party to this
Agreement. Allegheny Energy, Inc. agrees to give the Sellers
prompt written notice of any such assignment.
(d) Further Assurances
Subject to the terms and conditions of this Agreement,
each of the Parties hereto will use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the sale of the
Shares pursuant to this Agreement, including without limitation
using its best efforts to ensure satisfaction of the conditions
precedent to such party's obligations hereunder. Neither of the
Parties hereto will, without prior written consent of the other
Party, take or fail to take any action, which would reasonably be
expected to prevent or materially impede, interfere with or delay
the transactions contemplated by this Agreement. From time to
time after the date hereof, the Buyer will, at its own expense,
execute and deliver such documents to the Seller as the Seller
may reasonably request in order to consummate more effectively
the sale of the Shares pursuant to this Agreement.
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(e) Transition Matters
ECA shall cause Mountaineer to terminate the employment
by Mountaineer of each of the Mountaineer employees in the
following positions: Chief Executive Officer, Strategic Planning
Executive, President, Senior Vice President, Chief Information
Officer, Controller/Treasurer, Regulatory Affairs Manager, and
Human Resources Manager (the "Management Employees") and shall
employ each such Management Employee on the same terms and with
the same salary and benefits as applied to such Management
Employee's employment by Mountaineer, in each case as of and with
effect from the close of business on the last calendar day prior
to the Closing Date. ECA shall pay all of the costs and assume
liabilities (including severance and benefits payments and
liabilities under state and federal law) in connection with such
terminations and employment, shall hold Mountaineer harmless
therefrom, and shall comply, and cause Mountaineer to comply with
applicable law in connection with such terminations and
employment.
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ARTICLE VIII - CONDITIONS PRECEDENT
8.01 Preamble
The respective obligations set forth herein of the Seller
and the Buyer to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or before the Closing
Date, of the conditions set forth in Section 8.02, in the case of
the Seller, and of the conditions set forth in Section 8.03, in
the case of the Buyer. Any of the following conditions may be
waived in whole or in part by the Party who is to receive the
benefit of the obligation to be performed.
8.02 Conditions to Obligations of the Seller
(a) Representations and Warranties of the Buyer
The representations and warranties of the Buyer in
Article V shall be true and correct when made and shall be true
and correct at and as of the Closing with the same effect as
though made at and as of the Closing. The Buyer shall have duly
performed and complied with all agreements and covenants
contained herein required to be performed or complied with by it
at or before the Closing.
(b) Officer's Certificate
The Buyer shall have delivered to the Seller a
certificate dated as of the Closing Date and signed by its
Chairman, President or a Vice President as to the fulfillment of
the conditions set forth in Section 8.02 hereof.
(c) Opinion of Counsel
The Seller shall have received from counsel for the
Buyer an opinion in form and substance reasonably satisfactory to
the Seller concerning (i) the enforceability of this Agreement
and Ancillary Agreements, (ii) the due incorporation of
Mountaineer, (iii) that Seller has good title to the Shares, and
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(iv) that no shareholder approval that has not been obtained is
required, which opinion shall be limited to the laws of the State
of West Virginia.
(d) Regulatory Approval
All regulatory authorizations, including those recited
in Section 7.03(a) hereof,
required for the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements shall have been
received and shall be final and shall not contain any terms or
conditions which, individually or in the aggregate, are
reasonable likely to have a Material Adverse Effect on
Mountaineer.
(e) Consents
Any and all consents, permits, approvals, waivers and
other actions of any person, required for the consummation of the
transactions contemplated by this Agreement and the Ancillary
Agreements shall have been received, and shall be in full force
and effect.
(f) Absence of Litigation
No order, stay, judgment or decree shall have been
issued and be in effect by any court restraining or prohibiting the
Closing and no action, suit or proceeding shall be pending (or
threatened by any governmental or regulatory body) seeking to restrain
or prohibit or questioning the validity or legality of the consummation
of the transactions, contemplated by this Agreement or the Ancillary
Agreements or seeking damages in connection therewith.
(g) Execution and Delivery of the Lease and Development
Agreement.
8.03 Conditions to Obligations of the Buyer
(a) Representations and Warranties of the Seller
The representations and warranties of the Seller in
Article IV shall be true and correct when made and shall be true and
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correct at and as of the Closing with the same effect as though made
at and as of the Closing. The Seller shall have duly performed and
complied with all agreements and covenants contained herein required
to be performed or complied with by it at or before the Closing.
(b) Officer's Certificate
The Seller shall have delivered to the Buyer a
certificate, dated the Closing Date and signed by its Chairman,
President or any Vice President, as to the fulfillment of the
conditions set forth in Section 8.03 hereof.
(c) Opinion of Counsel
The Buyer shall have received from counsel for the
Seller in form and substance reasonably satisfactory to the
Buyer concerning the enforceability of this Agreement and
Ancillary Agreements which opinion shall be limited to the laws
of the State of West Virginia.
(d) Regulatory Approval
All regulatory authorizations, including those recited
in Section 7.03(a) hereof,
required for the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements shall have been
received and shall be final and shall not contain any terms or
conditions which, individually or in the aggregate, are
reasonably likely to have a Material Adverse Effect on
Mountaineer.
(e) Consents
Any and all consents, permits, approvals and other actions of any
person, required for the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements shall
have been received, and shall be in full force and effect and
shall not contain any terms or conditions which, individually or
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in the aggregate, are reasonably likely to have a Material
Adverse Effect on Mountaineer.
(f) Absence of Litigation
No order, stay, judgment or decree shall have been
issued and be in effect by
any court restraining or prohibiting the Closing; and no action,
suit or proceeding shall be pending (or threatened by any
governmental or regulatory body) seeking to restrain or prohibit
or question the validity or legality of the consummation of the
transactions contemplated by this Agreement the Ancillary
Agreements or seeking material damages in connection therewith.
(g) Execution and Delivery of Lease and Development
Agreement.
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ARTICLE IX - CLOSING AND SETTLEMENT
9.01 Closing
(a) The Closing shall take place at the offices of Goodwin
& Goodwin, LLP, 1500 One Valley Square, Charleston, West Virginia
25301 at 10:00 A.M. local time, on the Closing Date, or at such
other time and place as the Parties hereto may mutually agree.
(b) At the Closing, subject to the satisfaction or waiver
of the conditions set forth in Article VIII:
(i) ECS shall deliver to Buyer certificates
representing the Shares, duly endorsed and in form for transfer
to Buyer; and
(ii) Buyer shall pay to ECA, by wire transfer to an
account designated by ECA not fewer than two Business Days prior
to the Closing, immediately available funds equal to the Purchase
Price.
(c) The Sellers and Buyer shall cause all intercompany
accounts between Mountaineer Gas and its Subsidiaries, on the one
hand, and the Sellers and their respective Affiliates (other than
Mountaineer Gas and its Subsidiaries), on the other hand, to be
canceled as of the Closing Date.
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ARTICLE X - TERMINATION
10.01 Termination
This Agreement and the transactions contemplated hereby may
be terminated and abandoned upon the occurrence of any of the
following:
(a) At any time prior to the Closing Date by mutual written
consent of the Buyer and the Seller; or
(b) By the Buyer or the Seller at any time after 18 months
after the date of this Agreement if Closing has not occurred; or
(c) By the Buyer, at any time following the date or dates
that any regulatory authorizations or orders issued by any
regulatory agencies having jurisdiction which, individually or in
the aggregate, contain any terms or conditions that would cause
the condition set forth in Section 8.03(d) not to be satisfied,
have become final; or
(d) By the adversely affected Party, at any time after the
date two (2) months following the issuance of the last regulatory
authorization required for the consummation of the transactions
contemplated by this Agreement to occur at Closing, if one or
more conditions precedent to the terminating Party's obligations
as set forth in Article VIII, other than the obtaining of
required regulatory authorizations, shall have been and remains
unfulfilled; or
(f) By Buyer upon the occurrence prior to Closing of a
Material Adverse Change or Material Adverse Effect.
The power of termination and abandonment of the transactions
contemplated by this Agreement pursuant to this Section 10.01 may
be exercised by the Seller only after authorization by the Board
of Directors of the Seller or by the Buyer only after
authorization by the Board of Directors of the Buyer, and will be
effective only after written notice thereof, signed on behalf of
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the Party for which it is given by a duly authorized officer,
shall have been given to the other Party hereto.
10.02 Limitation on Right to Terminate; Effect of Termination
If this Agreement is terminated as permitted under Section
10.01 hereof, this Agreement shall thereafter become void and
have no effect and no Party shall have liability to any Party, or
any shareholder, director, officer, employee, agent, servant,
consultant or representative of such Party except for the
obligations of the parties hereto contained in this Section 10.02
and Section 12.03; provided, however, that if such termination
shall result from the failure of any Party to fulfill a condition
to the Closing or to perform a covenant of this Agreement or from
a breach of this Agreement by any Party thereto, then such Party
shall be fully liable for any and all direct and indirect costs,
not including consequential damages, sustained or incurred by the
other Party.
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ARTICLE XI - TAXES
11.01 Section 338(h)(10)
(a) Election
At the request of the Buyer, ECA shall make a joint
election with Buyer under Section 338(h)(10) of the Code with
respect to the purchase of the Shares and under any similar
provisions of state or foreign law. ECA represents that its sale
of the Shares is eligible for, and Buyer represents that it is
qualified to make, such election. If the election is made, ECA
and Buyer shall on the Closing Date exchange completed and
executed copies of Internal Revenue Service Form 8023, required
schedules thereto, and any similar state and foreign forms. If
any changes are required in these forms as a result of
information which is first available after the Closing Date, the
parties will promptly agree on such changes.
(b) Allocation of Purchase Price
If an election under Section 338(h)(10) of the Code is
made, ECA and Buyer will (i) cause their respective accountants
to negotiate in good faith, on their behalf, and agree to a
purchase price and an allocation of that price among the assets
of Mountaineer that are deemed to have been acquired pursuant to
Section 338(h)(10) of the Code or state or foreign law
equivalent. Buyer and ECA shall use the asset values determined
from such allocation for purposes of all reports and returns with
respect to Taxes, including Internal Revenue Service Form 8594 or
any equivalent statement.
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11.02 Liability for Taxes and Related Matters
(a) Liability for Taxes.
(i) ECA shall be liable for and indemnify Buyer for
all Taxes (including, without limitation, any obligation to
contribute to the payment of a tax determined on a consolidated,
combined or unitary basis with respect to a group of corporations
that includes or included Mountaineer and Taxes resulting from
Mountaineer ceasing to be a member of the Seller's Group or
attributable to the election to be made under Section 338(h)(10)
of the Code and any state or foreign law equivalents) (a) imposed
on Seller's Group (other than the Purchased Entity) for any
taxable year, (b) imposed on Mountaineer or for which Mountaineer
may otherwise be liable for any taxable year or period that ends
on or before the Closing Date and, with respect to any taxable
year or period beginning before and ending after the Closing
Date, the portion of such taxable year ending on and including
the Closing Date. Except as set forth in (d), ECA shall be
entitled to any refund of Taxes of Mountaineer received for such
periods.
(ii) Buyer shall be liable for and indemnify ECA for
the Taxes of Mountaineer for any taxable year or period that
begins after the Closing Date and, with respect to any taxable
year or period beginning before and ending after the Closing
Date, the portion of such taxable year beginning after the
Closing Date. The Buyer shall be entitled to any refund of Taxes
of Mountaineer received for such periods.
(b) Taxes for Short Taxable Year.
For purposes of Sections 11.02(a)(i) and (a)(ii),
whenever it is necessary to determine the liability for Taxes of
Mountaineer for a portion of a taxable year or period that begins
before and ends after the Closing Date, the determination of the
Taxes of Mountaineer for the portion of the year or period ending
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on, and the portion of the year or period beginning after, the
Closing Date shall be determined by assuming that Mountaineer had
a taxable year or period which ended at the close of the Closing
Date, except that exemptions, allowances or deductions that are
calculated on an annual basis, such as the deduction for
depreciation, shall be apportioned on a time basis.
(c) Adjustment to Purchase Price.
Any payment by Buyer or ECA under this Article XI will
be an adjustment to the Purchase Price.
(d) Refunds from Carrybacks.
If ECA becomes entitled to a refund or credit of Taxes
for any period for which it is liable under Section 11.02(a)(i)
to indemnify Buyer and such Taxes are attributable solely to the
carryback of losses, credits or similar items attributable to
Mountaineer and from a taxable year or period that begins after
the Closing Date, ECA shall promptly pay to the Buyer the amount
of such refund or credit together with any interest thereon. In
the event that any refund or credit of Taxes for which a payment
has been made is subsequently reduced or disallowed, the Buyer
shall indemnify and hold harmless ECA for any tax liability,
including interest and penalties, assessed against ECA by reason
of the reduction or disallowance.
(e) Tax Returns.
ECA shall file or cause to be filed when due all Tax
Returns that are required to be filed by or with respect to
Mountaineer for taxable years or periods ending on or before the
Closing Date and shall pay any Taxes due in respect of such Tax
Returns, and Buyer shall file or cause to be filed when due all
Tax Returns that are required to be filed by or with respect to
Mountaineer for taxable years or periods ending after the Closing
Date and shall remit any Taxes due in respect of such Tax
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Returns. ECA shall pay Buyer the Taxes for which ECA is liable
pursuant to Section 11.02(a)(i) but which are payable with Tax
Returns to be filed by Buyer pursuant to the previous sentence
within 10 days prior to the due date for the filing of such Tax
Returns.
(f) Contest Provisions.
Buyer shall promptly notify ECA in writing upon receipt
by Buyer, any of its Affiliates or Mountaineer of notice of any
pending or threatened federal, state, local or foreign income or
franchise tax audits or assessments which may materially affect
the tax liabilities of Mountaineer for which ECA would be
required to indemnify Buyer pursuant to Section 11.02(a)(i),
provided that failure to comply with this provision shall not
affect Buyer's right to indemnification hereunder. ECA shall
have the sole right to represent Mountaineer's interests in any
tax audit or administrative or court proceeding relating to
taxable periods ending on or before the Closing Date, and to
employ counsel of its choice at its expense. Notwithstanding the
foregoing, ECA shall not be entitled to settle, either
administratively or after the commencement of litigation, any
claim for Taxes which would adversely affect the liability for
Taxes of the Buyer or Mountaineer for any period after the
Closing Date to any extent (including, but not limited to, the
imposition of income tax deficiencies, the reduction of asset
basis or cost adjustments, the lengthening of any amortization or
depreciation periods, the denial of amortization or depreciation
deductions, or the reduction of loss or credit carryforwards)
without the prior written consent of Buyer. Such consent shall
not be unreasonably withheld, and shall not be necessary to the
extent that ECA has indemnified the Buyer against the effects of
any such settlement.
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ECA shall be entitled to participate at its expense in
the defense of any claim for Taxes for a year or period ending
after the Closing Date which may be the subject of
indemnification by ECA pursuant to Section 11.02(a)(i) and, with
the written consent of Buyer, and at its sole expense, may assume
the entire defense of such tax claim. Neither Buyer nor
Mountaineer may agree to settle any tax claim for the portion of
the year or period ending on the Closing Date which may be the
subject of indemnification by ECA under Section 11.02(a)(i)
without the prior written consent of ECA, which consent shall not
be unreasonably withheld.
(g) Termination of Tax Allocation Agreements.
Any tax allocation or sharing agreement or arrangement,
whether or not written, that may have been entered into by ECA or
any member of Seller's Group and Mountaineer shall be terminated
as to Mountaineer as of the Closing Date, and no payments which
are owed by or to Mountaineer pursuant thereto shall be made
thereunder, except to the extent such obligation is reflected on
the Closing Date Balance Sheet.
11.03 Transfer Taxes
ECA shall be liable for all transfer taxes arising from the
sale of the Shares.
11.04 Information to be Provided by Buyer.
With respect to the taxable year of ECA ending for the most
recent full tax year and the periods prior to the Closing Date,
Buyer shall promptly cause the Purchased Entity to prepare and
provide to ECA a package of tax information materials (the "Tax
Package"), which shall be completed in accordance with past
practice including past practice as to providing the information,
schedules and work papers and as to the method of computation of
separate taxable income or other relevant measure of income of
Mountaineer. Buyer shall cause the Tax Package for the portion
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of the taxable period ending on the Closing Date to be delivered
to ECA within one hundred twenty (120) days after the Closing
Date.
11.05 Assistance and Cooperation
After the Closing Date, each of ECA and Buyer shall:
(i) assist (and cause their respective Affiliates to
assist) the other party in preparing any Tax Returns or reports
which such other party is responsible for preparing and filing in
accordance with this Article XI;
(ii) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of
Mountaineer;
(iii) make available to the other and to any taxing
authority as reasonably requested all information, records, and
documents relating to Taxes of Mountaineer;
(iv) provide timely notice to the other in writing of
any pending or threatened tax audits or assessments of
Mountaineer for taxable periods for which the other may have a
liability under this Article XI; and
(v) furnish the other with copies of all
correspondence received from any taxing authority in connection
with any tax audit or information request with respect to any
such taxable period.
11.06 Survival of Obligations
The obligations of the parties set forth in this Article XI
shall be unconditional and absolute and shall remain in effect
without limitation as to time.
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ARTICLE XII - MISCELLANEOUS
12.01 Modification; Waiver
This Agreement may be modified, amended or supplemented only
by a written instrument executed by the Buyer and the Seller.
The failure of either Party to enforce or insist upon compliance
with any of the terms or conditions of this Agreement shall not
constitute a general waiver or relinquishment of any such terms
or conditions, but the same shall be and remain at all times in
full force and effect.
12.02 Entire Agreement
This Agreement and the Ancillary Agreements, including the
Schedules and Exhibits hereto and thereto, constitute the entire
agreement of the Parties hereto with respect to the subject
matter hereof and supersedes any and all other prior
understandings, contracts or agreements, representations or
warranties, oral or written, among the Parties hereto in respect
of the subject matter of this Agreement.
12.03 Expenses
Whether or not the transactions contemplated herein shall be
consummated, each Party shall (except as otherwise specifically
provided herein) pay its own expenses incident to the preparation
and performance of this Agreement, including broker's fees and
commissions.
12.04 Rights and Remedies
The rights and remedies granted under this Agreement shall
not be exclusive rights and remedies, but shall be in addition to
all other rights and remedies available at law or in equity.
12.05 Further Actions
Each Party shall execute and deliver such other
certificates, agreements, conveyances, certificates of title and
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other documents and take such other actions as may reasonably be
requested by the other Party in order to consummate or implement the
transactions contemplated by this Agreement.
12.06 Notices
All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed, registered mail, first-class
postage paid,
If to the Seller:
Mr. John Mork, President
Energy Corporation of America
4643 South Ulster, Suite 1100
Denver, CO 80237
Copies to:
Thomas R. Goodwin
Goodwin & Goodwin, LLP
1500 One Valley Square
Charleston, WV 25301
If to the Buyer:
Allegheny Energy, Inc.
Attn: Jay Pifer, President
800 Cabin Hill Drive
Greensburg, PA 15601-1689
Copies to:
Allegheny Power
Attn: Tom Henderson, General Counsel
10435 Downsville Pike
Hagerstown, MD 21740
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and:
Mathew G. Hurd
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
12.07 Assignment
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned, by operation of law or
otherwise, by any Party hereto without the prior written consent
of the other Party, except pursuant to Section 7.03(c). This
Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns. Except as
aforesaid, nothing in this Agreement, express or implied, is
intended to confer upon any person other than the Parties hereto
and their said successors and assigns, any rights, remedies or
obligations under or by reason of this Agreement.
12.08 Severability
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any adverse manner to
either Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
Parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as
closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent
possible.
12.09 Counterparts
This Agreement may be executed in one or more counterparts,
all of which shall constitute one and the same instrument.
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12.10 Headings
The article and section headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or
affect the meaning or interpretation of any provisions hereof.
12.11 Governing Law; Submission to Jurisdiction; Selection of
Forum
This Agreement shall be construed, performed and enforced in
accordance with the laws of the State of West Virginia, without
reference to the conflict of laws principles thereof. Each party
hereto agrees that it shall bring any action or proceeding in
respect of any claim arising out of or related to this agreement
or the transactions contained in or contemplated by this
agreement, whether in tort or contract or at law or in equity,
exclusively in the United States District Court for the Southern
District of West Virginia (the "Chosen Court") and
(i) irrevocably submits to the exclusive jurisdiction of the
Chosen Court, (ii) waives any objection to laying venue in any
such action or proceeding in the Chosen Court, (iii) waives any
objection that the Chosen Court is an inconvenient forum or does
not have jurisdiction over any party hereto and (iv) agrees that
service of process upon such party in any such action or
proceeding shall be effective if notice is given in accordance
with Section 12.06 of this Agreement.
12.12 Construction
The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any item disclosed in Seller's
Disclosure Schedule under any specific Section number thereof or
disclosed in reference to any specific Section hereof, shall be
deemed to have been disclosed by Seller for all purposes of this
Agreement in response to other Sections of the Seller's
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Disclosure Schedule to the extent buy only to the extent that
such disclosure is specifically cross-referenced to such other
Section(s).
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
SELLER
ENERGY CORPORATION OF AMERICA
By: /S/ JOHN MORK
John Mork
Its: President and Chief
Executive Officer
SELLER
EASTERN SYSTEMS CORPORATION
By: /S/ MICHAEL S. FLETCHER
Michael S. Fletcher
Its: President
BUYER
ALLEGHENY ENERGY, INC.
By: /S/ JAY PIFER
Jay Pifer
Its: President
70
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT (this "Agreement"), dated as of
December 20, 1999, between Allegheny Energy, Inc., a Maryland
corporation ("AYE") and Energy Corporation of America, a West
Virginia corporation ("ECA").
RECITALS
WHEREAS, the parties desire to coordinate their efforts
in the identification and acquisition of certain gas and gas-
related assets and properties, and/or certain business entities
that engage in gas and gas-related activities, upon the terms and
subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the agreements set
forth herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS
Section 1.01. Certain Definitions. As used in this
Agreement, the terms set forth in Appendix A have the meanings
ascribed to them therein.
Section 1.02. Schedule of Definitions. As used in this
Agreement, the terms set forth in Appendix B have the meanings
ascribed to them in the Sections of this Agreement indicated in
such Appendix.
ARTICLE II
PARTICIPATION
Section 2.01. Election to Participate. (a) Promptly
following AYE's execution of Preliminary Documentation with respect
to any Gas Assets, AYE will provide ECA with a written notification
(the "Notification") to the effect that AYE is evaluating such Gas
Assets (any Gas Assets as to which AYE provides a Notification, a
"Confidential Acquisition"). Each Notification will include an
estimate of the date on which AYE and the seller or issuer of
such Confidential Acquisition are reasonably likely to execute
definitive documentation concerning AYE's acquisition of such
Confidential Acquisition (the "Estimate Date"). Subject to the
prior execution by ECA of a confidentiality agreement between ECA
and the seller or issuer of such Confidential Acquisition in form
and substance substantially identical to the confidentiality
agreement between AYE and such seller or issuer, AYE will furnish
to ECA, if and as received, all information received by AYE from
such seller or issuer. AYE makes no, and shall not be deemed to
make any, representation or warranty concerning any information
furnished to ECA concerning any Confidential Acquisition, or as
NY12524:42727.4
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to the past, present or future operating or financial performance
of the Confidential Acquisition. ECA agrees that it will satisfy
itself as to the accuracy and sufficiency of the matters on which
it relies in making any investment decision with respect to each
Confidential Acquisition. Following its receipt of the
Notification, ECA shall refrain from engaging in negotiations,
discussions or other activities that could result in a failure by
AYE to purchase the Confidential Acquisition. AYE shall have no
obligation to acquire or invest in any Confidential Acquisition
and shall have no obligation to enter into any discussions or
negotiations or to continue to engage in any discussions or
negotiations concerning any Confidential Acquisition. AYE shall
control any discussions and negotiations between AYE and/or ECA
(on the one hand) and third parties (on the other hand)
concerning the acquisition of each Confidential Acquisition, but
AYE shall afford ECA a reasonable opportunity to participate in
such discussions and negotiations. ECA shall not engage in any
discussions or negotiations with third parties concerning any
Confidential Acquisition without the prior consent of AYE.
(b) With respect to each Confidential Acquisition that
is a Gas Acquisition, ECA will provide AYE with a written
notification (each, a "Gas Acquisition Election") as to whether
ECA elects to exercise its rights pursuant to Section 2.02, not
fewer than 30 calendar days prior to the Estimate Date. With
respect to each Confidential Acquisition that is a Pooling
Acquisition, ECA will provide AYE with a written notification
(each, a "Pooling Acquisition Election") as to whether ECA elects
to exercise its rights pursuant to Section 2.03 not fewer than 30
calendar days prior to the Estimate Date.
(c) If the Confidential Acquisition consists of Gas
Assets, then not fewer than 20 calendar days prior to the
Estimate Date AYE will provide ECA with a financial model showing
the capitalization of a hypothetical business entity, the only
assets of which are such Gas Assets. The value of the equity
capital of such hypothetical entity as set forth in such model
(the "Initial Equity Amount") shall not exceed the long term
indebtedness of such entity set forth therein.
(d) ECA shall notify AYE of the Selected Percentage not
fewer than 15 calendar days prior to the Estimate Date.
Section 2.02. Selected Gas Acquisitions. AYE and ECA
agree that following AYE's receipt of a Gas Acquisition Election
stating that ECA has elected to exercise its rights pursuant to this
section, AYE and ECA will negotiate in good faith appropriate
contractual arrangements with respect to the related Selected Gas
Acquisition pursuant to which, if and only if AYE acquires such
Selected Gas Acquisition during the Reference Period or within 18
months following the end of the Reference Period: (i) AYE and ECA
will form a Selected Gas Entity for the purpose of acquiring,
holding and disposing of such Selected Gas Acquisition, and (ii)
ECA will purchase or otherwise acquire for value an ECA Interest.
In connection with such negotiations, the parties will negotiate
in good faith appropriate contractual arrangements concerning the
acquisition, holding, operation and disposition of such Selected
Gas Acquisition and the related Interests. Such contractual
arrangements:
(a) Will contain provisions that are not reasonably
likely to (i) cause a material delay or complication in obtaining
regulatory approval for the acquisition of such Selected Gas
-2-
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Acquisition or the related AYE Interest or ECA Interest, (ii)
cause the acquisition transaction not to qualify for any tax,
accounting or regulatory treatment, the failure to qualify for
which would either have a significant adverse on AYE, or to the
benefits to AYE of the acquisition of the Selected Gas
Acquisition or the related AYE Interest or the attractiveness to
the seller or issuer of such Selected Gas Acquisition of AYE's
proposal to acquire the Selected Gas Acquisition, or (iii) result
in any tax, accounting or regulatory conditions or circumstances
that would have a significant adverse effect on the ownership or
operation by AYE of the Selected Gas Acquisition, the AYE
Interest or any of AYE's other assets or properties, and
(b) Will provide that upon the payment by ECA to AYE of an
amount of cash equal to the product of (i) the Selected
Percentage, multiplied by (ii) the Initial Equity Amount, ECA
will acquire an ECA Interest representing a percentage "passive"
equity interest or similar "synthetic" equity in the related
Selected Gas Entity equal to the Selected Percentage.
(c) Will provide AYE with complete management and
operating control of the Selected Gas Entity and will provide
ECA with a "passive" equity interest or similar synthetic equity
in such Selected Gas Entity, and
(d) Will provide that the long term indebtedness of
or attributable to the Selected Gas Acquisition will be
refinanced and replaced by intercompany loans extended by AYE or
one of its Affiliates to the related Selected Gas Entity, the
interest on which will be equal to such intercompany lender's
cost of funds relating to the indebtedness incurred by such
lender in connection with the making of such intercompany loans,
and
(e) Will provide that AYE and ECA will have the same
rights and obligations with respect to Interests as those
provided in Article IV, and will contain provisions analogous to
those set forth in Articles III and VI.
AYE and ECA shall use their respective best efforts to
ensure that the foregoing contractual arrangements have been
executed and delivered at least five Business Days prior to the
Estimate Date.
Section 2.03. Pooling Acquisitions. AYE and ECA agree that
following AYE's receipt of an Election stating that ECA has
elected to exercise its rights pursuant to this Section 2.03, AYE
and ECA will negotiate in good faith appropriate contractual
arrangements with respect to the related Pooling Acquisition (and
shall negotiate in good faith concerning whether such
arrangements should be comprised of (i) modifications to this
Agreement applicable to subsequent Gas Acquisitions, (ii)
consulting and advisory arrangements with respect to such Pooling
Acquisition, and/or (iii) other contractual arrangements)
pursuant to which, if and only if AYE acquires such Pooling
Acquisition during the Reference Period or within 18 months
following the end of the Reference Period:
(a) ECA will pay to AYE at least two years and one day
following the date of consummation of such Pooling Acquisition, but
not prior to two years and one day following the date of such
consummation, cash equal to the product of (i) the Selected
Percentage, multiplied by (ii) the market value of the equity
consideration paid by AYE in connection with such Pooling
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Acquisition, which shall be determined in the manner set forth in
Section 4.06(j) as of the date of the consummation of such
Pooling Acquisition.
(b) At least two years and one day following the date
of consummation of such Pooling Acquisition, but not prior to two
years and one day following the date of such consummation or
prior to the payment referred to in Section 2.03(a), ECA will
have "synthetic equity" or other economic rights as equivalent as
may be practicable (in light of the factors specified in clause
(a) of Section 2.02 and in light of the requirements for "pooling
of interests" accounting treatment) to such economic rights as
ECA would have if ECA had purchased a percentage equity interest
in such Pooling Acquisition equal to the Selected Percentage.
(c) AYE and ECA will have substantially the same rights
and obligations with respect to such economic rights as those
provided in Article IV with respect to AYE Interests and ECA
Interests.
Such contractual arrangement will contain provisions
analogous to those set forth in Articles III and VI.
Section 2.04. Agreement Concerning Combined Gas and
Electric Acquisitions. In the event that during the Reference
Period AYE acquires assets or securities of an entity which operates
one or more electric utilities, and such assets or securities do not
constitute Gas Assets solely because the gross revenues of or
attributable to such entity or assets that are derived from
Covered Activities in the Territory (after giving effect to any
disposition of assets and businesses not acquired by AYE) do not
equal or exceed 50% of the gross revenues of or attributable to
such entity or assets, each of AYE and ECA will entertain
reasonable proposals from the other party concerning, and shall
discuss in good faith, whether and on what terms AYE and ECA
should cooperate in the ownership, operation and/or disposition
of such assets of the acquired entity or such portion of the
acquired assets as may be engaged or employed in connection with
Covered Activities in the Territory.
Section 2.05. Agreement Concerning Financing
Arrangements. The parties recognize that this Agreement broadly
prohibits the creation of liens, encumbrances and security
interests on or with respect to Interests. In connection with
the negotiations referred to in Section 2.02, AYE and ECA will
negotiate in good faith appropriate contractual arrangements (and
shall negotiate in good faith concerning whether such
arrangements should be comprised of modifications to this
Agreement and/or other contractual arrangements) concerning the
matters set forth in Article IV intended (i) to permit ECA to
borrow funds sufficient to make the payments contemplated by
Section 2.02(b), (ii) to accommodate such liens, encumbrances and
security interests as attach to AYE's assets and properties by
operation of federal or state law or in the ordinary course of
AYE's financing activities, (iii) to safeguard and protect AYE's
right to acquire an ECA Interest in the event a lender forecloses
or otherwise takes possession or title to such ECA Interest or
executes upon a lien, encumbrance or security interest thereon,
and (iv) to safeguard and protect ECA's right to acquire an AYE
Interest in the event a lender forecloses or otherwise takes
possession or title to such AYE Interest or executes upon a lien,
encumbrance or security interest thereon.
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ARTICLE III
REGULATORY APPROVALS
Section 3.01. Approval of Acquisitions. The effectiveness
of this Agreement will be conditioned upon the occurrence of the
Closing. The effectiveness of all contractual arrangements
concerning the matters specified in Sections 2.02 and 2.03 and
Article IV will be conditioned upon prior approval of the
Securities and Exchange Commission (the "SEC") if and to the
extent required by the Public Utility Holding Company Act of
1935, as amended, and the rules and regulations thereunder
(collectively, the "1935 Act"), and upon the prior receipt of any
other required regulatory approvals. AYE and ECA will negotiate
in good faith to cause such contractual arrangements to contain
such terms and conditions as are not reasonably likely to cause
such approvals to be withheld, delayed or conditioned.
ARTICLE IV
DISPOSITIONS
Section 4.01. General. Neither AYE nor ECA shall make any
Disposition to any Person unless such Disposition is expressly
permitted by and made in accordance with this Agreement. AYE and
ECA shall cause each Selected Gas Entity not to reflect on its
books any Disposition except Dispositions expressly permitted by
and made in accordance with, this Agreement. Any Disposition not
permitted by and made in accordance with this Agreement (an
"Impermissible Disposition"), including but not limited to
Dispositions made without prior compliance with the provisions of
this Article IV, shall be null and void ab initio. AYE and ECA
agree to cooperate in obtaining any regulatory approvals required
in connection with any Disposition made in accordance with this
Agreement.
Section 4.02. Dispositions By AYE. If at any time AYE
makes a determination to sell any AYE Interest, it shall submit to ECA a
written offer (an "Offer") with respect to such Disposition
specifying the price and the other material terms and conditions,
including deferred payment mechanics (if applicable) pursuant to
which AYE proposes to sell the AYE Interest. Such Offer shall
state that ECA is entitled to purchase, at its option and in
accordance with the provisions of this Agreement, all of the AYE
Interest for such price and on such other terms and conditions.
Section 4.03. Election to Purchase or to "Tag-Along". Upon
receipt of an Offer, ECA shall have the right (but not the
obligation), which it may exercise by delivering a written notice
of such exercise (an "Exercise Notice") to AYE within 30 calendar
days of the date of dispatch of such Offer, to either (i)
purchase all (but not less than all) of the AYE Interest for the
price and on the other terms and conditions, including deferred
payment mechanics (if applicable), set forth in the Offer, or,
alternatively, (ii) authorize and direct AYE, as agent and
attorney-in-fact for ECA, to offer the corresponding ECA Interest
for sale to any third party to which AYE offers to sell the AYE
Interest and to take all actions necessary or appropriate to sell
such ECA Interest on behalf of ECA, in each case on the same
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terms, and subject to the same conditions, as are applicable to
the AYE Interest (except for the price, which shall be
proportionate to the price for the AYE Interest), it being
understood that AYE may not sell the ECA Interest to any Person
other than the Person which acquires the corresponding AYE
Interest (the "Acquiror"). ECA may exercise either, but not
both, of the rights described in clauses (i) and (ii) of the
previous sentence but shall be under no obligation to exercise
either such right. Any Exercise Notice shall, together with the
Offer, constitute a valid, legally binding and enforceable
agreement on the part of ECA to either purchase such AYE Interest
from AYE for the price and on the other terms and conditions,
including deferred payment mechanics (if applicable) set forth in
the Offer, or to sell such ECA Interest to the Acquiror on the
same terms and subject to the same conditions as are applicable
to the sale of the AYE Interest (except the price, which shall be
proportionate to the price for the AYE Interest), each as the
case may be. If ECA shall have made the election contemplated by
clause (ii) of the first sentence of this Section 4.03 (the "Tag-
Along Election") within the time period specified in such
sentence, ECA shall execute such instruments and documents as may
be necessary to confirm AYE's power and authority as agent and
attorney-in-fact of ECA to offer and sell of the ECA Interest on
ECA's behalf.
Section 4.04. If ECA Elects to Purchase. If ECA shall
have made the election contemplated by clause (i) of the first
sentence of Section 4.03 (the "Purchase Election") within the time
period specified in such sentence, then subject to compliance with
applicable laws and regulations and the obtaining of such
regulatory approvals as may be required, the purchase and sale of
the AYE Interest shall be consummated as soon as practicable
following the receipt of all regulatory approvals required in
connection with such transaction. Such disposition shall be
effected by (i) AYE's delivery to ECA of documents sufficient to
effect the sale to ECA of the AYE Interest, and (ii) ECA's
delivery to AYE of the purchase price set forth in the Offer,
subject to any deferred payment mechanics (if any) set forth
therein, in cash, by wire transfer or by certified or official
bank check. AYE hereby (i) warrants to ECA that, as of the
consummation of such purchase and sale transaction the sale and
delivery of the AYE Interest shall vest in ECA good legal title
and beneficial ownership of the AYE Interest, free and clear of
all liens, charges, encumbrances, restrictions, equities, options
and claims, other than those incurred by action of ECA and (ii)
agrees to indemnify and hold harmless ECA against any losses or
damages arising out of any breach of the warranty set forth in
clause (i) of this sentence.
Section 4.05. If ECA Does Not Elect to Purchase.
(a) If ECA does not make a Purchase Election or Tag Along Election
within the time period specified in Section 4.03, AYE shall have the
right, which may be exercised at any time during the period prior
to the 150th calendar day following the date of dispatch of the
Offer (the "Drag-Along Period"), to elect to cause ECA to sell
the ECA Interest to the Acquiror at a price and subject to other
terms and conditions which are (i) not more favorable in the
aggregate to the Acquiror than those specified in the Offer
(other than the price, which shall be proportionate to the price
for the AYE Interest), and (ii) identical (except the price,
which shall be proportionate to the price for the AYE Interest)
to the terms and conditions of the sale of the AYE Interest (any
such election, a "Drag-Along Election").
(b) AYE may exercise a Drag-Along Election by furnishing
written notice thereof to ECA prior to the expiration of the Drag-
Along Period. The consummation of the purchase and sale of the
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ECA Interest shall occur contemporaneously with the consummation
of the purchase and sale of the AYE Interest. If AYE shall cause
the Acquiror to purchase the ECA Interest, such purchase shall be
at a price and subject to terms and conditions which are (i) not
more favorable in the aggregate to the Acquiror than those
specified in the Offer (other than the price, which shall be
proportionate to the price for the AYE Interest), and (ii) are
identical (except the price, which shall be proportionate to the
price for the AYE Interest) to the price, terms and conditions
applicable to the sale of the AYE Interest;
(c) If ECA does not make a Purchase Election within
the time period specified in Section 4.03, AYE may, at any time
within 180 days following the date of dispatch of the Offer, enter
into an agreement to sell the AYE Interest to any Person. Any such
sale of an AYE Interest shall be made to the Acquiror at a price and
on other terms and conditions not more favorable in the aggregate
to the Acquiror than those specified in the Offer. If ECA shall
have made the Tag-Along Election, AYE shall not sell or agree to
sell the AYE Interest unless the Acquiror agrees to purchase all
of the ECA Interest on terms and conditions identical (except the
price, which shall be proportionate to the price for the AYE
Interest) to the price, terms and conditions applicable to the
sale of the AYE Interest. If an Acquiror shall not have entered
into definite documentation concerning the purchase of the AYE
Interest within 180 calendar days following the date of dispatch
of the Offer, the AYE Interest shall continue to be subject to
the rights of first offer set forth in this Article IV, and AYE's
power and authority as agent and attorney-in-fact of ECA with
respect to the ECA Interest shall terminate.
Section 4.06. Other Purchase Rights. (a) Impermissible
Disposition by AYE. AYE agrees to furnish to ECA prompt written
notice upon becoming aware of the occurrence of an Impermissible
Disposition with respect to an AYE Interest. If such
Impermissible Disposition has not been reversed, rescinded or
canceled within 30 calendar days following the date of dispatch
by AYE of a notice with respect to a particular Impermissible
Disposition (the "AYE Impermissible Disposition Cure Period"),
ECA shall have the right, which may be exercised at any time
during the period of 30 calendar days following the elapse of the
Impermissible Disposition Cure Period to elect to purchase the
AYE Interest at Fair Market Value in accordance with this Section
4.06. Notwithstanding the foregoing, ECA shall retain all causes
of action, rights and remedies in respect of a breach by AYE of
its obligations under this Agreement to which ECA would otherwise
be entitled under applicable law.
(b) Impermissible Dispositions by ECA. ECA agrees to
furnish to AYE prompt written notice upon becoming aware of the
occurrence of an Impermissible Disposition with respect to an ECA
Interest. If such Impermissible Disposition has not been
reversed, rescinded or canceled within 30 calendar days following
the date of dispatch by ECA of a notice with respect to a
particular Impermissible Disposition (the "ECA Impermissible
Disposition Cure Period"), AYE shall have the right, which may be
exercised at any time during the period of 30 calendar days
following the elapse of the Impermissible Disposition Cure Period
to elect to purchase the ECA Interest at Fair Market Value in
accordance with this Section 4.06. Notwithstanding the
foregoing, AYE shall retain all causes of action, rights and
remedies in respect of a breach by ECA of its obligations under
this Agreement to which AYE would otherwise be entitled under
applicable law.
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(c) AYE Call Right. AYE shall have the right, which may be
exercised at any time following the second anniversary of the
acquisition by ECA of an ECA Interest, to elect to purchase all,
but not less than all, of such ECA Interest for Fair Market Value
in accordance with this Section 4.06.
(d) ECA Put Right. ECA shall have the right, which
may be exercised at any time following the second anniversary of the
acquisition by ECA of an ECA Interest, to elect to cause AYE to
purchase all, but not less than all, of such ECA Interest for
Fair Market Value in accordance with this Section 4.06.
(e) AYE Change of Control. AYE shall have the right,
which may be exercised at any time following the termination of this
Agreement by AYE pursuant to Section 5.02, to elect to purchase
all, but not less than all, of any ECA Interest for Fair Market
Value plus the Control Premium in accordance with this Section
4.06.
(f) ECA Change of Control. AYE shall have the right,
which may be exercised at any time following the termination of this
Agreement by AYE pursuant to Section 5.03, to elect to purchase
all, but not less than all, of any ECA Interest for Fair Market
Value in accordance with this Section 4.06.
(g) Closing. If either AYE or ECA elects to exercise
any right pursuant to Section 4.06(a), through (f), such party (the
"Exercising Party") shall provide to the other a written
notification of such exercise (any such notification, a "Put/Call
Notice") prior to the expiration of the period of time during
which such right may be exercised. The consummation of the
purchase and sale of the Interest to which the Put/Call Notice
relates, shall occur on the fifteenth calendar day following the
last to occur of (x) the final determination of the Fair Market
Value of the Interest, and (y) the receipt of all governmental
and regulatory approvals required for the consummation of such
purchase and sale (or if such fifteenth calendar day is not a
business day, then the next succeeding business day), at 10:00
a.m., local time, at a location in Pittsburgh, Pennsylvania
mutually agreed upon by AYE and ECA.
(h) Warranties. AYE warrants to ECA, with respect to
each Interest that is the subject of a Put/Call Notice and is an AYE
Interest, and ECA warrants to AYE, with respect to each Interest
that is the subject of a Put/Call Notice and is an ECA Interest,
that the sale and delivery of such Interest at the closing of the
purchase and sale of such Interest shall vest in the Exercising
Party good legal title to and beneficial ownership of such
Interest, free and clear of all liens, charges, encumbrances,
restrictions, equities, options and claims, other than such as
may be imposed by action of the Exercising Party. Each party
agrees to indemnify and hold harmless such Exercising Party
against any losses or damages arising out of any breach of the
warranty set forth in the previous sentence.
(i) AFair Market Value@ means the price which a willing
buyer would pay to a willing seller for the Interest in question in an
arms= length negotiated transaction without undue time
constraints, and shall be determined in U.S. dollars as of the
date of dispatch of the Put/Call Notice. AControl Premium @
means, with respect to any ECA Interest, an amount equal to the
product of (i) the aggregate Achange of control premium,@ if any,
received or to be received by AYE stockholders as a result of the
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<PAGE>
related AYE Change in Control, as determined in accordance with
Section 4.06(j), multiplied by (ii) the product of (A) the amount
that would have been shown on AYE=s books at the time of the
consummation of the AYE Change in Control as the book value of
such ECA Interest if AYE had acquired such ECA Interest at the
time ECA acquired such ECA Interest, divided by (B) the aggregate
book value of AYE=s assets at the time of the consummation of the
AYE Change in Control.
(j) Any Determination Amount shall be determined, if
possible, by the mutual agreement of AYE and ECA. If AYE and ECA are
unable to reach such an agreement within 30 calendar days
following the receipt of the Put/Call Notice, the Determination
Amount shall be determined by a nationally recognized investment
banking firm jointly selected by AYE and ECA. If AYE and ECA are
unable to mutually agree on an investment banking firm, each
shall choose an investment banking firm and the two firms so
chosen shall select a third investment banking firm. The third
firm so selected shall determine the Determination Amount, which
determination shall be final and binding on the parties. If
either party shall fail to select an investment banking firm
within 10 calendar days following receipt from the other party of
a notice specifying such failure, or if the two investment
banking firms shall fail to select a third investment banking
firm, such third investment banking firm shall be selected by the
American Arbitration Association or by arbitration in accordance
with the Commercial Arbitration Rules thereof. The parties shall
instruct such third investment banking firm so retained to
deliver to such parties a written opinion as to the Determination
Amount within 60 days following the selection of such firm. The
cost of determining the Determination Amount, including the fees
and expenses of such investment banking firms, shall, unless
otherwise agreed by the parties in writing, be borne equally by
AYE, on the one hand, and ECA, on the other hand.
(k) Each party agrees to furnish to each investment
banking firm referred to in Section 4.06(j) such financial,
business and other information as is reasonably necessary to
allow it to evaluate the business, financial condition and
results of operation of the related Selected Gas Entity, subject
to the execution of a reasonable confidentiality agreement by
such investment banking firm.
ARTICLE V
TERMINATION
Section 5.01. Mutual Agreement. This Agreement may be
terminated at any time by the mutual written consent of AYE and
ECA.
Section 5.02. AYE Change of Control. AYE agrees to furnish
to ECA 30 days' prior written notice upon becoming aware of the
occurrence of an AYE Change in Control. AYE shall have the
right, which may be exercised at any time during the period of 90
calendar days following the consummation of any AYE Change in
Control, to terminate this Agreement.
Section 5.03. ECA Change of Control. ECA agrees to furnish
to AYE 30 days' prior written notice upon becoming aware of the
occurrence of an ECA Change in Control. AYE shall have the
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right, which may be exercised at any time during the period of 90
calendar days following the date that AYE receives such notice or
otherwise becomes aware of an ECA Change in Control, to terminate
this Agreement.
Section 5.04 Automatic Termination. This Agreement
shall terminate automatically on the second anniversary of the
last day of the Reference Period.
ARTICLE VI
CONFIDENTIALITY; NONCOMPETITION; NONSOLICITATION
Section 6.01. Confidential Information Provided to ECA. (a)
From and after the date hereof and until the fifth anniversary of
the last day of the Reference Period, ECA (i) shall hold and
shall use its reasonable efforts to cause its Affiliates,
officers, directors, employees, representatives, consultants and
advisors (collectively with ECA, the "ECA Group") to hold in
strict confidence, unless compelled to disclose by judicial or
administrative process, or, in the opinion of its counsel, by
other requirements of law or the rules of any applicable stock
exchange, all Confidential Information that it has obtained
(except to the extent that such information can be shown to have
been (x) previously actually known by any member of the ECA
Group, or (y) in the public domain through no fault of any member
of the ECA Group), (ii) shall not release or disclose, and shall
cause each member of the ECA Group not to release or disclose,
Confidential Information to any other Person (other than members
of the ECA Group and its auditors, counsel and lenders who need
to know such information for the purpose of evaluating a
Confidential Acquisition), and (iii) will not use such
Confidential Information to the detriment of AYE. If any member
of ECA Group shall be required by legal process to make
disclosure of any such Confidential Information, ECA shall give
AYE prior written notice of the making of such disclosure (which
notice shall attach a copy of such legal process) and shall use
all reasonable efforts to afford AYE an opportunity to, and will
cooperate with AYE if AYE chooses to, contest the making of such
disclosure.
(b) In addition to the covenants contained in Section
6.01(a), ECA shall, and shall cause each member of the ECA Group to,
use any Confidential Information of or relating to any Selected Gas
Entity solely for the purpose of owning or holding the related
ECA Interest.
Section 6.02. Confidential Information Provided to AYE.
(a) From and after the date hereof and until the fifth anniversary of
the last day of the Reference Period, AYE (i) shall hold and shall
use its reasonable efforts to cause its Affiliates, officers,
directors, employees, representatives, consultants and advisors
(collectively with AYE, the "AYE Group") to hold in strict
confidence, unless compelled to disclose by judicial or
administrative process, or, in the opinion of its counsel, by
other requirements of law or the rules of any applicable stock
exchange, all Confidential Information that it has obtained
(except to the extent that such information can be shown to have
been (x) previously actually known by any member of the AYE
Group, or (y) in the public domain through no fault of any member
of the AYE Group), (ii) shall not release or disclose, and shall
cause each member of the AYE Group not to release or disclose,
Confidential Information to any other Person (other than members
of the AYE Group and its auditors, counsel and lenders who need
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to know such information for the purpose of evaluating a Confidential
Acquisition), and (iii) will not use such Confidential Information to
the detriment of ECA. If any member of AYE Group shall be required by
legal process to make disclosure of any such Confidential Information,
AYE shall give ECA prior written notice of the making of such disclosure
(which notice shall attach a copy of such legal process) and shall use
all reasonable efforts to afford ECA an opportunity to, and will
cooperate with ECA if ECA chooses to, contest the making of such
disclosure.
(b) In addition to the covenants contained in Section 6.02(a),
AYE shall, and shall cause each member of the AYE Group to, use any
Confidential Information of or relating to any Selected Gas
Entity solely for the purpose of owning or holding the related
AYE Interest.
Section 6.03. Confidentiality of Acquisition Discussions.
ECA shall not, and ECA will use its reasonable efforts to cause the
ECA Group to not, discuss a Confidential Acquisition with any
other person or disclose to any other Person either the fact that
discussions or negotiations are taking place concerning a
Confidential Acquisition or any of the terms, conditions or other
facts with respect to any such Confidential Acquisition,
including the status thereof; provided, however, that any member
of the ECA Group may make such disclosure to the extent such
member has received the written opinion of ECA's outside counsel
that such disclosure is required to be made in order to avoid
violating the federal securities laws and ECA is otherwise not in
breach of this Agreement.
Section 6.04. Noncompetition. (a) In consideration for
being furnished with Confidential Information, ECA hereby covenants and
agrees that until two years after the Reference Period, ECA shall
not directly or indirectly acquire any financial or beneficial
interest in, provide services with respect to, lease or own,
manage, operate or control any Confidential Acquisition that does
not result in the acquisition by ECA of an ECA Interest.
(b) In consideration for being furnished with
Confidential Information, ECA hereby covenants and agrees that is
will not, directly or indirectly (whether as an owner, partner,
stockholder, employee, director, officer, agent, consultant or
the equivalent of any person or entity), engage in, assist any
other person or entity to engage in, or have any equity,
financial, proprietary, ownership or like interest in, any
business which is in competition with the business conducted by
any Selected Gas Entity.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Survival. Articles IV and VI shall survive
termination of this Agreement.
Section 7.02. Amendment and Waiver. Any provision of
this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and signed, in the case of an
amendment, by AYE and ECA, or in the case of a waiver, by the
party against whom the waiver is to be effective. No failure or
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<PAGE>
delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.
Section 7.03. Performance and Assignment. Any action or
obligation to be performed by AYE under this Agreement shall be
deemed to be performed by AYE if such action or obligation is
performed by a Subsidiary of AYE. No party to this Agreement may
assign or delegate any of its rights or obligations under this
Agreement without the prior written consent of the other party
hereto, except that AYE may assign or delegate any or all of its
rights under this Agreement to any wholly owned Subsidiary or
Subsidiaries of AYE. Any assignment made in violation of this
Section 7.03 shall be null and void.
Section 7.04. Expenses. Except as otherwise expressly
provided in this Agreement, whether or not the transactions contemplated
by this Agreement are consummated, the parties shall bear their
own respective expenses (including, but not limited to, all
compensation and expenses of counsel, financial advisors,
consultants, actuaries and independent accountants) incurred in
connection with this Agreement and the transactions contemplated
hereby.
Section 7.05. Parties in Interest; No Third Party
Beneficiaries. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any Person other than AYE and ECA and
their successors or permitted assigns any rights or remedies
under or by reason of this Agreement.
Section 7.06. Public Disclosure. Each of the parties to
this Agreement hereby agrees with the other parties hereto that,
except as may be required to comply with the requirements of
applicable law or the rules and regulations of each stock
exchange upon which the securities of one of the parties or its
Affiliates is listed, no press release or similar public
announcement or communication will be made or caused to be made
concerning the execution or performance of this Agreement unless
specifically approved in advance by all parties hereto; provided,
however, that, to the extent that either party to this Agreement
is required by law or the rules and regulations of any stock
exchange upon which the securities of one of the parties or its
Affiliates is listed to make such a public disclosure, such
public disclosure shall only be made after prior consultation
with the other party to this Agreement.
Section 7.07. Entire Agreement. This Agreement (including
all Annexes and Schedules hereto) and any agreement between AYE and
ECA making specific reference to this Section 8.06 constitutes
the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect to such matters.
Section 7.08. Counterparts. This Agreement and any
amendments hereto may be executed in one or more counterparts, each
of which shall be deemed to be an original, and all of which shall be
considered one and the same instrument.
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Section 7.09. Schedules. The inclusion of any matter in any
schedule to this Agreement shall be deemed to be an inclusion for
all purposes of this Agreement, including each representation and
warranty as to which the relevance of such matter is readily
apparent, but inclusion therein shall expressly not be deemed to
constitute an admission by AYE or ECA, or otherwise imply, that
any such matter is material or creates a measure for materiality
for the purposes of this Agreement.
Section 7.10. Section Headings. The section and paragraph
headings and table of contents contained in this Agreement are
for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
Section 7.11. Notices. All notices hereunder shall be deemed
given if in writing and delivered personally or sent by facsimile
or by registered or certified mail (return receipt requested) to
the parties at the following addresses (or at such other
addresses as shall be specified by like notice):
(a) if to AYE, to:
Allegheny Energy, Inc.
Attention: Jay Pifer, President
800 Cabin Hill Drive
Greensburg, Pennsylvania 15601-1689
With a copy to:
Allegheny Energy, Inc.
Attention: Thomas K. Henderson, Vice President, Legal
10435 Downsville Pike
Hagerstown, Maryland 21740
and
Sullivan & Cromwell
Attention: Matthew G. Hurd
125 Broad Street
New York, New York 10004
(b) if to ECA, to:
Energy Corporation of America
Attention: John Mork, President
4643 South Ulster, Suite 1100
Denver, Colorado 80237
With a copy to:
Goodwin & Goodwin, LLP
Attention: Thomas R. Goodwin
1500 One Valley Square
Charleston, West Virginia 25301
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Section 7.12. Governing Law; Submission to Jurisdiction;
Selection of Forum. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of West
Virginia without reference to the choice of law principles
thereof. Each party hereto agrees that it shall bring any action
or proceeding in respect of any claim arising out of or related
to this Agreement or the transactions contained in or
contemplated by this Agreement, whether in tort or contract or at
law or in equity, exclusively in the United States District Court
for the Southern District of West Virginia (the "Chosen Court")
and (i) irrevocably submits to the exclusive jurisdiction of the
Chosen Court, (ii) waives any objection to the laying of venue in
any such action or proceeding in the Chosen Court, (iii) waives
any objection that the Chosen Court is an inconvenient forum or
does not have jurisdiction over any party hereto and (iv) agrees
that service of process upon such party in any such action or
proceeding shall be effective if notice is given in accordance
with Section 7.11 of this Agreement.
Section 7.13. Severability. The provisions of this
Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provision of
this Agreement, or the application thereof to any person or entity or
any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to
carry out, so far as may be valid and enforceable, the intent and
purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision
to other persons, entities or circumstances shall not be affected
by such invalidity or unenforceability, nor shall such invalidity
or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
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IN WITNESS WHEREOF, this Agreement has been signed on
behalf of each of the parties hereto as of the date hereof.
ALLEGHENY ENERGY, INC.
By:
Name:
Title:
ENERGY CORPORATION OF AMERICA
By:
Name:
Title:
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APPENDIX A
CERTAIN DEFINITIONS
"Affiliate" means, with respect to any Person, any
other Person that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such Person.
"AYE Change in Control" means any merger or
consolidation of AYE with or into another entity, any transfer or
sale of all or substantially all of AYE's assets, any Bankruptcy
Event with respect to AYE and any assignment of the Agreement by
AYE, by operation of law or otherwise.
"AYE Interest" means, with respect to any Selected Gas
Acquisition, any equity or economic interest in the related
Selected Gas Entity, which interest is owned or held, directly or
indirectly, by AYE.
"Bankruptcy Event" means, with respect to any Person,
the occurrence of any of the following events: (i) the entry by a
United States Bankruptcy Court or by a court having jurisdiction
in the premises of (A) a decree or order for relief in respect of
such Person in an involuntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other
similar law, or (B) a decree or order adjudging such Person a
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of
or in respect of such Person under any applicable law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of such Person or of any
substantial part of its property, or ordering the winding up or
liquidation or its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 150
consecutive calendar days; or (ii) the commencement by such
Person of a voluntary case or proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar law or of
any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or order
for relief in respect of such Person in an involuntary case or
proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable law, or the consent
by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar office of such Person or
of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they
become due, or the taking of corporate, limited liability company
or partnership action by such Person in furtherance of any such
action.
"Business Day" means any day other than a Saturday, a
Sunday or a day on which banks in any of Denver, Colorado,
Hagerstown, Maryland or New York, New York are authorized or
obligated by law or executive order to close.
"Closing" means the Closing contemplated by the Stock
Purchase Agreement, dated as of December 20, 1999, among
Allegheny Energy, Inc., Energy Corporation of America and Eastern
Systems Corporation.
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"Confidential Information" means any financial,
technical, operational or other information (including, without
limitation, analyses, compilations, memoranda, notes, any other
writings, financial and valuation models, financial projections,
trade secrets, processes, customer lists and know-how) of or
relating to any Confidential Acquisition or Selected Gas Entity.
"Covered Activities" means the exploration,
production, storage, transportation, distribution, sale,
development, operation and marketing, regulated or otherwise, of
oil and/or natural gas.
"Determination Amount" means any of the following: (i)
the Fair Market Value of an Interest, (ii) the Change in Control
Premium, (iii) the component of the Change in Control Premium
described in the second sentence of Section 4.06(i), and (iv) the
market value of equity consideration described in clause (ii) of
Section 2.03(a).
"Dispose" means to effect a Disposition.
"Disposition" means any direct or indirect sale,
assignment (by operation of law or otherwise), transfer, pledge,
hypothecation, placement in trust (voting or otherwise) or
disposition of, lien or encumbrance on, creation of a security
interest in, or foreclosure by any person or entity other than
AYE and ECA on, any Interest A divestiture of property or assets
by a Selected Gas Acquisition or such an entity shall not
constitute a Disposition.
"ECA Change in Control" means any merger or
consolidation of ECA with or into another entity, any transfer or
sale of all or substantially all of ECA's assets, any purchase by
persons other than persons or entities controlled by the current
management of ECA of more than 50% of ECA's voting equity
securities, any Bankruptcy Event with respect to ECA and any
assignment of the Agreement by ECA, by operation of law or
otherwise.
"ECA Interest" means, with respect to any Selected Gas
Acquisition, a non-voting equity or economic interest equal to
the Selected Percentage in the related Selected Gas Entity, which
interest is owned or held, directly or indirectly, by ECA.
"Gas Acquisition" means any Gas Assets which are both
(i) the subject of Preliminary Documentation executed by AYE
during the Reference Period, and (ii) actually acquired by AYE in
transactions consummated during the Reference Period or within 18
months following the end of the Reference Period, except for:
a. Gas Assets the aggregate consideration for which
will be less than $25 million (if the consideration is "all
cash") or have a fair market value of less than $25 million
(if the consideration is anything other than "all cash"),
and
b. Pooling Acquisitions.
"Gas Assets" means both:
a. Equity securities (including securities convertible
or exchangeable for equity securities) of business entities
(other than subsidiaries of AYE), at least 50% of the gross
revenues of which (giving effect to any disposition of
assets and businesses not acquired by AYE) are derived from
Covered Activities in the Territory, and
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b. Property and other assets (other than property and
assets owned or held by subsidiaries of AYE), at least 50%
of the gross revenues attributable to which are derived from
Covered Activities in the Territory,
provided, however, that the following do not constitute
Gas Assets:
c. Interests acquired by AYE in joint ventures between
AYE and third parties, or
d. Any combustion turbine assets, cogeneration assets
or electric power generation assets, or interests or
participations therein, or
e. The assets or securities of Mountaineer Gas
Company.
"Interest" means an AYE Interest or an ECA Interest, as
the case may be.
"Person" means any individual, partnership, firm,
corporation, association, joint venture, trust or other entity,
or any government or political subdivision or agency, department
or instrumentality thereof.
"Pooling Acquisition" means any Gas Assets which are
both (i) the subject of Preliminary Documentation executed by AYE
during the Reference Period, and (ii) actually acquired by AYE in
transactions consummated in business combination transactions
intended to qualify for "pooling of interests" accounting
treatment during the Reference Period or within 18 months
following the end of the Reference Period.
"Preliminary Documentation" means, with respect to any
Gas Assets, any confidentiality agreement, letter of intent or
memorandum of understanding with respect to the acquisition by
AYE of such Gas Assets.
"Reference Period" means the period between the Closing
and the fifth anniversary of such date.
"Selected Gas Acquisition" means any Gas Acquisition as
to which ECA submits a timely Gas Acquisition Election stating
that ECA has elected to exercise its rights pursuant to Section
2.02.
"Selected Gas Entity" means any business entity or
contractual joint venture formed for the purpose of acquiring,
holding and disposing of a Gas Acquisition as to which ECA
submits a timely Gas Acquisition Election stating that ECA has
elected to exercise its rights pursuant to Section 2.02.
"Selected Percentage" means a percentage, which shall
not be less than 10% nor greater than 20%, determined by ECA in
its sole discretion.
"Subsidiary" means, with respect to any Person, any
other Person the shares of stock or other ownership interests of
which having ordinary voting power to elect a majority of the
board of directors of such Person and are at the time owned, or
the management or policies of which are otherwise at the time
controlled, directly or indirectly through one or more
intermediaries (including other Subsidiaries) or both, by such
first Person.
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"Territory" means the United States, Canada and Mexico,
and their respective territories and possessions.
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APPENDIX B
SCHEDULE OF DEFINITIONS
Term Section
1935 Act 3.01
Acquiror 4.03
Agreement Preamble
AYE Preamble
AYE Group 6.02
AYE Impermissible Disposition Cure Period 4.06
Chosen Court 7.12
Confidential Acquisition 2.01
Control Premium 4.06
Drag-Along Election 4.05
Drag-Along Period 4.05
ECA Preamble
ECA Group 6.01
ECA Impermissible Disposition Cure Period 4.06
Estimate Date 2.01
Exercise Notice 4.03
Exercising Party 4.06
Fair Market Value 4.06
Gas Acquisition Election 2.01
Impermissible Disposition 4.01
Initial Equity Amount 2.01
Notification 2.01
Offer 4.02
Pooling Acquisition Election 2.01
Purchase Election 4.04
Put/Call Notice 4.06
SEC 3.01
Tag-Along Election 4.03
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