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
MONONGAHELA POWER COMPANY
(Exact name of registrant as specified in its charter)
Ohio 1-5164 13-5229392
(State or other Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
1310 Fairmont Avenue
Fairmont, WV 26554
(Address of principal executive offices)
Registrant's telephone number,
including area code: (304) 366-3000
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Item 5. Other Events.
On December 20, 1999, Allegheny 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. 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
foregoing text is qualified in its entirety by the
press release dated December 20, 1999, and the stock
purchase agreement which are attached as Exhibits 99.1
and 99.2, 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
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.
Monongahela Power Company
Dated: December 28, 1999 By: /S/THOMAS K. HENDERSON
Name: Thomas K. Henderson
Title: Vice President
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EXHIBIT INDEX
Item No. 7 Exhibits
Ex.99.1 Press release dated
December 20, 1999
Ex.99.2 Stock Purchase
Agreement
STOCK PURCHASE AGREEMENT
between
ALLEGHENY ENERGY, INC.,
ENERGY CORPORATION OF AMERICA
and
EASTERN SYSTEMS CORPORATION
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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
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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:
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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).
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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.
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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.
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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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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
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-
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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.
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