EXECUTION COPY
ACQUISITION AGREEMENT
BY AND BETWEEN
MONONGAHELA POWER COMPANY
AND
MOUNTAINEER GAS HOLDINGS LIMITED PARTNERSHIP
DATED AS OF AUGUST 4, 2004
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
1.1. Definitions...........................................................1
ARTICLE II
PURCHASE AND SALE
2.1. Purchase and Sale....................................................11
2.2. Excluded Assets......................................................13
2.3. Assumed Obligations..................................................13
2.4. Excluded Obligations.................................................14
2.5. Assignment of Certain Personal Property and Vehicle Leases...........15
ARTICLE III
PURCHASE PRICE
3.1. Purchase Price.......................................................15
3.2. Post-Closing True-Up.................................................17
3.3. Release From Further Liability.......................................20
3.4. Allocation of Purchase Price.........................................20
ARTICLE IV
THE CLOSING
4.1. Time and Place of Closing............................................21
4.2. Payment of Purchase Price............................................21
4.3. Deliveries by the Seller.............................................21
4.4. Deliveries by the Buyer..............................................22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLER
5.1. Organization; Qualification..........................................22
-i-
Page
----
5.2. Authority Relative to this Agreement.................................23
5.3. Capitalization and Other Matters.....................................23
5.4. Consents and Approvals; No Violation.................................24
5.5. Company Reports......................................................24
5.6. Financial Statements.................................................25
5.7. Undisclosed Liabilities..............................................25
5.8. Absence of Certain Changes or Events.................................25
5.9. Indebtedness of the Company..........................................26
5.10. Title and Related Matters............................................26
5.11. Rights of Way and Real Property......................................29
5.12. Transportation Contracts and Sales and Purchase Contracts............29
5.13. Insurance............................................................29
5.14. Environmental Matters................................................30
5.15. Public Service Commission............................................31
5.16. Labor Matters:.......................................................31
5.17. ERISA; Employee Benefit Plans........................................33
5.18. Sufficiency of Assets................................................35
5.19. Certain Contracts and Arrangements...................................35
5.20. Legal Proceedings, Etc...............................................36
5.21. Compliance with Permits and Laws.....................................36
5.22. Tax Matters..........................................................37
5.23. Related Party Matters................................................38
5.24. Regulatory Proceedings...............................................38
5.25. Regulation as a Utility..............................................38
5.26. Intellectual Property................................................38
5.27. Fees and Commissions.................................................39
5.28. Subsidiaries and Affiliates..........................................39
5.29. Books and Records....................................................39
5.30. Accounts Receivable..................................................40
5.31. Inventory............................................................40
5.32. Plant and Equipment..................................................40
5.33. Customers and Suppliers..............................................40
5.34. Company Accounts.....................................................41
5.35. No Other Representations or Warranties...............................41
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BUYER
6.1. Organization.........................................................41
6.2. Authority Relative to this Agreement.................................41
6.3. Consents and Approvals; No Violation.................................42
6.4. Availability of Funds................................................42
6.5. Securities Act.......................................................42
6.6. Litigation; Regulatory Approvals.....................................43
-ii-
Page
----
6.7. Fees and Commissions.................................................43
ARTICLE VII
COVENANTS OF THE PARTIES
7.1. Conduct of Business Prior to the Closing.............................43
7.2. Access to Information................................................46
7.3. Expenses.............................................................48
7.4. Further Assurances; Post-Closing Payment Arrangements................49
7.5. Public Statements....................................................51
7.6. Consents and Approvals...............................................51
7.7. Tax Matters..........................................................53
7.8. Employees............................................................55
7.9. Risk of Loss.........................................................61
7.10. Tax Clearance Certificates...........................................62
7.11. Name of the West Virginia Gas Distribution Business After the
Closing..............................................................62
7.12. Insurance............................................................62
7.13. No Solicitation of Competing Transaction.............................62
7.14. Environmental Matters................................................63
ARTICLE VIII
CONDITIONS
8.1. Conditions to Each Party's Obligations to Effect the Transactions....63
8.2. Conditions to Obligations of the Buyer...............................65
8.3. Conditions to Obligations of the Seller..............................66
ARTICLE IX
INDEMNIFICATION
9.1. Indemnification......................................................67
9.2. Defense of Claims....................................................69
9.3. Tax Contest..........................................................71
ARTICLE X
TERMINATION AND ABANDONMENT
10.1. Termination..........................................................72
10.2. Procedure and Effect of Termination..................................73
-iii-
Page
----
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Amendment and Modification...........................................74
11.2. Waiver of Compliance; Consents.......................................74
11.3. Limited Survival.....................................................74
11.4. Notices..............................................................74
11.5. Assignment...........................................................75
11.6. Rights Under This Agreement; No Third Party Beneficiaries............76
11.7. Governing Law........................................................76
11.8. Counterparts.........................................................76
11.9. Interpretation; Construction.........................................76
11.10. Schedules and Exhibits...............................................76
11.11. Entire Agreement.....................................................76
11.12. Bulk Sales or Transfer Laws..........................................77
11.13. Consent to Jurisdiction..............................................77
11.14. Waiver of Jury Trial.................................................77
11.15. Guarantee of Buyer's Obligations.....................................77
Exhibit A 2004 Capital Budget
Exhibit B Form of Xxxx of Sale
Exhibit C Form of FIRPTA Affidavit
Exhibit D Form of Instrument of Assumption
Exhibit E Form of Transition Services Agreement
Exhibit F Form of Opinion of Seller's Counsel
Exhibit G Form of Opinion of Buyer's Counsel
Exhibit H Certain Indemnification Obligations
Schedule 3.1(b)(v) OPEB Actuarial Assumptions
Schedule 3.1(c)(ii) Payment of Affiliate Long-Term Liabilities
-iv-
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT, dated as of August 4, 2004 (this "Agreement"),
---------
is made by and between Monongahela Power Company, an Ohio corporation (the
"Seller"), and Mountaineer Gas Holdings Limited Partnership, a West Virginia
------
limited partnership (the "Buyer"). ArcLight Energy Partners Fund II, L.P. a
-----
Delaware limited partnership, is also executing this Agreement for the sole
purpose of its obligations pursuant to Section 11.15 of this Agreement.
WHEREAS, the Seller is engaged in the business of transporting,
distributing and selling natural gas to commercial, residential and industrial
customers in the State of West Virginia primarily through Mountaineer Gas
Company, a West Virginia corporation and a wholly-owned subsidiary of the
Seller (the "Company"), and through certain Related Assets (as defined herein)
-------
that were previously the assets of West Virginia Power Gas Service (the Company
and the Related Assets, together, are the "West Virginia Gas Distribution
------------------------------
Business"); and
--------
WHEREAS, the Seller desires to sell, and Buyer desires to purchase,
the Company Common Stock (as defined herein) and each of the Related Assets and
Buyer desires to assume each of the Assumed Obligations (as defined herein);
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1. Definitions. (a) As used in this Agreement, the following terms
-----------
have the meanings specified in this Section 1.1(a). For capitalized terms used
in this Agreement but not defined in this subsection (a), see subsection (b).
(1) "2004 Capital Budget" means the 2004 budget for capital
-------------------
expenditures for the West Virginia Gas Distribution Business attached hereto as
Exhibit A, which sets forth the projected Expansion Capital Expenditures and
---------
Maintenance Capital Expenditures for fiscal year 2004.
(2) "Acquisition Proposal" means any proposal or offer made by any
--------------------
Person other than the Buyer or any Subsidiary or Affiliate of the Buyer to
acquire all or a substantial part of the West Virginia Gas Distribution
Business or any Subsidiary of the Company or any capital stock of the Company
or any Company Subsidiary, whether by merger, tender offer, exchange offer,
sale of assets or similar transactions involving the Seller, the Company or any
Company Subsidiary.
1
(3) "Additional Capital Budget" means the capital budget of the West
-------------------------
Virginia Gas Distribution Business for any fiscal year, or portion thereof,
commencing after December 31, 2004 and prior to the Closing Date established
pursuant to the historical budgeting process of the West Virginia Gas
Distribution Business in the ordinary course of business and consistent with
past practice, with the consent of the Buyer, which consent shall not be
unreasonably withheld, which shall set forth the projected Expansion Capital
Expenditures and Maintenance Capital Expenditures for such fiscal year.
(4) "Affiliate" has the meaning set forth in Rule 12b-2 under the
---------
Exchange Act.
(5) "Affiliate Accounts Payable" means any accounts payable by the
--------------------------
Company or the Company Subsidiaries to Affiliates of the Company or any Company
Subsidiary (as determined immediately prior to the Closing), other than the
Company or any Company Subsidiary, as determined from time to time in
accordance with GAAP and using the same policies, practices and methods as used
to prepare the financial statements of the Company and the Company Subsidiaries
as of September 30, 2003. For the avoidance of doubt, Affiliate Accounts
Payable shall be treated as Current Liabilities for purposes of this Agreement.
(6) "Affiliate Long-Term Liabilities" means Long-Term Debt and other
-------------------------------
long-term liabilities owed or payable by the Company or the Company
Subsidiaries to Affiliates of the Company or any Company Subsidiary (as
determined immediately prior to the Closing), other than the Company or any
Company Subsidiary, as determined from time to time in accordance with GAAP and
using the same policies, practices and methods as used to prepare the financial
statements of the Company and the Company Subsidiaries as of September 30,
2003.
(7) "Affiliate Notes Payable" means short-term notes payable by the
-----------------------
Company or the Company Subsidiaries to Affiliates of the Company or any Company
Subsidiary (as determined immediately prior to the Closing), other than the
Company or any Company Subsidiary, as determined from time to time in
accordance with GAAP and using the same policies, practices and methods as used
to prepare the financial statements of the Company and the Company Subsidiaries
as of September 30, 2003. For the avoidance of doubt, Affiliate Notes Payable
shall be treated as Current Liabilities for purposes of this Agreement.
(8) "Affiliate Short-Term Liabilities" means, together, Affiliate
--------------------------------
Accounts Payable and Affiliate Notes Payable.
(9) "Agreement" has the meaning set forth in the Preamble.
---------
2
(10) "Xxxx of Sale" means the Xxxx of Sale to be delivered at the
------------
Closing with respect to the Related Assets which constitute personal property
and which are to be transferred at the Closing, substantially in the form of
Exhibit B hereto.
(11) "Business Day" shall mean any day other than Saturday, Sunday
------------
and any day which is a legal holiday or a day on which banking institutions in
the City of New York are authorized by law or other governmental action to
close.
(12) "Buyer" has the meaning set forth in the Preamble.
-----
(13) "Buyer Representatives" means the Buyer's accountants,
---------------------
employees, counsel, environmental consultants, financial advisors and other
authorized representatives.
(14) "CERCLA" means the Federal Comprehensive Environmental Response,
------
Compensation, and Liability Act of 1980 and any amendments thereto.
(15) "COBRA" means the Consolidated Omnibus Reconciliation Act of
-----
1985, as amended.
(16) "Code" means the Internal Revenue Code of 1986, as amended.
----
(17) "Collective Bargaining Agreements" means the collective
--------------------------------
bargaining agreements listed on Schedule 1.1(a)(17) hereto.
(18) "Company" has the meaning set forth in the Recitals.
-------
(19) "Company Common Stock" means the common stock, par value $25 per
--------------------
share, of the Company.
(20) "Company Notes" means all of the Company's issued and
-------------
outstanding (i) 7.59% Senior Notes, due October 1, 2010 (the "1995 Notes"), and
(ii) 7.83% Senior Notes, Class A, due October 31, 2009, and 8.09% Senior Notes,
Class B, due October 31, 2019 (the "1999 Notes").
(21) "Confidentiality Agreement" means the Confidentiality Agreement,
-------------------------
dated January 28, 2003, by and between Allegheny Energy, Inc. and IGS Utilities
Corp., a Delaware corporation.
(22) "Current Assets" means all current assets, excluding deferred
--------------
Taxes established to reflect temporary differences between book basis and Tax
basis of assets and liabilities, of the West Virginia Gas Distribution Business
as determined in accordance with GAAP on a basis consistent with past practice
(except as provided herein).
3
(23) "Current Liabilities" means all current liabilities, including
-------------------
accruals of sales tax, deferred income and liabilities in respect of
consideration received for services not yet performed, but excluding deferred
Taxes established to reflect temporary differences between book basis and Tax
basis of assets and liabilities, of the West Virginia Gas Distribution Business
determined in accordance with GAAP on a basis consistent with past practice
(except as provided herein); provided, however, that any amounts in respect of
-------- -------
the principal of the Company Notes that are shown on the Balance Sheets as
"long term debt due within one year" shall not constitute "Current
Liabilities." For the avoidance of doubt, "Current Liabilities" shall include
any Affiliate Accounts Payable and Affiliate Notes Payable.
(24) "Encumbrances" means any mortgages, pledges, liens, security
------------
interests, and conditional and installment sale agreements.
(25) "Environmental Claim" means any claim, action, investigation or
-------------------
written notice by any person or entity alleging potential liability (including,
without limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from (a)
the presence, or release into the environment, of any Hazardous Substance at
any location, whether or not owned or operated by Seller, the Company, or any
of the Company's Subsidiaries, or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
(26) "Environmental Laws" means all federal, state, local and foreign
------------------
laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or
judicial or administrative orders which relate to pollution or protection of
the environment (including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) including, without
limitation, laws which relate to any Release or threatened Release of any
Hazardous Substance or otherwise relate to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or handling of any
Hazardous Substance.
(27) "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended.
(28) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
(29) "Expansion Capital Expenditures" means those capital expenditures
------------------------------
made by Seller in respect of the West Virginia Gas Distribution Business, the
Company or any Company Subsidiary, in each case in order to provide service to
customers of the West Virginia Gas Distribution Business that were not customers
of the West Virginia Gas Distribution Business prior to January 1, 2004.
4
(30) "Expansion Capital Expenditures Amount" means the sum of (A) the
-------------------------------------
lesser of (i) 10% of the amount of Expansion Capital Expenditures included in
the 2004 Capital Budget and any Additional Capital Budget and (ii) the amount by
which (a) the aggregate amount of all funds actually expended on, or for which
liabilities included as Current Liabilities on the Closing Balance Sheet were
accrued in accordance with GAAP (using the same policies, practices and methods
as used to prepare the Financial Statements), in respect of Expansion Capital
Expenditures by the Seller or the Company or any Company Subsidiary, as the case
may be, during the period beginning January 1, 2004 and ending on the Closing
Date, exceeds (b) the amount of Expansion Capital Expenditures included in the
2004 Capital Budget or any Additional Capital Budget (pro rated on a monthly
basis if the Closing shall occur other than at a year-end) and (B) if not
included in the 2004 Capital Budget or any Additional Capital Budget, any
Expansion Capital Expenditures consented to in writing by the Buyer pursuant to
Section 7.1(a)(xix) of this Agreement.
(31) "FIRPTA Affidavit" means the Foreign Investment in Real Property
----------------
Tax Act Certification and Affidavit substantially in the form of Exhibit C
hereto.
(32) "GAAP" means United States generally accepted accounting
----
principles as in effect from time to time.
(33) "Gas Distribution Intellectual Property" means the Intellectual
--------------------------------------
Property used exclusively in the conduct of the West Virginia Gas Distribution
Business in the areas set forth on Schedule 1.1(a)(33).
(34) "Governmental Entity" means any governmental, administrative or
-------------------
regulatory arbitral tribunal, authority, agency, board, commission, body or
other governmental entity.
(35) "Hazardous Substance" means any substance regulated under any
-------------------
Environmental Law including any petroleum compounds, asbestos or polychlorinated
biphenyls and any other chemical, material or substance defined as or included
in the definition of "hazardous substance," "hazardous waste," "hazardous
material," "restricted hazardous material," "extremely hazardous substance,"
"toxic substance," "contaminant" or "pollutant" or words of similar meaning or
import found in any Environmental Law.
(36) "Holding Company Act" means the Public Utility Holding Company
-------------------
Act of 1935, as amended.
(37) "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
-------
of 1976, as amended.
(38) "Income Tax" means any federal, state, local or foreign Tax (a)
----------
based upon, measured by or calculated with respect to net income, profits or
receipts (including, without limitation, capital gains Taxes and minimum Taxes)
5
or (b) based upon, measured by or calculated with respect to multiple bases
(including, without limitation, corporate franchise taxes) if one or more of the
bases on which such Tax may be based, measured by or calculated with respect to,
is described in clause (a), in each case together with any interest, penalties,
or additions to such Tax.
(39) "Independent Accounting Firm" means an independent accounting
---------------------------
firm of national reputation mutually appointed by the Seller and Buyer.
(40) "Instrument of Assumption" means the Instrument of Assumption
------------------------
substantially in the form of Exhibit D hereto relating to the assumption by
Buyer of the Assumed Obligations.
(41) "Intellectual Property" means all patents and industrial designs
---------------------
(including any continuations, divisionals, continuations-in-part, renewals,
reissues, and applications for any of the foregoing); copyrights (including any
registrations and applications for any of the foregoing); trademarks, trade
names, mask works, service marks, service names, logos and Internet domain names
(together with all goodwill, registrations and applications related to the
foregoing); technology, know-how, processes, trade secrets, inventions,
proprietary rights, proprietary data, formulae, research and development data,
databases, computer software programs and any other intellectual property as
provided by applicable Law, and any registrations or applications for the same
and all goodwill associated therewith.
(42) "Laws" means any federal, state, local or foreign law, statute,
----
ordinance, rule, regulation, judgment, order, injunction, decree, arbitration
award, agency requirement, license or permit of any Governmental Entity.
(43) "Long-Term Debt" means the long-term debt of the Company or the
--------------
Company Subsidiaries as determined from time to time in accordance with GAAP and
using the same policies, practices and methods as used to prepare the financial
statements of the Company and the Company Subsidiaries as of September 30, 2003,
but shall not include Affiliate Long-Term Liabilities.
(44) "Long-Term Liabilities" means the long-term liabilities (other
---------------------
than Long-Term Debt) of the Company or the Company Subsidiaries, as determined
from time to time in accordance with GAAP and using the same policies, practices
and methods as used to prepare the financial statements of the Company and the
Company Subsidiaries as of September 30, 2003 and shall include deferred credits
and shall include Affiliate Long-Term Liabilities. Long-Term Liabilities as of
the Closing Date shall not include any increase in liabilities of the Company as
of the Closing Date due to fulfillment of Seller's obligations pursuant to
Sections 7.8(a) and (b) of this Agreement on or after the Plan Creation Date.
(45) "Maintenance Capital Expenditures" means those capital
--------------------------------
expenditures made by the Seller in respect of the West Virginia Gas Distribution
6
Business, the Company or any Company Subsidiary that are not Expansion Capital
Expenditures, including capital expenditures incurred for the maintenance of the
assets comprising the West Virginia Gas Distribution Business.
(46) "Maintenance Capital Expenditures Amount" means the amount by
---------------------------------------
which the aggregate amount of all funds actually expended on, or for which
liabilities included as Current Liabilities on the Closing Balance Sheet were
accrued in accordance with GAAP (using the same policies, practices and methods
as used to prepare the Financial Statements), in respect of Maintenance Capital
Expenditures by the Seller or the Company or any Company Subsidiary, as the case
may be, during the period beginning January 1, 2004 and ending on the Closing
Date, is less than the Maintenance Capital Expenditures included in the 2004
Capital Budget or any Additional Capital Budget (pro rated on a monthly basis if
the Closing shall occur other than at a year-end).
(47) "Material Adverse Effect" means any change or changes in, or
-----------------------
effect on, the West Virginia Gas Distribution Business that individually or when
taken together with one or more other events would be materially adverse to the
business, assets, operations or financial condition of the West Virginia Gas
Distribution Business, taken as a whole, other than (i) any change or effect
resulting from changes in general economic conditions or the international,
national, regional or local wholesale or retail markets for natural gas that
does not affect the West Virginia Gas Distribution Business in a significantly
disproportionate manner relative to other local natural gas distribution
companies operating in West Virginia or any state adjacent to West Virginia,
(ii) any change or effect resulting from changes in Laws or in industry or
applicable accounting standards that does not affect the West Virginia Gas
Distribution Business in a significantly disproportionate manner relative to
other local natural gas distribution company operating in West Virginia or any
state adjacent to West Virginia, (iii) any change or effect which is cured in
full (including by means of any cash payment or payments) by the earlier of the
Closing Date or the date that is thirty (30) days after the date of such change
or effect, provided that any such cure shall be acceptable to Buyer in its
--------
reasonable discretion, and (iv) any change or effect resulting from announcement
or performance of this Agreement and the transactions contemplated hereby
(including, without limitation, the identity of the Buyer and the public
announcement of this Agreement and the transactions contemplated hereby), but
specifically including, for the avoidance of doubt, any actual labor strike,
slowdown or work stoppage pending, or, to the knowledge of the Seller, the
Company or the Buyer, threatened with respect to West Virginia Gas Distribution
Business Employees as of the date all the conditions to Closing set forth in
Section 8.2, other than the condition set forth in Section 8.2(a), are
satisfied.
(48) "Net Working Capital" means Current Assets minus Current
-------------------
Liabilities as calculated in accordance with GAAP on a basis consistent with
past practice.
7
(49) "Note Purchase Agreement" means that certain Note Purchase
-----------------------
Agreement, dated as of October 12, 1995, from the Company to the Xxxx Xxxxxxx
Mutual Life Insurance Company.
(50) "Note Purchase Amendment" means the amendment to the Note
-----------------------
Purchase Agreement dated as of July 16, 2004.
(51) "Permitted Encumbrances" means (i) those exceptions to title
----------------------
listed on Schedules 5.10(a) and 5.10(b), (ii) liens for current Taxes or
assessments not yet due and delinquent or the validity of which is being
contested in good faith by appropriate proceedings and for which reserves have
been set up in accordance with, and to the extent required by, GAAP, (iii)
mechanics', carriers', workers', repairers' and other similar liens arising or
incurred in the ordinary course of business relating to obligations as to which
there is no default on the part of the Seller, the Company or any Company
Subsidiary, as the case may be, or the validity of which are being contested in
good faith by appropriate proceedings, (iv) such other rights, liens,
imperfections in or failures of title, charges, easements, leases, licenses,
restrictions, encumbrances, encroachments and defects and zoning, entitlement,
conservation restriction and other land use and environmental regulations by
Governmental Entities, which in each case do not materially interfere with the
present use of the Related Assets or the use of the properties owned by the
Company or any Company Subsidiary, as the case may be, and (v) provided that
such matters do not materially interfere with the present use of the Related
Assets or the use of the properties owned by the Company or any Company
Subsidiary, as the case may be, such matters as an accurate survey would show.
(52) "Person" means an individual, a partnership, a limited liability
------
company, a joint venture, a corporation, a trust, an unincorporated organization
and a governmental entity or a department or agency thereof.
(53) "Related Agreements" means the Transition Services Agreement, the
------------------
specialty warranty deeds in recordable form conveying the Real Property (subject
to the applicable Permitted Encumbrances), the Xxxx of Sale, the Instrument of
Assumption, the FIRPTA Affidavit, and any other instruments of sale, transfer,
conveyance, assignment, or assumption as the parties may reasonably request.
(54) "Release" means any release, spill, leak, discharge, disposal of,
-------
pumping, pouring, emitting, emptying, injecting, leaching, dumping or otherwise
allowing any Hazardous Substance to escape into or through the environment.
(55) "SEC" means the Securities and Exchange Commission.
---
(56) "Securities Act" means the Securities Act of 1933, as amended,
--------------
and the rules and regulations promulgated thereunder.
8
(57) "Seller's Representatives" means the Seller's accountants,
------------------------
employees, counsel, financial advisors and other authorized representatives.
(58) A "Straddle Period" means a taxable year or period beginning on
---------------
or before, and ending after, the Closing Date.
(59) "Subsidiary" when used in reference to any other Person means any
----------
entity of which outstanding securities having ordinary voting power to elect a
majority of the Board of Directors, or other Persons performing similar
functions, of such entity are owned directly or indirectly by such other Person.
(60) "Tariff Restructuring" means the proposed modifications to the
--------------------
existing tariff structure(s) of the West Virginia Gas Distribution Business
mutually acceptable to the Seller and the Buyer as a result of good faith
negotiations and filed by the Company, Seller and the Buyer with the Public
Service Commission pursuant to Section 7.6(c) hereof.
(61) "Taxes" means all taxes, charges, fees, duties, customs, tariffs,
-----
imports, levies, penalties or other assessments imposed by any federal, state,
local or foreign taxing authority, including, but not limited to, Income Taxes,
excise, property, sales, use, transfer, franchise, payroll, withholding, social
security or other taxes of the same or of a similar nature to any of the
foregoing, including any interest, penalties or additions attributable thereto.
(62) "Tax Return" means any return, report, information return, claim
----------
for refund or other document (including any related or supporting information)
supplied to or required to be filed with any taxing authority with respect to
Taxes, including any attachments, amendments and supplements thereto.
(63) "Transferring Employee Records" means all personnel files related
-----------------------------
to the Seller's or the Company's personnel, as applicable, who will become
employees of the Buyer.
(64) "Transition Services Agreement" means the Transition Services
-----------------------------
Agreement substantially in the form of Exhibit E hereto relating to the delivery
by Allegheny Energy Service Corporation of specified services to Buyer following
the Closing.
(65) "West Virginia Gas Distribution Business" has the meaning set
---------------------------------------
forth in the Recitals.
(66) "WARN Act" means the Federal Worker Adjustment Retraining and
--------
Notification Act of 1988.
9
(b) Each of the following terms has the meaning specified in the
Section set forth opposite such term:
Term Section
---- -------
AEESOP 7.8(b)(i)
AERP 7.8(b)(i)
Applicable Employee 7.8(a)
Applicable Rate 3.2(c)
Assumed Obligations 2.3(b)
Balance Sheets 5.6
Bankruptcy and Equity Exception 5.2
Benefit Plans 5.17(a)
Benefits Continuation Period 7.8(d)
Buyer DC Plan 7.8(h)
Buyer Indemnified Parties 9.1(a)
Buyer Pension Plan 7.8(g)
Buyer Required Regulatory Approvals 6.3(b)
Closing 4.1
Closing Date 4.1
Closing Notice 7.4(e)
Closing Statement 3.2(a)
Closing Statement Review Period 3.2(b)
Company Account 5.34
Contracts 5.19(a)
De Minimis Loss 9.1(a)
December 2003 Financial Statements 5.6
Direct Claim 9.2(c)
Disclosure Schedules Article V
Entitled Party 7.4(d)
Environmental Permits 5.14(a)
ERISA Affiliate 5.17(a)
Excluded Assets 2.2
Excluded Obligations 2.4
Expiring Contracts 2.4
Final Purchase Price Component 3.2(b)
Indemnifiable Loss 9.1(a)
Indemnifying Party 9.1(d)
Indemnitee 9.1(c)
Independent Accounting Firm Closing Statement Determination 3.2(b)
Leased Real Property 5.10(f)
Liabilities 5.7
March 2004 Financial Statements 5.6
NLRB 5.16(b)
10
Term Section
---- -------
Non-Retirement Savings Benefits 7.8(b)(i)
Non-Union Transferred Employee 7.8(d)
Old Cameron Service Center 2.1(a)
OPEB Amount 3.1(b)(v)
Owned Real Property 5.10(f)
Parent 5.13
Permits 5.21(a)
Plan Creation Date 7.8(a)
Public Service Commission 5.4(b)
Purchase Price 3.1(b)
Purchase Price Certificate 3.1(d)
Purchase Price Component 3.2(a)
Real Property 2.1(a)
Receiving Party 7.4(d)
Related Assets 2.1
Restrictions 7.6(b)
Seller Indemnified Parties 9.1(b)
Seller Lease Buy-Out 2.5
Seller Leases 2.5
Seller Non-Regulatory Approvals 5.4(a)
Seller Qualified Plans 7.8(f)
Seller Required Regulatory Approvals 5.4(b)
Tax Audit 9.3(a)
Termination Date 10.1(b)
Third Party Claim 9.2(a)
Transfer Taxes 7.7(a)
Transferred Employees 7.8(f)
Transferred Pipelines 2.1(b)
Union Employees 7.8(c)
West Virginia Gas Distribution Business Employee 5.16(a)
Written Acceptance 7.6(b)
ARTICLE II
PURCHASE AND SALE
-----------------
2.1. Purchase and Sale. Upon the terms and subject to the satisfaction
-----------------
or waiver of the conditions contained in this Agreement, at the Closing the
Seller will sell, assign, convey, transfer and deliver to the Buyer, and the
Buyer will purchase and acquire from the Seller (x) all of the issued and
outstanding Company Common Stock and (y) the following assets owned by Seller
(the "Related Assets"), free and clear of all Encumbrances (except for Permitted
--------------
Encumbrances):
11
(a) all real property that is set forth on Schedule 2.1(a)
(the "Real Property"), including any rights of way or easements
-------------
appurtenant thereto; provided, however, such Related Assets shall
-------- -------
exclude that certain real property commonly known as the Cameron
Service Center, located at 0 Xxxxxxx Xxxxxx in Xxxxxxx, Xxxxxxxx
County, West Virginia, and more particularly described as all or a
portion of Parcel 272, Tax Map Number 2, which real property shall
hereinafter be referred to as the "Old Cameron Service Center."
--------------------------
(b) all natural gas pipelines owned by Seller that are
located in the State of West Virginia and that are shown on Schedule
2.1(b) (the "Transferred Pipelines"), including any rights of way or
---------------------
easements appurtenant thereto;
(c) all natural gas owned by Seller that is stored in the
Transferred Pipelines as of the Closing Date;
(d) all inventories of supplies and materials set forth on
Schedule 2.1(d);
(e) subject to Section 2.5, the machinery, equipment,
vehicles, furniture and other personal property listed on Schedule
2.1(e) and all warranties against manufacturers or vendors relating
thereto, to the extent that such warranties are freely transferable;
(f) (i) the contracts set forth on Schedule 2.1(f)(i) and
(ii) any contract entered into by Seller after the date of this
Agreement and prior to the Closing Date in accordance with the terms
of Section 7.1 that relates to the West Virginia Gas Distribution
Business;
(g) all books, operating records, operating, safety and
maintenance manuals, engineering design plans, blueprints and as-built
plans, specifications and procedures to the extent related to the
Related Assets and in Seller's possession, other than books of
account;
(h) all right, title and interest in and to the insurance
proceeds for any damage to the Related Assets arising after the date
of this Agreement and prior to the Closing Date, except to the extent
such damage is reflected in the Net Working Capital;
(i) all Permits of Seller that relate to the West Virginia
Gas Distribution Business;
(j) the rights of Seller in, to and under all causes of
action against third parties (excluding, for the avoidance of doubt,
any Affiliates of Seller) to the extent arising out of or in
connection with Seller's rights, title and interests in and to the
12
West Virginia Gas Distribution Business, whether accruing prior to, on
or after the Closing Date, whether received as payment or credit
against future liabilities, in each case, relating to any period prior
to, on or after the Closing Date;
(k) all rights of Seller to licenses or other valid rights
to use all Gas Distribution Intellectual Property (subject to the
Excluded Assets below); and
(l) the accounts receivable of Seller in respect of the West
Virginia Gas Distribution Business as reflected on the Closing Balance
Sheet.
2.2. Excluded Assets. The Related Assets shall expressly exclude the
---------------
Old Cameron Service Center and any right to use of the names "Allegheny",
"Allegheny Energy", "Allegheny Power", "Monongahela", "Monongahela Power
Company" or any Intellectual Property derived from such names and any
Intellectual Property that is not Gas Distribution Intellectual Property
(collectively, the "Excluded Assets"), which shall not be sold or transferred to
---------------
the Buyer; provided, however, that the Buyer may make use of the Excluded Assets
-------- -------
as provided in Section 7.11.
2.3. Assumed Obligations. (a) At the Closing, the Buyer shall deliver
-------------------
to the Seller the Instrument of Assumption. Buyer agrees to assume and discharge
all of the following liabilities and obligations of the Seller, direct or
indirect, known or unknown, absolute or contingent, to the extent arising out of
or related to ownership or use of the Related Assets in connection with the West
Virginia Gas Distribution Business in accordance with the respective terms and
subject to the respective conditions of the Instrument of Assumption and subject
to the terms of this Agreement, including, without limitation, the
indemnification provisions of Article IX and the representations and warranties
contained in Section 5.14 of this Agreement:
(i) all liabilities and obligations associated
with the Related Assets in connection with the West Virginia
Gas Distribution Business regardless of whether such
liabilities or obligations arose before or after the
Closing;
(ii) all liabilities and obligations associated
with the Related Assets in connection with the West Virginia
Gas Distribution Business in respect of Taxes attributable
to taxable periods ending after the Closing Date, except
those for which the Seller is expressly liable pursuant to
the terms of this Agreement;
(iii) any liability, obligation, responsibility or
capital expenditure arising under or related to any former,
current or future Environmental Laws, health and safety laws
or the common law, whether such liability or obligation or
responsibility is known or unknown, contingent or accrued,
arising as a result of or in connection with (a) any
violation, alleged violation, Release, threatened Release,
permit, closure, post-closure or remedial obligation
relating to any Environmental Law, whether prior to or on or
after the Closing Date, with respect to the ownership or
operation of the Related Assets; (b) any alleged loss of
life, injury to persons or property or damage to natural
resources (whether or not such alleged loss, injury or
damage arose or has become manifest before the Closing Date
or arises or becomes manifest on or after the Closing Date),
relating to the alleged generation, discharge, emission,
use, transportation, disposal, presence or Release of any
Hazardous Substances at, on, in, under, to or from the
Related Assets whether prior to or on or after the Closing
Date, including, but not limited to, any offsite
transportation, discharge, emission, deposition, disposal or
migration, Hazardous Substances contained in building
materials or structures at the Related Assets or in the
soil, surface, water, sediments, groundwater, landfill
cells, or in other environmental media at or migrating from
the Related Assets; and (c) the investigation, monitoring
and/or remediation (whether or not such investigation,
monitoring or remediation commenced before the Closing Date
or commences on or after the Closing Date) of Hazardous
Substances that are present on or have been used, generated,
discharged, emitted, transported, disposed or Released
whether prior to or on or after the Closing Date at, on, in,
under, to or from the Related Assets, including, but not
limited to, any offsite transportation, discharge, emission,
deposition, disposal or migration and any Hazardous
Substance in building materials or structures at the Related
Assets or in the soil, surface water, sediments,
groundwater, landfills, disposal sites, or in other
environmental media at or migrating from the Related Assets;
and
13
(iv) all liabilities and obligations incurred by
the Seller in accordance with the terms of this Agreement
with respect to capital expenditures associated with, or on
behalf of, the Related Assets.
(b) All of the foregoing liabilities and obligations to be
assumed by the Buyer under Section 2.3(a) are collectively referred to
herein as the "Assumed Obligations." All liabilities and obligations
-------------------
of the Company shall remain the liabilities and obligations of the
Company and it is understood and agreed that Seller and its Affiliates
shall not retain or assume any such liability or obligation (except to
the extent otherwise expressly provided by this Agreement or any
Related Agreement).
2.4. Excluded Obligations. The Assumed Obligations shall expressly
--------------------
exclude, and Seller shall remain responsible for: (i) any liabilities or
obligations, direct or indirect, absolute or contingent, to the extent not
arising out of or related to ownership or use of the Related Assets in
connection with the West Virginia Gas Distribution Business, (ii) any
liabilities or obligations associated with or arising under contracts,
agreements, personal property leases, commitments, understandings or instruments
the terms of which provide that they will be fully performed or otherwise expire
prior to the Closing Date (the "Expiring Contracts") to which the Company or any
------------------
of its Subsidiaries is not or has not been a party, (iii) any liabilities
expressly assumed or retained by the Seller or its Affiliates pursuant to this
Agreement or any Related Agreement and (iv) any liabilities or obligations
associated with or arising under any of the Seller Leases (as defined in Section
2.5) to the extent such leases are not assigned to the Buyer or the Company at
the Closing. All of the foregoing liabilities and obligations which are not
being transferred to the Buyer and which will remain the responsibility of the
Seller (or its Affiliates, as the case may be) are referred to herein as the
"Excluded Obligations."
--------------------
2.5. Assignment of Certain Personal Property and Vehicle Leases. The
----------------------------------------------------------
Seller shall use its commercially reasonable efforts to assign to the Buyer or
the Company at the Closing the personal property, equipment and vehicle leases
set forth on Schedule 2.5 in respect of the personal property, equipment and
vehicles set forth on Schedule 2.1(e) (the "Seller Leases"), including without
-------------
limitation seeking to obtain any required consents to such assignments from the
lessors party to such Seller Leases. In the event the Seller is unable to assign
any of the Seller Leases as of the Closing as a result of the failure to obtain
14
any consent of any lessor under such Seller Lease, it shall notify the Buyer
promptly that it will not be able to assign such Seller Lease to the Buyer or
the Company at the Closing. From and after receipt of such notice, the Buyer
shall use it commercially reasonable efforts to renegotiate the Seller Leases as
leases of the Buyer or the Company on terms and conditions (including with
respect to costs and expenses with respect to such Seller Leases) substantially
similar to the terms and conditions contained in the Seller Leases. In the event
that both (A) Seller is unable to assign any Seller Lease to the Buyer or the
Company at the Closing and (B) the Buyer is unable to renegotiate any Seller
Lease as a lease of the Buyer or the Company on terms and conditions (including
with respect to costs and expenses with respect to such Seller Lease)
substantially similar to the terms and conditions contained in the Seller
Leases, then the Buyer shall have the right, exercisable in its sole discretion,
but not the obligation, to request that the Seller, and the Seller shall,
exercise any "buy-out" rights contained in such Seller Lease, such that the
Seller will acquire the personal property, equipment or vehicles underlying such
Seller Lease (a "Seller Lease Buy-Out"). Any Seller Lease Buy-Out requested by
--------------------
the Buyer and consummated by the Seller pursuant to this Section 2.5 shall be at
the sole cost and expense of the Buyer and any personal property, equipment or
vehicles acquired by the Seller upon the exercise of a Seller Lease Buy Out
shall be transferred to the Buyer at the Closing for no additional
consideration. Any personal property, equipment or vehicles transferred to the
Buyer pursuant to this Section 2.5 shall be deemed a "Related Asset" for all
purposes under this Agreement.
ARTICLE III
PURCHASE PRICE
--------------
3.1. Purchase Price.
--------------
(a) In consideration of the sale, assignment, conveyance,
transfer and delivery to Buyer of the right, title and interest as of
15
the Closing of Seller and its Subsidiaries in the Company Common Stock
and the Related Assets, Buyer shall (i) pay to Seller at Closing an
amount equal to the Purchase Price and (ii) assume, as of the Closing,
the Assumed Obligations.
(b) As used in this Agreement, "Purchase Price" shall mean
--------------
an amount determined pursuant to the following formula together with
the amounts payable by the Company to Seller pursuant to Section
3.1(c):
(i) $185,798,000;
(ii) plus Net Working Capital as of the Closing
----
Date;
(iii) less total Long-Term Debt outstanding as of
----
the Closing Date, including any current portion thereof;
(iv) less any Long-Term Liabilities outstanding as
----
of the Closing Date;
(v) less 50% of any increase in liabilities of the
----
Company from immediately prior to the Plan Creation Date
through the Closing Date due to fulfillment of Seller's
obligations pursuant to Sections 7.8(a) and (b) of this
Agreement, as determined in accordance with the methodology
and assumptions set forth on Schedule 3.1(b)(v) (such 50%,
the "OPEB Amount");
(vi) plus the Expansion Capital Expenditures
----
Amount; and
(vii) less the Maintenance Capital Expenditures
----
Amount.
(c) In addition to the amounts determined pursuant to the
above formula, the Company shall, and the Buyer shall cause the
Company to, pay to the Seller (i) immediately following the Closing,
the amount of Affiliate Short-Term Liabilities outstanding as of the
Closing Date in an amount not to exceed $60,684,000 and the Buyer will
either (A) provide for such working capital financing directly to the
Company immediately following the Closing or (B) arrange for third
party working capital financing to be available to the Company
immediately following the Closing, in each case so that the Company
can make the payments provided in this Section 3.1(c)(i) immediately
following the Closing, and (ii) in the manner and at the time set
forth on Schedule 3.1(c)(ii), the amount of Affiliate Long-Term
Liabilities outstanding as of the Closing Date in an amount not to
exceed $14,596,000;
(d) Not less than five (5) Business Days prior to the
Closing Date, the Seller will prepare and deliver a certificate (the
"Purchase Price Certificate") of an authorized officer of the Seller
--------------------------
setting forth the Seller's best estimate of the Purchase Price,
16
including, in reasonable detail, the Seller's best estimate of each of
(i) the Net Working Capital, (ii) the Affiliate Short-Term
Liabilities, (iii) the Affiliate Long-Term Liabilities, (iv) total
Long-Term Debt, (v) any Long-Term Liabilities, (vi) the OPEB Amount,
(vii) the Expansion Capital Expenditures Amount, and (viii) the
Maintenance Capital Expenditures Amount, in each case as of the
Closing Date. For purposes of preparing the Purchase Price
Certificate, the OPEB Amount will be calculated using actual
demographics as of the Plan Creation Date. From and after the delivery
of the Purchase Price Certificate until the Closing, the Buyer will be
permitted to review the Seller's working papers relating to the
preparation of the Purchase Price Certificate and shall be provided
with reasonable access to individuals involved in preparing or
reviewing the Purchase Price Certificate.
(e) The Purchase Price shall be further subject to the
adjustments in Section 3.2.
3.2. Post-Closing True-Up.
--------------------
(a) The Buyer shall deliver, no sooner than 30 days nor
later than 60 days after the Closing, the Buyer's determination of
each of (i) the Net Working Capital, (ii) the Affiliate Short-Term
Liabilities, (iii) the Affiliate Long-Term Liabilities, (iv) total
Long-Term Debt, (v) any Long-Term Liabilities, (vi) the OPEB Amount,
(vii) the Expansion Capital Expenditures Amount, and (viii) the
Maintenance Capital Expenditures Amount (the "Purchase Price
--------------
Components") in each case as of the Closing Date (the "Closing
---------- -------
Statement"). For purposes of preparing the Closing Statement, the OPEB
---------
Amount will be calculated using actual demographics as of the Closing
Date. The Seller agrees to cooperate with the Buyer in connection with
the preparation of the Closing Statement and related information, and
shall provide to the Buyer access to such books, records, personnel
and other information as may be reasonably requested from time to
time.
(b) The Seller may dispute the Closing Statement or any item
set forth thereon; provided, however, that the Seller shall notify the
-------- -------
Buyer in writing of the disputed amount, and the basis of such
dispute, within ten (10) Business Days of the Seller's receipt of the
Closing Statement (the "Closing Statement Review Period"). During the
-------------------------------
Closing Statement Review Period, the Seller will be permitted to
review the Buyer's working papers relating to the Closing Statement
and shall be provided with reasonable access to individuals involved
in preparing or reviewing the Closing Statement. In the event of a
dispute with respect to any part of the Closing Statement, the Buyer
and the Seller shall use reasonable efforts to reconcile their
differences. If the Buyer and the Seller are unable to reach a
resolution of such differences within 30 days of receipt of the
Seller's written notice of dispute to the Buyer, the Buyer and the
Seller shall submit the amounts remaining in dispute for determination
17
and resolution to the Independent Accounting Firm, which shall be
instructed to determine and report to the parties, within 30 days
after such submission, upon such remaining disputed amounts, and such
report shall be final, binding and conclusive on the parties hereto
with respect to the amounts disputed (such determination, an
"Independent Accounting Firm Closing Statement Determination"). The
-----------------------------------------------------------
Seller, the Buyer and the Company shall each make available to the
Independent Accounting Firm all work papers, books and records
relating to the West Virginia Gas Distribution Business to the extent
relevant to the determination of amounts set forth on the Closing
Statement. The Closing Statement and the Purchase Price Components set
forth thereon shall be adjusted (i) in accordance with any amount
mutually agreed to in writing by the Seller and the Buyer with respect
to any item set forth on the Closing Statement or (ii) in accordance
with any Independent Accounting Firm Closing Statement Determination.
As used herein, the term "Final Purchase Price Component" shall mean,
------------------------------
as applicable, (x) such Purchase Price Component set forth on the
Closing Statement, as so adjusted pursuant to either clause (i) or
(ii) of the immediately preceding sentence, as applicable, or (y) if
Seller fails to dispute in writing any Purchase Price Component
included on the Closing Statement within the Closing Statement Review
Period, the computation of such Purchase Price Component set forth on
the Closing Statement. The fees and disbursements of the Independent
Accounting Firm with respect to this Section 3.2 shall be allocated
between the Buyer and the Seller so that the Seller's share of such
fees and disbursements shall be in the same proportion that the
aggregate amount of such disputed amounts so submitted by the Seller
to the Independent Accounting Firm that is unsuccessfully disputed by
the Seller (as finally determined by the Independent Accounting Firm)
bears to the total amount of all disputed amounts so submitted by the
Seller to the Independent Accounting Firm.
(c) If any of the Net Working Capital, Affiliate Short-Term
Liabilities, Affiliate Long-Term Liabilities or Expansion Capital
Expenditures set forth in the Purchase Price Certificate exceeds the
corresponding Final Purchase Price Component, the Seller shall pay the
Buyer the difference promptly, but no later than five (5) Business
Days following the final determination of such Final Purchase Price
Component pursuant to Section 3.2(b), by wire transfer of immediately
available funds to an account designated by the Buyer (it being
understood that in the event Buyer does not designate such an account
to Seller on or prior to the date such Final Purchase Price Component
is determined, Seller shall pay such difference to Buyer on the
Business Day following the date such account is designated (if such
Business Day is later than five (5) Business Days following such date
of determination)). If any of the Net Working Capital, Affiliate
Short-Term Liabilities, Affiliate Long-Term Liabilities or Expansion
Capital Expenditures set forth in the Purchase Price Certificate is
less than the corresponding Final Purchase Price Component, the Buyer
shall pay the Seller the difference promptly, but no later than five
(5) Business Days following the final determination of such Final
Purchase Price Component pursuant to Section 3.2(b), by wire transfer
of immediately available funds to an account designated by the Seller
(it being understood that in the event Seller does not designate such
an account to Buyer on or prior to the date such Final Purchase Price
18
Component is determined, Buyer shall pay such difference to Seller on
the Business Day following the date such account is designated (if
such Business Day is later than five (5) Business Days following such
date of determination)). If any of the Net Working Capital, Affiliate
Short-Term Liabilities, Affiliate Long-Term Liabilities or Expansion
Capital Expenditures set forth in the Purchase Price Certificate is
equal to the corresponding Final Purchase Price Component, no payment
shall be made pursuant to this Section 3.2(c) with respect to such
Purchase Price Component. For purposes of calculating the difference
between Purchase Price Components as set forth on the Purchase Price
Certificate and the corresponding final Purchase Price Components
pursuant to this Section 3.2(c), (i) any amount of Affiliate
Short-Term Liabilities in excess of $60,684,000 shall be disregarded
and (ii) any amount of Affiliate Long-Term Liabilities in excess of
$14,596,000 shall be disregarded. Any amount paid pursuant to this
Section 3.2(c) (i) shall be paid with interest for the period
commencing on the Closing Date through the date of payment, calculated
at the published prime rate of Citibank N.A. as in effect on the
Closing Date (the "Applicable Rate") and (ii) shall, to the maximum
---------------
extent permitted by applicable law, constitute an adjustment to the
Purchase Price.
(d) If any of the Long-Term Debt, the Long-Term Liabilities,
the OPEB Amount or the Maintenance Capital Expenditures Amount set
forth in the Purchase Price Certificate is less than the corresponding
Final Purchase Price Component, the Seller shall pay the Buyer the
difference promptly, but no later than five (5) Business Days
following the final determination of such Final Purchase Price
Component pursuant to Section 3.2(b), by wire transfer of immediately
available funds to an account designated by the Buyer (it being
understood that in the event Buyer does not designate such an account
to Seller on or prior to the date such Final Purchase Price Component
is determined, Seller shall pay such difference to Buyer on the
Business Day following the date such account is designated (if such
Business Day is later than five (5) Business Days following such date
of determination)). If any of the Long-Term Debt, the Long-Term
Liabilities, the OPEB Amount or the Maintenance Capital Expenditures
Amount set forth in the Purchase Price Certificate exceeds such Final
Purchase Price Component, the Buyer shall pay the Seller the
difference promptly, but no later than five (5) Business Days
following the final determination of such Final Purchase Price
Component pursuant to Section 3.2(b), by wire transfer of immediately
available funds to an account designated by the Seller (it being
understood that in the event Seller does not designate such an account
to Buyer on or prior to the date such Final Purchase Price Component
is determined, Buyer shall pay such difference to Seller on the
Business Day following the date such account is designated (if such
Business Day is later than five (5) Business Days following such date
of determination)). If any of the Long-Term Debt, the Long-Term
Liabilities, the OPEB Amount or the Maintenance Capital Expenditures
Amount forth in the Purchase Price Certificate is equal to the
corresponding Final Purchase Price Component, no payment shall be made
pursuant to this Section 3.2(d) with respect to such Purchase Price
19
Component. Any amount paid pursuant to this Section 3.2(d) (i) shall
be paid with interest for the period commencing on the Closing Date
through the date of payment, calculated at the Applicable Rate and
(ii) shall, to the maximum extent permitted by applicable law,
constitute an adjustment to the Purchase Price.
3.3. Release From Further Liability.
------------------------------
Following the payment in full of the Purchase Price (other than
amounts payable by the Company to Seller pursuant to Section 3.1(c)(ii) and
after giving effect to any adjustments pursuant to Section 3.2), the Buyer and
the Seller agree that any and all amounts and accounts payable (including,
without limitation, all notes payable to affiliates and long term affiliated
accounts payable) owed by the Company and its Subsidiaries to Affiliates of the
Company (as determined immediately prior to the Closing), other than the Company
and its Subsidiaries, shall be deemed to be paid in full and neither the Company
nor any of its Subsidiaries shall have any liability with respect thereto,
whether or not any such amounts were included as a Purchase Price Component,
were reflected in the adjustments to the Purchase Price set forth in this
Article III or are reflected on the Financial Statements, except for the
Affiliate Long-Term Liabilities set forth on Schedule 3.1(c)(ii) which shall
remain outstanding and be repaid in accordance with the terms of Schedule
3.1(c)(ii).
3.4. Allocation of Purchase Price. The Buyer and the Seller shall use
----------------------------
their best efforts to agree upon an allocation among the Related Assets and, as
a result of elections made under Section 338(h)(10) of the Code, the assets of
the Company and, as applicable, the assets of the Company's Subsidiaries, of the
purchase price (determined for tax purposes). Such purchase price allocation
shall be consistent with Section 1060 of the Code and the Treasury Regulations
thereunder, and completed within 180 days of the date of this Agreement but in
no event less than 30 days prior to the Closing. Any post Closing adjustments
for purchase price allocation purposes under this Section 3.4 shall be jointly
made and agreed to following the Closing within a reasonable time in a manner
consistent with the allocation determined pursuant to this Section 3.4. Each of
the Buyer and the Seller agrees to file Internal Revenue Service Form 8594 and
Form 8883 and all federal, state, local and foreign Tax Returns, in accordance
with the allocation determined under this Section 3.4. Each of the Buyer and the
Seller shall report the transactions contemplated by this Agreement for Tax
purposes in a manner consistent with the allocation determined pursuant to this
Section 3.4. Each of the Buyer and the Seller agrees to provide the other
promptly with any other information reasonably required to complete Form 8594
and Form 8883. Each of the Buyer and the Seller shall notify the other in the
event of an examination, audit or other proceeding regarding the allocation
determined under this Section 3.4. If the Buyer and the Seller are unable to
reach an agreement on a purchase price allocation, then the Buyer and the Seller
shall submit such disputed items for determination and resolution to the
Independent Accounting Firm, whose decision shall be final, binding and
conclusive on the parties hereto and whose fees and expenses shall be borne
equally by the parties.
20
ARTICLE IV
THE CLOSING
-----------
4.1. Time and Place of Closing. Upon the terms and subject to the
-------------------------
satisfaction of the conditions contained in Article VIII of this Agreement, the
closing of the purchase and sale of the Common Stock and the Related Assets
contemplated by this Agreement (the "Closing") will take place at the offices of
-------
Xxxxxxxx & Xxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on the first
Business Day of the full calendar month immediately following the date five days
after the date on which all of the conditions contained in Article VIII have
been satisfied or waived (other than those conditions that by their nature are
to be satisfied or waived at the Closing, but subject to the satisfaction or
waiver at the Closing of such conditions), subject to the continued satisfaction
or waiver of each such condition contained in Article VIII up to and including
the Closing, or at such other place or time as the parties may agree. The date
on which the Closing actually occurs is hereinafter referred to as the "Closing
-------
Date."
----
4.2. Payment of Purchase Price. Upon the terms and subject to the
-------------------------
satisfaction of the conditions contained in this Agreement, the Buyer will pay
to Seller at the Closing, or following the Closing in accordance with Section
3.2(c), an amount in United States dollars equal to the Purchase Price (as
calculated by Seller pursuant to Section 3.1(d)), by wire transfer of
immediately available funds to an account designated by Seller to Buyer at least
five (5) Business Days prior to the Closing Date or in the case of payments to
be made pursuant to Section 3.2(c)(ii), to an account designated by Seller to
Buyer at least five (5) Business Days prior to the date such portion of the
Purchase Price is to be paid.
4.3. Deliveries by the Seller. At the Closing, the Seller will deliver
------------------------
the following to the Buyer:
(a) A certificate or certificates evidencing all of the then
outstanding shares of Company Common Stock, duly endorsed in blank or
accompanied by stock powers duly executed in blank, in proper form for
transfer, with any required stock transfer tax stamps properly affixed
thereto and any other documents reasonably requested by Buyer to vest
in Buyer good and marketable title to such Company Common Stock;
(b) The Related Agreements, duly executed by the Seller;
(c) All consents, waivers or approvals obtained by the
Seller with respect to (i) the Related Assets or the Company Common
Stock, (ii) the transfer of any Permit or Environmental Permit
constituting a Related Asset and (iii) the consummation of the
transactions contemplated by this Agreement, to the extent
specifically required hereunder;
21
(d) All such other instruments of assignment or conveyance
as shall, in the reasonable opinion of the Buyer and its counsel, be
necessary to transfer to the Buyer the Related Assets and the Company
Common Stock in accordance with the terms of this Agreement and, where
necessary or desirable, in recordable form;
(e) An opinion of counsel to the Seller, dated the Closing
Date, substantially in the form of Exhibit F hereto;
(f) All Transferring Employee Records; and
(g) Such other agreements, documents, instruments and
writings as are required to be delivered by the Seller at or prior to
the Closing pursuant to the terms of this Agreement or as are
otherwise required in connection herewith.
4.4. Deliveries by the Buyer. At or immediately following the Closing
-----------------------
(as applicable), the Buyer will deliver the following to the Seller or its
designees:
(a) The Purchase Price;
(b) The Related Agreements, duly executed by the Buyer;
(c) An opinion of counsel to the Buyer, dated the Closing
Date, substantially in the form of Exhibit G hereto;
(d) All such other instruments of assumption as shall, in
the reasonable opinion of the Seller and its counsel, be necessary for
the Buyer to assume the Assumed Obligations in accordance with the
terms of this Agreement; and
(e) Such other agreements, documents, instruments and
writings as are required to be delivered by the Buyer at or prior to
the Closing Date pursuant to the terms of this Agreement or as are
otherwise required in connection herewith.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLER
--------------------------------------------
Except as set forth in the disclosure schedules attached to
this Agreement (the "Disclosure Schedules"), the Seller hereby represents and
--------------------
warrants to the Buyer as follows:
5.1. Organization; Qualification.
---------------------------
22
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of Ohio, and the Company
is a corporation duly organized, validly existing and in good standing
under the laws of West Virginia.
(b) The Seller has all requisite corporate power and
authority to own, lease, and operate the Related Assets, except where
the failure to have such corporate power and authority would be
immaterial.
(c) The Company and its Subsidiaries each has all requisite
corporate power and authority to own, lease and operate its respective
properties and to carry out its respective business as it is now being
conducted, except where the failure to have such corporate power and
authority would be immaterial.
(d) The Seller has heretofore delivered to the Buyer
complete and correct copies of the Company's Articles of Incorporation
and By-laws, each as currently in effect.
5.2. Authority Relative to this Agreement. The Seller has full
------------------------------------
corporate power and authority to execute and deliver this Agreement and the
Related Agreements and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Related Agreements
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by the Board of Directors of the Seller and no
other corporate proceedings on the part of the Seller or the Company are
necessary to authorize this Agreement or the Related Agreements or to consummate
the transactions contemplated hereby and thereby. This Agreement and the Related
Agreements have been duly and validly executed and delivered by the Seller, and,
assuming that this Agreement and the Related Agreements constitute valid and
binding agreements of the Buyer, constitute valid and binding agreements of the
Seller, enforceable against the Seller in accordance with their respective
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles (the "Bankruptcy and Equity
---------------------
Exception").
---------
5.3. Capitalization and Other Matters. The Seller owns, beneficially
--------------------------------
and of record, all of the Company Common Stock, free and clear of all
Encumbrances. There are no outstanding contracts or other rights of the Seller
or any other Person to subscribe for or purchase, repurchase, redeem or
otherwise acquire any capital stock of the Company or any of the Company's
Subsidiaries. Except for this Agreement, the Seller has not entered into any
contract or granted any warrant, option or similar right for the sale, transfer
or other disposition of the Company Common Stock. The Company does not have any
equity or other investment interest in any other Person.
23
5.4. Consents and Approvals; No Violation.
------------------------------------
(a) Other than obtaining the consents of third parties set
forth on Schedule 5.4 (the "Seller Non-Regulatory Approvals"), the
-------------------------------
Seller Required Regulatory Approvals and the Buyer Required Regulatory
Approvals, neither the execution and delivery of this Agreement and
the Related Agreements by the Seller, the sale by the Seller of the
Related Assets or the Company Common Stock pursuant to this Agreement
nor performance under this Agreement or the Related Agreements will:
(i) conflict with or result in any breach of any provision of the
Articles of Incorporation or Code of Regulations of the Seller; (ii)
require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Entity or other Persons
(including without limitation consents from parties to loans,
contracts, licenses, leases and other agreements to which Seller is a
party), except for those requirements which become applicable to the
Seller as a result of the specific regulatory status of the Buyer (or
any of its Affiliates) or as a result of any other facts that
specifically relate to the business or activities in which the Buyer
(or any of its Affiliates) is or proposes to be engaged; (iii) result
in a default (or give rise to any right of termination, cancellation
or acceleration) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which the Seller, the Company or the
Company's Subsidiaries is a party or by which the Seller or the
Company may be bound or to which any of the Related Assets may be
subject, except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or
consents have been obtained in writing, or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to
the Seller.
(b) Except for (i) any necessary approvals of the SEC
pursuant to the Holding Company Act with respect to the sale of the
Related Assets and the Company and the Transition Services Agreement,
(ii) the filings by the Seller required by the HSR Act and the
expiration or earlier termination of all waiting periods under the HSR
Act, (iii) the approval of the Public Service Commission of West
Virginia (the "Public Service Commission"), and (iv) the consent of
-------------------------
the Federal Communications Commission to the assignment and transfer,
as applicable, of the radio station licenses set forth on Schedule
5.21(b) hereto (the filings and approvals referred to in clauses (i)
through (iv) are collectively referred to as the "Seller Required
---------------
Regulatory Approvals"), no declaration, filing or registration with,
--------------------
or notice to, or authorization, consent or approval of, any
Governmental Entity is necessary for the consummation by the Seller of
the transactions contemplated hereby or by the Related Agreements.
5.5. Company Reports. Since January 1, 1999, each of the Seller, the
---------------
Company and the Company's Subsidiaries has filed or caused to be filed with the
Public Service Commission all forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by them with respect to the business and operations of the Seller (as it
relates to the West Virginia Gas Distribution Business), all of which complied
24
in all respects with all applicable requirements of the rules and regulations of
the Public Service Commission as in effect on the date each such report was
filed, except for such failures to file, cause to be filed or to be in
compliance that are immaterial.
5.6. Financial Statements. Attached hereto as Schedule 5.6 is a copy
--------------------
of (i) the audited consolidated balance sheet of the Company and the unaudited
balance sheet for the Related Assets (together, the "Balance Sheets"), in each
--------------
case as of December 31, 2003 (the "December 2003 Financial Statements"), and
----------------------------------
(ii) the unaudited consolidated balance sheet of the Company and the unaudited
balance sheet for the Related Assets, in each case as of March 31, 2004 (the
"March 2004 Financial Statements"). The December 2003 Financial Statements and
-------------------------------
the March 2004 Financial Statements: (i) were prepared in accordance with GAAP
as in effect for the period covered thereby, applied on a consistent basis; and
(ii) taken together, present fairly, in all material respects, the financial
position of the West Virginia Gas Distribution Business as of December 31, 2004
and March 31, 2004, respectively. The December 2003 Financial Statements and the
March 2004 Financial Statements set forth all net accounts payable (including,
without limitation, all notes payable to affiliates and long term affiliated
accounts payable) owed by the Company and its Subsidiaries to upstream
Affiliates of the Company and affiliated accounts receivable of the Company and
its Subsidiaries (including, without limitation, all notes receivable from
affiliates and long term affiliated accounts receivable) due from upstream
Affiliates of the Company, in each case as of December 31, 2003 and March 31,
2004, respectively.
5.7. Undisclosed Liabilities. The Assumed Obligations do not include,
-----------------------
and the Company and its Subsidiaries do not have, any Liabilities except for (i)
Liabilities reflected or reserved against in the Financial Statements and (ii)
Liabilities incurred after the dates of the Balance Sheets in the ordinary and
usual course of business. "Liabilities" means any debts, liabilities,
-----------
commitments or obligations of any kind, character or nature whatsoever.
5.8. Absence of Certain Changes or Events. Since December 31, 2003,
------------------------------------
(i) no Material Adverse Effect has occurred, (ii) the Company and each Company
Subsidiary has conducted its respective business only in the ordinary and usual
course, consistent with past practice, (iii) there has been no damage,
destruction or casualty loss to the Related Assets or the assets of the Company
or any of its Subsidiaries, whether or not covered by insurance and (iv) neither
the Seller (with respect to the West Virginia Gas Distribution Business), the
Company nor any Subsidiary of the Company has:
(a) incurred any liability or obligation (absolute, accrued,
contingent or otherwise) except in the ordinary course of business and
consistent with past practice, or increased, or experienced any change
in assumptions underlying or methods of calculating, any bad debt,
contingency or other reserves, other than increases or changes that
are immaterial;
25
(b) paid, discharged, settled or satisfied any claim,
liability or obligation other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with
past practice of liabilities and obligations reflected or reserved
against on the Balance Sheets or incurred in the ordinary course of
business and consistent with past practice;
(c) permitted or allowed any of its properties (real,
personal or mixed, tangible or intangible) or assets to be subject to
any Encumbrance, except for Permitted Encumbrances;
(d) cancelled any debts or waived any claims or rights of
substantial value;
(e) sold, transferred or otherwise disposed of any of its
properties (real, personal or mixed, tangible or intangible) or
assets, except in the ordinary course of business and consistent with
past practice;
(f) granted any general increase in the compensation of
officers or employees of the Company (including any such increases
pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or any other increases in the compensation payable or to
become payable to any officer or employee of the Company other than as
required by contracts in existence prior to December 31, 2003 or in
the ordinary course of business consistent with past practice;
(g) (i) changed any financial or material Tax accounting
methods, policies or practices except as required by a change in GAAP,
(ii) made, revoked, or amended any material Tax election, (iii) filed
any material amended Tax Return or claim for refund, (iv) consented to
extend the period of limitations for the payment or assessment of any
material Tax, (v) entered into any closing agreement affecting any
material Tax liability or refund, or (vi) settled or compromised any
material Tax liability or refund; or
(h) declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock.
5.9. Indebtedness of the Company. The Company and its Subsidiaries (a)
---------------------------
do not have any outstanding indebtedness for borrowed money (including
obligations in respect of capital leases), other than amounts owed to Affiliates
of the Company, and (b) have not guaranteed the obligations (whether directly or
indirectly, contingently or otherwise) of any other Person.
5.10. Title and Related Matters.
-------------------------
26
(a) Except for Permitted Encumbrances, the Company or the
Seller, as the case may be, holds an insurable fee simple title to the
Real Property and any real property that the Company or its
Subsidiaries purports to own.
(b) Except for Permitted Encumbrances, (x) the Seller has
good and valid title to the Related Assets (other than the Real
Property) which it purports to own, free and clear of all
Encumbrances, and (y) the Company and its Subsidiaries have good and
valid title to the material assets which they purport to own, free and
clear of all Encumbrances.
(c) Assuming they constitute valid and binding agreements of
the Buyer (where applicable), the Xxxx of Sale and the deeds,
endorsements, assignments and other instruments to be executed and
delivered by Seller to Buyer at Closing will be valid and binding
obligations of Seller, enforceable in accordance with their respective
terms, and will effectively vest in Buyer good, valid and marketable
title to, and ownership of, all the Related Assets to be transferred
to Buyer pursuant to and as contemplated by this Agreement, free and
clear of all Encumbrances (except Permitted Encumbrances).
(d) Assuming they constitute valid and binding agreements of
the Buyer (where applicable), the share certificates of Company Common
Stock, stock powers, endorsements, assignments and other instruments
to be executed and delivered by Seller to Buyer at Closing will be
valid and binding obligations of Seller, enforceable in accordance
with their respective terms, and will effectively vest in Buyer good,
valid and marketable title to, and ownership of, the shares of Company
Common Stock to be transferred to Buyer pursuant to and as
contemplated by this Agreement, free and clear of all Encumbrances
(except Permitted Encumbrances).
(e) None of the Seller (so far as it relates to the Related
Assets), the Company or any Company Subsidiary is a party to any lease
or agreement under which it is a lessee of any material personal
property. Each Seller Lease is a valid agreement, duly authorized and
entered into, without any default of the Seller, the Company or any
Company Subsidiary thereunder and, to the knowledge of Seller, without
any default thereunder of any other party thereto. To the knowledge of
Seller, none of the Seller, the Company or any Company Subsidiary has
received or given a written notice of default under the Seller Leases
other than notices with respect to defaults which have either been
cured or waived.
(f) Schedule 5.10(f) lists all material real property leases
to which the Seller (so far as it relates to the Related Assets), the
Company or any Company Subsidiary is a party (the "Leased Real
-----------
Property"). Schedule 5.10(f) lists all real property owned by the
--------
Seller (so far as it relates to the Related Assets), the Company and
each Company Subsidiary (the "Owned Real Property"). The Owned Real
-------------------
Property and the Leased Real Property, together with any and all
27
easements appurtenant to (i) such real property and (ii) the
Transferred Pipelines and the natural gas pipelines owned by the
Company and the Company Subsidiaries, in each case granted to the
Seller (so far as they relate to the Related Assets), the Company or
any Company Subsidiary, if any, include all of the material real
property used or held for use in connection with the West Virginia Gas
Distribution Business as now conducted.
(g) None of the Seller, the Company or any Company
Subsidiary has any outstanding options or rights of first refusal to
purchase any Leased Real Property or any portion thereof or interest
therein.
(h) Each lease related to the Leased Real Property is valid,
binding and enforceable in accordance with its terms, subject to the
Bankruptcy and Equity Exception. No notice of any default has been
given to the Seller, the Company or any Company Subsidiary under any
such lease.
(i) There are no material subleases or assignments of any
kind to which the Seller, the Company or any Company Subsidiary is a
party with respect to the Seller's, the Company's or applicable
Company Subsidiary's interest in the Leased Real Property or Owned
Real Property.
(j) None of the Seller, the Company or the Company
Subsidiaries has received any written notice of, or has any knowledge
of, any action, proceeding or litigation pending (and, to the
knowledge of the Seller, threatened) (i) to take all or any portion of
the Owned Real Property or the Leased Real Property, or any interest
therein, by eminent domain or similar proceeding; (ii) to modify the
zoning of the Owned Real Property or the Leased Real Property, or the
use or development thereof; or (iii) otherwise relating to the Owned
Real Property or the Leased Real Property, or the interests of the
Seller, the Company or the Company Subsidiaries therein, which would
be reasonably likely to interfere with the use, ownership,
improvement, development and/or operation of the Owned Real Property
or the Leased Real Property.
(k) There are no contracts outstanding for the sale,
exchange or transfer of any of the Owned Real Property or Leased Real
Property, or any portion thereof.
(l) The parcels constituting the Owned Real Property are
assessed separately from all other adjacent property not constituting
Owned Real Property for purposes of real property taxes assessed to,
or paid by, the Seller, the Company or any Company Subsidiary. To the
knowledge of the Seller, each of the parcels of the Owned Real
Property and the Leased Real Property complies with all applicable
subdivision, land parcelization and local governmental taxation or
separate assessment requirements.
28
(m) There has been no delivery of any written notice to the
Seller regarding any material repairs, alterations or other work on
any Owned Real Property or Leased Real Property which have been
required by any insurance company or any Governmental Entity.
5.11. Rights of Way and Real Property. To the knowledge of Seller,
-------------------------------
Seller owns or possesses all rights-of-way necessary for the operation of the
Related Assets, as now being conducted, without any known conflict with the
rights of others.
5.12. Transportation Contracts and Sales and Purchase Contracts. There
---------------------------------------------------------
are no contracts pursuant to which the Seller, with respect to the West Virginia
Gas Distribution Business, the Company or the Company's Subsidiaries either (a)
are legally obligated to transport gas owned by a third party, or (b) are
legally obligated to undertake any such transportation, other than pursuant to
tariffs or agreements approved or authorized by the Public Service Commission.
There are no agreements or other legally binding arrangements pursuant to which
the Seller, with respect to the West Virginia Gas Distribution Business, or the
Company or the Company's Subsidiaries are a seller of gas to any third party
other than pursuant to tariffs or arrangements approved or authorized by the
Public Service Commission.
5.13. Insurance. All policies of fire, liability, worker's
---------
compensation and other forms of insurance owned or held by Allegheny Energy
Inc., of which the Seller is a wholly owned subsidiary ("Parent"), that insure
------
the Related Assets or the assets, properties or operations of the Company or the
Company's Subsidiaries are in full force and effect, subject to the terms of
each policy, all premiums due with respect thereto covering all periods up to
and including the date as of which this representation is being made have been
paid (other than retroactive premiums which may be payable with respect to
comprehensive general liability and worker's compensation insurance policies),
and no notice of cancellation or termination has been received with respect to
any such policy which was not replaced on substantially similar terms prior to
the date of such cancellation. As of the date of this Agreement, Parent has not
been refused any insurance with respect to the Related Assets, the Company or
the Company's Subsidiaries nor has such coverage been limited by any insurance
carrier to which Parent has applied for any such insurance or with which it has
carried insurance during the last twelve months. Schedule 5.13 sets forth (a) a
true and complete list and description of all insurance policies, other
insurance arrangements and other contracts or arrangements for the transfer or
sharing of insurance risks by the West Virginia Gas Distribution Business in
force on the date hereof, together with a statement of the aggregate amount of
claims paid out and claims pending, in each case since December 31, 2003 with
respect to the West Virginia Gas Distribution Business, under each such
insurance policy or other arrangement through the date of this Agreement, (b) a
description of such risks which the Seller, the Company, any Subsidiary of the
Company, or the Board of Directors or officers thereof, have designated as being
self-insured and (c) a true and complete list of all outstanding claims for
medical expenses in excess of $10,000 made by or with respect to any single
29
employee (but not including the identity of such employee) of the Company or any
Company Subsidiary.
5.14. Environmental Matters. Except as set forth in Schedule 5.14:
---------------------
(a) (i) The Seller, the Company and the Company's
Subsidiaries each hold, and are in compliance with, permits, licenses,
and governmental authorizations necessary under applicable
Environmental Laws ("Environmental Permits") to operate the West
---------------------
Virginia Gas Distribution Business as presently conducted, and (ii)
the Seller (with respect to the West Virginia Gas Distribution
Business and the ownership or operation of the Related Assets), the
Company, and the Company's Subsidiaries, are in compliance with
applicable Environmental Laws.
(b) None of the Seller, the Company or the Company's
Subsidiaries has received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that
alleges that either Seller (with respect to the West Virginia Gas
Distribution Business or the ownership or operation of the Related
Assets), the Company, or any of the Company's Subsidiaries, is not in
such compliance. None of the Seller, the Company or the Company's
Subsidiaries has received any written request for information, or been
notified that it is a potentially responsible party, under CERCLA or
any similar state law with respect to any on-site location.
(c) There is no Environmental Claim pending or threatened
against either Seller (with respect to the West Virginia Gas
Distribution Business or the ownership or operation of the Related
Assets), the Company or any of the Company's Subsidiaries.
(d) To the knowledge of Seller, there are no past or present
actions, activities, circumstances, conditions, events or incidents,
including without limitation the release, emission, discharge,
presence or disposal of any Hazardous Substance, that could reasonably
be expected to result in any Environmental Claim against any of Seller
(with respect to the West Virginia Gas Distribution Business or the
ownership or operation of the Related Assets), the Company or the
Company's Subsidiaries.
(e) None of the Seller (with respect to the West Virginia
Gas Distribution Business or the ownership or operation of the Related
Assets), the Company or the Company's Subsidiaries has entered into or
agreed to any consent decree or order, and is not subject to any
outstanding judgment, decree, or judicial order concerning compliance
with any Environmental Law or the investigation or cleanup of
Hazardous Substances under any Environmental Law, except for any such
consent decree or order, judgment, decree or judicial order that is
immaterial.
30
Notwithstanding any other representations in this Article V, the
representations and warranties made in this Section 5.14 are the Seller's
exclusive representations and warranties relating to any Environmental Law or
the protection of the environment.
5.15. Public Service Commission. Schedule 5.15 lists all of the
-------------------------
currently operative tariffs authorized and approved prior to the date of this
Agreement by the Public Service Commission applicable to the West Virginia Gas
Distribution Business and all of the currently pending rate, certificate or
other filings made prior to the date of this Agreement by the Seller (with
respect to the West Virginia Gas Distribution Business), the Company or the
Company's Subsidiaries before the Public Service Commission and the status of
each such filing on the date of this Agreement. The West Virginia Gas
Distribution Business is in compliance with all of the rules, regulations and
currently operative tariffs authorized and approved by the Public Service
Commission applicable to the West Virginia Gas Distribution Business and all of
the currently pending rate, certificate or other filings made by the Seller (in
respect of the West Virginia Gas Distribution Business), the Company or the
Company's Subsidiaries before the Public Service Commission.
5.16. Labor Matters:
-------------
(a) None of the Seller (with respect to each employee who is
employed in the West Virginia Gas Distribution Business (whether by
Seller, the Company or the Company's Subsidiaries) (a "West Virginia
-------------
Gas Distribution Business Employee"), other than in connection with
----------------------------------
services that will be provided by Seller or its Affiliates pursuant to
the Transition Services Agreement, the Company or the Company's
Affiliates (with respect to a West Virginia Gas Business Employee) is
party to, or bound by, any labor agreement, collective bargaining
agreement, work rules or practices, or any other labor-related
agreements or arrangements, in each case, with any labor union, labor
organization or works council, other than the Collective Bargaining
Agreements listed on Schedule 1.1(a)(17); and to the knowledge of
Seller or the Company, no West Virginia Gas Distribution Business
Employee is represented by any labor organization with respect to his
or her employment with the Seller, the Company or any of the Company's
Affiliates.
(b) To the knowledge of Seller, no labor union, labor
organization, works council, or group of West Virginia Gas
Distribution Business Employees has made a pending demand for
recognition or certification in respect of the West Virginia Gas
Distribution Business, and to the knowledge of Seller, there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing
to be brought or filed with the National Labor Relations Board
("NLRB") or any other labor relations tribunal or authority. To the
----
knowledge of Seller or the Company, there are no labor union
31
organizing activities taking place as of the date of this Agreement in
respect of West Virginia Gas Distribution Business Employees.
(c) From January 1, 2003 to the date of this Agreement,
there have been no actual labor strikes, labor disputes, slowdowns,
work stoppages or lockouts pending, or, to the knowledge of Seller or
the Company, threatened with respect to West Virginia Gas Distribution
Business Employees.
(d) The Seller (in respect of West Virginia Gas Distribution
Business Employees), the Company and the Company's Affiliates (in
respect of the West Virginia Gas Distribution Business Employees) have
not committed any material unfair labor practice as defined in the
National Labor Relations Act.
(e) To the knowledge of Seller, the Seller (in respect of
West Virginia Gas Distribution Business Employees), the Company and
the Company's Affiliates (in respect of the West Virginia Gas
Distribution Business Employees) are in material compliance with all
applicable Laws in respect of employment and employment practices,
including, without limitation, all Laws respecting terms and
conditions of employment, health and safety, wages and hours,
immigration, employment discrimination, disability rights or benefits,
equal opportunity, plant closures and layoffs, affirmative action,
workers' compensation, labor relations, employee leave issues and
unemployment insurance.
(f) The Seller, the Company and their Affiliates are not
delinquent in material payments to any current or former West Virginia
Gas Distribution Business Employees for any services or amounts
required to be reimbursed or otherwise paid.
(g) None of the Seller (in respect of West Virginia Gas
Distribution Business Employees), the Company or any of the Company's
Affiliates (in respect of the West Virginia Gas Distribution Business
Employees) has received (i) notice of any unfair labor practice,
charge or complaint against it pending or threatened before the NLRB
or any other Governmental Entity, (ii) notice of any complaints,
grievances or arbitrations arising out of any Collective Bargaining
Agreement or other complaint, grievance or arbitration procedure
against it, (iii) notice of any charge or complaint with respect to or
relating to it pending before the Equal Employment Opportunity
Commission or any other Governmental Entity responsible for the
prevention of unlawful employment practices, (iv) notice of the intent
of any Governmental Entity responsible for the enforcement of labor,
employment, wages and hours of work, or occupational safety and health
laws to conduct an investigation with respect to or relating to it and
no such investigation is in progress, (iv) notice of any complaint,
lawsuit or other proceeding pending or threatened in any forum by or
on behalf of any current or former West Virginia Gas Distribution
Business Employees, any applicant for employment or classes of the
foregoing alleging breach of any express or implied contract of
employment, any applicable Law governing employment or the termination
32
thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship.
(h) The Seller (in respect of West Virginia Gas Distribution
Business Employees), the Company and the Company's Affiliates (in
respect of the West Virginia Gas Distribution Business Employees) are
in substantial compliance with all of their obligations under the WARN
Act and any other notification and bargaining obligations arising
under applicable Law.
(i) To the knowledge of Seller, the Company and the
Company's Affiliates, no West Virginia Gas Distribution Employee is in
violation of any term of any employment agreement, nondisclosure
agreement, common law nondisclosure obligation, fiduciary duty,
noncompetition agreement, restrictive covenant or other obligation to
a former employer of any such employee relating (i) to the right of
any such employee to be employed by the Seller or the Company or the
Company's Affiliates or (ii) to the use of trade secrets or
proprietary information.
(j) The execution of this Agreement and the consummation of
the transactions contemplated by this Agreement will not entitle any
third party (including, but not limited to, any labor union or labor
organization) to any material payments pursuant to any of the
Collective Bargaining Agreements.
5.17. ERISA; Employee Benefit Plans.
-----------------------------
(a) Schedule 5.17(a) lists each employment, bonus, deferred
compensation, incentive compensation, stock purchase, stock option,
severance or termination pay, hospitalization or other medical, life
or other insurance, supplemental unemployment benefits,
profit-sharing, pension, or retirement plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement
or arrangement currently maintained or contributed to or required to
be contributed to by the Company or any trade or business, whether or
not incorporated, that together with the Company would be deemed a
"single employer" within the meaning of Section 4001(b) of ERISA or
Section 414 of the Code (an "ERISA Affiliate") for the benefit of any
---------------
employee or former employee of the West Virginia Gas Distribution
Business (collectively, the "Benefit Plans").
-------------
(b) With respect to each Benefit Plan, the Seller has
delivered or made available to Buyer complete copies of each of the
following documents: (1) the governing plan document and any funding
instrument established thereunder; (2) the most recent annual report
and actuarial report, if required under ERISA or the Code, and, if
separate, the most recent financial statement; (3) the most recent
Summary Plan Description, together with each Summary of Material
Modifications, if required under ERISA; and (4) the most recent
determination letter received from the Internal Revenue Service with
33
respect to each Benefit Plan that is intended to be qualified under
Section 401(a) of the Code.
(c) No liability under Title IV of ERISA has been incurred
by the Company or any ERISA Affiliate that has not been satisfied in
full, and, to the knowledge of the Seller, no condition exists that
presents a material risk to the Company or any Subsidiary of the
Company of incurring a liability under such Title. No Benefit Plan
subject to the minimum funding requirements of Section 412 of the Code
or Section 302 of ERISA or any trust established thereunder has
incurred any "accumulated finding deficiency" (as defined in Section
302 of ERISA or Section 412 of the Code), whether or not waived, as of
the last day of the most recently ended fiscal year of such Benefit
Plan, and all contributions as of the date hereof and as of Closing
required to be made with respect thereto (whether pursuant to the
terms of such Benefit Plan or by Law) have been made.
(d) No Benefit Plan is a multiemployer plan within the
meaning of Section 3(37) or 4001(a)(3) of ERISA, and neither the
Company nor any ERISA Affiliate has contributed to or been obligated
to contribute to any such multiemployer plan during the preceding six
years. No Benefit Plan is a plan described in Section 4063(a) of
ERISA.
(e) Each Benefit Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service as to its
qualification under said Section 401(a), as amended to date, excluding
any statutory amendment that is not effective as of the date hereof
and any statutory amendment for which the remedial amendment period
under Section 401(b) of the Code has not yet expired and, to the best
knowledge of the Seller and the Company, no event has occurred that is
likely to result in the disqualification of such Benefit Plan.
(f) Each Benefit Plan has been operated and administered in
all material respects in accordance with its terms and applicable
Laws, including without limitation ERISA and the Code. Except as set
forth on Schedule 5.17(f), there are no pending or, to the best
knowledge of the Seller or the Company, threatened claims by or on
behalf of any of the Benefit Plans, by any employee or beneficiary
covered under any such Plan or otherwise involving any such Plan
(other than routine claims for benefits).
(g) The consummation of the transactions contemplated by
this Agreement will not, whether alone or together with any other
event, (i) entitle any current or former employee of the West Virginia
Gas Distribution Business to severance pay, unemployment compensation
or any other payment, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such person.
34
(h) Except as set forth on Schedule 5.17(h), no Benefit Plan
provides benefits, including without limitation death or medical
benefits (whether or not insured), with respect to current or former
employees of the West Virginia Gas Distribution Business beyond their
retirement or other termination of service, other than (i) coverage
mandated solely by applicable Law, (ii) death benefits or retirement
benefits under any "employee pension benefit plan," as defined in
Section 3(2) of ERISA, or (iii) disability benefits.
(i) To the knowledge of the Seller, neither the Seller nor
any other person or entity has engaged in a transaction with respect
to any Benefit Plan that, assuming the taxable period of such
transaction expired as of the date of this Agreement, could subject
the Seller or any other person or entity to a tax or penalty imposed
by either Section 4975 of the Code or Section 502(i) of ERISA in
respect of any Benefit Plan.
(j) There has been no amendment to, announcement by the
Seller or any of its subsidiaries relating to, or change in employee
participation or coverage under, any Benefit Plan which would increase
materially the aggregate benefits provided to West Virginia Gas
Distribution Employees under such Plan above the level of the
aggregate benefits provided thereunder for the most recent fiscal
year.
5.18. Sufficiency of Assets. The assets of the Company and the Related
---------------------
Assets, together, include all of the assets and rights necessary to conduct the
West Virginia Gas Distribution Business in substantially the same manner as it
is currently conducted, other than with respect to the services to be provided
by Seller or its Affiliates pursuant to the Transition Services Agreement.
Substantially all of the assets used or held for use or relating to the West
Virginia Gas Distribution Business are owned or leased by Seller, the Company or
the Company's Subsidiaries, as the case may be, and none of their other
Affiliates owns or holds any material assets relating to, used or held for use
in the conduct of the West Virginia Gas Distribution Business. The Permits held
by the Company after Closing or to be transferred to Buyer at Closing will
include all Permits necessary to conduct the West Virginia Gas Distribution
Business in substantially the same manner as it is currently conducted, other
than with respect to the services to be provided by Seller or its Affiliates
pursuant to the Transition Services Agreement.
5.19. Certain Contracts and Arrangements.
----------------------------------
(a) Except for (i) the contracts set forth on Schedule
5.19(a) and (ii) the Collective Bargaining Agreements (such contracts
referred to in clause (i) and (ii) being the "Contracts"), (x) the
---------
Seller is not a party to any written contract, agreement, personal
property lease, commitment, understanding or instrument which is
material to the business or operations of the West Virginia Gas
Distribution Business and (y) the Company or its Subsidiaries are not
a party to any written contract, agreement, personal property lease,
35
commitment, understanding or instrument which is material to their
business or operations taken as a whole.
(b) Each of the Contracts (i) constitutes a valid and
binding obligation of the Seller, the Company or the Company's
Subsidiaries, as the case may be, and to the knowledge of the Seller
constitutes a valid and binding obligation of the other parties
thereto, (ii) is in full force and effect except to the extent such
contract expires by its own terms after the date of this Agreement,
and (iii) may be transferred to the Buyer pursuant to this Agreement
and will continue in full force and effect thereafter, in each case
without breaching the terms thereof or resulting in the forfeiture or
impairment of any material rights thereunder.
(c) There is not, under any of the Contracts, any default or
event which, with notice or lapse of time or both, would constitute a
default on the part of any of the parties thereto, except such events
of default and other events as to which requisite waivers or consents
have been obtained or which are immaterial.
5.20. Legal Proceedings, Etc. There are no claims, actions,
----------------------
proceedings or investigations pending or threatened against or relating to the
Seller, the Company or any of their Affiliates before any court or Governmental
Entity, which question, challenge the validity of, or could be reasonably
expected to have the effect of preventing, delaying, making illegal or otherwise
interfering in any material respect with, this Agreement or the Related
Agreements, the consummation of the transactions contemplated hereby or thereby
or any action taken or proposed to be taken by Seller pursuant hereto or thereto
or in connection with the transactions contemplated herein or therein. As of the
date of this Agreement, Seller is not aware of any reason relating to it, the
Company or their Affiliates that all Buyer Required Regulatory Approvals, other
than the Tariff Restructuring, are not likely to be timely obtained. There are
no claims, charges, complaints, actions, proceedings or investigations pending
or threatened against or relating to the Seller (in respect of the West Virginia
Gas Distribution Business), the Company or the Company's Subsidiaries before any
Governmental Entity other than those that are immaterial or are set forth on
Schedule 5.20 hereto. None of the Seller, the Company nor the Company's
Subsidiaries is subject to any outstanding judgment, rule, order, writ,
injunction or decree of any court or Governmental Entity.
5.21. Compliance with Permits and Laws.
--------------------------------
(a) Each of the Seller, the Company and the Company's
Subsidiaries has all permits, subdivision approvals, variances,
licenses, franchises and other governmental authorizations,
certificates, consents and approvals (other than with respect to
Environmental Laws, which are addressed in Section 5.14)
(collectively, "Permits") necessary to operate the West Virginia Gas
-------
Distribution Business as presently conducted, except where the failure
to have any such Permit is immaterial. Each of the Seller (with
respect to the West Virginia Gas Distribution Business), the Company
and the Company's Subsidiaries is in compliance with all Permits and
Laws of all Governmental Entities applicable to it and no notice,
charge, claim, action or assertion has been received by the Seller
36
(with respect to the West Virginia Gas Distribution Business), the
Company or any Subsidiary of the Company or, to the knowledge of
Seller, threatened against the Seller (with respect to the West
Virginia Gas Distribution Business), the Company or any Subsidiary of
the Company, in each case alleging any violation of any of the
foregoing, except for any immaterial violations or failures to be in
compliance with any Permits or Laws.
(b) Schedule 5.21(b) sets forth all Permits and
Environmental Permits and consent orders to which Seller (with respect
to the West Virginia Gas Distribution Business), the Company or the
Company's Subsidiaries is subject as of the date of this Agreement,
with the exception of routine approvals which are not discretionary.
5.22. Tax Matters. (a) (i) All Tax Returns required to be filed on or
-----------
before the Closing Date by or with respect to the Company or its Subsidiaries or
by the Seller with respect to the West Virginia Gas Distribution Business, other
than those Tax Returns the failure of which to file would be immaterial, have
been or will be timely filed on or before the Closing Date, (ii) such Tax
Returns are or will be true, correct, and complete in all material respects, and
(iii) all Taxes shown to be due on such Tax Returns have been or will be timely
paid in full.
(b) None of the Company, its Subsidiaries or the Seller with
respect to the West Virginia Gas Distribution Business has extended or
waived the application of any statute of limitations of any
jurisdiction regarding the assessment or collection of any Tax.
(c) There are no audits, claims, assessments, levies,
administrative or judicial proceedings pending, or to the knowledge
of the Seller and its affiliates, threatened, proposed or
contemplated against the Company, its Subsidiaries or with respect to
the West Virginia Gas Distribution Business by any tax authority.
(d) There are no liens for Taxes on any assets of the
Company or its Subsidiaries or with respect to the West Virginia Gas
Distribution Business except for Permitted Encumbrances.
(e) Neither the Company nor any of its Subsidiaries (i) is
a party to, bound by or has any obligation under any Tax allocation,
Tax sharing, Tax indemnity or similar agreement, arrangement or
understanding or (ii) has any liability for the Taxes of any person,
other than the Company or any of its Subsidiaries, as a transferee,
or successor or otherwise (including any liability under Treasury
Regulation Section 1.1502-6 or any similar provision of state, local
or foreign law).
37
(f) The Company and its Subsidiaries have withheld and paid
all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, member or other third party.
(g) The Seller filed a consolidated United States federal
income tax return with the Company and the Company's Subsidiary for
the taxable year immediately preceding the current taxable year.
5.23. Related Party Matters. The Company and its Subsidiaries are not
---------------------
party to any agreement, contract, commitment, transaction or proposed
transaction with any of their Affiliates, except agreements, contracts,
commitments, transactions and proposed transactions which have been entered into
and conducted on an arm's-length basis. No contract included in the Related
Assets has, as a counterparty thereto, an Affiliate of Seller (other than the
Company or its Subsidiaries), except for those contracts that have been entered
into and conducted on an arm's-length basis.
5.24. Regulatory Proceedings. Neither the Seller, with respect to the
----------------------
West Virginia Gas Distribution Business, the Company nor its Subsidiaries has
rates which have been or are being collected subject to refund, pending final
resolution of any proceeding pending before a Governmental Entity or on appeal
to the courts.
5.25. Regulation as a Utility. The Company and its Subsidiaries are
-----------------------
not regulated as a public utility by any state other than the State of West
Virginia, and Mountaineer Gas Services, Inc. and Universal Coil, LLC are not
regulated by any state public utility laws.
5.26. Intellectual Property. The Seller or the Company owns, or
---------------------
possesses licenses or has other valid rights to use (in each case, free and
clear of any Encumbrances other than Permitted Encumbrances) all Gas
Distribution Intellectual Property, and (i) the conduct of the businesses of the
Seller (as it relates to the West Virginia Gas Distribution Business) and of the
Company as currently conducted, to the knowledge of Seller, does not infringe
upon or misappropriate any Intellectual Property of any third party, and neither
the Seller nor the Company has received written notice by any Person of any
pending or threatened claims, suits, actions, mediations, arbitrations, orders
or other adversarial proceedings (A) alleging infringement (or other violation)
by the Seller or the Company of Intellectual Property or other rights of any
Person or (B) challenging the Seller's or the Company's ownership or use of, or
the validity, enforcement, registrability or maintenance of, any Gas
Distribution Intellectual Property; (ii) to the knowledge of Seller, no Person
is infringing upon or otherwise violating any Gas Distribution Intellectual
Property of the Seller or the Company; (iii) the use by the Seller or the
Company of any Gas Distribution Intellectual Property is, except as would be
immaterial, in accordance with any and all applicable grants, licenses,
agreements, instruments or other arrangements pursuant to which the Seller or
the Company acquired the right to use such Gas Distribution Intellectual
Property; (iv) neither the Seller nor the Company has entered into any consents,
38
judgments, orders, indemnifications, forbearances to xxx, settlement agreements,
licenses or other arrangements which (A) restrict the Seller's or the Company's
right to use any Gas Distribution Intellectual Property, (B) restrict the
Seller's or the Company's West Virginia Gas Distribution Business in order to
accommodate a third Person's Intellectual Property rights, or (C) permit any
third party to use any Gas Distribution Intellectual Property.
5.27. Fees and Commissions. Except for X.X. Xxxxxx Securities Inc.,
--------------------
whose fees will be paid by Seller, there is no investment banker, broker, finder
or other intermediary that has been retained by or is authorized to act on
behalf of Seller or any Affiliate or Subsidiary of Seller that may be entitled
to any fee or commission from Seller, the Company or the Company's Subsidiaries
in connection with the transactions contemplated hereby.
5.28. Subsidiaries and Affiliates. Schedule 5.28 sets forth the name,
---------------------------
jurisdiction of incorporation or organization and authorized and outstanding
capital of each Subsidiary of the Company and the jurisdictions in which each
Subsidiary of the Company is qualified to do business. All the outstanding
capital stock of each Subsidiary of the Company is owned directly by the Company
free and clear of all Encumbrances (except Permitted Encumbrances) and all
material claims or charges of any kind, and is validly issued, fully paid and
nonassessable, and there are no outstanding options, rights or agreements of any
kind relating to the issuance, sale or transfer of any capital stock or other
equity securities of any such Company Subsidiary. Each Company Subsidiary (i) is
a corporation or limited liability company duly organized, validly existing and
in good standing under the laws of its state of organization; (ii) has full
corporate power and authority to carry on its business as it is now being
conducted and to own the properties and assets it now owns; and (iii) is duly
qualified or licensed to do business as a foreign entity in good standing in
every jurisdiction in which such qualification is required, except to the extent
the failure to be so qualified or licensed would be immaterial. Seller has
heretofore delivered to Buyer complete and correct copies of the certificate of
incorporation and by-laws of each Company Subsidiary, as presently in effect.
5.29. Books and Records. The books of account, minute books, stock
-----------------
record books and other records of Seller relating to the Company and the Related
Assets (in each case dated after August 18, 2000) are complete and correct in
all material respects and have been maintained in accordance with sound business
practices. The minute books of the Company and Company Subsidiaries (in each
case dated after August 18, 2000) contain accurate and complete records of all
meetings of, and corporate action taken by, the shareholders and directors of
the Company and Company Subsidiaries and, since August 18, 2000, no meeting of
the shareholders or boards of directors of the Company or Company Subsidiaries
has been held for which minutes have not been prepared and are not contained in
such minute books. Buyer has been provided access to all minute books and all
stock record books of the Company and all Company Subsidiaries in Seller's
possession as of the date of this Agreement.
39
5.30. Accounts Receivable. All accounts receivable of the West
-------------------
Virginia Gas Distribution Business, regardless of whether reflected in the
Financial Statements, represent sales actually made in the ordinary course of
business, and are current and collectible net of any reserves shown on the
Financial Statements.
5.31. Inventory. All of the inventories of the West Virginia Gas
---------
Distribution Business, whether reflected in the Financial Statements, on
Schedule 2.1(d) or otherwise, consist of a quality and quantity usable and
salable in the ordinary and usual course of business, except for items of
obsolete materials and materials of below-standard quality, all of which items
have been written off or written down on the Financial Statements to fair market
value or for which adequate reserves have been provided therein. All inventories
not written off have been priced at the lower of average cost or market.
5.32. Plant and Equipment. The plants, structures and equipment owned
-------------------
or used by the West Virginia Gas Distribution Business are structurally sound
with no known defects and are in good operating condition and repair in all
material respects and are adequate for the uses to which they are being put.
None of such plants, structures or equipment are in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. None of Seller, Seller's Affiliates, the Company or
any Company Subsidiary has received notification that the Company or any Company
Subsidiary or Seller or its Affiliates with respect to the Related Assets is in
violation of any applicable building, zoning, health or similar law, ordinance
or regulation in respect of their operations or the real property to be
transferred pursuant to this Agreement.
5.33. Customers and Suppliers. None of the Company, the Company
-----------------------
Subsidiaries or Seller with respect to the West Virginia Gas Distribution
Business has any customer that accounts for more than 5% of the sales generated
by the West Virginia Gas Distribution Business. There has not been any material
adverse change in the business relationship of the Company, any Company
Subsidiary or Seller with respect to the West Virginia Gas Distribution Business
with any supplier or group of suppliers from which the Company, any Company
Subsidiary or Seller with respect to the West Virginia Gas Distribution
Business, taken as a whole, could reasonably be expected to purchase more than
5% of the goods or services to be purchased in connection with the conduct and
operation of the West Virginia Gas Distribution Business during the fiscal year
2004 that would not be reasonably likely to be replaced on substantially similar
terms and at a substantially similar cost as compared to the terms and cost that
would reasonably be expected to be obtained from the previous supplier or group
of suppliers absent any material adverse change in the business relationship of
the Company, any Company Subsidiary or Seller with respect to the West Virginia
Gas Distribution Business with such previous supplier or group of suppliers
through the exercise of commercially reasonable efforts by the Company, such
Company Subsidiary or Seller with respect to the West Virginia Gas Distribution
Business.
40
5.34. Company Accounts. Schedule 5.34 sets forth as of the date of
----------------
this Agreement, the names and locations of all banks, trust companies, savings
and loan associations and other financial institutions at which the Company or
any Company Subsidiary maintains safe deposit boxes, checking accounts or other
accounts of any nature (each, a "Company Account") the available balance of
---------------
which customarily exceeds $5,000 and the names of all Persons authorized to draw
thereon, make withdrawals therefrom or have access thereto.
5.35. No Other Representations or Warranties. EXCEPT FOR THE
--------------------------------------
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE V, THE SELLER
IS NOT MAKING ANY OTHER REPRESENTATIONS OR WARRANTIES, WRITTEN OR ORAL,
STATUTORY, EXPRESS OR IMPLIED, CONCERNING THE RELATED ASSETS OR THE COMPANY
COMMON STOCK (OR THE ASSETS HELD BY THE COMPANY), INCLUDING, IN PARTICULAR, ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH
ARE HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer represents and warrants to the Seller as follows:
6.1. Organization. The Buyer is a limited partnership duly organized,
------------
validly existing and in good standing under the laws of the State of West
Virginia and has all requisite limited partnership power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted except where the failure to have such limited partnership power and
authority would be immaterial.
6.2. Authority Relative to this Agreement. The Buyer has full limited
------------------------------------
partnership power and authority to execute and deliver this Agreement and the
Related Agreements and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Related Agreements
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by the general partners of the Buyer and no
other limited partnership proceedings on the part of the Buyer are necessary to
authorize this Agreement and the Related Agreements or to consummate the
transaction contemplated hereby or thereby. This Agreement and the Related
Agreements have been duly and validly executed and delivered by the Buyer, and,
assuming that this Agreement and the Related Agreements constitute valid and
binding obligations of the Seller, constitute valid and binding agreements of
the Buyer, enforceable against the Buyer in accordance with their terms, subject
to the Bankruptcy and Equity Exception.
41
6.3. Consents and Approvals; No Violation.
------------------------------------
(a) Other than obtaining the Buyer Required Regulatory
Approvals and the Seller Required Regulatory Approvals, neither the
execution and delivery of this Agreement and the Related Agreements by
the Buyer, the purchase by the Buyer of the Related Assets or the
Company Common Stock, the assumption by the Buyer of the Assumed
Obligations pursuant to this Agreement nor performance under the
Related Agreements will (i) conflict with or result in any breach of
any provision of the Certificate of Incorporation or By-Laws (or other
similar governing documents) of the Buyer, (ii) require any consent,
approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, (iii) result in a
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, agreement, lease or other instrument
or obligation to which the Buyer or any of its subsidiaries is a party
or by which any of their respective assets may be bound, except for
such defaults (or rights of termination, cancellation or acceleration)
as to which requisite waivers or consents have been obtained.
(b) Except for (i) the "no-action" letter or exemptive order
described in Section 8.2(h)(i) and Section 8.2(h)(ii), (ii) the
exemptive order described in Section 8.2(h)(iii), (iii) the filings by
the Buyer required by the HSR Act and the expiration or earlier
termination of all waiting periods under the HSR Act, (iv) the
approval of the Public Service Commission of the transfer of the West
Virginia Gas Distribution Business and the Tariff Restructuring, and
(v) the consent of the Federal Communications Commission to the
assignment and transfer, as applicable, of the radio station licenses
set forth on Schedule 5.21(b) hereto (the filings and approvals
referred to in clauses (i) through (v) are collectively referred to as
the "Buyer Required Regulatory Approvals"), no declaration, filing or
-----------------------------------
registration with, or notice to, or authorization, consent or approval
of any governmental or regulatory body or authority is necessary for
the consummation by the Buyer of the transactions contemplated hereby
or by the Related Agreements.
6.4. Availability of Funds. On the Closing Date the Buyer will have
---------------------
available sufficient funds to enable it to pay the Purchase Price on the terms
and conditions of this Agreement. The Buyer will have available sufficient funds
to pay to Seller any amounts due after the Closing Date pursuant to Sections
3.1(c), 3.2(c) and 3.2(d). Buyer's obligations hereunder are not subject to any
conditions regarding Buyer's ability to obtain financing for the consummation of
the transactions contemplated hereby.
6.5. Securities Act. Buyer is acquiring the Company Common Stock for
--------------
its own account and not with a view to its distribution within the meaning of
Section 2(a)(11) of the Securities Act in any manner that would be in violation
of the Securities Act. Buyer has not, directly or indirectly, offered the
Company Common Stock to anyone or solicited any offer to buy the Company Common
Stock from anyone, so as to bring such offer and sale of the Company Common
42
Stock by Buyer within the registration requirements of the Securities Act. Buyer
will not sell, convey, transfer or offer for sale any of the Company Common
Stock except upon compliance with the Securities Act and any applicable state
securities laws or pursuant to any exemption therefrom.
6.6. Litigation; Regulatory Approvals. There are no claims, actions,
--------------------------------
proceedings or investigations pending or threatened against or relating to the
Buyer or any of its Affiliates before any court, governmental or regulatory
authority or body acting in an adjudicative capacity, which question, challenge
the validity of, or could be reasonably expected to have the effect of
preventing, delaying, making illegal or otherwise interfering with, this
Agreement or the Related Agreements, the consummation of the transactions
contemplated hereby or thereby or any action taken or proposed to be taken by
Buyer pursuant hereto or thereto or in connection with the transactions
contemplated herein or therein. As of the date of this Agreement, Buyer is not
aware of any reason relating to it or its Affiliates that all Seller Required
Regulatory Approvals are not likely to be timely obtained.
6.7. Fees and Commissions. There is no investment banker, broker,
--------------------
finder or other intermediary that has been retained by or is authorized to act
on behalf of Buyer or any Subsidiary or Affiliate of Buyer that may be entitled
to any fee or commission from Seller, the Company or any of their Affiliates in
connection with the transactions contemplated hereby.
ARTICLE VII
COVENANTS OF THE PARTIES
------------------------
7.1. Conduct of Business Prior to the Closing.
----------------------------------------
(a) During the period from the date of this Agreement to the
Closing Date, the Seller will operate the West Virginia Gas
Distribution Business in the usual, regular and ordinary course
consistent with good industry practice and shall use all commercially
reasonable efforts to preserve intact the West Virginia Gas
Distribution Business and endeavor to preserve the goodwill and
relationships with customers, suppliers and others having business
dealings with such business. Without limiting the generality of the
foregoing, and, except as contemplated in this Agreement, prior to the
Closing Date, without the prior written consent of the Buyer (which
shall not be unreasonably withheld or delayed), the Seller will not,
and will not permit the Company to:
(i) (x) except for (1) Permitted Encumbrances and (2)
indebtedness that does not create an Encumbrance on the Related Assets
or any assets of the Company not discharged at or prior to Closing,
create, incur, assume or suffer to exist any indebtedness for borrowed
43
money (including obligations in respect of capital leases); or (y) if
such would be an Assumed Obligation, assume, guarantee, endorse or
otherwise become directly liable or responsible (whether directly or
indirectly, contingently or otherwise) for the obligations of any
Person other than the Company and its Subsidiaries;
(ii) make any material change in the levels of fuel
inventory and stores inventory customarily maintained (taking into
account seasonal variation) by the Seller with respect to the Related
Assets, other than consistent with good industry practice;
(iii) sell, lease (as lessor), transfer or otherwise dispose
of any of the Related Assets, other than assets used, consumed or
replaced in the ordinary course of business consistent with good
industry practice;
(iv) terminate or extend or otherwise amend (x) any contract
to the extent any such extension or amendment would require such
contract to be disclosed pursuant to Section 5.19(a) or (y) any
Contract, except in each case as permitted pursuant to Section
7.1(a)(xiii);
(v) execute, enter into, terminate or otherwise amend (x)
any of the Permits or Environmental Permits, other than routine
renewals or non-material modifications or amendments or (y) any other
agreement, order, decree or judgment relating to the current or any
new Permits or Environmental Permits;
(vi) (x) amend or cancel any liability or casualty insurance
policies related thereto or (y) fail to maintain, to the extent
commercially reasonable to do so, by self insurance or with
financially responsible insurance companies, insurance in such amounts
and against such risks and losses as was in place as of the date of
this Agreement for such assets;
(vii) enter into any commitment or contract for goods or
services not addressed in clauses (i) through (vi) above that will be
delivered or provided after December 31, 2004 or such other date that
the parties mutually agree to be a date by which the Closing is
expected to occur, in an amount greater than $1,000,000, except as
permitted pursuant to Section 7.1(a)(xiii);
(viii)amend the Company's Certificate of Incorporation or
By-laws in any manner adverse to Buyer;
(ix) (x) issue, sell, pledge or dispose of any new capital
stock in the Company or any of the Company's Subsidiaries to any third
party or encumber capital stock of the Company or any of the Company's
Subsidiaries except for an Encumbrance that is to be discharged at or
prior to the Closing, (y) grant any stock option, warrant or other
right to purchase capital stock of the Company or any of the Company's
44
Subsidiaries or (z) issue any security convertible into capital stock
of the Company or any stock option, warrant or other right to purchase
capital stock of the Company or any of the Company's Subsidiaries;
(x) permit the Company or any of its Subsidiaries to acquire
(including by merger, consolidation or acquisition of stock or
assets), or make a material investment in, any Person or any division
thereof or material portion of the assets thereof;
(xi) liquidate, dissolve or wind up the Company;
(xii) amend the terms of any Expiring Contract so that it
continues in force and effect beyond the Closing Date, except as
permitted pursuant to Section 7.1(a)(xiii);
(xiii) enter into any contract or commitment for the
procurement of natural gas to or transportation of natural gas in
respect of the West Virginia Gas Distribution Business having a term
of longer than 12 months and a purchase price commitment in excess of
$5,000,000;
(xiv) make any change in the compensation payable or to
become payable to any of the officers, employees, agents or
consultants of the Company (other than normal recurring increases in
the ordinary course of business consistent with past practice in wages
payable to employees who are not officers of the Company) or to
Persons providing management services to the Company, or enter into or
amend any employment, collective bargaining, severance, consulting,
termination or other agreement with, or employee benefit plan for, or
make any loan or advance to, any of the officers, employees,
Affiliates, agents or consultants of the Company or make any change in
its existing borrowing or lending arrangements for or on behalf of any
of such Persons pursuant to an employee benefit plan or otherwise,
other than travel and entertainment advances made in the ordinary
course of business and consistent with past practice;
(xv) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to any
shares of any class or series of the Company's capital stock;
(xvi) modify, amend or terminate any contracts or licenses
material to the West Virginia Gas Distribution Business or waive,
release or assign any rights or claims material to the West Virginia
Gas Distribution Business, except in the ordinary course of business
and consistent with past practice;
(xvii) (A) incur or assume any long-term debt payable to any
Person, or incur or assume any short-term debt payable to any Person
(other than Affiliates of the Company) other than in the ordinary
course of business consistent with past practice; (B) pay, repay,
00
xxxxxxxxx, xxxxxxxx, xxxxxxxxxx or satisfy any indebtedness issued or
guaranteed by the West Virginia Gas Distribution Business, except as
required by the terms thereof and except for payments of any or all
Affiliate Short-Term Liabilities and Affiliate Long-Term Liabilities;
(C) modify the terms of any indebtedness or other liability; (D)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of
any other Person; (E) enter into any "keep well" or other agreement to
maintain the financial statement condition of any Person; (F) make any
loans, advances or capital contributions to, or investments in, any
other Person; (G) enter into any material commitment or transaction
(including any capital expenditure or purchase, sale or lease of
assets or real estate); (H) write down the value of any inventory or
write off as uncollectible any notes or accounts receivable; (I) make
any optional pre-payment with respect to the Company Notes; or (J)
make any change to any banking or safe deposit box arrangements in
effect on the date hereof;
(xviii) (A) change any financial or material Tax
accounting methods, policies or practices except as required by a
change in GAAP, (B) make, revoke, or amend any material Tax election,
(C) file any material amended Tax Return or claim for refund, (D)
consent to extend the period of limitations for the payment or
assessment of any material Tax, (E) enter into any closing agreement
affecting any material Tax liability or refund, or (F) settle or
compromise any material Tax liability or refund;
(xix) make any Expansion Capital Expenditure in excess of
110% of the amounts provided for Expansion Capital Expenditures in the
2004 Capital Budget or any Additional Capital Budget; or
(xx) enter into any written or oral contract, agreement,
commitment or arrangement with respect to any of the matters described
in the foregoing paragraphs (i) through (xviii).
(b) Without limiting the generality of Section 7.1(a), from
the date hereof through the Closing Date, Seller shall, and Seller
shall cause the Company to, maintain the properties and assets
comprising the West Virginia Gas Distribution Business consistent with
past practices and in accordance with the 2004 Capital Budget and any
Additional Capital Budget adopted after the date of this Agreement.
7.2. Access to Information.
---------------------
(a) Between the date of this Agreement and the Closing Date,
each of the Seller and the Company will, during ordinary business
hours and upon reasonable notice: (i) give the Buyer and the Buyer
Representatives reasonable access to all books, records, plants,
offices and other facilities and properties of such Person (limited,
in the case of Seller, to the extent they constitute the Related
Assets or Assumed Obligations), but only to the extent to which the
46
Buyer is not denied access by law; (ii) permit the Buyer to make such
reasonable inspections thereof as the Buyer may reasonably request;
(iii) furnish the Buyer with such financial and operating data and
other information related to the West Virginia Gas Distribution
Business as the Buyer may from time to time reasonably request,
including an unaudited consolidated balance sheet of the Company and
an unaudited balance sheet for the Related Assets in respect of each
fiscal quarter completed from and after the date hereof, provided,
--------
however, that neither the Seller nor the Company shall be required to
-------
create special reports or perform any studies; (iv) furnish the Buyer
a copy of each material report, schedule or other document filed or
received by it (but only to the extent related to the Related Assets
in the case of Seller) with or from the SEC or the Public Service
Commission; and (v) allow Buyer to perform or conduct ASTM 1527 Phase
I environmental assessments at the Related Assets or at any property
or facility or real estate owned by the Company, provided, however,
-------- -------
that (A) any such investigation shall be conducted in such manner so
as not to interfere with the operation of the West Virginia Gas
Distribution Business, (B) neither the Seller nor the Company shall be
required to take any action which would constitute a waiver of the
attorney-client privilege and (C) the Seller and the Company need not
supply the Buyer with any information which the Seller or the Company
is under a legal obligation not to supply. Notwithstanding anything in
this Section 7.2 to the contrary, (i) the Seller and the Company shall
furnish or provide such access to Transferring Employee Records and
personnel and medical records to the extent permitted by Law or as
required by legal process or subpoena and (ii) the Buyer shall not
have the right to perform or conduct any environmental sampling or
testing at, in, on or underneath the Related Assets or at any property
or facility or real estate owned by the Company.
(b) All information furnished to or obtained by the Buyer
and the Buyer Representatives pursuant to this Section 7.2 or the
Related Agreements shall be subject to the provisions of the
Confidentiality Agreement and shall be treated as "Information" (as
defined in the Confidentiality Agreement).
(c) For a period of six years after the Closing Date, each
party and its representatives shall have reasonable access to all of
the books and records related to the Related Assets, the Assumed
Obligations and the Company, including all Transferring Employee
Records, in the possession of the other party to the extent that such
access may reasonably be required by such party and to the extent
permitted under applicable Law. Such access shall be afforded by the
party or parties in possession of such books and records upon receipt
of reasonable advance notice and during normal business hours. The
party or parties exercising this right of access shall be solely
responsible for any costs or expenses incurred by it or them pursuant
to this Section 7.2(c). If the party or parties in possession of such
books and records shall desire to dispose of any such books and
records upon or prior to the expiration of such six-year period, such
party or parties shall, prior to such disposition, give the other
party or parties a reasonable opportunity at such other party's or
47
parties' expense, to segregate and remove such books and records as
such other party or parties may select.
(d) The Seller agrees, and agrees to cause the Company, not
to release any Person (other than the Buyer and its Affiliates) from
any confidentiality agreement now existing with respect to the West
Virginia Gas Distribution Business, or waive or amend any provision
thereof.
(e) Unless otherwise agreed to in writing by the Buyer, for
a period commencing on the Closing Date and terminating three years
after such date the Seller shall, except as may be required by Law or
legal process, keep all Information (as defined in the Confidentiality
Agreement) confidential and (i) shall not disclose or reveal any
Information (as defined in the Confidentiality Agreement) to any
Person other than Seller's Representatives who are actively and
directly participating in the transactions contemplated hereby or who
otherwise need to know the Information for such purpose and shall
cause those Persons to observe the terms of this Section 7.2(e) and
(ii) shall not use Information for any purpose other than consistent
with the terms of this Agreement. The Seller shall continue to hold
all Information according to the same internal procedures and with the
same degree of care regarding its secrecy and confidentiality as
currently applicable thereto. The Seller shall notify the Buyer of any
unauthorized disclosure to third parties that it discovers, and shall
endeavor to prevent any further such disclosures. The Seller shall be
responsible for any breach of the terms of this Section 7.2(e) by the
Seller or the Seller's Representatives.
(f) After the Closing Date, in the event that the Seller is
requested pursuant to, or required by, applicable Law or regulation or
by legal process to disclose any Information, or any other information
concerning the Related Assets, the Company, the Assumed Obligations,
or the transactions contemplated hereby, the Seller shall provide the
Buyer with prompt notice of such request or requirement in order to
enable the Buyer, at its expense, to seek an appropriate protective
order or other remedy, to consult with the Seller with respect to
taking steps to resist or narrow the scope of such request or legal
process, or to waive compliance, in whole or in part, with the terms
of Section 7.2(e). The Seller agrees not to oppose any action by the
Buyer to obtain a protective order or other appropriate remedy after
the Closing Date. In the event that no such protective order or other
remedy is obtained, or that the Buyer waives compliance with the terms
of Section 7.2(e), the Seller shall furnish only that portion of the
Information which the Seller is advised by counsel is legally
required. In any such event the Seller shall use its reasonable best
efforts to ensure that all Information and other information that is
so disclosed will be accorded confidential treatment.
7.3. Expenses. Except to the extent specifically provided in this
--------
Agreement, whether or not the transactions contemplated hereby are consummated,
48
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be borne by the party incurring such
costs and expenses.
7.4. Further Assurances; Post-Closing Payment Arrangements.
-----------------------------------------------------
(a) Subject to the terms and conditions of this Agreement,
each of the parties hereto will use its reasonable 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
Related Assets and the Company Common Stock pursuant to this
Agreement, including without limitation using its reasonable best
efforts to ensure satisfaction of the conditions precedent to each
party's obligations hereunder. Notwithstanding anything in the
previous sentence to the contrary, the Seller and the Buyer shall use
reasonable best efforts to obtain all Permits and Environmental
Permits necessary for the Buyer to operate the Related Assets. None of
the parties hereto will, without prior written consent of the other
parties, 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 of this Agreement, without further consideration, the Seller
will, at its own expense, execute and deliver such documents to the
Buyer as the Buyer may reasonably request in order to vest more
effectively in the Buyer the Seller's title to the Related Assets and
the Company Common Stock, subject to Permitted Encumbrances and
Schedule 5.10A. From time to time after the date of this Agreement,
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 assumption of the Assumed Obligations
pursuant to this Agreement.
(b) In the event that any material Related Asset shall not
have been conveyed to the Buyer at the Closing but Buyer elects to
waive the condition set forth in Section 8.2(b), Buyer may either (i)
proceed to Closing subject to an appropriate adjustment of the
Purchase Price in respect of such material Related Asset reasonably
satisfactory to Buyer and Seller, or (ii) proceed to Closing subject
to (x) Seller's undertaking to use its reasonable best efforts to
convey such asset to the Buyer as promptly as practicable after the
Closing and (y) such additional reasonable undertakings by Seller as
may be requested by Buyer.
(c) In the event that any immaterial Related Asset shall not
have been conveyed to the Buyer at the Closing, the Seller shall use
its reasonable best efforts to convey such asset to the Buyer as
promptly as practicable after the Closing.
(d) Without limiting the generality of Sections 7.4(b) and
(c), from and after the Closing, in the event the Buyer or the Seller
becomes aware that Seller or its Affiliates (other than the Company)
is a party to any real property lease or owns real property that in
49
each case was used exclusively in the West Virginia Gas Distribution
Business prior to the Closing (other than the Old Cameron Service
Center) and was not included in the Related Assets or the assets of
the Company as of the Closing, then, at the request of the Buyer,
Seller shall convey such real property lease or owned real property to
the Buyer for no additional consideration.
(e) Not less than thirty (30) days prior to the anticipated
Closing Date, the Seller shall prepare and deliver to the Buyer a
draft letter of notification to be sent to each customer of the West
Virginia Gas Distribution Business and each other Person who is
reasonably expected to pay money to the West Virginia Gas Distribution
Business on a periodic basis after the Closing Date (the "Closing
-------
Notice"). The Closing Notice shall include, among other things
------
reasonably requested by the Buyer, (i) notice to each customer and
such other Person who is reasonably expected to pay money to the West
Virginia Gas Distribution Business on a periodic basis after the
Closing Date that the Closing shall have occurred and that Buyer is
the new owner of the West Virginia Gas Distribution Business, (ii)
instructions for the manner of payment to be followed by customers and
such other Persons from and after the Closing, including, without
limitation, all necessary information regarding the account or
accounts to which payments should be made following the Closing, which
account or accounts shall be acceptable to Buyer, and (iii) all other
information which, in the opinion of the Seller and the Buyer, will be
beneficial in causing such payments to be made to accounts controlled
by the Company or the Company Subsidiaries from and after Closing as
soon as reasonably practicable following the Closing.
(f) If after the Closing the Seller or any of its
Affiliates, on the one hand, or Buyer or any of its Affiliates, on the
other hand (as applicable, the "Receiving Party"), receives any funds
---------------
that, pursuant to the terms of this Agreement, belong to the other
party, including in the case of the Buyer, the Company (the "Entitled
--------
Party"), the Receiving Party shall hold such funds in trust for, and
-----
promptly as practicable pay over such funds to, the Entitled Party.
Without limiting the generality of the forgoing, for a period of
twelve (12) months following the Closing, the Seller shall (i) within
ten (10) Business Days following the end of each such month, provide
to the Buyer a statement of all funds received by the Seller or its
Affiliates in the immediately preceding month that are required to be
delivered to the Company or the Buyer pursuant to the terms of this
Agreement, including the date on which such funds were received by the
Seller or its Affiliates and the date on which Seller or such
Affiliate remitted such funds to the Company or the Buyer, together
with any reasonable supporting detail requested by the Buyer or the
Company and (ii) upon each receipt of funds from any customer of the
West Virginia Gas Distribution Business or other Person who is
reasonably expected to pay money to the West Virginia Gas Distribution
Business on a periodic basis after the Closing Date, promptly send, or
cause to be sent, the Closing Notice (as finally approved and modified
by Buyer) and/or such other notice reasonably requested by the Buyer
to such customer or other Person, whether or not the Seller or the
50
Buyer shall have previously sent, or caused to be sent, the Closing
Notice to such customer or other Person.
(g) Seller shall cause the amount of cash, cash equivalents
and securities reflected on the Purchase Price Certificate to be
included in the Company Accounts as of the Closing Date.
7.5. Public Statements. The parties shall consult with each other
-----------------
prior to issuing any public announcement, statement or other disclosure with
respect to this Agreement or the Related Agreements or the transactions
contemplated hereby or thereby and shall not issue any such public announcement,
statement or other disclosure prior to obtaining the consent of the other,
except as may be required by law.
7.6. Consents and Approvals.
----------------------
(a) Seller (or Parent, if necessary) and the Buyer (or the
ultimate parent entity of Buyer, if necessary) shall each file or
cause to be filed with the Federal Trade Commission and the United
States Department of Justice any notifications required to be filed
under the HSR Act and the rules and regulations promulgated thereunder
with respect to the transactions contemplated hereby. The parties
shall consult with each other as to the appropriate time of filing
such notifications (which time shall be no later than 60 days from the
date of this Agreement) and shall use their reasonable best efforts to
make such filings at such time, to respond promptly to any requests
for additional information made by either of such agencies, and to
cause the waiting periods under the HSR Act to terminate or expire at
the earliest possible date after the date of filing.
(b) The Seller and the Buyer shall cooperate with each other
and (i) promptly prepare and file all necessary documentation, (ii)
effect all necessary applications, notices, petitions and filings and
execute all agreements and documents, (iii) use reasonable best
efforts to promptly obtain the transfer or reissuance to the Buyer of
all necessary Permits, consents, approvals and authorizations of all
Governmental Entities and (iv) use reasonable best efforts to obtain
all necessary consents, approvals and authorizations of all other
parties, in the case of each of the foregoing clauses (i), (ii), (iii)
and (iv), necessary or advisable to consummate the transactions
contemplated by this Agreement (including, without limitation, the
Seller Required Regulatory Approvals and the Buyer Required Regulatory
Approvals (other than incident to the Tariff Restructuring, which is
the subject of Section 7.6(c)) or required by the terms of any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument to which the Seller or
the Buyer is a party or by which either of them is bound.
Notwithstanding the foregoing, in connection with seeking and
obtaining the approval of the Public Service Commission of the
transactions contemplated hereby, none of the Seller, the Buyer, the
Company, any Company Subsidiary or any of their respective Affiliates
shall be required to (i) proffer or agree to any obligation,
51
undertaking, commitment, or any other limitation with respect to or
restriction or condition that would reasonably be expected to result
in an adverse economic impact (collectively, "Restrictions") on the
------------
West Virginia Gas Distribution Business (including its tariffs (other
than incident to the Tariff Restructuring, which is the subject of
Section 7.6(c)) and operations) or any of the businesses or operations
of the Buyer, the Buyer's Affiliates or Seller or its Affiliates, in
each case that is materially different from the Restrictions on the
West Virginia Gas Distribution Business or such other business or
operations of the Buyer's Affiliates or Seller or its Affiliates as of
the date of this Agreement, except to the extent (A) the Restriction
is explicitly offered or proposed in any stipulation or other formal
representation (whether in a petition, application, motion, written
testimony, acknowledgement or acceptance, or otherwise) presented for
approval to the Public Service Commission in connection with efforts
to secure the Public Service Commission's approval of the Tariff
Restructuring, the transactions contemplated by this Agreement, or
otherwise (a "Written Acceptance"); and (B) the party that would (or
------------------
the Affiliates of which would) be subject to the Restriction (which in
the case of a Restriction to which the Company shall be subject, shall
be Buyer) has presented or otherwise formally advanced a Written
Acceptance that offers or proposes such Restriction; or (ii) proffer
or agree to any Restriction on the West Virginia Gas Distribution
Business (including its tariffs (other than incident to the Tariff
Restructuring, which is the subject of Section 7.6(c)) and operations)
or any of the businesses or operations of the Buyer's Affiliates or
Seller or its Affiliates, in each case of any nature whatsoever to the
extent such Restriction is not included in any Written Acceptance
presented or otherwise formally advanced by the party that would (or
the affiliates of which would) be subject to such Restriction (which
in the case of a Restriction to which the Company shall be subject,
shall be Buyer). From and after the date of this Agreement through the
Closing, Seller shall not, and shall cause the Company not to, proffer
or agree to any Restriction on the West Virginia Gas Distribution
Business (including its tariffs and operations) that is materially
different from the Restrictions on the West Virginia Gas Distribution
Business as of the date of this Agreement, in connection with seeking
or obtaining the approval of the Public Service Commission of the
transactions contemplated hereby, the Tariff Restructuring or
otherwise, without the prior consent of the Buyer, except as Seller
and Buyer specifically agree to include in any Written Acceptance.
(c) Without limiting the generality of Section 7.6(b), the
Seller and the Buyer shall cooperate with each other and use
reasonable best efforts to take, or cause to be taken, all actions,
and do, or cause to be done, all things necessary, proper or advisable
to prepare and file the Tariff Restructuring with the Public Service
Commission as promptly as practicable after the date of this
Agreement. From and after the date of such initial filing, the Seller
and the Buyer shall cooperate with each other and use reasonable best
efforts to take, or cause to be taken, all actions, and do, or cause
to be done, all things necessary, proper or advisable under applicable
Laws to cause the Public Service Commission to issue a final and
52
nonappealable order approving the Tariff Restructuring at the earliest
possible time, including without limitation, (i) making the
appropriate personnel, representatives and advisors available at all
reasonable times, (ii) making all other filings and giving all other
notices required to be made prior to the Closing with respect to the
Tariff Restructuring, (iii) responding promptly to any requests for
additional applicable information made by (A) the Public Service
Commission, (B) the Buyer or the Seller, (C) any other Person involved
in any proceeding relating to the Tariff Restructuring or (D) any
other Person involved in the preparation and filing of the Tariff
Restructuring, and (iv) avoiding taking any action or failing to take
any action that would reasonably be expected to have the effect of
delaying, conditioning, or reducing the likelihood of obtaining an
order of the Public Service Commission approving the Tariff
Restructuring; provided, however, that nothing in this Section 7.6(c)
shall require, or be construed to require, (x) the Seller or its
Affiliates to proffer or agree to any moratorium or rate change with
respect to, or any other Restrictions on, any business or activities
other than the West Virginia Gas Distribution Business or any actions
that could cause a failure of any condition to Closing or give rise to
any claim for indemnification or breach of any representation or
warranty or (y) the Buyer or its Affiliates to proffer or agree to any
Restriction on the West Virginia Gas Distribution Business (including
its tariffs and operations) or any of the businesses or operations of
the Buyer's Affiliates that in each case is materially different from
the Restrictions on the West Virginia Gas Distribution Business or
such other business or operations of the Buyer's Affiliates as of the
date of this Agreement or any actions that could cause a failure of
any condition to Closing or give rise to any claim for indemnification
or breach of any representation or warranty, except as Seller and
Buyer specifically agree to include in any Written Acceptance. The
Buyer will bear all costs and expenses of the preparation of any
filing or notice required in connection with the Tariff Restructuring,
provided that the Seller shall bear its own costs and expenses in
connection with making its personnel, representatives and advisors
available in order to comply with Seller's obligations set forth in
this Section 7.6(c).
(d) The Seller and the Buyer shall cooperate with each other
and promptly prepare and file notifications with, and request Tax
clearances from, state and local taxing authorities in jurisdictions
in which a portion of the Purchase Price may be required to be
withheld pursuant to such state and local Tax law.
7.7. Tax Matters.
-----------
(a) All applicable sales, transfer, use, stamp, conveyance,
value added, recording, excise, and other similar Taxes, if any,
together with all recording or filing fees, notarial fees and other
similar costs of Closing, that may be imposed upon, or payable,
collectible or incurred in connection with the transfer of the Related
Assets or the Company Common Stock (or its Subsidiaries) to the Buyer
or otherwise as a result of the transfer of the Related Assets or the
Company Common Stock (or its Subsidiaries) ("Transfer Taxes") shall be
--------------
borne 50% by the Seller and 50% by the Buyer. The Seller and the Buyer
53
shall cooperate in the preparation, execution and filing of, to the
extent required by applicable Law, all necessary Tax Returns and other
documentation with respect to all such Transfer Taxes.
(b) The Buyer shall prepare and timely file all Tax Returns
required to be filed after the Closing with respect to the Related
Assets, the Company or its Subsidiaries, and shall duly and timely pay
all such Taxes shown to be due on such Tax Returns. The Buyer shall
make such Tax Returns available for the Seller's review and consent,
which shall not be unreasonably withheld, conditioned or delayed, not
later than fifteen (15) Business Days prior to the due date for filing
such Tax Return.
(c) In respect of Taxes, if any, on or with respect to the
Related Assets, the Company or its Subsidiaries (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 the Company or any of its
Subsidiaries), (i) Seller shall be liable and indemnify Buyer for all
Taxes (A) with respect to a taxable period that ends on or before the
Closing Date and (B) with respect to any Straddle Period, the portion
of such Straddle Period deemed to end on and include the Closing Date,
but only to the extent that such specific Tax has not been taken into
account in the determination of Net Working Capital as set forth in
the Purchase Price Certificate or the corresponding Final Purchase
Price Component, and (ii) Buyer shall be liable and indemnify Seller
for all Taxes (A) with respect to a taxable period that begins after
the Closing Date and (B) with respect to any Straddle Period, the
portion of such Straddle Period deemed to begin the day after the
Closing Date. For purposes of this Section 7.7(c), where it is
necessary to apportion between the Buyer and the Seller the Tax
liability for a Straddle Period, such liability shall be apportioned
between the period deemed to end at the close of the Closing Date, and
the period deemed to begin at the beginning of the day following the
Closing Date on the basis of an interim closing of the books, except
that Taxes (such as real property Taxes) imposed on a periodic basis
shall be allocated on a daily basis.
(d) Each of the Buyer and the Seller shall provide the other
with such assistance as may reasonably be requested by the other party
in connection with the preparation of any Tax Return, any audit or
other examination by any taxing authority, or any judicial or
administrative proceedings relating to liability for Taxes, and each
will retain and provide the requesting party with any records or
information that may be relevant to such return, audit, or
examination, proceedings or determination. Any information obtained
pursuant to this Section 7.7(d) or pursuant to any other section
hereof providing for the sharing of information or review of any Tax
Return or other schedule relating to Taxes shall be kept confidential
by the parties hereto and shall be subject to Sections 7.2(e) and (f)
of this Agreement and to the Confidentiality Agreement, provided,
--------
however, that any such information must be treated as confidential by
-------
the party that receives such information for at least three years
54
following the date that such information is received by such party.
(e) The Buyer shall remit to the Seller any refund or credit
of Taxes actually received to the extent such Taxes are attributable
to any taxable period, or portion thereof, ending on or before the
Closing Date.
(f) Any payment by Buyer or Seller to the other pursuant to
this Section 7.7 will be treated for all purposes by both parties as
an adjustment to the Purchase Price, unless otherwise required by law.
(g) The obligations of the parties set forth in this Section
7.7 shall be unconditional and absolute and shall remain in effect
until the expiration of all applicable statutes of limitations.
(h) Buyer and Seller shall make a joint election under
Section 338(h)(10) of the Code (and under any similar provisions of
state or foreign law) with respect to the purchase of the Company
Common Stock and further elections with respect to the purchase of the
Company's Subsidiaries. Seller and Buyer shall (i) 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 and (ii) as provided in, and in accordance with, Section
3.4 hereof, exchange completed and executed copies of Internal Revenue
Service Form 8883, 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.
(i) All Tax allocation, Tax sharing, Tax indemnity or
similar agreements between Allegheny Energy, Inc. or any of its
Subsidiaries (other than the Company and its Subsidiaries), on the one
hand, and the Company or its Subsidiaries, on the other hand, shall be
terminated with respect to the Company and its Subsidiaries prior to
the Closing Date, and, after the Closing Date, neither Allegheny
Energy, Inc. or any of its Subsidiaries (other than the Company and
its Subsidiaries), on the one hand, nor the Company or its
Subsidiaries, on the other hand, shall be bound thereby or have any
further liability or obligation thereunder to the other party with
respect to periods prior to the Closing Date.
7.8. Employees.
---------
(a) Effective no later than the earlier of January 1, 2005,
or the Closing Date (the "Plan Creation Date"), Seller shall cause the
------------------
employment of each individual who is a West Virginia Gas Distribution
Business Employee, including each such Employee on medical,
disability, family, military or other leave or leave of absence, as of
immediately prior to the Plan Creation Date (each, an "Applicable
----------
Employee") to be transferred to the Company, and the Seller shall
--------
cause the Company to be the employer of any individual who
55
subsequently becomes an employee of the West Virginia Gas Distribution
Business before the Closing.
(b) Effective as of the Plan Creation Date and through the
Closing Date (if later than the Plan Creation Date), Seller shall:
(i) cause the Company to be the exclusive
sponsoring employer of benefit plans (not including pension
or retirement savings plans) that provide benefits to all
Applicable Employees (the "Non-Retirement Savings Benefits")
-------------------------------
that are no less favorable in the aggregate to the
Applicable Employees than the Benefit Plans (not including
the Allegheny Energy Retirement Plan (the "AERP") and the
----
Allegheny Energy Employee Stock Ownership and Savings Plan
(the "AEESOP")), and all Applicable Employees shall commence
------
to participate or, as applicable, become eligible to
participate in those benefit plans effective as of the Plan
Creation Date;
(ii) cause the Company to maintain insurance in
respect of any and all liabilities attributable to the
employees of the West Virginia Gas Distribution Business
(including without limitation worker's compensation
insurance) to the extent that such insurance is maintained
immediately prior to the Plan Creation Date by Seller, any
Affiliate or otherwise; and
(iii) cause the Company to maintain a separate
payroll system for all of its employees with features
substantially equivalent to the payroll system in effect
with respect to the Applicable Employees immediately prior
to the Plan Creation Date.
Seller and Buyer shall use reasonable best efforts to
mutually agree as to the nature and amount of the Non-Retirement
Savings Benefits promptly but in no event later than October 1, 2004;
provided, that if Seller and Buyer are unable to so agree, the
--------
Non-Retirement Savings Benefits shall be substantially identical to
the Non-Retirement Savings Benefits in effect with respect to the
Applicable Employees immediately prior to the Plan Creation Date and
shall be provided pursuant to benefit plans with a cost to the Company
not substantially in excess of that borne by the Company immediately
prior to the Plan Creation Date (it being understood that such plans
shall be obtained by the Company on commercially reasonable terms).
(c) Promptly after the date the employee benefit plans
providing for the Non-Retirement Savings Benefits shall have been
developed pursuant to Section 7.8(b), the Seller shall provide copies
of such benefit plans to the unions representing the Applicable
Employees (and any other West Virginia Gas Distribution Business
Employees who are hired after the Plan Creation Date) who are covered
by a Collective Bargaining Agreement (the "Union Employees"). From and
---------------
after the date of this Agreement, the Buyer and the Seller shall be
available, and shall use their reasonable best efforts, to meet
jointly and on a regular basis with such unions to make presentations,
56
discuss and respond to inquiries about the benefit plans that will
replace the Benefit Plans and the employee benefit plans providing for
the Non-Retirement Savings Benefits developed pursuant to Section
7.8(b).
(d) The Buyer shall cause the Company or a Subsidiary of the
Company to provide each Applicable Employee (and any other West
Virginia Gas Distribution Business Employee who is hired after the
Plan Creation Date) who is not covered by a Collective Bargaining
Agreement and who remains employed by the Company through the Closing
(a "Non-Union Transferred Employee"), for the period commencing on the
------------------------------
Closing Date and ending 12 months thereafter (the "Benefits
--------
Continuation Period"), with total compensation (including, without
-------------------
limitation, base pay, authorized overtime, bonuses, and benefits
contained in the employee benefit plans, programs and fringe benefit
arrangements (excluding education reimbursement)) which is, in the
aggregate, at least equivalent in value to the Non-Union Transferred
Employee's total compensation as in effect immediately prior to the
Closing, which shall be based upon (x) such employee's existing
individual base pay, (y) authorized overtime, if applicable, and (z)
an average bonus and benefit component for such employee's salary plan
level, as consistently applied by the Seller or its Affiliates,
apportioned according to such employee's base pay. Such total
compensation during the Benefits Continuation Period shall include,
without limitation, employer matching contributions (whether paid
during or after the Benefits Continuation Period) that shall be
available in respect of elective contributions made by the Non-Union
Transferred Employee at any time during the Benefits Continuation
Period under the Buyer DC Plan (as defined below) that are not less
than 50% of all of each employee's elective contributions that equal
up to 6% of the employee's compensation. The Buyer shall also pay
reasonable relocation costs with respect to any Non-Union Transferred
Employees who shall relocate at the Buyer's request. After the end of
the Benefits Continuation Period, the Buyer shall cause each Non-Union
Transferred Employee to be provided total compensation (including
those compensation and benefit items parenthetically listed in this
Section 7.8(d)) which is, in the aggregate, no less favorable than the
total compensation then provided to similarly-situated employees of
the Buyer. Nothing in this Section 7.8(d) or otherwise in this
Agreement shall require the Buyer to establish or maintain any
particular plan, program or arrangement in order to satisfy its
obligations, as specified above in this Section 7.8(d), to provide
benefit plans, programs and arrangements as part of substantially
equivalent total compensation either during or after the Benefits
Continuation Period.
(e) The Buyer shall (i) waive all pre-existing condition
exclusions and limitations, all waiting periods and all evidence of
insurability requirements with respect to Non-Union Transferred
Employees and, to the extent permissible under a Collective Bargaining
Agreement, with respect to Union Employees, under any welfare benefit
plans (as such term is defined in ERISA, but whether or not the plan
is subject to ERISA) maintained by Buyer or its Affiliates on or after
the Closing Date, other than, but only to the extent of, limitations
57
or waiting periods that were in effect with respect to such employees
immediately prior to the Closing Date and that have not been satisfied
as of the Closing Date, and (ii) provide each Non-Union Transferred
Employee and, to the extent permissible under a Collective Bargaining
Agreement, each Union Employee, with full credit for any co-payments,
deductibles, coinsurance or out-of-pocket expenses paid or incurred
under applicable welfare plans prior to the Closing Date in satisfying
any co-payment, deductible, coinsurance or out-of-pocket requirements
under any welfare benefit plans maintained by Buyer or its Affiliates
on or after the Closing Date (on a pro-rata basis in the event of a
difference in plan years).
(f) Effective as of 12:00 a.m. on the day immediately
following the Closing Date, each Non-Union Transferred Employee and
each Union Employee (collectively, the "Transferred Employees") who is
---------------------
a participant in either or both of the AERP and the AEESOP
(collectively, the "Seller Qualified Plans") shall cease to be an
----------------------
active participant in and shall become one hundred percent (100%)
vested in his or her accrued benefit under each Seller Qualified Plan.
As soon as practicable after the Closing Date, each Transferred
Employee who is a participant in the AEESOP shall be provided the
ability to obtain a distribution of the employee's account balance
under the AEESOP in accordance with its provisions that provide for
distributions to participants whose employment terminates. The Buyer
shall take any and all necessary action (including plan amendments, if
necessary) to cause the trustee of a defined contribution plan of the
Buyer or one of its Affiliates, if requested to do so by a Transferred
Employee, to accept a direct "rollover" of all or a portion of said
employee's distribution that is made in cash (specifically excluding
distributions that are made in the form of securities or otherwise in
kind) and of the promissory note or notes representing any loans
outstanding to the Transferred Employee under the AEESOP on the date
of the direct rollover from the AEESOP in the form of an "eligible
rollover distribution" within the meaning of Section 402(c)(4) of the
Code, provided that the administrator of such defined contribution
plan may condition its acceptance of such a rollover upon the receipt
of reasonable assurances that such distribution is such an eligible
rollover distribution; provided, however, that any such assurances
-------- -------
required by the administrator shall not exceed any of the measures
described in Treas. Reg. Section 1.401(a)(31)-1, Q&A-14(c), Example 1,
2, 3 or 4 (as applicable) as a sufficient basis on which a plan
administrator may reasonably conclude that the putative rollover is a
valid rollover contribution from a qualified plan. In the case of any
such direct rollover of a loan, Buyer and the Company will cooperate
with Seller to enable such direct rollover to occur before the loan
becomes defaulted. Except to the extent provided in the preceding two
sentences, no assets or liabilities of the Seller Qualified Plans
shall be transferred to any plans maintained by Buyer or its
Affiliates. Transferred Employees shall be given credit under each
benefit plan, program, policy or arrangement maintained by Buyer or
its Affiliates after the Closing for eligibility, vesting and all
other purposes, including for purposes of any service requirement for
early retirement, subsidized early retirement, or any other benefit
58
conditioned on completion of a specific period of service, but not for
any other benefit accrual purposes other than in the case of the Buyer
Pension Plan (but only to the extent provided in Section 7.8(g)) and
in the case of vacation benefits, for all service with the Seller and
its Affiliates for the period before the Closing (to the extent that
such service was credited under a corresponding Benefit Plan
immediately prior to the Closing).
(g) Effective as of the Closing Date, Buyer shall establish
or maintain a defined benefit pension plan covering all Transferred
Employees that is substantially identical to the AERP as in effect
immediately prior to the Closing and that is intended to satisfy the
requirements of Section 401(a) of the Code (the "Buyer Pension Plan").
------------------
Buyer shall cause the Buyer Pension Plan to recognize all service of
Transferred Employees with Seller and its Affiliates and with Buyer
and its Affiliates for all purposes, including without limitation for
purposes of eligibility, vesting, benefit accrual, eligibility to
receive benefits, eligibility for retirement (early or normal),
eligibility for early retirement subsidies, eligibility for receipt of
optional forms of benefits, and eligibility for all other benefits,
rights, features or other purposes under the provisions of the Buyer
Pension Plan. The AERP shall maintain as a frozen accrued benefit the
accrued benefit of each Transferred Employee determined as of the
Closing Date as if the Transferred Employee had terminated employment
with Seller and its Affiliates and had terminated participation in the
AERP as of the Closing Date under the provisions of the AERP in effect
on that date. Buyer may cause benefits paid under the Buyer Pension
Plan to be offset by benefits previously provided to Transferred
Employees or accrued by Transferred Employees under the AERP;
provided, that, in no event shall the benefit (as described above)
--------
payable to any Transferred Employee under the Buyer Pension Plan in
the form of a single life annuity (with all optional forms of benefit
available to the Transferred Employee being at least the actuarial
equivalent of this single life annuity) be less than the excess of (i)
over (ii), where (i) is the benefit that would be payable under the
provisions of the Buyer Pension Plan in the form of a single life
annuity recognizing service with both Seller and its Affiliates and
Buyer and its Affiliates for all purposes under such Plan (as
described in the second sentence of this Section 7.8(g)) and (ii) is
the benefit that would be payable from the AERP (without regard to any
offset benefit payable from any other defined benefit pension plan, as
applicable) as if the Transferred Employee elected to commence receipt
of benefits in the form of a single life annuity under the AERP
coincident with commencing receipt of a benefit under the Buyer
Pension Plan. Buyer shall have no obligation under the foregoing
provisions of this Section 7.8(g) beyond the Benefits Continuation
Period. Seller shall deliver to Buyer as soon as practicable following
such request, all data and records reasonably requested by Buyer in
connection with its administration of retirement benefits for those
Transferred Employees who become participants in the Buyer Pension
Plan, including the information relating to the service of Transferred
Employees with Seller and its Affiliates.
59
(h) Effective as of the Closing Date, Buyer shall establish
or maintain a defined contribution plan covering all Transferred
Employees the provisions of which are not substantially less favorable
to Transferred Employees than those of the AEESOP as in effect
immediately prior to the Closing (provided that the Buyer's defined
contribution plan shall not be required to provide for contributions
or investments in employer stock) and that is intended to satisfy the
requirements of Section 401(a) of the Code (the "Buyer DC Plan").
-------------
Buyer shall cause the Buyer DC Plan to recognize all service of
Transferred Employees with Seller and its Affiliates and with Buyer
and its Affiliates for purposes of eligibility, vesting, eligibility
to receive benefits, and eligibility for all other benefits, rights,
features or other purposes under the provisions of the Buyer DC Plan.
Buyer shall have no obligation under the foregoing provisions of this
Section 7.8(h) beyond the Benefits Continuation Period. Seller shall
deliver to Buyer as soon as practicable following such request, all
data and records reasonably requested by Buyer in connection with its
administration of the Buyer DC Plan for those Transferred Employees
who become participants in the Buyer DC Plan, including the
information relating to the service of Transferred Employees with
Seller and its Affiliates.
(i) The Buyer shall pay to each Non-Union Transferred
Employee whose employment is terminated by the Buyer or one of its
Affiliates within eighteen months of the Closing Date a severance
benefit package equivalent to that which would have been provided to
such individual upon such termination by the Seller under the
Allegheny Energy Separation Allowance Plan as in effect immediately
prior to the date of this Agreement had such individual remained
continuously employed by the Seller or its Affiliates and had been
eligible for, and entitled to benefits under, such plan on the date of
such termination. Following the eighteen-month anniversary of the
Closing Date, Buyer shall provide severance benefits to the Non-Union
Transferred Employees that are no less favorable than those provided
to similarly situated employees of the Buyer.
(j) On or before the Closing Date, the Seller shall provide
a list, to be current as of the Closing Date, of the name and site of
employment of any employees of the West Virginia Gas Distribution
Business who have experienced, or will experience, an "employment
loss" (as defined by the WARN Act) within ninety (90) days prior to
the Closing Date. The Seller agrees to timely perform and discharge
all requirements under the WARN Act and under similar applicable state
or local laws or regulations up to and including the Closing Date.
After the Closing Date, the Buyer shall be responsible for performing
and discharging all requirements under the WARN Act and under similar
applicable state or local laws or regulations; provided, however, that
the parties agree that Seller shall have no liability hereunder for
any violation of or non-compliance with any requirements under the
WARN Act to the extent that they arise due to actions of Buyer, the
Company, or the Company's Subsidiaries taken after the Closing.
60
(k) Seller or its Affiliates (other than the Company or any
of its Subsidiaries) shall retain and be solely responsible for all
liabilities and obligations whatsoever with respect to employees of
Seller, the Company or any of their Affiliates who are not Transferred
Employees, whether arising out of actions, events or omissions that
occurred (or, in the case of omissions, failed to occur) before, on or
after the Closing Date. Except as otherwise specifically provided in
this Section 7.8, Seller or its Affiliates (other than the Company or
any of its Subsidiaries) shall retain and be solely responsible for
all liabilities and obligations whatsoever with respect to Transferred
Employees to the extent attributable to actions, events or omissions
that occurred (or, in the case of omissions, failed to occur) before
the Plan Creation Date. Without limiting the generality of the
preceding sentence, with respect to each Transferred Employee
(including any beneficiary or the dependent thereof), the Seller shall
retain all liabilities and obligations arising under any welfare plan
or under the workers' compensation laws of any state to the extent
that such liability or obligation relates to claims incurred (whether
or not reported) prior to the Plan Creation Date, and for such
purposes a claim shall be deemed to be incurred when the event,
condition or illness giving rise to such claim occurs. Neither the
Buyer, the Company, any Company Subsidiary or any of their Affiliates
(such Affiliates as determined with respect to the period after the
Closing) shall have any liability for benefits under, contributions
to, or otherwise in respect of any Benefit Plan, except that the Buyer
shall, and shall cause the Company and any Company Subsidiary and any
of their Affiliates to, honor in accordance with their terms all
employee benefit obligations to Transferred Employees and former
employees of the Company that were accrued as of the Closing Date and
after the Plan Creation Date under any plans established in accordance
with Section 7.8(b)(i) above.
7.9. Risk of Loss.
------------
(a) From the date of this Agreement until the Closing, all
risk of loss or damage to the property included in the Related Assets
or owned by the Company or its Subsidiaries shall be borne by the
Seller or the Company, respectively.
(b) If, before the Closing, all or any portion of the
Related Assets or assets owned by the Company or its Subsidiaries is
taken by eminent domain or is the subject of a pending or (to the
knowledge of the Seller) contemplated taking which has not been
consummated, the Seller shall notify the Buyer promptly in writing of
such fact. If such taking would create a Material Adverse Effect, the
Buyer and the Seller shall negotiate in good faith to settle the loss
resulting from such taking (including, without limitation, by making a
fair and equitable adjustment to the Purchase Price) and, upon such
settlement, consummate the transactions contemplated by this Agreement
pursuant to the terms of this Agreement. If no such settlement is
reached within sixty (60) days after the Seller has notified the Buyer
of such taking, the Buyer or the Seller may terminate this Agreement
pursuant to Section 10.1(f).
61
(c) If, before the Closing, all or any material portion of
the Related Assets or any material assets owned by the Company or its
Subsidiaries is damaged or destroyed by fire or other casualty, the
Seller shall notify the Buyer promptly in writing of such fact. If
such damage or destruction would create a Material Adverse Effect and
the Seller has not notified the Buyer of its intention to cure such
damage or destruction within fifteen (15) days after its occurrence,
the Buyer and the Seller shall negotiate in good faith to settle the
loss resulting from such casualty (including, without limitation, by
making a fair and equitable adjustment to the Purchase Price) and,
upon such settlement, consummate the transactions contemplated by this
Agreement pursuant to the terms of this Agreement. If no such
settlement is reached within sixty (60) days after the Seller has
notified the Buyer of such casualty, the Buyer or the Seller may
terminate this Agreement pursuant to Section 10.1(f).
7.10. Tax Clearance Certificates. The Buyer shall use reasonable
--------------------------
efforts to provide or obtain from any taxing authority any certificate, permit,
license, or other document necessary to mitigate, reduce or eliminate any Taxes
(including additions thereto or interest and penalties thereon) that otherwise
would be imposed with respect to the transactions contemplated by this
Agreement.
7.11. Name of the West Virginia Gas Distribution Business After the
-------------------------------------------------------------
Closing. Promptly (but in any event no more than 20 days) after the Closing,
-------
Buyer shall ensure that the West Virginia Gas Distribution Business ceases to do
business as "Allegheny Power" and will thereafter conduct such business with a
name that will not otherwise indicate or imply that Seller or any of its
Affiliates have an ownership interest in, or are otherwise associated with or
related to, the West Virginia Gas Distribution Business, Buyer or any of its
Affiliates.
7.12. Insurance. Buyer acknowledges that neither the Related Assets
---------
nor the Company (in respect of its assets, properties or operations) will be
covered by any insurance policy in respect of fire, liability, worker's
compensation or otherwise following the Closing except to the extent Buyer
procures any insurance. Accordingly, the parties agree that Buyer shall be
responsible for procuring insurance in respect of the Related Assets and/or the
Company from and after the Closing Date (to the extent that Buyer determines
that such insurance is desirable).
7.13. No Solicitation of Competing Transaction. Neither Seller nor any
----------------------------------------
Affiliate of Seller shall (and Seller shall cause the officers, directors,
employees, representatives and agents of Seller and each Affiliate of Seller
including investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any Person or group (other
than Buyer, any of its Affiliates or representatives) concerning any Acquisition
Proposal. Seller shall not approve or recommend, or propose to approve or
recommend any Acquisition Proposal, or enter into any agreement with respect to
any Acquisition Proposal. Upon execution of this Agreement, Seller shall
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing and Seller
62
shall request (or if Seller has the contractual right to do so, demand) the
return or destruction of all documents, analyses, financial statements,
projections, descriptions and other data previously furnished to others in
connection with Seller's efforts to sell the Company and the Related Assets.
Seller shall immediately notify the Buyer of the existence of any proposal or
inquiry received by Seller on or after the date of this Agreement, and Seller
shall immediately communicate to the Buyer the terms of any proposal or inquiry
which Seller may receive on or after the date of this Agreement (and shall
immediately provide to the Buyer copies of any written materials received by
Seller in connection with such proposal, discussion, negotiation or inquiry) and
the identity of the party making such proposal or inquiry.
7.14. Environmental Matters. Seller shall, or shall cause the Company
---------------------
or a Company Subsidiary to, in either case at Seller's sole expense, complete
the tasks set forth in the column entitled "AYE Action" in Schedule 7.14
"Resolution of MGC/MGS Environmental Issues," to Buyer's reasonable
satisfaction, prior to the Closing Date. Seller agrees to keep Buyer reasonably
apprised, between the date of this Agreement and the Closing Date, of Seller's
progress in completing such tasks. In the event any such tasks have not been
completed to Buyer's reasonable satisfaction prior to the Closing Date and the
Closing shall occur, Buyer shall have the right but not the obligation, at
Buyer's sole discretion, to complete such tasks after the Closing Date. In the
event Buyer undertakes the completion of such tasks as set forth in the
preceding sentence herein, and without regard to whether Seller has used
reasonable best efforts to accomplish such completion, Seller agrees to
reimburse Buyer for all of Buyer's reasonable out-of-pocket expenses in
completing such tasks, subject to production of documentation of such expenses
incurred by Buyer, provided, further, in the event Buyer undertakes remediation
-------- -------
as provided in this Section 7.14, Seller shall be responsible for reimbursing
Buyer's remediation expenses only to the extent that Seller has concurred in the
type, method, and extent of remediation performed by Buyer (such concurrence not
to be unreasonably withheld) or to the extent that such remediation shall have
been required or approved by any Governmental Entity having legal authority to
review or require such remediation, including any such remediation required or
requested by such Governmental Entity as a condition of issuing a no further
action letter or the substantial equivalent thereof for the contamination or
circumstance that is the subject of such remediation. Seller's obligations as
set forth in this Section 7.14 shall be supplemental to any other provision of
this Agreement, including without limitation the indemnification provisions of
Article IX of this Agreement.
ARTICLE VIII
CONDITIONS
----------
8.1. Conditions to Each Party's Obligations to Effect the
----------------------------------------------------
Transactions. The respective obligations of each party to effect the
------------
63
transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have
expired or been terminated;
(b) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation
of the sale of the Related Assets or the Company Common Stock
contemplated hereby shall have been (i) (A) threatened by any
Governmental Entity or (B) sought in writing by any other Person that,
in the good faith judgment of either the Buyer or the Seller, would
have a reasonable likelihood of being issued by a court of competent
jurisdiction, or (ii) issued and remain in effect (each party agreeing
to use its reasonable best efforts to have any such injunction, order
or decree lifted) and no statute, rule or regulation shall have been
enacted by any state or federal government or governmental agency in
the United States which prohibits the consummation of the sale of the
Related Assets or the Company Common Stock;
(c) Other than as described in Section 8.1(a) and Section
8.2(g), all federal, state and local government consents and approvals
required for the consummation of the sale of the Related Assets and
the Company Common Stock, the Seller Required Regulatory Approvals and
the Buyer Required Regulatory Approvals shall have been obtained and
shall not have been revised, stayed, enjoined, set aside, annulled or
suspended, and all conditions to effectiveness prescribed in any such
consent or approval or otherwise by law, regulation or order shall
have been satisfied, except for any such federal, state or local
government consent or approval the failure of which to obtain would
not be reasonably likely to result in any loss, liability, damages,
obligation, payment, cost or expense in excess of $15,000;
(d) The Seller Non-Regulatory Approvals and all other
consents and approvals necessary for the consummation of the sale of
the Related Assets and the Company Common Stock contemplated hereby
that are required under the terms of any note, bond, mortgage,
indenture, contract or other agreement to which the Seller, or any of
its Subsidiaries, is a party shall have been obtained, except for any
such consents or approvals set forth on Schedule 2.5 or the failure of
which to obtain would not be reasonably likely to result in any loss,
liability, damages, obligation, payment, fine, cost or expense in
excess of $15,000;
(e) The Buyer and the Seller shall have executed the Related
Agreements; and
(f) At least 30 days shall have passed since the Plan
Creation Date.
64
8.2. Conditions to Obligations of the Buyer. The obligation
--------------------------------------
of the Buyer to effect the transactions contemplated hereby shall be
subject to the fulfillment at or prior to the Closing Date of the
following additional conditions:
(a) There shall not have occurred since the date of this
Agreement and be continuing a Material Adverse Effect;
(b) (i) The Seller and the Company shall have performed and
complied in all material respects with the covenants and agreements
contained in this Agreement that are required to be performed and
complied with by the Seller or the Company on or prior to the Closing
Date (except to the extent clause (ii) of this Section 8.2(b) applies
to such covenant or agreement) and (ii) Seller shall have performed
and complied in all respects with its obligations under Sections
7.4(g) and 7.14 and to deliver the Related Assets at the Closing,
except for any immaterial noncompliance with such obligation;
(c) Each of the representations and warranties of Seller
contained in this Agreement (other than the representations and
warranties set forth in Sections 5.1, 5.2, 5.3, 5.10(a), 5.10(b),
5.10(c), 5.10(d), 5.18, 5.21(b) and 5.28 hereof), which
representations and warranties shall be deemed for purposes of this
Section 8.2(c) not to include any qualification or limitation with
respect to materiality or immateriality (whether by reference to
"Material Adverse Effect," "material," "immaterial," "material
respect" or otherwise), shall be true and correct in all respects as
of the date of this Agreement and as of the Closing Date, except where
the failure of such representations and warranties to be true and
correct, in the aggregate, have not had or resulted in and would not
be reasonably likely to have or result in a Material Adverse Effect,
with the same effect as though such representations and warranties had
been made on and as of the Closing Date, except to the extent that any
such representation or warranty is made as of a specified date, in
which case such representation or warranty need only be true and
correct as of such date;
(d) Each of the representations and warranties of the Seller
set forth in Sections 5.1, 5.2, 5.3, 5.10(a), 5.10(b), 5.10(c),
5.10(d), 5.18, 5.21(b) and 5.28 hereof shall be true and correct in
all respects as of the date of this Agreement and as of the Closing
Date (other than with respect to any defects in the deeds,
endorsements, assignments and other instruments referred to in Section
5.10(c) (other than the Xxxx of Sale) that are immaterial in the
aggregate), with the same effect as though such representations and
warranties had been made on and as of the Closing Date, except to the
extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty need
only be true and correct as of such date;
(e) The Buyer shall have received a certificate from an
authorized officer of the Seller, dated the Closing Date, to the
65
effect that, to the best of such officer's knowledge, the conditions
set forth in Sections 8.2(a), 8.2(b), 8.2(c) and 8.2(d) have been
satisfied;
(f) All consents and approvals required under Sections
8.1(c) and 8.1(d) of this Agreement shall have been obtained and all
such consents and approvals shall not be subject to any undertakings,
assurances or any other terms or conditions which would have,
individually or in the aggregate, a Material Adverse Effect;
(g) The Public Service Commission shall have issued a final,
nonappealable order approving the transactions contemplated by this
Agreement and a tariff restructuring that (A) includes a rate change
that is not materially different from the rate change requested as
part of the Tariff Restructuring and (B) does not include Restrictions
on the West Virginia Gas Distribution Business (including its tariffs
and operations) that are, in the aggregate, materially different from
the Restrictions on the West Virginia Gas Distribution Business as of
the date of this Agreement (except to the extent any such Restrictions
were included in any Written Acceptance presented or otherwise
formally advanced by the Buyer);
(h) The SEC shall have (i) issued a "no-action" letter to
the effect that the staff of the SEC will not recommend any
enforcement action against ArcLight Energy Partners Fund II, L.P. or
any of its Affiliates (other than the Buyer) under Sections 2(a)(7) or
2(a)(8) of the Holding Company Act as a result of its ownership
interests or other rights with respect to ownership, management or
governance of the Buyer or (ii) issued an order under Sections 2(a)(7)
or 2(a)(8) of the Holding Company Act to the effect that neither
ArcLight Energy Partners Fund II, L.P. nor any of its Affiliates
(other than the Buyer) will be subject to the obligations, duties, and
liabilities imposed on a "holding company" or a "subsidiary company"
under the Holding Company Act as a result of its ownership interests
or other rights with respect to ownership, management or governance of
the Buyer, and (iii) issued an order under Sections 9(a)(2) and 10 of
the Holding Company Act authorizing any holding company of which the
Buyer is a subsidiary company under the Holding Company Act, and any
affiliate of the Buyer under the Holding Company Act, to acquire its
direct and/or indirect interests in the Buyer and the Company; and
(i) The Note Purchase Amendment shall be in full force and
effect.
8.3. Conditions to Obligations of the Seller. The obligation of the
---------------------------------------
Seller to effect the transactions contemplated hereby shall be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) The Buyer shall have performed and complied in all
material respects with the covenants and agreements contained in this
66
Agreement that are required to be performed and complied with by the
Buyer on or prior to the Closing Date;
(b) Each of the representations and warranties of the Buyer
contained in this Agreement, which representations and warranties
shall be deemed for purposes of this Section 8.3(b) not to include any
qualification or limitation with respect to materiality or
immateriality, shall be true and correct as of the date of this
Agreement and as of the Closing Date, except where the failure of such
representations and warranties to be true and correct, in the
aggregate, would not reasonably be expected to prevent, materially
delay or materially impair the ability of the Buyer to perform and
comply with its obligations under this Agreement, with the same effect
as though those representations and warranties had been made on and as
of the Closing Date, except to the extent that any such representation
or warranty is made as of a specified date, in which case such
representation or warranty shall be true in all material respects as
of such date.
(c) The Seller shall have received a certificate from an
authorized officer of the Buyer, dated the Closing Date, to the effect
that, to the best of such officer's knowledge, the conditions set
forth in Sections 8.3(a) and 8.3(b) have been satisfied; and
(d) The Buyer shall have taken all of the actions with
respect to employee plans set forth in Section 7.8.
ARTICLE IX
INDEMNIFICATION
---------------
9.1. Indemnification.
---------------
(a) The Seller will indemnify, defend and hold harmless the
Buyer, its Affiliates and their respective directors, officers,
shareholders, partners, members, attorneys, accountants, agents,
representatives and employees and their heirs, successors and
permitted assigns, each in their capacity as such (the "Buyer
-----
Indemnified Parties"), from and against any and all claims, demands or
-------------------
suits (by any Person), losses, liabilities, damages (other than
punitive or special damages), obligations, payments, costs and
expenses (including, without limitation, the costs and expenses of any
and all actions, suits, proceedings, assessments, judgments,
settlements and compromises relating thereto and reasonable attorneys'
fees and reasonable disbursements in connection therewith) (each, an
"Indemnifiable Loss"), asserted against or suffered by the Buyer
------------------
Indemnified Parties relating to, resulting from or arising out of (i)
any breach by the Seller or the Company (in the case of the Company,
provided that such breach occurred prior to the Closing Date), of any
covenant or agreement of the Seller or the Company contained in this
67
Agreement or the representations and warranties contained in Article V
hereof which representations and warranties shall be deemed for
purposes of this Article IX not to include any qualification or
limitation with respect to materiality or immateriality (whether by
reference to "Material Adverse Effect," "material," "immaterial,"
"material respect" or otherwise), (ii) the Excluded Obligations and
(iii) as set forth on Exhibit H hereto; provided, however, that the
-------- -------
Seller shall have no liability pursuant to Section 9.1(a) for
Indemnifiable Losses asserted against or suffered by the Buyer
Indemnified Parties relating to, resulting from or arising out of any
breach by the Seller of any representation or warranty contained in
Article V hereof (i) for any individual Indemnifiable Loss that does
not exceed $15,000 (a "De Minimis Loss"), and (ii) unless and until
---------------
the aggregate of such Indemnifiable Losses (excluding all De Minimis
Losses) incurred by the Buyer Indemnified Parties exceeds $2,000,000,
in which case the Seller shall be liable for all Indemnifiable Losses
in excess of $2,000,000; provided, further, that in no case shall the
-------- -------
Seller be obligated to indemnify the Buyer Indemnified Parties against
any such Indemnifiable Losses asserted against or suffered by the
Buyer Indemnified Parties relating to, resulting from or arising out
of any breach by the Seller of any representation or warranty
contained in Article V hereof to the extent the aggregate amount
thereof exceeds $100,000,000.
(b) The Buyer will indemnify, defend and hold harmless the
Seller, its Affiliates and their respective directors, officers,
shareholders, partners, members, attorneys, accountants, agents,
representatives and employees and their heirs, successors and
permitted assigns, each in their capacity as such (the "Seller
------
Indemnified Parties"), from and against any and all Indemnifiable
-------------------
Losses asserted against or suffered by the Seller Indemnified Parties
relating to, resulting from or arising out of (i) any breach by the
Buyer of any covenant or agreement of the Buyer contained in this
Agreement or the representations and warranties contained in Article
VI hereof which representations and warranties shall be deemed for
purposes of this Article IX not to include any qualification or
limitation with respect to materiality or immateriality and (ii) the
Assumed Obligations, provided, however, that the Buyer shall have no
-------- -------
liability pursuant to Section 9.1(b) for Indemnifiable Losses asserted
against or suffered by the Seller Indemnified Parties relating to,
resulting from or arising out of any breach by the Buyer of any
representation or warranty contained in Article VI hereof (i) for any
individual De Minimis Loss, and (ii) unless and until the aggregate of
such Indemnifiable Losses (including all De Minimis Losses) incurred
by the Seller Indemnified Parties exceeds $2,000,000, in which case
the Buyer shall be liable for all Indemnifiable Losses in excess of
$2,000,000; provided, further, that in no case shall the Buyer be
-------- -------
obligated to indemnify the Seller Indemnified Parties against any such
Indemnifiable Losses asserted against or suffered by the Seller
Indemnified Parties relating to, resulting from or arising out of any
breach by the Buyer of any representation or warranty contained in
Article VI hereof to the extent the aggregate amount thereof exceeds
$100,000,000.
68
(c) The amount of any Indemnifiable Loss of any Person
entitled to receive indemnification under this Agreement (an
"Indemnitee") shall be reduced to take into account any net Tax
----------
benefit actually recognized by the Indemnitee arising from the
recognition of the Indemnifiable Loss and any other payment actually
received with respect to an Indemnifiable Loss.
(d) The expiration, termination or extinguishments of any
covenant or agreement shall not affect the parties' obligations under
this Section 9.1 if the Indemnitee provided the Person required to
provide indemnification under this Agreement (the "Indemnifying
------------
Party") with proper notice of the claim or event for which
-----
indemnification is sought prior to such expiration, termination or
extinguishment.
(e) The rights and remedies of the Seller and the Buyer
under this Article IX are exclusive and in lieu of any and all other
rights and remedies which the Seller and the Buyer may have under this
Agreement or otherwise for monetary relief with respect to (i) any
breach of any representation or warranty or any failure to perform any
covenant or agreement set forth in this Agreement and (ii) the Assumed
Obligations.
(f) The Buyer and the Seller each agree that notwithstanding
any provision in this Agreement to the contrary, all parties to this
Agreement retain their remedies at law or in equity with respect to
willful or intentional breaches of this Agreement.
(g) Any indemnity payment under this Agreement shall be
treated for all purposes by both parties as an adjustment to the
Purchase Price, unless otherwise required by law.
9.2. Defense of Claims.
-----------------
(a) If any Indemnitee receives notice of the assertion of
any claim or of the commencement of any claim, action, or proceeding
made or brought by any Person who is not a party to this Agreement or
an Affiliate of a party to this Agreement (a "Third Party Claim") with
-----------------
respect to which indemnification is to be sought from an Indemnifying
Party, the Indemnitee will give such Indemnifying Party reasonably
prompt written notice thereof, but in any event not later than ten
(10) calendar days after the Indemnitee's receipt of notice of such
Third Party Claim. Such notice shall describe the nature of the Third
Party Claim in reasonable detail and shall indicate the estimated
amount, if practicable, of the Indemnifiable Loss that has been or may
be sustained by the Indemnitee. The Indemnifying Party will have the
right to participate in or, by giving written notice to the
Indemnitee, to elect to assume the defense of any Third Party Claim at
such Indemnifying Party's own expense and by such Indemnifying Party's
own counsel, and the Indemnitee will cooperate in good faith in such
defense at such Indemnitee's own expense.
69
(b) If within ten (10) calendar days after an Indemnitee
provides written notice to the Indemnifying Party of any Third Party
Claim the Indemnitee receives written notice from the Indemnifying
Party that such Indemnifying Party has elected to assume the defense
of such Third Party Claim as provided in the last sentence of Section
9.2(a), the Indemnifying Party will not be liable for any legal
expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party
-------- -------
fails to take reasonable steps necessary to defend diligently such
Third Party Claim within twenty (20) calendar days after receiving
notice from the Indemnitee that the Indemnitee believes the
Indemnifying Party has failed to take such steps, the Indemnitee may
assume its own defense, and the Indemnifying Party will be liable for
all reasonable expenses thereof. Without the prior written consent of
the Indemnitee, the Indemnifying Party will not enter into any
settlement of any Third Party Claim which would lead to liability or
create any financial or other obligation on the part of the Indemnitee
for which the Indemnitee is not entitled to indemnification hereunder.
If a firm offer is made to settle a Third Party Claim without leading
to liability or the creation of a financial or other obligation on the
part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder and the Indemnifying Party desires to accept
and agree to such offer, the Indemnifying Party may accept and agree
to such offer in its sole discretion.
(c) Any claim by an Indemnitee on account of an
Indemnifiable Loss which does not result from a Third Party Claim (a
"Direct Claim") will be asserted by giving the Indemnifying Party
------------
reasonably prompt written notice thereof, stating the nature of such
claim in reasonable detail and indicating the estimated amount, if
practicable, but in any event not later than ten (10) calendar days
after the Indemnitee becomes aware of such Direct Claim, and the
Indemnifying Party will have a period of thirty (30) calendar days
within which to respond to such Direct Claim. If the Indemnifying
Party rejects or fails to respond to such claim, the Indemnitee will
be free to seek enforcement of its rights to indemnification under
this Agreement.
(d) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an indemnity payment in respect thereof,
is reduced by recovery, settlement or otherwise under or pursuant to
any insurance coverage, or pursuant to any claim, recovery, settlement
or payment by or against any other entity, the amount of such
reduction, less any costs, expenses or premiums incurred in connection
therewith (together with interest thereon from the date of payment
thereof at the Applicable Rate), will promptly be repaid by the
Indemnitee to the Indemnifying Party. Upon making any indemnity
payment, the Indemnifying Party will, to the extent of such indemnity
payment, be subrogated to all rights of the Indemnitee against any
third party in respect of the Indemnifiable Loss to which the
indemnity payment relates. Without limiting the generality or effect
of any other provision hereof, each such Indemnitee and Indemnifying
Party will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above-described subrogation and
70
subordination rights, and otherwise cooperate in the prosecution of
such claims at the direction of the Indemnifying Party. Nothing in
this Section 9.2(d) shall be construed to require any party hereto to
obtain or maintain any insurance coverage.
(e) A failure to give timely notice as provided in this
Section 9.2 will not affect the rights or obligations of any party
hereunder except if, and only to the extent that, as a result of such
failure, the party which was entitled to receive such notice was
actually prejudiced as a result of such failure.
9.3. Tax Contest.
-----------
(a) The Buyer shall notify the Seller in writing within
thirty (30) days of receipt of written notice of any federal or state,
local or foreign pending or threatened audits, adjustments or
assessments (each a "Tax Audit"), which may affect the Seller's
---------
liability for Taxes. If the Buyer fails to give such notice to the
Seller, the Buyer shall not be entitled to indemnification for any
Taxes arising in connection with such Tax Audit if such failure to
give notice adversely affects the Seller's right to effectively
participate in the Tax Audit.
(b) (i) If such Tax Audit relates to any Taxes or Tax items
for which the Seller is liable in full hereunder, the Seller shall at
its expense control the defense and settlement of such Tax Audit,
provided, however, the Buyer shall be entitled to participate in such
-------- -------
Tax Audit at its own expense and the Seller shall not settle any such
Tax Audit without the written consent of the Buyer, which consent
shall not be unreasonably withheld, conditioned or delayed; (ii) if
such Tax Audit relates to any Taxes or Tax items for which the Buyer
is liable in full hereunder, the Buyer shall at its expense control
the defense and settlement of such Tax Audit, provided, however, the
-------- -------
Seller shall be entitled to participate in such Tax Audit at its own
expense and the Buyer shall not settle any such Tax Audit without the
written consent of Seller, which consent shall not be unreasonably
withheld, conditioned or delayed; and (iii) if such Tax Audit relates
to any Taxes or Tax items that cannot be identified as being a
liability in full of either party or cannot be separated from any
Taxes or Tax items for which the other party is liable, the Buyer
shall at its expense control the defense and settlement of the Tax
Audit, provided, however, the Seller shall be entitled to participate
-------- -------
in such Tax Audit at its own expense and the Buyer shall not settle
any such Tax Audit without the written consent of the Seller, which
consent shall not be unreasonably withheld, conditioned or delayed.
71
ARTICLE X
TERMINATION AND ABANDONMENT
---------------------------
10.1. Termination.
-----------
(a) This Agreement may be terminated at any time prior to
the Closing Date by mutual written consent of the Seller and the
Buyer.
(b) This Agreement may be terminated by the Seller or the
Buyer if the Closing contemplated hereby shall have not occurred on or
before the nine-month anniversary of the date of this Agreement (the
"Termination Date"); provided, however, that the right to terminate
---------------- -------- -------
this Agreement pursuant to this Section 10.1(b) shall not be available
to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date; and provided, further, that
-------- -------
if on the nine-month anniversary of the date of this Agreement the
conditions to the Closing set forth in Section 8.1(c) or 8.2(g) shall
not have been fulfilled but all other conditions to the Closing shall
be fulfilled or shall be capable of being fulfilled, then the
Termination Date shall be the day which is 15 months from the date of
this Agreement.
(c) This Agreement may be terminated by the Seller or the
Buyer if (i) any Governmental Entity, the consent of which is a
condition to the obligations of the Seller and the Buyer to consummate
the Closing, shall have determined not to grant its consent or
approval and all appeals of such determination shall have been taken
and have been finally determined and unsuccessful, (ii) one or more
courts of competent jurisdiction in the United States shall have
issued an order, judgment or decree permanently restraining, enjoining
or otherwise prohibiting the Closing, and such order, judgment or
decree shall have become final and nonappealable or (iii) any statute,
rule or regulation shall have been enacted by any state or federal
government or governmental agency in the United States which prohibits
the consummation of the Closing.
(d) This Agreement may be terminated by the Buyer if (i)(A)
there has been a material violation or breach by the Seller of any
covenant or agreement contained in this Agreement that if not cured
would result in the failure to be satisfied of the condition set forth
in Section 8.2(b) or (B) there has been a violation or breach by the
Seller of a representation or warranty contained in this Agreement
that if not cured would result in the failure to be satisfied of the
condition set forth in Section 8.2(c) or Section 8.2(d) and (ii) such
violation or breach is not cured by the earlier of (A) the date which
would otherwise be the Closing Date pursuant to this Agreement but for
the material violation or breach by the Seller and (B) the date thirty
(30) days after receipt by Seller of notice specifying in reasonable
72
detail the nature of such breach, and such violation or breach has not
been waived by the Buyer.
(e) This Agreement may be terminated by the Seller if (i)(A)
there has been a material violation or breach by the Buyer of any
covenant or agreement contained in this Agreement that if not cured
would result in the failure to be satisfied of the condition set forth
in Section 8.3(a) or (B) there has been a violation or breach by the
Buyer of any representation or warranty contained in this Agreement
that if not cured would result in the failure to be satisfied of the
condition set forth in Section 8.3(b) and (ii) such violation or
breach is not cured by the earlier of (A) the date which would
otherwise be the Closing Date pursuant to this Agreement but for the
material violation or breach by the Buyer and (B) the date thirty (30)
days after receipt by Seller of notice specifying in reasonable detail
the nature of such breach and such violation or breach has not been
waived by the Seller.
(f) This Agreement may be terminated by the Seller or the
Buyer in accordance with the provisions of Section 7.9(b) or (c).
10.2. Procedure and Effect of Termination. In the event of termination
-----------------------------------
of this Agreement and abandonment of the transactions contemplated hereby by
either or both of the parties pursuant to Section 10.1, written notice thereof
shall forthwith be given by the terminating party to the other party and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) Said termination shall be the sole remedy of the parties
hereto with respect to breaches of any agreement, representation or
warranty contained in this Agreement and none of the parties hereto,
including ArcLight Energy Partners Fund II, L.P., nor any of their
respective directors, officers, partners, managers, Affiliates or
advisors, as the case may be, shall have any liability or further
obligation to the other party or any of their respective directors,
officers, partners, managers, Affiliates or advisors, as the case may
be, pursuant to this Agreement, except in each case as stated in this
Section 10.2 and in Sections 7.2(b), 7.3 and 7.5; provided, however,
-------- -------
that no such termination shall relieve any party, including ArcLight
Energy Partners Fund II, L.P., from any liability arising from the
willful or intentional breach of this Agreement; and
(b) All filings, applications and other submissions made
pursuant to this Agreement, to the extent practicable, shall be
withdrawn from the agency or other Person to which they were made.
73
ARTICLE XI
MISCELLANEOUS PROVISIONS
------------------------
11.1. Amendment and Modification. Subject to applicable Law, this
--------------------------
Agreement may be amended, modified or supplemented only by written agreement of
the Seller and the Buyer.
11.2. Waiver of Compliance; Consents. Except as otherwise provided in
------------------------------
this Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
Notwithstanding anything in this Agreement to the contrary, the condition set
forth in Section 8.3(d) cannot be waived by the Seller.
11.3. Limited Survival. Subject to the provisions of Section 9.2, each
----------------
and every representation, warranty and covenant contained in this Agreement
other than (a) the covenants contained in Sections 3.2, 3.3, 3.4, 7.1, 7.2, 7.3,
7.4, 7.5, 7.7, 7.8, 7.9, 7.11 and 7.13 and in Articles IX and XI (which
covenants shall survive in accordance with their terms), (b) the representations
and warranties contained in Sections 5.1, 5.2, 5.3, 5.10(a), 5.10(b), 5.10(c)
and 5.10(d) in the case of Seller, and Sections 6.1, 6.2 and 6.4, in the case of
Buyer (which representations and warranties shall survive indefinitely) and (c)
the representations and warranties contained in Sections 5.17 and 5.22 (which
representations and warranties shall survive until ninety (90) days following
the expiration of the applicable statute or similar period of limitations),
shall expire with, and be terminated 18 months from the Closing Date, and such
representations, warranties and covenants shall not survive such date, and none
of the Seller, the Buyer or any officer, director, advisor or Affiliate of any
of them shall be under any liability whatsoever with respect to any such
representation, warranty or covenant.
11.4. Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given if delivered personally or by facsimile
transmission, telexed or mailed by overnight courier or registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice; provided that notices of a change of address shall be effective
--------
only upon receipt thereof):
74
(a) If to the Seller, to:
Monongahela Power Company
000 Xxxxx Xxxx Xxxxx
Xxxxxxxxxx, XX
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
with a copy to:
Allegheny Power
000 Xxxxx Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
(b) If to the Buyer, to:
Mountaineer Gas Holdings Limited Partnership
c/o Corporation Service Company
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: General Partners
with a copy to:
ArcLight WV Holdings I LLC
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: General Counsel
11.5. Assignment. 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, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any party
hereto, including by operation of law without the prior written consent of the
other party. Notwithstanding the foregoing, (i) the Buyer may assign all of its
rights and obligations hereunder to any of its wholly owned Subsidiaries (direct
or indirect), provided that no such assignment will release the Buyer from any
--------
liabilities or obligations hereunder, and (ii) the Buyer or its permitted
assignee may assign, transfer, pledge or otherwise dispose of its rights and
interests hereunder to a trustee or lending institution(s) for the purposes of
financing or refinancing, or by way of assignments, transfers, conveyances or
dispositions in lieu thereof, provided that no such assignment or disposition
--------
shall relieve or in any way discharge the Buyer or such assignee from the
performance of its duties and obligations under this Agreement. The Seller
75
agrees to execute and deliver such documents as may be reasonably necessary to
accomplish any such assignment, transfer, conveyance, pledge or disposition of
rights hereunder so long as the Seller's rights under this Agreement are not
thereby altered, amended, diminished or otherwise impaired.
11.6. Rights Under This Agreement; No Third Party Beneficiaries. This
---------------------------------------------------------
Agreement shall be binding upon and insure solely to the benefit of the parties
hereto. Except as provided in Section 9.1, this Agreement is not intended to
confer upon any Person other than the parties hereto any rights hereunder.
Without limiting the foregoing, no provision of this Agreement shall create any
third party beneficiary rights in any employee or former employee of the Seller
or any of its Affiliates (including any current or former beneficiary, spouse,
or dependent thereof) in respect of continued employment or resumed employment,
and no provision of this Agreement shall create any rights in any such Persons
in respect of any benefits that may be provided, directly or indirectly, under
any employee benefit plan or arrangement.
11.7. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York (without regard to
conflicts of law principles thereof) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
11.8. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.9. Interpretation; Construction.
----------------------------
(a) The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
(b) The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event that an ambiguity or a
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 provisions of this Agreement.
11.10.Schedules and Exhibits. All Exhibits and Schedules referred to
----------------------
herein are intended to be and hereby are specifically made a part of this
Agreement.
11.11.Entire Agreement. This Agreement, the Confidentiality Agreement
----------------
and the Related Agreements including the Exhibits, Schedules, documents,
certificates and instruments referred to herein or therein, embody the entire
agreement and understanding of the parties hereto in respect of the transactions
contemplated by this Agreement. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
76
expressly set forth or referred to herein or therein. It is expressly
acknowledged and agreed that there are no restrictions, promises,
representations, warranties, covenants or undertakings contained in any material
made available to the Buyer pursuant to the terms of the Confidentiality
Agreement (including the Information Memorandum, dated February 20, 2003, or the
Request for Proposal, dated February 13, 2003, previously made available to the
Buyer by the Seller and X.X. Xxxxxx Securities Inc.). This Agreement supersedes
all prior agreements and understandings, whether written or oral, between the
parties with respect to such transactions other than the Confidentiality
Agreement.
11.12.Bulk Sales or Transfer Laws. The Buyer acknowledges that the
---------------------------
Seller will not comply with the provision of any bulk sales or transfer laws of
any jurisdiction in connection with the transactions contemplated by this
Agreement. The Buyer hereby waives compliance by the Seller with the provisions
of the bulk sales or transfer laws of all applicable jurisdictions.
11.13.Consent to Jurisdiction. Each party hereby irrevocably submits
-----------------------
to the exclusive jurisdiction of the federal or state courts located in the
State of New York in any action, suit or proceeding arising out of or relating
to this Agreement or the Related Agreements or any of the transactions
contemplated hereby or thereby; provided, however, that such consent to
-------- -------
jurisdiction is solely for the purpose referred to in this section and shall not
be deemed to be a general submission to the jurisdiction of said courts or in
the State of New York other than for such purpose. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of the venue of any such action, suit or proceeding
brought in such a court and any claim that any such action, suit or proceeding
brought in such a court has been brought in an inconvenient forum.
11.14.Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
--------------------
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE RELATED AGREEMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
11.15.Guarantee of Buyer's Obligations. ArcLight Energy Partners Fund
--------------------------------
II, L.P. agrees to use its reasonable best efforts to cause Buyer to perform all
of its obligations under this Agreement to the extent of Buyer's obligations
under this Agreement, and shall cause payment of the Purchase Price if, as and
when provided in this Agreement. ArcLight Energy Partners Fund II, L.P. further
agrees to use its reasonable best efforts to obtain a "no-action" letter or an
order satisfying the condition set forth in Section 8.2(h) based, in either
case, on existing precedent. In no event shall ArcLight Energy Partners Fund II,
L.P. have any greater liability than Buyer pursuant to this Agreement.
77
IN WITNESS WHEREOF, the Seller and the Buyer have caused this
agreement to be signed by their respective duly authorized officers as of the
date first above written.
MONONGAHELA POWER COMPANY
By
-----------------------------------
Name: Xxxxxx X. Xxxxxxxxxx Title:
President
MOUNTAINEER GAS HOLDINGS LIMITED
PARTNERSHIP
By ARCLIGHT WV HOLDINGS I LLC
By ArcLight Energy Partners Fund II,
L.P., its Member
By ArcLight PEF XX XX, LLC, its
general partner
By ArcLight Capital Holdings, LLC,
its Manager
----------------------------
By Name:
Title:
By IGS UTILITIES LLC
By ---------------------------------
Name:
Title:
78
The undersigned hereby executes this Agreement for the sole purpose of its
obligations pursuant to Section 11.15 of this Agreement, subject to the
limitations set forth therein and in Section 10.2(a).
ArcLight Energy Partners Fund II, L.P.
By: ArcLight PEF XX XX, LLC, its general partner
By: ArcLight Capital Holdings, LLC, its Manager
By:
----------------------------------------
Name: ____________________________
Title: ___________________________
79
EXHIBIT A
2004 CAPITAL BUDGET
A-1
EXHIBIT B
FORM OF XXXX OF SALE
THIS XXXX OF SALE, dated as of [ ] (this "Xxxx of Sale") by
------------
Monongahela Power Company, an Ohio corporation ("Seller"), is to and in favor of
------
Mountaineer Gas Holdings Limited Partnership, a West Virginia limited
partnership ("Buyer"). Capitalized terms used but not otherwise defined herein
-----
shall have the meaning ascribed thereto in the Acquisition Agreement, dated as
of August 4, 2004, between Seller and Buyer, (the "Agreement").
---------
WHEREAS, Seller and Buyer have entered into the Agreement, pursuant to
which Seller, subject to the terms of the Agreement, has agreed, among other
things, to sell, assign, convey, transfer and deliver to Buyer all of Seller's
right, title and interest in and to the Related Assets, and Buyer has agreed to
purchase and acquire such Related Assets from Seller, as more fully described in
the Agreement, for consideration in the amount, and on the terms and conditions,
provided in the Agreement;
WHEREAS, Section 4.4 of the Agreement provides that Seller shall
deliver this Xxxx of Sale at the Closing pursuant to which the Related Assets
will be conveyed to Buyer; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and in the Agreement, and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, Seller
does hereby, effective as of the Closing, sell, convey, assign, transfer and
deliver unto Buyer and its successors and assigns, free and clear of all
Encumbrances (except for Permitted Encumbrances), the Related Assets in
accordance with and subject to the terms and provisions of the Agreement.
TO HAVE AND TO HOLD all of Seller's right, title and interest in and
to the Related Assets unto Buyer, its successors and assigns, for its and their
own use and benefit, forever.
Nothing in this Xxxx of Sale shall constitute a waiver of, expansion
of, or a limitation upon, the rights, liabilities, duties, obligations and
remedies of Seller or Buyer under the Agreement and, in case of any conflict,
the terms and provisions of the Agreement shall govern.
Except as expressly set forth in the Agreement, Seller makes no
representations or warranties, written or oral, statutory, expressed or implied,
concerning the Related Assets, including, in particular, any warranty of
merchantability or fitness for a particular purpose, all of which are hereby
expressly excluded and disclaimed, except to the extent expressly set forth in
the Agreement.
B-1
This Xxxx of Sale shall be governed by and construed in accordance
with the laws of the State of New York (without regard to conflicts of law
principles thereof) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.
This instrument shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors in interest and permitted
assigns.
This Xxxx of Sale may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
B-2
IN WITNESS WHEREOF, the undersigned has caused this Xxxx of Sale to be
duly executed and delivered on behalf of Seller as of the date first written
above.
MONONGAHELA POWER COMPANY
By:__________________________
Name:___________________
Title:__________________
Receipt of the Foregoing Xxxx of Sale Acknowledged By:
MOUNTAINEER GAS HOLDINGS LIMITED
PARTNERSHIP
By ARCLIGHT WV HOLDINGS I LLC
By ArcLight Energy Partners Fund II,
L.P., its Member
By ArcLight PEF XX XX, LLC, its general
partner
By ArcLight Capital Holdings, LLC, its
Manager
__________________________________
By Name:
Title:
By IGS UTILITIES LLC
By _____________________________________
Name:
Title:
X-0
XXXXXXX X
XXXX XX
XXXXXX CERTIFICATION AND AFFIDAVIT OF
MONONGAHELA POWER COMPANY
Section 1445 of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), provides that a transferee of a U.S. real property
---------------------
interest must withhold tax if the transferor is a foreign person. For U.S. tax
purposes (including Section 1445), the owner of a disregarded entity (which has
legal title to a U.S. real property interest under local law) will be the
transferor of the property and not the disregarded entity. To inform the
transferee that withholding of tax is not required upon the disposition of a
U.S. real property interest by Monongahela Power Company, an Ohio corporation
("Seller"), to Mountaineer Gas Holdings Limited Partnership, a West Virginia
------
limited partnership, the undersigned hereby certifies the following on behalf of
Seller:
1. Seller is not a foreign corporation, foreign partnership, foreign
trust or foreign estate (as those terms are defined in the Internal Revenue Code
and the Income Tax Regulations);
2. Seller is not a disregarded entity as defined in Treas. Reg.
Section 1.1445-2(b)(2)(iii);
3. Seller's U.S. employer identification number is 00-0000000; and
4. Seller's office address is:
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Seller understands that this certification may be disclosed to the
Internal Revenue Service by a transferee and that any false statement contained
herein could be punished by fine, imprisonment or both.
Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have authority to sign this document on
behalf of Seller.
Dated: [ ] By: ________________________
Name:
Title:
C-1
EXHIBIT D
INSTRUMENT OF ASSUMPTION
INSTRUMENT OF ASSUMPTION, dated as of [ ] (this "Instrument of
-------------
Assumption"), by and between Monongahela Power Company, an Ohio corporation
----------
("Seller"), and Mountaineer Gas Holdings Limited Partnership, a West Virginia
------
limited partnership ("Buyer"). Capitalized terms used but not otherwise defined
-----
herein shall have the meanings ascribed thereto in the Acquisition Agreement,
dated as of August 4, 2004, between Seller and Buyer (the "Agreement").
---------
WHEREAS, Seller and Buyer have entered into the Agreement, pursuant to
which Buyer, subject to the terms of the Agreement, has agreed, among other
things, to assume and discharge the Assumed Obligations on the terms and
conditions provided in the Agreement;
WHEREAS, Section 2.3 of the Agreement provides that Buyer shall
execute and deliver this Instrument of Assumption at the Closing, pursuant to
which Buyer will assume and discharge the Assumed Obligations; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and in the Agreement and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto covenant and agree as follows:
1. Assumption. Buyer hereby assumes and discharges all of the
----------
following liabilities and obligations of the Seller, direct or indirect, known
or unknown, absolute or contingent, to the extent arising out of or related to
ownership or use of the Related Assets in connection with the West Virginia Gas
Distribution Business in accordance with the respective terms and subject to the
respective conditions of this Instrument of Assumption and subject to the terms
of the Agreement:
(ii) all liabilities and obligations associated with the
Related Assets in connection with the West Virginia Gas Distribution
Business regardless of whether such liabilities or obligations arose
before or after the Closing;
(iii) all liabilities and obligations associated with the
Related Assets in connection with the West Virginia Gas Distribution
Business in respect of Taxes attributable to taxable periods ending
after the Closing Date, except those for which the Seller is expressly
liable pursuant to the terms of the Agreement;
D-1
(iv) any liability, obligation, responsibility or capital
expenditure arising under or related to any former, current or future
Environmental Laws, health and safety laws or the common law, whether
such liability or obligation or responsibility is known or unknown,
contingent or accrued, arising as a result of or in connection with
(a) any violation, alleged violation, Release, threatened Release,
permit, closure, post-closure or remedial obligation relating to any
Environmental Law, whether prior to or on or after the Closing Date,
with respect to the ownership or operation of the Related Assets; (b)
any alleged loss of life, injury to persons or property or damage to
natural resources (whether or not such alleged loss, injury or damage
arose or has become manifest before the Closing Date or arises or
becomes manifest on or after the Closing Date), relating to the
alleged generation, discharge, emission, use, transportation,
disposal, presence or Release of any Hazardous Substances at, on, in,
under, to or from the Related Assets whether prior to or on or after
the Closing Date, including, but not limited to, any offsite
transportation, discharge, emission, deposition, disposal or
migration, Hazardous Substances contained in building materials or
structures at the Related Assets or in the soil, surface, water,
sediments, groundwater, landfill cells, or in other environmental
media at or migrating from the Related Assets; and (c) the
investigation, monitoring and/or remediation (whether or not such
investigation, monitoring or remediation commenced before the Closing
Date or commences on or after the Closing Date) of Hazardous
Substances that are present on or have been used, generated,
discharged, emitted, transported, disposed or Released whether prior
to or on or after the Closing Date at, on, in, under, to or from the
Related Assets, including, but not limited to, any offsite
transportation, discharge, emission, deposition, disposal or migration
and any Hazardous Substance in building materials or structures at the
Related Assets or in the soil, surface water, sediments, groundwater,
landfills, disposal sites, or in other environmental media at or
migrating from the Related Assets; and
(v) all liabilities and obligations incurred by the Seller
in accordance with the terms of the Agreement with respect to capital
expenditures associated with, or on behalf of, the Related Assets.
2. Conflicts. Nothing in this Instrument of Assumption shall
---------
constitute a waiver of, expansion of, or limitation upon, the rights,
liabilities, duties, obligations and remedies of Seller or Buyer under the
Agreement and, in case of any conflict, the terms and provisions of the
Agreement shall govern.
3. Amendments; Waivers. This Instrument of Assumption cannot be
-------------------
changed or terminated orally and no waiver of compliance with any provision or
D-2
condition hereof shall be effective unless evidenced by an instrument in writing
duly executed by the parties hereto.
4. Governing Law. This Instrument of Assumption shall be governed by
-------------
and construed in accordance with the laws of the State of New York (without
regard to conflicts of law principles thereof) as to all matters, including but
not limited to matters of validity, construction, effect, performance and
remedies.
5. Binding Effect; Assignment. This Instrument of Assumption shall be
--------------------------
binding upon, and inure to the benefit of, the parties hereto and their
respective successors in interest and permitted assigns. This Instrument of
Assumption may not be assigned by any party without the prior written consent of
the other party hereto. Notwithstanding the foregoing, Buyer may, without the
prior consent of Seller or any of its Affiliates, assign all of its rights and
obligations hereunder to any of its Affiliates, provided that no such assignment
--------
will release Buyer from any liabilities or obligations hereunder.
6. Counterparts. This Instrument of Assumption may be executed in two
------------
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7. Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be made in accordance with Section 11.4 of the
Agreement.
[SIGNATURE PAGE FOLLOWS]
D-3
IN WITNESS WHEREOF, the parties hereto have caused this Instrument of
Assumption to be executed and delivered as of the date first written above.
Monongahela Power Company
By:__________________________
Name:___________________
Title:__________________
MOUNTAINEER GAS HOLDINGS LIMITED PARTNERSHIP
By ARCLIGHT WV HOLDINGS I LLC
By ArcLight Energy Partners Fund II, L.P., its
Member
By ArcLight PEF XX XX, LLC, its general
partner
By ArcLight Capital Holdings, LLC,
its Manager
_______________________________
By Name:
Title:
By IGS UTILITIES LLC
By ____________________________________
Name:
Title:
D-4
EXHIBIT E
FORM OF TRANSITION SERVICES AGREEMENT
E-1
EXHIBIT F
FORM OF OPINION OF SELLER'S COUNSEL
F-1
EXHIBIT G
FORM OF OPINION OF BUYER'S COUNSEL
G-1
EXHIBIT H
CERTAIN INDEMNIFICATION OBLIGATIONS
In addition to and without limiting the indemnification provided in
Section 9.1(a)(i) and (ii) of the Agreement (provided there shall be no
--------
indemnification pursuant to Section 9.1(a)(i) or (ii) to the extent
indemnification for any Indemnifiable Loss is provided pursuant to Section
9.1(a)(iii) of the Agreement and this Exhibit H, the Seller will indemnify,
defend and hold harmless the Buyer Indemnified Parties from and against any and
all Indemnifiable Losses asserted against or suffered by the Buyer Indemnified
Parties relating to, resulting from or arising out of any Environmental Claim,
including without limitation, pollution or threat to human health or the
environment, that is related in any way to the ownership (including leasing, if
applicable) or operation of, or any previous owner's, lessee's or operator's
management, use, control, ownership or operation of (i) the Old Cameron Service
Center and (ii) the real property listed below to the extent that the
Environmental Claim arises out of or relates to any of the specific conditions
or circumstances identified below for such real property or any investigation or
remediation or cleanup of any such condition or circumstance, provided, however,
-------- -------
that any immaterial factual inaccuracies in describing any matter or location
herein shall not affect or reduce Seller's obligation as provided herein with
respect to any such condition or circumstance; provided, further, that in no
case shall the Seller be obligated to indemnify the Buyer Indemnified Parties
against any Indemnifiable Losses for which indemnification is provided pursuant
to the foregoing clause (ii) to the extent the aggregate amount of such
Indemnifiable Losses exceeds $7 million. The indemnification obligation of
Seller pursuant to the foregoing clause (ii) shall terminate upon the fifth
anniversary of the Closing Date.
PROPERTY: Xxxxx Service Center, located on Xxxxx 0 xx Xxxxx Xxx, Xxxx Xxxxxxxx.
CONDITIONS AND CIRCUMSTANCES:
1. All matters identified for this property in Schedule 5.14
(Environmental Matters) hereof.
2. Underground storage tank removed in approximately 1993.
3. Release of creosote or oil for dust suppression.
4. Storage of drip gas and antifreeze containers outdoors.
PROPERTY: Wheeling Service Center, located at 19th and Wood Streets in Wheeling,
West Virginia.
CONDITIONS OR CIRCUMSTANCES:
1. Two underground storage tanks removed in approximately 1989.
2. Storage of drip gas and antifreeze containers outdoors and
staining of asphalt at such storage area.
H-1
3. Historic underground and aboveground storage tanks shown on
Xxxxxxx maps.
4. Fish kill that occurred on or about April 2003.
5. Indoor floor drains.
6. Two outdoor trench drains.
7. Storage of hazardous materials (including methanol, glycol,
waste antifreeze and drip gas, and a drum of unknown
material in the compressed gas cage) without secondary
containment.
PROPERTY: Nitro Service Center, located in the vicinity of 0000 Xxxxx Xxxxxx xx
Xxxxx, Xxxx Xxxxxxxx.
CONDITIONS OR CIRCUMSTANCES:
1. Underground storage tank removed in 1993.
2. Disposition of soil removed from site of removed underground
storage tank.
H-2
