PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT (this "Agreement"), dated as of
December 20, 1999, between Allegheny Energy, Inc., a Maryland
corporation ("AYE") and Energy Corporation of America, a West
Virginia corporation ("ECA").
RECITALS
WHEREAS, the parties desire to coordinate their efforts
in the identification and acquisition of certain gas and gas-
related assets and properties, and/or certain business entities
that engage in gas and gas-related activities, upon the terms and
subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the agreements set
forth herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS
Section 1.01. Certain Definitions. As used in this
Agreement, the terms set forth in Appendix A have the meanings
ascribed to them therein.
Section 1.02. Schedule of Definitions. As used in this
Agreement, the terms set forth in Appendix B have the meanings
ascribed to them in the Sections of this Agreement indicated in
such Appendix.
ARTICLE II
PARTICIPATION
Section 2.01. Election to Participate. (a) Promptly
following AYE's execution of Preliminary Documentation with respect
to any Gas Assets, AYE will provide ECA with a written notification
(the "Notification") to the effect that AYE is evaluating such Gas
Assets (any Gas Assets as to which AYE provides a Notification, a
"Confidential Acquisition"). Each Notification will include an
estimate of the date on which AYE and the seller or issuer of
such Confidential Acquisition are reasonably likely to execute
definitive documentation concerning AYE's acquisition of such
Confidential Acquisition (the "Estimate Date"). Subject to the
prior execution by ECA of a confidentiality agreement between ECA
and the seller or issuer of such Confidential Acquisition in form
and substance substantially identical to the confidentiality
agreement between AYE and such seller or issuer, AYE will furnish
to ECA, if and as received, all information received by AYE from
such seller or issuer. AYE makes no, and shall not be deemed to
make any, representation or warranty concerning any information
furnished to ECA concerning any Confidential Acquisition, or as
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to the past, present or future operating or financial performance
of the Confidential Acquisition. ECA agrees that it will satisfy
itself as to the accuracy and sufficiency of the matters on which
it relies in making any investment decision with respect to each
Confidential Acquisition. Following its receipt of the
Notification, ECA shall refrain from engaging in negotiations,
discussions or other activities that could result in a failure by
AYE to purchase the Confidential Acquisition. AYE shall have no
obligation to acquire or invest in any Confidential Acquisition
and shall have no obligation to enter into any discussions or
negotiations or to continue to engage in any discussions or
negotiations concerning any Confidential Acquisition. AYE shall
control any discussions and negotiations between AYE and/or ECA
(on the one hand) and third parties (on the other hand)
concerning the acquisition of each Confidential Acquisition, but
AYE shall afford ECA a reasonable opportunity to participate in
such discussions and negotiations. ECA shall not engage in any
discussions or negotiations with third parties concerning any
Confidential Acquisition without the prior consent of AYE.
(b) With respect to each Confidential Acquisition that
is a Gas Acquisition, ECA will provide AYE with a written
notification (each, a "Gas Acquisition Election") as to whether
ECA elects to exercise its rights pursuant to Section 2.02, not
fewer than 30 calendar days prior to the Estimate Date. With
respect to each Confidential Acquisition that is a Pooling
Acquisition, ECA will provide AYE with a written notification
(each, a "Pooling Acquisition Election") as to whether ECA elects
to exercise its rights pursuant to Section 2.03 not fewer than 30
calendar days prior to the Estimate Date.
(c) If the Confidential Acquisition consists of Gas
Assets, then not fewer than 20 calendar days prior to the
Estimate Date AYE will provide ECA with a financial model showing
the capitalization of a hypothetical business entity, the only
assets of which are such Gas Assets. The value of the equity
capital of such hypothetical entity as set forth in such model
(the "Initial Equity Amount") shall not exceed the long term
indebtedness of such entity set forth therein.
(d) ECA shall notify AYE of the Selected Percentage not
fewer than 15 calendar days prior to the Estimate Date.
Section 2.02. Selected Gas Acquisitions. AYE and ECA
agree that following AYE's receipt of a Gas Acquisition Election
stating that ECA has elected to exercise its rights pursuant to this
section, AYE and ECA will negotiate in good faith appropriate
contractual arrangements with respect to the related Selected Gas
Acquisition pursuant to which, if and only if AYE acquires such
Selected Gas Acquisition during the Reference Period or within 18
months following the end of the Reference Period: (i) AYE and ECA
will form a Selected Gas Entity for the purpose of acquiring,
holding and disposing of such Selected Gas Acquisition, and (ii)
ECA will purchase or otherwise acquire for value an ECA Interest.
In connection with such negotiations, the parties will negotiate
in good faith appropriate contractual arrangements concerning the
acquisition, holding, operation and disposition of such Selected
Gas Acquisition and the related Interests. Such contractual
arrangements:
(a) Will contain provisions that are not reasonably
likely to (i) cause a material delay or complication in obtaining
regulatory approval for the acquisition of such Selected Gas
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Acquisition or the related AYE Interest or ECA Interest, (ii)
cause the acquisition transaction not to qualify for any tax,
accounting or regulatory treatment, the failure to qualify for
which would either have a significant adverse on AYE, or to the
benefits to AYE of the acquisition of the Selected Gas
Acquisition or the related AYE Interest or the attractiveness to
the seller or issuer of such Selected Gas Acquisition of AYE's
proposal to acquire the Selected Gas Acquisition, or (iii) result
in any tax, accounting or regulatory conditions or circumstances
that would have a significant adverse effect on the ownership or
operation by AYE of the Selected Gas Acquisition, the AYE
Interest or any of AYE's other assets or properties, and
(b) Will provide that upon the payment by ECA to AYE of an
amount of cash equal to the product of (i) the Selected
Percentage, multiplied by (ii) the Initial Equity Amount, ECA
will acquire an ECA Interest representing a percentage "passive"
equity interest or similar "synthetic" equity in the related
Selected Gas Entity equal to the Selected Percentage.
(c) Will provide AYE with complete management and
operating control of the Selected Gas Entity and will provide
ECA with a "passive" equity interest or similar synthetic equity
in such Selected Gas Entity, and
(d) Will provide that the long term indebtedness of
or attributable to the Selected Gas Acquisition will be
refinanced and replaced by intercompany loans extended by AYE or
one of its Affiliates to the related Selected Gas Entity, the
interest on which will be equal to such intercompany lender's
cost of funds relating to the indebtedness incurred by such
lender in connection with the making of such intercompany loans,
and
(e) Will provide that AYE and ECA will have the same
rights and obligations with respect to Interests as those
provided in Article IV, and will contain provisions analogous to
those set forth in Articles III and VI.
AYE and ECA shall use their respective best efforts to
ensure that the foregoing contractual arrangements have been
executed and delivered at least five Business Days prior to the
Estimate Date.
Section 2.03. Pooling Acquisitions. AYE and ECA agree that
following AYE's receipt of an Election stating that ECA has
elected to exercise its rights pursuant to this Section 2.03, AYE
and ECA will negotiate in good faith appropriate contractual
arrangements with respect to the related Pooling Acquisition (and
shall negotiate in good faith concerning whether such
arrangements should be comprised of (i) modifications to this
Agreement applicable to subsequent Gas Acquisitions, (ii)
consulting and advisory arrangements with respect to such Pooling
Acquisition, and/or (iii) other contractual arrangements)
pursuant to which, if and only if AYE acquires such Pooling
Acquisition during the Reference Period or within 18 months
following the end of the Reference Period:
(a) ECA will pay to AYE at least two years and one day
following the date of consummation of such Pooling Acquisition, but
not prior to two years and one day following the date of such
consummation, cash equal to the product of (i) the Selected
Percentage, multiplied by (ii) the market value of the equity
consideration paid by AYE in connection with such Pooling
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Acquisition, which shall be determined in the manner set forth in
Section 4.06(j) as of the date of the consummation of such
Pooling Acquisition.
(b) At least two years and one day following the date
of consummation of such Pooling Acquisition, but not prior to two
years and one day following the date of such consummation or
prior to the payment referred to in Section 2.03(a), ECA will
have "synthetic equity" or other economic rights as equivalent as
may be practicable (in light of the factors specified in clause
(a) of Section 2.02 and in light of the requirements for "pooling
of interests" accounting treatment) to such economic rights as
ECA would have if ECA had purchased a percentage equity interest
in such Pooling Acquisition equal to the Selected Percentage.
(c) AYE and ECA will have substantially the same rights
and obligations with respect to such economic rights as those
provided in Article IV with respect to AYE Interests and ECA
Interests.
Such contractual arrangement will contain provisions
analogous to those set forth in Articles III and VI.
Section 2.04. Agreement Concerning Combined Gas and
Electric Acquisitions. In the event that during the Reference
Period AYE acquires assets or securities of an entity which operates
one or more electric utilities, and such assets or securities do not
constitute Gas Assets solely because the gross revenues of or
attributable to such entity or assets that are derived from
Covered Activities in the Territory (after giving effect to any
disposition of assets and businesses not acquired by AYE) do not
equal or exceed 50% of the gross revenues of or attributable to
such entity or assets, each of AYE and ECA will entertain
reasonable proposals from the other party concerning, and shall
discuss in good faith, whether and on what terms AYE and ECA
should cooperate in the ownership, operation and/or disposition
of such assets of the acquired entity or such portion of the
acquired assets as may be engaged or employed in connection with
Covered Activities in the Territory.
Section 2.05. Agreement Concerning Financing
Arrangements. The parties recognize that this Agreement broadly
prohibits the creation of liens, encumbrances and security
interests on or with respect to Interests. In connection with
the negotiations referred to in Section 2.02, AYE and ECA will
negotiate in good faith appropriate contractual arrangements (and
shall negotiate in good faith concerning whether such
arrangements should be comprised of modifications to this
Agreement and/or other contractual arrangements) concerning the
matters set forth in Article IV intended (i) to permit ECA to
borrow funds sufficient to make the payments contemplated by
Section 2.02(b), (ii) to accommodate such liens, encumbrances and
security interests as attach to AYE's assets and properties by
operation of federal or state law or in the ordinary course of
AYE's financing activities, (iii) to safeguard and protect AYE's
right to acquire an ECA Interest in the event a lender forecloses
or otherwise takes possession or title to such ECA Interest or
executes upon a lien, encumbrance or security interest thereon,
and (iv) to safeguard and protect ECA's right to acquire an AYE
Interest in the event a lender forecloses or otherwise takes
possession or title to such AYE Interest or executes upon a lien,
encumbrance or security interest thereon.
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ARTICLE III
REGULATORY APPROVALS
Section 3.01. Approval of Acquisitions. The effectiveness
of this Agreement will be conditioned upon the occurrence of the
Closing. The effectiveness of all contractual arrangements
concerning the matters specified in Sections 2.02 and 2.03 and
Article IV will be conditioned upon prior approval of the
Securities and Exchange Commission (the "SEC") if and to the
extent required by the Public Utility Holding Company Act of
1935, as amended, and the rules and regulations thereunder
(collectively, the "1935 Act"), and upon the prior receipt of any
other required regulatory approvals. AYE and ECA will negotiate
in good faith to cause such contractual arrangements to contain
such terms and conditions as are not reasonably likely to cause
such approvals to be withheld, delayed or conditioned.
ARTICLE IV
DISPOSITIONS
Section 4.01. General. Neither AYE nor ECA shall make any
Disposition to any Person unless such Disposition is expressly
permitted by and made in accordance with this Agreement. AYE and
ECA shall cause each Selected Gas Entity not to reflect on its
books any Disposition except Dispositions expressly permitted by
and made in accordance with, this Agreement. Any Disposition not
permitted by and made in accordance with this Agreement (an
"Impermissible Disposition"), including but not limited to
Dispositions made without prior compliance with the provisions of
this Article IV, shall be null and void ab initio. AYE and ECA
agree to cooperate in obtaining any regulatory approvals required
in connection with any Disposition made in accordance with this
Agreement.
Section 4.02. Dispositions By AYE. If at any time AYE
makes a determination to sell any AYE Interest, it shall submit to ECA a
written offer (an "Offer") with respect to such Disposition
specifying the price and the other material terms and conditions,
including deferred payment mechanics (if applicable) pursuant to
which AYE proposes to sell the AYE Interest. Such Offer shall
state that ECA is entitled to purchase, at its option and in
accordance with the provisions of this Agreement, all of the AYE
Interest for such price and on such other terms and conditions.
Section 4.03. Election to Purchase or to "Tag-Along". Upon
receipt of an Offer, ECA shall have the right (but not the
obligation), which it may exercise by delivering a written notice
of such exercise (an "Exercise Notice") to AYE within 30 calendar
days of the date of dispatch of such Offer, to either (i)
purchase all (but not less than all) of the AYE Interest for the
price and on the other terms and conditions, including deferred
payment mechanics (if applicable), set forth in the Offer, or,
alternatively, (ii) authorize and direct AYE, as agent and
attorney-in-fact for ECA, to offer the corresponding ECA Interest
for sale to any third party to which AYE offers to sell the AYE
Interest and to take all actions necessary or appropriate to sell
such ECA Interest on behalf of ECA, in each case on the same
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terms, and subject to the same conditions, as are applicable to
the AYE Interest (except for the price, which shall be
proportionate to the price for the AYE Interest), it being
understood that AYE may not sell the ECA Interest to any Person
other than the Person which acquires the corresponding AYE
Interest (the "Acquiror"). ECA may exercise either, but not
both, of the rights described in clauses (i) and (ii) of the
previous sentence but shall be under no obligation to exercise
either such right. Any Exercise Notice shall, together with the
Offer, constitute a valid, legally binding and enforceable
agreement on the part of ECA to either purchase such AYE Interest
from AYE for the price and on the other terms and conditions,
including deferred payment mechanics (if applicable) set forth in
the Offer, or to sell such ECA Interest to the Acquiror on the
same terms and subject to the same conditions as are applicable
to the sale of the AYE Interest (except the price, which shall be
proportionate to the price for the AYE Interest), each as the
case may be. If ECA shall have made the election contemplated by
clause (ii) of the first sentence of this Section 4.03 (the "Tag-
Along Election") within the time period specified in such
sentence, ECA shall execute such instruments and documents as may
be necessary to confirm AYE's power and authority as agent and
attorney-in-fact of ECA to offer and sell of the ECA Interest on
ECA's behalf.
Section 4.04. If ECA Elects to Purchase. If ECA shall
have made the election contemplated by clause (i) of the first
sentence of Section 4.03 (the "Purchase Election") within the time
period specified in such sentence, then subject to compliance with
applicable laws and regulations and the obtaining of such
regulatory approvals as may be required, the purchase and sale of
the AYE Interest shall be consummated as soon as practicable
following the receipt of all regulatory approvals required in
connection with such transaction. Such disposition shall be
effected by (i) AYE's delivery to ECA of documents sufficient to
effect the sale to ECA of the AYE Interest, and (ii) ECA's
delivery to AYE of the purchase price set forth in the Offer,
subject to any deferred payment mechanics (if any) set forth
therein, in cash, by wire transfer or by certified or official
bank check. AYE hereby (i) warrants to ECA that, as of the
consummation of such purchase and sale transaction the sale and
delivery of the AYE Interest shall vest in ECA good legal title
and beneficial ownership of the AYE Interest, free and clear of
all liens, charges, encumbrances, restrictions, equities, options
and claims, other than those incurred by action of ECA and (ii)
agrees to indemnify and hold harmless ECA against any losses or
damages arising out of any breach of the warranty set forth in
clause (i) of this sentence.
Section 4.05. If ECA Does Not Elect to Purchase.
(a) If ECA does not make a Purchase Election or Tag Along Election
within the time period specified in Section 4.03, AYE shall have the
right, which may be exercised at any time during the period prior
to the 150th calendar day following the date of dispatch of the
Offer (the "Drag-Along Period"), to elect to cause ECA to sell
the ECA Interest to the Acquiror at a price and subject to other
terms and conditions which are (i) not more favorable in the
aggregate to the Acquiror than those specified in the Offer
(other than the price, which shall be proportionate to the price
for the AYE Interest), and (ii) identical (except the price,
which shall be proportionate to the price for the AYE Interest)
to the terms and conditions of the sale of the AYE Interest (any
such election, a "Drag-Along Election").
(b) AYE may exercise a Drag-Along Election by furnishing
written notice thereof to ECA prior to the expiration of the Drag-
Along Period. The consummation of the purchase and sale of the
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ECA Interest shall occur contemporaneously with the consummation
of the purchase and sale of the AYE Interest. If AYE shall cause
the Acquiror to purchase the ECA Interest, such purchase shall be
at a price and subject to terms and conditions which are (i) not
more favorable in the aggregate to the Acquiror than those
specified in the Offer (other than the price, which shall be
proportionate to the price for the AYE Interest), and (ii) are
identical (except the price, which shall be proportionate to the
price for the AYE Interest) to the price, terms and conditions
applicable to the sale of the AYE Interest;
(c) If ECA does not make a Purchase Election within
the time period specified in Section 4.03, AYE may, at any time
within 180 days following the date of dispatch of the Offer, enter
into an agreement to sell the AYE Interest to any Person. Any such
sale of an AYE Interest shall be made to the Acquiror at a price and
on other terms and conditions not more favorable in the aggregate
to the Acquiror than those specified in the Offer. If ECA shall
have made the Tag-Along Election, AYE shall not sell or agree to
sell the AYE Interest unless the Acquiror agrees to purchase all
of the ECA Interest on terms and conditions identical (except the
price, which shall be proportionate to the price for the AYE
Interest) to the price, terms and conditions applicable to the
sale of the AYE Interest. If an Acquiror shall not have entered
into definite documentation concerning the purchase of the AYE
Interest within 180 calendar days following the date of dispatch
of the Offer, the AYE Interest shall continue to be subject to
the rights of first offer set forth in this Article IV, and AYE's
power and authority as agent and attorney-in-fact of ECA with
respect to the ECA Interest shall terminate.
Section 4.06. Other Purchase Rights. (a) Impermissible
Disposition by AYE. AYE agrees to furnish to ECA prompt written
notice upon becoming aware of the occurrence of an Impermissible
Disposition with respect to an AYE Interest. If such
Impermissible Disposition has not been reversed, rescinded or
canceled within 30 calendar days following the date of dispatch
by AYE of a notice with respect to a particular Impermissible
Disposition (the "AYE Impermissible Disposition Cure Period"),
ECA shall have the right, which may be exercised at any time
during the period of 30 calendar days following the elapse of the
Impermissible Disposition Cure Period to elect to purchase the
AYE Interest at Fair Market Value in accordance with this Section
4.06. Notwithstanding the foregoing, ECA shall retain all causes
of action, rights and remedies in respect of a breach by AYE of
its obligations under this Agreement to which ECA would otherwise
be entitled under applicable law.
(b) Impermissible Dispositions by ECA. ECA agrees to
furnish to AYE prompt written notice upon becoming aware of the
occurrence of an Impermissible Disposition with respect to an ECA
Interest. If such Impermissible Disposition has not been
reversed, rescinded or canceled within 30 calendar days following
the date of dispatch by ECA of a notice with respect to a
particular Impermissible Disposition (the "ECA Impermissible
Disposition Cure Period"), AYE shall have the right, which may be
exercised at any time during the period of 30 calendar days
following the elapse of the Impermissible Disposition Cure Period
to elect to purchase the ECA Interest at Fair Market Value in
accordance with this Section 4.06. Notwithstanding the
foregoing, AYE shall retain all causes of action, rights and
remedies in respect of a breach by ECA of its obligations under
this Agreement to which AYE would otherwise be entitled under
applicable law.
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(c) AYE Call Right. AYE shall have the right, which may be
exercised at any time following the second anniversary of the
acquisition by ECA of an ECA Interest, to elect to purchase all,
but not less than all, of such ECA Interest for Fair Market Value
in accordance with this Section 4.06.
(d) ECA Put Right. ECA shall have the right, which
may be exercised at any time following the second anniversary of the
acquisition by ECA of an ECA Interest, to elect to cause AYE to
purchase all, but not less than all, of such ECA Interest for
Fair Market Value in accordance with this Section 4.06.
(e) AYE Change of Control. AYE shall have the right,
which may be exercised at any time following the termination of this
Agreement by AYE pursuant to Section 5.02, to elect to purchase
all, but not less than all, of any ECA Interest for Fair Market
Value plus the Control Premium in accordance with this Section
4.06.
(f) ECA Change of Control. AYE shall have the right,
which may be exercised at any time following the termination of this
Agreement by AYE pursuant to Section 5.03, to elect to purchase
all, but not less than all, of any ECA Interest for Fair Market
Value in accordance with this Section 4.06.
(g) Closing. If either AYE or ECA elects to exercise
any right pursuant to Section 4.06(a), through (f), such party (the
"Exercising Party") shall provide to the other a written
notification of such exercise (any such notification, a "Put/Call
Notice") prior to the expiration of the period of time during
which such right may be exercised. The consummation of the
purchase and sale of the Interest to which the Put/Call Notice
relates, shall occur on the fifteenth calendar day following the
last to occur of (x) the final determination of the Fair Market
Value of the Interest, and (y) the receipt of all governmental
and regulatory approvals required for the consummation of such
purchase and sale (or if such fifteenth calendar day is not a
business day, then the next succeeding business day), at 10:00
a.m., local time, at a location in Pittsburgh, Pennsylvania
mutually agreed upon by AYE and ECA.
(h) Warranties. AYE warrants to ECA, with respect to
each Interest that is the subject of a Put/Call Notice and is an AYE
Interest, and ECA warrants to AYE, with respect to each Interest
that is the subject of a Put/Call Notice and is an ECA Interest,
that the sale and delivery of such Interest at the closing of the
purchase and sale of such Interest shall vest in the Exercising
Party good legal title to and beneficial ownership of such
Interest, free and clear of all liens, charges, encumbrances,
restrictions, equities, options and claims, other than such as
may be imposed by action of the Exercising Party. Each party
agrees to indemnify and hold harmless such Exercising Party
against any losses or damages arising out of any breach of the
warranty set forth in the previous sentence.
(i) AFair Market Value@ means the price which a willing
buyer would pay to a willing seller for the Interest in question in an
arms= length negotiated transaction without undue time
constraints, and shall be determined in U.S. dollars as of the
date of dispatch of the Put/Call Notice. AControl Premium @
means, with respect to any ECA Interest, an amount equal to the
product of (i) the aggregate Achange of control premium,@ if any,
received or to be received by AYE stockholders as a result of the
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related AYE Change in Control, as determined in accordance with
Section 4.06(j), multiplied by (ii) the product of (A) the amount
that would have been shown on AYE=s books at the time of the
consummation of the AYE Change in Control as the book value of
such ECA Interest if AYE had acquired such ECA Interest at the
time ECA acquired such ECA Interest, divided by (B) the aggregate
book value of AYE=s assets at the time of the consummation of the
AYE Change in Control.
(j) Any Determination Amount shall be determined, if
possible, by the mutual agreement of AYE and ECA. If AYE and ECA are
unable to reach such an agreement within 30 calendar days
following the receipt of the Put/Call Notice, the Determination
Amount shall be determined by a nationally recognized investment
banking firm jointly selected by AYE and ECA. If AYE and ECA are
unable to mutually agree on an investment banking firm, each
shall choose an investment banking firm and the two firms so
chosen shall select a third investment banking firm. The third
firm so selected shall determine the Determination Amount, which
determination shall be final and binding on the parties. If
either party shall fail to select an investment banking firm
within 10 calendar days following receipt from the other party of
a notice specifying such failure, or if the two investment
banking firms shall fail to select a third investment banking
firm, such third investment banking firm shall be selected by the
American Arbitration Association or by arbitration in accordance
with the Commercial Arbitration Rules thereof. The parties shall
instruct such third investment banking firm so retained to
deliver to such parties a written opinion as to the Determination
Amount within 60 days following the selection of such firm. The
cost of determining the Determination Amount, including the fees
and expenses of such investment banking firms, shall, unless
otherwise agreed by the parties in writing, be borne equally by
AYE, on the one hand, and ECA, on the other hand.
(k) Each party agrees to furnish to each investment
banking firm referred to in Section 4.06(j) such financial,
business and other information as is reasonably necessary to
allow it to evaluate the business, financial condition and
results of operation of the related Selected Gas Entity, subject
to the execution of a reasonable confidentiality agreement by
such investment banking firm.
ARTICLE V
TERMINATION
Section 5.01. Mutual Agreement. This Agreement may be
terminated at any time by the mutual written consent of AYE and
ECA.
Section 5.02. AYE Change of Control. AYE agrees to furnish
to ECA 30 days' prior written notice upon becoming aware of the
occurrence of an AYE Change in Control. AYE shall have the
right, which may be exercised at any time during the period of 90
calendar days following the consummation of any AYE Change in
Control, to terminate this Agreement.
Section 5.03. ECA Change of Control. ECA agrees to furnish
to AYE 30 days' prior written notice upon becoming aware of the
occurrence of an ECA Change in Control. AYE shall have the
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right, which may be exercised at any time during the period of 90
calendar days following the date that AYE receives such notice or
otherwise becomes aware of an ECA Change in Control, to terminate
this Agreement.
Section 5.04 Automatic Termination. This Agreement
shall terminate automatically on the second anniversary of the
last day of the Reference Period.
ARTICLE VI
CONFIDENTIALITY; NONCOMPETITION; NONSOLICITATION
Section 6.01. Confidential Information Provided to ECA. (a)
From and after the date hereof and until the fifth anniversary of
the last day of the Reference Period, ECA (i) shall hold and
shall use its reasonable efforts to cause its Affiliates,
officers, directors, employees, representatives, consultants and
advisors (collectively with ECA, the "ECA Group") to hold in
strict confidence, unless compelled to disclose by judicial or
administrative process, or, in the opinion of its counsel, by
other requirements of law or the rules of any applicable stock
exchange, all Confidential Information that it has obtained
(except to the extent that such information can be shown to have
been (x) previously actually known by any member of the ECA
Group, or (y) in the public domain through no fault of any member
of the ECA Group), (ii) shall not release or disclose, and shall
cause each member of the ECA Group not to release or disclose,
Confidential Information to any other Person (other than members
of the ECA Group and its auditors, counsel and lenders who need
to know such information for the purpose of evaluating a
Confidential Acquisition), and (iii) will not use such
Confidential Information to the detriment of AYE. If any member
of ECA Group shall be required by legal process to make
disclosure of any such Confidential Information, ECA shall give
AYE prior written notice of the making of such disclosure (which
notice shall attach a copy of such legal process) and shall use
all reasonable efforts to afford AYE an opportunity to, and will
cooperate with AYE if AYE chooses to, contest the making of such
disclosure.
(b) In addition to the covenants contained in Section
6.01(a), ECA shall, and shall cause each member of the ECA Group to,
use any Confidential Information of or relating to any Selected Gas
Entity solely for the purpose of owning or holding the related
ECA Interest.
Section 6.02. Confidential Information Provided to AYE.
(a) From and after the date hereof and until the fifth anniversary of
the last day of the Reference Period, AYE (i) shall hold and shall
use its reasonable efforts to cause its Affiliates, officers,
directors, employees, representatives, consultants and advisors
(collectively with AYE, the "AYE Group") to hold in strict
confidence, unless compelled to disclose by judicial or
administrative process, or, in the opinion of its counsel, by
other requirements of law or the rules of any applicable stock
exchange, all Confidential Information that it has obtained
(except to the extent that such information can be shown to have
been (x) previously actually known by any member of the AYE
Group, or (y) in the public domain through no fault of any member
of the AYE Group), (ii) shall not release or disclose, and shall
cause each member of the AYE Group not to release or disclose,
Confidential Information to any other Person (other than members
of the AYE Group and its auditors, counsel and lenders who need
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to know such information for the purpose of evaluating a Confidential
Acquisition), and (iii) will not use such Confidential Information to
the detriment of ECA. If any member of AYE Group shall be required by
legal process to make disclosure of any such Confidential Information,
AYE shall give ECA prior written notice of the making of such disclosure
(which notice shall attach a copy of such legal process) and shall use
all reasonable efforts to afford ECA an opportunity to, and will
cooperate with ECA if ECA chooses to, contest the making of such
disclosure.
(b) In addition to the covenants contained in Section 6.02(a),
AYE shall, and shall cause each member of the AYE Group to, use any
Confidential Information of or relating to any Selected Gas
Entity solely for the purpose of owning or holding the related
AYE Interest.
Section 6.03. Confidentiality of Acquisition Discussions.
ECA shall not, and ECA will use its reasonable efforts to cause the
ECA Group to not, discuss a Confidential Acquisition with any
other person or disclose to any other Person either the fact that
discussions or negotiations are taking place concerning a
Confidential Acquisition or any of the terms, conditions or other
facts with respect to any such Confidential Acquisition,
including the status thereof; provided, however, that any member
of the ECA Group may make such disclosure to the extent such
member has received the written opinion of ECA's outside counsel
that such disclosure is required to be made in order to avoid
violating the federal securities laws and ECA is otherwise not in
breach of this Agreement.
Section 6.04. Noncompetition. (a) In consideration for
being furnished with Confidential Information, ECA hereby covenants and
agrees that until two years after the Reference Period, ECA shall
not directly or indirectly acquire any financial or beneficial
interest in, provide services with respect to, lease or own,
manage, operate or control any Confidential Acquisition that does
not result in the acquisition by ECA of an ECA Interest.
(b) In consideration for being furnished with
Confidential Information, ECA hereby covenants and agrees that is
will not, directly or indirectly (whether as an owner, partner,
stockholder, employee, director, officer, agent, consultant or
the equivalent of any person or entity), engage in, assist any
other person or entity to engage in, or have any equity,
financial, proprietary, ownership or like interest in, any
business which is in competition with the business conducted by
any Selected Gas Entity.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Survival. Articles IV and VI shall survive
termination of this Agreement.
Section 7.02. Amendment and Waiver. Any provision of
this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and signed, in the case of an
amendment, by AYE and ECA, or in the case of a waiver, by the
party against whom the waiver is to be effective. No failure or
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delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.
Section 7.03. Performance and Assignment. Any action or
obligation to be performed by AYE under this Agreement shall be
deemed to be performed by AYE if such action or obligation is
performed by a Subsidiary of AYE. No party to this Agreement may
assign or delegate any of its rights or obligations under this
Agreement without the prior written consent of the other party
hereto, except that AYE may assign or delegate any or all of its
rights under this Agreement to any wholly owned Subsidiary or
Subsidiaries of AYE. Any assignment made in violation of this
Section 7.03 shall be null and void.
Section 7.04. Expenses. Except as otherwise expressly
provided in this Agreement, whether or not the transactions contemplated
by this Agreement are consummated, the parties shall bear their
own respective expenses (including, but not limited to, all
compensation and expenses of counsel, financial advisors,
consultants, actuaries and independent accountants) incurred in
connection with this Agreement and the transactions contemplated
hereby.
Section 7.05. Parties in Interest; No Third Party
Beneficiaries. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any Person other than AYE and ECA and
their successors or permitted assigns any rights or remedies
under or by reason of this Agreement.
Section 7.06. Public Disclosure. Each of the parties to
this Agreement hereby agrees with the other parties hereto that,
except as may be required to comply with the requirements of
applicable law or the rules and regulations of each stock
exchange upon which the securities of one of the parties or its
Affiliates is listed, no press release or similar public
announcement or communication will be made or caused to be made
concerning the execution or performance of this Agreement unless
specifically approved in advance by all parties hereto; provided,
however, that, to the extent that either party to this Agreement
is required by law or the rules and regulations of any stock
exchange upon which the securities of one of the parties or its
Affiliates is listed to make such a public disclosure, such
public disclosure shall only be made after prior consultation
with the other party to this Agreement.
Section 7.07. Entire Agreement. This Agreement (including
all Annexes and Schedules hereto) and any agreement between AYE and
ECA making specific reference to this Section 8.06 constitutes
the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect to such matters.
Section 7.08. Counterparts. This Agreement and any
amendments hereto may be executed in one or more counterparts, each
of which shall be deemed to be an original, and all of which shall be
considered one and the same instrument.
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Section 7.09. Schedules. The inclusion of any matter in any
schedule to this Agreement shall be deemed to be an inclusion for
all purposes of this Agreement, including each representation and
warranty as to which the relevance of such matter is readily
apparent, but inclusion therein shall expressly not be deemed to
constitute an admission by AYE or ECA, or otherwise imply, that
any such matter is material or creates a measure for materiality
for the purposes of this Agreement.
Section 7.10. Section Headings. The section and paragraph
headings and table of contents contained in this Agreement are
for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
Section 7.11. Notices. All notices hereunder shall be deemed
given if in writing and delivered personally or sent by facsimile
or by registered or certified mail (return receipt requested) to
the parties at the following addresses (or at such other
addresses as shall be specified by like notice):
(a) if to AYE, to:
Allegheny Energy, Inc.
Attention: Xxx Xxxxx, President
000 Xxxxx Xxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
With a copy to:
Allegheny Energy, Inc.
Attention: Xxxxxx X. Xxxxxxxxx, Vice President, Legal
00000 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
and
Xxxxxxxx & Xxxxxxxx
Attention: Xxxxxxx X. Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(b) if to ECA, to:
Energy Corporation of America
Attention: Xxxx Xxxx, President
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxxxxx & Xxxxxxx, LLP
Attention: Xxxxxx X. Xxxxxxx
0000 Xxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
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Section 7.12. Governing Law; Submission to Jurisdiction;
Selection of Forum. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of West
Virginia without reference to the choice of law principles
thereof. Each party hereto agrees that it shall bring any action
or proceeding in respect of any claim arising out of or related
to this Agreement or the transactions contained in or
contemplated by this Agreement, whether in tort or contract or at
law or in equity, exclusively in the United States District Court
for the Southern District of West Virginia (the "Chosen Court")
and (i) irrevocably submits to the exclusive jurisdiction of the
Chosen Court, (ii) waives any objection to the laying of venue in
any such action or proceeding in the Chosen Court, (iii) waives
any objection that the Chosen Court is an inconvenient forum or
does not have jurisdiction over any party hereto and (iv) agrees
that service of process upon such party in any such action or
proceeding shall be effective if notice is given in accordance
with Section 7.11 of this Agreement.
Section 7.13. Severability. The provisions of this
Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provision of
this Agreement, or the application thereof to any person or entity or
any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to
carry out, so far as may be valid and enforceable, the intent and
purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision
to other persons, entities or circumstances shall not be affected
by such invalidity or unenforceability, nor shall such invalidity
or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
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IN WITNESS WHEREOF, this Agreement has been signed on
behalf of each of the parties hereto as of the date hereof.
ALLEGHENY ENERGY, INC.
By:
Name:
Title:
ENERGY CORPORATION OF AMERICA
By:
Name:
Title:
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APPENDIX A
CERTAIN DEFINITIONS
"Affiliate" means, with respect to any Person, any
other Person that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such Person.
"AYE Change in Control" means any merger or
consolidation of AYE with or into another entity, any transfer or
sale of all or substantially all of AYE's assets, any Bankruptcy
Event with respect to AYE and any assignment of the Agreement by
AYE, by operation of law or otherwise.
"AYE Interest" means, with respect to any Selected Gas
Acquisition, any equity or economic interest in the related
Selected Gas Entity, which interest is owned or held, directly or
indirectly, by AYE.
"Bankruptcy Event" means, with respect to any Person,
the occurrence of any of the following events: (i) the entry by a
United States Bankruptcy Court or by a court having jurisdiction
in the premises of (A) a decree or order for relief in respect of
such Person in an involuntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other
similar law, or (B) a decree or order adjudging such Person a
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of
or in respect of such Person under any applicable law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of such Person or of any
substantial part of its property, or ordering the winding up or
liquidation or its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 150
consecutive calendar days; or (ii) the commencement by such
Person of a voluntary case or proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar law or of
any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or order
for relief in respect of such Person in an involuntary case or
proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable law, or the consent
by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar office of such Person or
of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they
become due, or the taking of corporate, limited liability company
or partnership action by such Person in furtherance of any such
action.
"Business Day" means any day other than a Saturday, a
Sunday or a day on which banks in any of Denver, Colorado,
Hagerstown, Maryland or New York, New York are authorized or
obligated by law or executive order to close.
"Closing" means the Closing contemplated by the Stock
Purchase Agreement, dated as of December 20, 1999, among
Allegheny Energy, Inc., Energy Corporation of America and Eastern
Systems Corporation.
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"Confidential Information" means any financial,
technical, operational or other information (including, without
limitation, analyses, compilations, memoranda, notes, any other
writings, financial and valuation models, financial projections,
trade secrets, processes, customer lists and know-how) of or
relating to any Confidential Acquisition or Selected Gas Entity.
"Covered Activities" means the exploration,
production, storage, transportation, distribution, sale,
development, operation and marketing, regulated or otherwise, of
oil and/or natural gas.
"Determination Amount" means any of the following: (i)
the Fair Market Value of an Interest, (ii) the Change in Control
Premium, (iii) the component of the Change in Control Premium
described in the second sentence of Section 4.06(i), and (iv) the
market value of equity consideration described in clause (ii) of
Section 2.03(a).
"Dispose" means to effect a Disposition.
"Disposition" means any direct or indirect sale,
assignment (by operation of law or otherwise), transfer, pledge,
hypothecation, placement in trust (voting or otherwise) or
disposition of, lien or encumbrance on, creation of a security
interest in, or foreclosure by any person or entity other than
AYE and ECA on, any Interest A divestiture of property or assets
by a Selected Gas Acquisition or such an entity shall not
constitute a Disposition.
"ECA Change in Control" means any merger or
consolidation of ECA with or into another entity, any transfer or
sale of all or substantially all of ECA's assets, any purchase by
persons other than persons or entities controlled by the current
management of ECA of more than 50% of ECA's voting equity
securities, any Bankruptcy Event with respect to ECA and any
assignment of the Agreement by ECA, by operation of law or
otherwise.
"ECA Interest" means, with respect to any Selected Gas
Acquisition, a non-voting equity or economic interest equal to
the Selected Percentage in the related Selected Gas Entity, which
interest is owned or held, directly or indirectly, by ECA.
"Gas Acquisition" means any Gas Assets which are both
(i) the subject of Preliminary Documentation executed by AYE
during the Reference Period, and (ii) actually acquired by AYE in
transactions consummated during the Reference Period or within 18
months following the end of the Reference Period, except for:
a. Gas Assets the aggregate consideration for which
will be less than $25 million (if the consideration is "all
cash") or have a fair market value of less than $25 million
(if the consideration is anything other than "all cash"),
and
b. Pooling Acquisitions.
"Gas Assets" means both:
a. Equity securities (including securities convertible
or exchangeable for equity securities) of business entities
(other than subsidiaries of AYE), at least 50% of the gross
revenues of which (giving effect to any disposition of
assets and businesses not acquired by AYE) are derived from
Covered Activities in the Territory, and
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b. Property and other assets (other than property and
assets owned or held by subsidiaries of AYE), at least 50%
of the gross revenues attributable to which are derived from
Covered Activities in the Territory,
provided, however, that the following do not constitute
Gas Assets:
c. Interests acquired by AYE in joint ventures between
AYE and third parties, or
d. Any combustion turbine assets, cogeneration assets
or electric power generation assets, or interests or
participations therein, or
e. The assets or securities of Mountaineer Gas
Company.
"Interest" means an AYE Interest or an ECA Interest, as
the case may be.
"Person" means any individual, partnership, firm,
corporation, association, joint venture, trust or other entity,
or any government or political subdivision or agency, department
or instrumentality thereof.
"Pooling Acquisition" means any Gas Assets which are
both (i) the subject of Preliminary Documentation executed by AYE
during the Reference Period, and (ii) actually acquired by AYE in
transactions consummated in business combination transactions
intended to qualify for "pooling of interests" accounting
treatment during the Reference Period or within 18 months
following the end of the Reference Period.
"Preliminary Documentation" means, with respect to any
Gas Assets, any confidentiality agreement, letter of intent or
memorandum of understanding with respect to the acquisition by
AYE of such Gas Assets.
"Reference Period" means the period between the Closing
and the fifth anniversary of such date.
"Selected Gas Acquisition" means any Gas Acquisition as
to which ECA submits a timely Gas Acquisition Election stating
that ECA has elected to exercise its rights pursuant to Section
2.02.
"Selected Gas Entity" means any business entity or
contractual joint venture formed for the purpose of acquiring,
holding and disposing of a Gas Acquisition as to which ECA
submits a timely Gas Acquisition Election stating that ECA has
elected to exercise its rights pursuant to Section 2.02.
"Selected Percentage" means a percentage, which shall
not be less than 10% nor greater than 20%, determined by ECA in
its sole discretion.
"Subsidiary" means, with respect to any Person, any
other Person the shares of stock or other ownership interests of
which having ordinary voting power to elect a majority of the
board of directors of such Person and are at the time owned, or
the management or policies of which are otherwise at the time
controlled, directly or indirectly through one or more
intermediaries (including other Subsidiaries) or both, by such
first Person.
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"Territory" means the United States, Canada and Mexico,
and their respective territories and possessions.
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APPENDIX B
SCHEDULE OF DEFINITIONS
Term Section
1935 Act 3.01
Acquiror 4.03
Agreement Preamble
AYE Preamble
AYE Group 6.02
AYE Impermissible Disposition Cure Period 4.06
Chosen Court 7.12
Confidential Acquisition 2.01
Control Premium 4.06
Drag-Along Election 4.05
Drag-Along Period 4.05
ECA Preamble
ECA Group 6.01
ECA Impermissible Disposition Cure Period 4.06
Estimate Date 2.01
Exercise Notice 4.03
Exercising Party 4.06
Fair Market Value 4.06
Gas Acquisition Election 2.01
Impermissible Disposition 4.01
Initial Equity Amount 2.01
Notification 2.01
Offer 4.02
Pooling Acquisition Election 2.01
Purchase Election 4.04
Put/Call Notice 4.06
SEC 3.01
Tag-Along Election 4.03
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