THIS MANAGEMENT AGREEMENT (the "Agreement"), dated as of 20th day of
December 1999, between ENERGY CORPORATION OF AMERICA, a West Virginia
corporation ("ECA") of 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, XX 00000,
and ALLEGHENY ENERGY, INC., a Maryland corporation ("Allegheny") of 000 Xxxxx
Xxxx Xxxxx, Xxxxxxxxxx, XX 00000.
WHEREAS, by Stock Purchase Agreement of even date herewith (the "Stock
Purchase Agreement"), ECA has agreed to sell and Allegheny has agreed to
purchase all of the issued and outstanding stock (the "Shares") of Mountaineer
Gas Company, a West Virginia corporation ("Mountaineer") upon the terms and
conditions set forth therein (the "Stock Sale"); and
WHEREAS, in the course of the parties negotiations, the parties also have
agreed that, subject to the successful closing of the Stock Sale, Allegheny also
will engage ECA to provide management services to Mountaineer for up to five
(5) years from the Effective Date, upon the terms and conditions set forth
below.
NOW THEREFORE, for and in consideration of the sum of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt of which is hereby
acknowledged, Allegheny agrees to engage ECA and ECA agrees to provide natural
gas utility management services upon the following terms and conditions:
1. EFFECTIVE DATE. This Management Agreement shall become effective
---------------
immediately upon the Closing of the Stock Sale (the "Effective Date"). In the
event the Stock Purchase Agreement is terminated this Management Agreement shall
be null and void for all purposes.
1
2. TERM. The term of this Management Agreement shall extend for a period of
----
five (5) years after the Closing of the Stock Sale.
3. BUSINESS TO BE MANAGED. ECA shall provide management services to
-------------------------
Allegheny to manage Mountaineer and its subsidiaries.
4. MANAGEMENT SERVICES TO BE PROVIDED. All management services to be
------------------------------------
provided hereunder shall be provided by persons experienced in the natural gas
business and who are familiar with Mountaineer's operations. The management
services will entail those functions and duties customarily performed by persons
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.
ECA and Allegheny shall agree on all personnel providing such management
services. In performing its duties and functions hereunder, ECA shall abide by
the general directions and guidelines established by Allegheny. ECA shall
obtain the prior approval of Allegheny with respect to any changes in the
utilities' rates and the execution of any material contract or financing
arrangement. In making management judgments and decisions, ECA will execute
good business judgment. ECA will perform the services using such care as ECA
customarily employed, directly or indirectly through Mountaineer management, in
managing Mountaineer. ECA shall, and shall cause its employees to, keep
strictly confidential all information concerning Mountaineer's operations and
shall not disclose such information to third parties without Allegheny's consent
or except as is required by law. All records or reports prepared by ECA
concerning the utilities' operations shall remain the property of Allegheny.
2
5. MANAGEMENT FEE. Allegheny shall pay to ECA the sum of $2.5 million
---------------
per year for such management services, (the "Management Fee") which amount shall
be adjusted for inflation annually based upon the increase in the consumer price
index as reported by the Bureau of Labor Statistics of the United States
Department of Labor for the area including the city of Charleston, West
Virginia. The Management Fee shall be payable in monthly installments due on the
first day of each month, with the first monthly installment due at Closing of
the Stock Sale. Allegheny shall not be obligated to pay any installment in
respect of any month subsequent to the effective date of any termination of this
Agreement.
6. GOVERNMENTAL APPROVAL. All parties' obligations hereunder shall be
----------------------
expressly subject to the prior approval of this Management Agreement by the West
Virginia Public Service Commission and the Securities and Exchange Commission,
if and only to the extent required by the Public Utility Holding Company Act of
1935.
7. TERMINATION. Prior to the expiration of the Term as set forth in
-----------
section 2 above, this Agreement may be terminated only:
a. upon mutual agreement of ECA and Allegheny;
b. by ECA upon thirty (30) days written notice to Allegheny in the event
Allegheny fails to pay any amounts due under section 5 above;
c. by Allegheny, upon written notice to ECA in the event ECA breaches any of
its duties hereunder; provided, however, Allegheny shall first provide ECA
written notice of such breach and the right to cure such breach within thirty
(30) days after receipt of such notice; or
d. by either ECA or Allegheny upon six (6) months written notice to the
other party.
3
8. GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of West Virginia.
9. ASSIGNMENT. This Agreement may not be assigned by operation of law
----------
or otherwise, provided that Allegheny may assign its rights hereunder to any
wholly owned subsidiary of Allegheny to which Allegheny assigns its rights and
obligations pursuant to the Stock Purchase Agreement without consent of ECA.
Any assignment made in contravention of this Agreement shall be null and void.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
-----------------
of the parties with respect to the subject matter hereof and supersedes any and
all other prior understanding, contracts, agreements, representations or
warranties, oral or written, among the parties hereto with respect to the
subject matter of this Agreement.
11. NOTICE. Any notice, request, consent, waiver or other communication
------
required or permitted to be given hereunder shall be effective only if in
writing and shall be deemed sufficiently given only if delivered in person or
sent by facsimile or by certified or registered mail, postage prepaid, return
receipt requested, addressed as follows:
IF TO ECA:
-----------
Energy Corporation of America
Attn: Xxxx Xxxx, President and CEO
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
WITH COPIES TO:
----------------
Xxxxxxx & Xxxxxxx, LLP
Attn: Xxxxxx X. Xxxxxxx
0000 Xxx Xxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
4
IF TO ALLEGHENY:
-----------------
Allegheny Energy, Inc.
Attn: Xxxxx Xxxxxx, Director
000 Xxxxx Xxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
WITH COPIES TO:
----------------
Allegheny Power
Attn: Xxxxxx X. Xxxxxxxxx, Vice President, Legal
00000 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Xxxxxxxx & Xxxxxxxx
Attn: Xxxxxxx X. Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
12. BINDING EFFECT. This Agreement is intended to constitute the
---------------
legally binding and enforceable agreement of the parties hereto, their
successors and assigns.
ENERGY CORPORATION OF AMERICA
By: /S/ Xxxx Xxxx
---------------------------------------
Xxxx Xxxx
Its: President and Chief Executive Officer
ALLEGHENY ENERGY, INC.
By: /S/ Xxx Xxxxx
--------------------------------------
Xxx Xxxxx
Its: Senior Vice President
5
