SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ]Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
Allegheny & Western Energy Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ X ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
Common Stock, par value $.01 per share
2) Aggregate number of securities to which transaction applies:
7,156,860
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it
was determined): $12.00
4) Proposed maximum aggregate value of transaction:
$85,882,320.00
5) Total fee paid: $17,176.46
[ X ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
ALLEGHENY & WESTERN ENERGY CORPORATION
300 Capitol Street
Suite 1600
Charleston, West Virginia 25301
April 13, 1995
Dear Stockholder:
On behalf of the Board of Directors, you are cordially
invited to attend the Annual Meeting of
Stockholders of Allegheny & Western Energy Corporation (the
"Company") to be held on Tuesday, May 16,
1995, at 10:30 a.m. Eastern Daylight Savings Time, at The
Charleston Marriott Hotel, 200 Lee Street East,
Charleston, West Virginia.
As described in the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement, at
the Annual Meeting you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan
of Merger, dated as of September 30, 1994 and amended as of
February 3, 1995 (the "Merger Agreement"),
pursuant to which the Company has agreed to merge (the "Merger")
with a subsidiary of Energy Corporation
of America. Upon consummation of the Merger, holders of the
Company's common stock will be entitled to
receive $12.00 in cash, without interest, for each share held.
Consummation of the Merger is, however, subject
to certain conditions, including the approval and adoption of the
Merger Agreement by the Company's
stockholders, satisfactory regulatory review and certain other
customary conditions.
The Board of Directors of the Company has determined
that the Merger is fair to, and in the best
interests of, the Company and its stockholders and has approved
the Merger. The Board unanimously
recommends that you vote "FOR" the approval of the Merger
Agreement. Allen & Company Incorporated, the
Company's financial advisor in connection with the Merger, has
rendered a written opinion to the Company's
Board that, as of the date hereof, the consideration to be
received by the Company's stockholders in the Merger
is fair to such holders from a financial point of view.
At the Annual Meeting, you will also be asked to elect
seven (7) directors of the Company, each to
serve until the earlier of (a) the next Annual Meeting of
Stockholders (or until their successors are duly elected
or appointed and qualified) or (b) the effective time of the
Merger. The Board of Directors also unanimously
recommends that you vote "FOR" the election of the seven nominees
for director named in the Proxy Statement
and "FOR" a third proposal relating to other business.
In addition to the foregoing business to be acted upon
at the Annual Meeting, there will be a report
on the Company's operations and an opportunity for questions.
The accompanying Notice of Annual Meeting and Proxy
Statement describe the Merger in greater detail
and provide specific information concerning the Annual Meeting.
Also enclosed are copies of the Company's
Annual Report to Stockholders for the fiscal year ended June 30,
1994 and the Company's Quarterly Reports
for the quarter ended September 30, 1994 and the six months ended
December 31, 1994. Please read these
materials carefully.
It is very important that you be represented at the
Annual Meeting, even if you are not able to attend
in person. The affirmative vote of a majority of all of the
outstanding shares of common stock of the Company
is required to approve and adopt the Merger Agreement.
Consequently, a failure to vote will have the same
effect as a vote against the Merger Agreement. Accordingly,
please take time to consider and vote upon this
significant matter.
Please mark, sign and date each proxy card you receive
and return it promptly in the enclosed,
postage-paid envelope even if you plan to attend the Annual
Meeting in person. This will not prevent you from
voting in person at the Annual Meeting, but will assure that your
vote is counted if you are unable to attend.
Please do not send in your stock certificates at this time. If
you wish to attend the Annual Meeting, you will
need to present proof of your ownership of shares of the
Company's common stock. If you hold your shares
through a bank, broker or other nominee, such nominee can provide
you with evidence of ownership.
On behalf of the Board of Directors, we urge you to
vote for approval of the Merger Agreement. Your
continued support and interest in the Company are greatly
appreciated.
Sincerely,
John G. McMillian
Chairman, President and Chief
Executive Officer
ALLEGHENY & WESTERN ENERGY CORPORATION
300 Capitol Street
Suite 1600
Charleston, West Virginia 25301
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 16, 1995
Notice is hereby given that the Annual Meeting of
Stockholders (the "Annual Meeting") of Allegheny
& Western Energy Corporation (the "Company") will be held at The
Charleston Marriott Hotel, 200 Lee Street
East, Charleston, West Virginia, on Tuesday, May 16, 1995, at
10:30 a.m. Eastern Daylight Savings Time, for the
following purposes, which are more completely set forth in the
accompanying Proxy Statement:
1. to elect seven (7) directors, each to serve for a term
of approximately one year, until the earlier of (a) the next
Annual Meeting of Stockholders (or until their successors are
elected or appointed and qualified) or (b) the effective time
of the Merger described below;
2. to consider and vote upon a proposal to approve an
Agreement and Plan of Merger, dated as of September 30, 1994 and
amended as of February 3, 1995 (the "Merger Agreement"),
among the Company, Energy Corporation of America
("ECA"), a Colorado corporation, Eastern Systems Corporation
("ESC"), a West Virginia corporation and wholly owned
subsidiary of ECA, and Appalachian Eastern Systems,
Inc. ("AESI"), a West Virginia corporation and wholly owned
subsidiary of ESC, which is included in the accompanying Proxy
Statement as Appendix A; and
3. to consider and act on such other business as may
properly come before the Annual Meeting or any adjournment
thereof.
As more fully described in the Proxy Statement,
pursuant to the Merger Agreement, AESI will merge with and into
the Company, with the Company becoming a wholly owned subsidiary
of ESC, and each outstanding share of the Company's common stock
(other than shares of common stock held by ECA and its
subsidiaries or by any stockholder who perfects dissenters'
rights) will be converted
into $12.00 in cash without interest. The proxies named in the
accompanying proxy card may, at the direction of the Board of
Directors, vote to adjourn the Annual Meeting to another time or
place for the purpose of soliciting additional proxies necessary
for approval of the Merger Agreement or otherwise.
The record date for the Annual Meeting is the close of
business on April 10, 1995, and only stockholders of record at
the close of business on said date will be entitled to notice of
and to vote at
the Annual Meeting and any adjournment or postponement thereof.
The transfer books will not be closed. A list of stockholders
entitled to vote at the Annual Meeting will be available for
inspection thereat.
Stockholders voting in person at the Annual Meeting
must provide evidence of ownership of the Company's common stock
and notify the Secretary of the Annual Meeting prior to the vote.
Any stockholder entitled to vote at the Annual Meeting
shall have the right to dissent from the vote on the Merger
Agreement and to receive payment of the fair value of the shares
of the Company's
common stock held of record by such stockholder, upon compliance
with Section 31-1-123 of the West Virginia Corporation Act, the
full text of which is included as Appendix C to the Proxy
Statement, which is attached to this Notice of Annual Meeting.
For a summary of the dissenters' rights of the Company's
stockholders, see "The Merger Agreement -- Dissenters' Rights" in
the Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
Richard L. Grant, Secretary
April 13, 1995
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF
COMMON STOCK IS REQUIRED TO APPROVE THE MERGER AGREEMENT. IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING
REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO BE
PRESENT, YOU ARE URGED TO COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE
PROVIDED AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY
GIVEN MAY BE REVOKED BY YOU AT ANY TIME PRIOR TO THE EXERCISE
THEREOF IN THE MANNER DESCRIBED IN THE PROXY STATEMENT.
TABLE OF CONTENTS
Page
INTRODUCTION . . . 1
SUMMARY. . . . . . . . . . . . 3
The Annual Meeting . . . . . . . . 3
Required Vote. . . . . . . . . . . 3
Execution of Proxy Cards and Revocability of Proxies 3
The Merger . . . . . . . . . . . . . . . . . . . . 4
Background and Reasons for the Merger. . . . . . . . 5
Opinion of Financial Advisor to the Company 6
Conflicts of Interest. . . . . . . . . . . . . . . 6
Certain Federal Income Tax Consequences. . . . . . . 6
Dissenters' Rights . . . . . . . . . . . . . . . . . 6
Market Prices. . . . . . . . . . . . . . . . . . . . 7
SELECTED FINANCIAL DATA OF ALLEGHENY & WESTERN ENERGY
CORPORATION. . . . . . . . . . . . . . . . . . . . . 8
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF. . . 9
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . 11
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD . 12
DIRECTOR COMPENSATION. . . . . . . . . . . . . . . . 13
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . 13
Summary Compensation Table . . . . . . . . . . . . . 13
Options/SAR Grants in Last Fiscal Year . . . . . . . 14
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Value. . . . . . . . . . . . 14
Stock Option Plan. . . . . . . . . . . . . . . . . . 15
Retirement Income Plan . . . . . . . . . . . . . . . 15
Pension Plan Table . . . . . . . . . . . . . . . . . 15
Key Executives' Supplemental Retirement Benefit Plan 15
Employment Contracts . . . . . . . . . . . . . . . . 16
Letter Agreements. . . . . . . . . . . . . . . . . . 16
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . 17
COMPENSATION COMMITTEE REPORT. . . . . . . . . . . . 17
Overview . . . . . . . . . . . . . . . . . . . . . . 17
Base Salaries. . . . . . . . . . . . . . . . . . . . 17
Annual Bonus . . . . . . . . . . . . . . . . . . . . 18
Stock Options . . . . . . . . . . . . . . . . . . . 18
Supplemental Retirement Benefits . . . . . . . . . . 18
Chief Executive Officer's Compensation . . . . . . . 18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 19
PERFORMANCE GRAPH . . . . . . . . . . . . . . . . . 19
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . 20
Parties to the Merger. . . . . . . . . . . . . . . . 20
Security Ownership of Management of the Company and ECA 20
The Merger . . . . . . . . . . . . . . . . . . . . . 20
Background of the Merger . . . . . . . . . . . . . . 21
Reasons for the Merger . . . . . . . . . . . . . . . 22
Opinion of Financial Advisor to the Company. . . . . 22
Effective Time . . . . . . . . . . . . . . . . . . . 25
Payment Procedures and Paying Agent. . . . . . . . . 25
Representations and Warranties . . . . . . . . . . . 26
Conditions to Consummation of the Merger . . . . . . 26
Amendment and Waiver; Termination. . . . . . . . . . 26
Regulatory Review. . . . . . . . . . . . . . . . . . 27
Conduct of Business Pending the Merger . . . . . . . 27
No Solicitation; Higher Proposals . . . . . . . . . 28
Conflicts of Interest. . . . . . . . . . . . . . . . 28
Dissenters' Rights . . . . . . . . . . . . . . . . . 29
Accounting Treatment . . . . . . . . . . . . . . . . 31
Certain Federal Income Tax Consequences. . . . . . . 31
PROPOSALS FOR STOCKHOLDER APPROVAL . . . . . . . . . 31
Proposal No. 1 - Election of Directors . . . . . . . 31
Proposal No. 2 - Approval of the Merger Agreement. . 32
Proposal No. 3 - Other Business. . . . . . . . . . . 32
GENERAL . . . . . . . . . . . . . . . . . . . . . . 32
Independent Public Accountants . . . . . . . . . . . 32
Stockholder Proposals. . . . . . . . . . . . . . . . 32
Other . . . . . . . . . . . . . . . . . . . . . . . 32
Expenses and Procedures . . . . . . . . . . . . . . 32
APPENDICES:
APPENDIX A - Agreement and Plan of Merger (including the
First Amendment thereto)
APPENDIX B - Fairness Opinion of Allen & Company Incorporated
APPENDIX C - Section 31-1-123 of the West Virginia Corporation
Act
ALLEGHENY & WESTERN ENERGY CORPORATION
300 Capitol Street
Suite 1600
Charleston, West Virginia 25301
April 13, 1995
PROXY STATEMENT
INTRODUCTION
To the Stockholders:
This statement is furnished to stockholders of
Allegheny & Western Energy Corporation (the "Company") in
connection with the solicitation on behalf of the Board of
Directors of the Company
of proxies for the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Tuesday, May 16, 1995, at 10:30 a.m.
Eastern Daylight Savings Time, at The Charleston Marriott Hotel,
200 Lee
Street East, Charleston, West Virginia. The enclosed proxy card,
the accompanying Notice of Annual Meeting of Stockholders and
this Proxy Statement are being first transmitted to stockholders
of the Company on or about April 13, 1995.
The purposes of the Annual Meeting are (i) to elect
seven (7) directors, each to serve for a term of approximately
one year, until the earlier of (a) the next Annual Meeting of
Stockholders (or
until their successors are elected or appointed and qualified) or
(b) the effective time of the Merger described below; (ii) to
consider and vote upon a proposal to approve an Agreement and
Plan of Merger,
dated as of September 30, 1994 and amended as of February 3, 1995
(the "Merger Agreement"), by and among Energy Corporation of
America, a Colorado corporation ("ECA"), Eastern Systems
Corporation, a West Virginia corporation and wholly owned
subsidiary of ECA ("ESC"), Appalachian Eastern Systems, Inc., a
West Virginia corporation and wholly owned subsidiary of ESC
("AESI"), and the Company,
a copy of which is included in this Proxy Statement as Appendix
A; and (iii) to consider and act on such other business as may
properly come before the Annual Meeting or any adjournment
thereof. As
more fully described herein under "The Merger Agreement -- The
Merger," pursuant to the Merger Agreement, AESI will merge (the
"Merger") with and into the Company, with the Company becoming
a wholly owned subsidiary of ESC, and each outstanding share of
common stock, par value $0.01 per share, of the Company (the
"Common Stock") (other than shares of Common Stock held by ECA
and its subsidiaries or by any stockholder who perfects
dissenters' rights) will be converted into $12.00 in cash without
interest.
The Board of Directors of the Company unanimously
recommends that stockholders vote "FOR" election of the seven
nominees named herein, "FOR" approval of the Merger Agreement and
"FOR" approval of the proposal relating to other business. The
Board considered the matters discussed herein under "The Merger
Agreement -- Conflicts of Interest" before making such
recommendation.
Only stockholders of record at the close of business on
April 10, 1995 (the "Record Date"), will be entitled to vote at
the Annual Meeting. At the close of business on the Record Date,
there were
7,479,360 shares of Common Stock outstanding and entitled to vote
at the Annual Meeting. Each share of Common Stock is entitled to
one vote. The holders of a majority of the Common Stock issued
and outstanding and entitled to vote at the Annual Meeting,
present in person or represented by proxy, shall constitute a
quorum for the transaction of business thereat.
The affirmative vote of a majority of all shares of
Common Stock of the Company outstanding on the record date is
required for approval of the Merger Agreement. Consequently, the
failure to
return a properly executed proxy card or to vote in person at the
Annual Meeting will have the same effect as a vote against the
Merger Agreement. Similarly, "broker non-votes" (referring to
where a broker
or other nominee physically indicates on the proxy that, because
it has not received instructions from beneficial owners, it does
not have discretionary authority as to certain shares of Common
Stock to vote
on the Merger Agreement) will have the same effect as a vote
against the Merger Agreement. The affirmative vote of a majority
of the shares of Common Stock voted at the Annual Meeting is
required for the election of directors and for the approval of
other business presented at the Annual Meeting. The proxies
named in the enclosed proxy card may, at the direction of the
Board of Directors, vote
to adjourn the Annual Meeting to another time or place for the
purpose of soliciting additional proxies necessary for approval
of the Merger or otherwise.
If the accompanying proxy card is executed and
returned, it will be voted at the Annual Meeting (whether or not
instructions are specified thereon). If instructions are
specified thereon, such proxy
will be voted in accordance therewith, and if no specifications
are made, such proxy will be voted for the election of the seven
nominees for director named herein, for approval of the Merger
Agreement
and for approval of the other business presented at the Annual
Meeting. However, a proxy may be revoked at any time before it
is voted, by submission of a written revocation to the Company,
by the return
of a new proxy to the Company or by the stockholder's personal
vote at the Annual Meeting. A written revocation or new proxy
may be sent to the Company's address, 300 Capitol Street, Suite
1600, Charleston, West Virginia 25301, Attention: Secretary, and
must be received prior to the Annual Meeting. No special form of
revocation is required. The presence of a stockholder at the
Annual Meeting does not automatically revoke his proxy.
Stockholders voting in
person at the Annual Meeting must present proof of ownership of
the Company's shares and notify the Secretary of the Annual
Meeting prior to the vote.
Stockholders are requested to promptly sign and date
the accompanying proxy card and return it to the Company in the
enclosed postage-paid, addressed envelope, even if they plan to
attend the Annual Meeting. Failure to return a properly executed
proxy card or to vote at the Annual Meeting will have the same
effect as a vote against the Merger Agreement.
Stockholders should not forward any stock certificates
with their proxy cards.
SUMMARY
The following is a summary of certain information
contained elsewhere in this Proxy Statement. Reference is made
to, and this summary is qualified in its entirety by, the more
detailed information
appearing in this Proxy Statement or in the accompanying
appendices. STOCKHOLDERS ARE URGED TO READ THIS PROXY STATEMENT
AND THE APPENDICES HERETO IN THEIR ENTIRETY.
The Annual Meeting
The Board of Directors of the Company is soliciting
proxies to be voted at the Annual Meeting to be held at The
Charleston Marriott Hotel, 200 Lee Street East, Charleston, West
Virginia 25301, on Tuesday, May 16, 1995, at 10:30 a.m. Eastern
Daylight Savings Time. Only stockholders of record at the close
of business on the Record Date, April 10, 1995, will be entitled
to vote at the Meeting.
The enclosed proxy card, the accompanying Notice of Annual
Meeting of Stockholders and this Proxy Statement are being first
transmitted to stockholders of the Company on or about April 13,
1995.
At the Annual Meeting and any adjournments thereof, the
stockholders will be asked (i) to elect the seven (7) nominees
named under "Election of Directors" herein as directors of the
Company, each to serve for a term of approximately one year,
until the earlier of (a) the next Annual Meeting of Stockholders
(or until their successors are elected or appointed and
qualified) or (b) the effective
time of the Merger; (ii) to consider and vote upon a proposal to
approve the Merger Agreement, described herein under "The Merger
Agreement"; and (iii) to consider and act on such other business
as may properly come before the Annual Meeting.
The Board of Directors of the Company unanimously
recommends that stockholders vote "FOR" election of the seven
nominees named herein, "FOR" approval of the Merger Agreement and
"FOR" approval of the proposal relating to other business. The
Board considered the matters discussed under "The Merger
Agreement -- Conflicts of Interest" before making such
recommendation.
Required Vote
The affirmative vote of the holders of a majority of
all shares of Common Stock of the Company outstanding on the
record date is required for approval of the Merger Agreement.
Consequently,
the failure to return a properly executed proxy card, to vote in
person at the Annual Meeting or, with respect to shares held of
record by a broker or other nominee, to provide such broker or
nominee with voting instructions, resulting in a broker non-vote,
will have the same effect as votes against the Merger Agreement.
The affirmative vote of a majority of the shares of Common Stock
voted at the Annual Meeting is required for the election of
directors and for the approval of other business presented at the
Meeting.
Execution of Proxy Cards and Revocability of Proxies
Proxy cards executed and returned by stockholders will
be voted at the Annual Meeting in accordance with the
specifications made thereon, or if no specifications are made,
will be voted for the
election of the seven nominees for director named herein under
"Election of Directors," for approval of the Merger Agreement and
for approval of the other business presented at the Annual
Meeting.
The proxies named in the accompanying proxy card may, at the
direction of the Board of Directors, vote to adjourn the Annual
Meeting to another time or place for the purpose of soliciting
additional proxies necessary for approval of the Merger or
otherwise.
Stockholders are requested to promptly sign, date and
return the accompanying proxy card to the Company in the enclosed
postage-paid, addressed envelope, even if they plan to attend the
Annual Meeting. Failure to return a properly executed proxy card
or to vote at the Annual Meeting will have the same effect as a
vote against the Merger Agreement.
A proxy may be revoked at any time before it is voted,
by submission of a written revocation to the Company, by the
return of a new proxy to the Company or by the stockholder's
personal vote at the Annual Meeting. A written revocation or new
proxy may be sent to the Company's address, 300 Capitol Street,
Suite 1600, Charleston, West Virginia 25301, Attention:
Secretary, and must be received
prior to the Annual Meeting. No special form of revocation is
required. The presence of a stockholder at the Annual Meeting
does not automatically revoke his proxy. Stockholders voting in
person at the Annual Meeting must present proof of ownership of
the Company's Common Stock and notify the Secretary of the Annual
Meeting prior to the vote.
STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES
WITH THEIR PROXY CARDS. See "The Merger Agreement -- Payment
Procedures and Paying Agent."
The Merger
Parties to the Merger:
(i) The Company. Allegheny and
Western Energy Corporation, a West Virginia corporation, is a
diversified natural gas company and owns Mountaineer Gas Company
("Mountaineer"),
the largest gas distribution utility in West Virginia. The
address of the Company's principal executive offices is 300
Capitol Street, Suite 1600, Charleston, West Virginia 25301, and
its telephone number is (304) 343-4567.
(ii) ECA. Energy Corporation of
America, a Colorado corporation, is a privately held diversified
oil and gas company. ECA's principal executive offices are
located at 4643 South Ulster Street, Suite 1100, Denver, Colorado
80237, and its telephone number is (303) 694-2667. ECA's direct
and indirect subsidiaries own oil and gas properties located
primarily in the Appalachian area.
(iii) ESC. Eastern Systems Corporation,
a West Virginia corporation, is a wholly owned subsidiary of ECA
and was created for the purpose of effecting the Merger. ESC's
principal place of business is 501 56th Street, Charleston, West
Virginia 25304, and its telephone number is (304) 925-6100.
(iv) AESI. Appalachian Eastern
Systems, Inc., a West Virginia corporation, is a wholly owned
subsidiary of ESC and was created for the purpose of effecting
the Merger. AESI's principal place of business is 501 56th
Street, Charleston, West Virginia 25304, and its telephone number
is (304) 925-6100.
See "The Merger Agreement -- Parties to the Merger."
General. The Merger Agreement contemplates that ECA
will acquire the Company through the merger of AESI with and into
the Company, with the Company being the surviving corporation and
becoming an indirect wholly owned subsidiary of ECA. The Merger
Agreement provides that each outstanding share of the Company's
Common Stock (other than shares of Common Stock held by ECA
or its subsidiaries or by any stockholder who perfects
dissenters' rights) will be converted into the right to receive
$12.00 in cash, without interest (the "Merger Consideration").
The amount of the Merger
Consideration was determined through arm's length negotiations
between ECA and the Company. See "The Merger Agreement --
Background of the Merger", "-- Reasons for the Merger" and "--
Opinion of Financial Advisor to the Company."
Effective Time. The "Effective Time" of the Merger
will be the date on which articles of merger are filed and a
certificate of merger is issued by the Secretary of State of the
State of West Virginia
in accordance with the West Virginia Corporation Act (the
"WVCA"). It is anticipated that such filings will be made as
promptly as practicable after receipt of all necessary corporate
and regulatory approvals
and the expiration or termination of all applicable waiting
periods and after satisfaction or waiver of all conditions to the
consummation of the Merger Agreement.
Conditions; Regulatory Review. Consummation of the
Merger and payment to stockholders of the Merger Consideration
are subject to various conditions, including receipt of the
stockholder approval
solicited hereby, satisfactory regulatory review and satisfaction
of other customary closing conditions. See "The Merger Agreement
- -- Conditions to Consummation of the Merger" and "-- Regulatory
Review."
On November 17, 1994, ECA caused the filing of a
petition requesting the West Virginia Public Service Commission
(the "WVPSC") to approve the Merger. The WVPSC has scheduled a
public hearing on April 25, 1995. See "The Merger
Agreement--Regulatory Review."
Consummation of the Merger and payment to stockholders
of the Merger Consideration were subject to expiration or
termination of the applicable waiting period under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"). Such waiting
period was terminated on April 4, 1995. See "The Merger
Agreement -- Regulatory Review."
It is not contemplated that any additional regulatory
review will be required for consummation of the Merger. If such
review is required, there can be no assurance that satisfactory
regulatory review
will occur, and there can be no assurance as to the date any such
review will be completed.
Termination of the Merger Agreement. The Merger
Agreement may be terminated, and the Merger abandoned, prior to
the Effective Time, either before or after its approval by the
stockholders
of the Company, (i) by the mutual consent of the Company and ECA,
(ii) by either of them individually under the following
circumstances: (a) if the Merger has not become effective by June
30, 1995,
although this deadline may be unilaterally extended by ECA during
the pendency of a Higher Proposal, as described herein under "The
Merger Agreement -- No Solicitation; Higher Proposals," (b) in
the event of a material breach by the other party of any
representation, warranty, covenant or agreement contained in the
Merger Agreement which breach cannot be cured, or is not cured
within a reasonable
period following demand therefor, or (c) if the approval of the
Company's stockholders shall not have been obtained in a vote
taken at a meeting duly convened therefor, (iii) by ECA, if the
Company shall
have entered into an agreement with respect to a Higher Proposal
and such agreement shall be in effect at the time of termination,
(iv) by ECA, if the Board shall have withdrawn, modified in a
manner adverse to ECA or refused to reaffirm its recommendation
that the Company's stockholders approve the Merger Agreement, or
(v) by the Company, if a Higher Proposal shall have been
consummated.
See "The Merger Agreement -- Amendment and Waiver; Termination."
Background and Reasons for the Merger
The Company's Board of Directors began to evaluate
alternative strategic courses of action for the Company,
including a possible sale of Mountaineer or the Company, in late
calendar year 1993.
During calendar year 1994, the Company held confidential
discussions with several potential acquirors, including ECA. In
September 1994, ECA offered to acquire the Company at a cash
price of $12.00
per share through a merger of the Company with and into a wholly
owned subsidiary of ECA. The Company and ECA reached an
agreement in principle on September 29, 1994, and the Merger
Agreement
was signed by the Company, ECA and ESC on September 30, 1994.
Subsequently, the Company, ECA, ESC and AESI signed a First
Amendment to the Merger Agreement, amending the Merger Agreement
to provide for AESI to merge with and into the Company, with the
Company being the surviving corporation and becoming a wholly
owned subsidiary of ESC. See "The Merger Agreement -- Background
of the Merger."
The Board of Directors believes that the Merger, at a
Merger Consideration representing a 39.13% premium over the
closing price of the Company's Common Stock on the day before the
Merger
was announced, offers significant financial benefits to, and is
in the best interests of, the Company's stockholders. See "The
Merger Agreement -- Background of the Merger", "-- Reasons for
the Merger" and "-- Conflicts of Interest."
The Board unanimously recommends that the Company's
stockholders vote "FOR" the approval of the Merger Agreement.
The Board considered the matters discussed herein under "The
Merger Agreement -- Conflicts of Interest" before making such
recommendation.
Opinion of Financial Advisor to the Company
Allen & Company Incorporated ("Allen & Company"), the
Company's financial advisor in connection with the Merger, has
rendered a written opinion to the Company's Board that, as of the
date
hereof, the Merger Consideration to be received by the Company's
stockholders in the Merger is fair to the stockholders from a
financial point of view. The full text of such opinion dated as
of April 13,
1995 appears as Appendix B to this Proxy Statement. Stockholders
are urged to read such opinion in its entirety for a description
of the procedures followed, assumptions made, matters considered
and qualifications on the review undertaken by Allen & Company in
connection therewith. See "The Merger Agreement -- Opinion of
Financial Advisor to the Company."
Conflicts of Interest
Certain members of the Company's management and its
Board of Directors may be deemed to have interests in the Merger
in addition to their interests, if any, as stockholders of the
Company
generally. These interests include certain rights to
indemnification, payments for outstanding stock options provided
for in the Merger Agreement and payments under employment
agreements, letter
agreements and the Company's SERP (as defined herein). See "The
Merger Agreement -- Conflicts of Interest."
Allen & Company, a principal stockholder of the
Company, is acting as financial advisor to the Company in
connection with the Merger. Additionally, Harold M. Wit, a
director of the Company,
is a member of the Executive Committee of Allen & Company. See
"The Merger Agreement -- Opinion of Financial Advisor to the
Company" and "-- Conflicts of Interest."
Certain Federal Income Tax Consequences
The receipt of the Merger Consideration in cash by a
stockholder pursuant to the Merger Agreement will be a taxable
transaction to such stockholder for federal income tax purposes
and may also
be a taxable transaction under applicable state, local or other
laws. Each stockholder is urged to consult his or her own tax
advisor as to the particular tax consequences to such
stockholder. See "The Merger Agreement -- Certain Federal Income
Tax Consequences."
Dissenters' Rights
Under the WVCA, a stockholder may dissent from the
Merger and receive payment of the "fair value" of such holder's
Common Stock in cash upon consummation of the Merger by following
certain
procedures set forth in Section 31-1-123 of the WVCA, the text of
which is attached as Appendix C to this Proxy Statement. Any
stockholder wishing to dissent from the Merger and obtain cash
payment
of the "fair value" of his or her Common Stock must: (i) deliver,
prior to or at the Annual Meeting, a written objection to the
Merger; (ii) not vote his or her shares of Common Stock in favor
of the Merger;
and (iii) follow the other procedures set forth in the WVCA as
more fully described in "The Merger Agreement -- Dissenters'
Rights" and Appendix C hereto. Failure to follow such procedures
may result
in a loss of dissenters' rights. Any stockholder returning a
blank executed proxy card will be deemed to have voted "FOR" the
Merger Agreement, thereby waiving any such dissenters' rights.
For a more
complete description of the procedures to be followed by a
stockholder who desires to perfect his or her dissenters' rights,
see "The Merger Agreement -- Dissenters' Rights."
The provisions of the WVCA regarding dissenters' rights
are complex and involve specific procedures, including those
described under "The Merger Agreement -- Dissenters' Rights,"
which must
be followed in order for a stockholder to perfect such rights.
Any deviation from such procedures may result in the forfeiture
of dissenters' rights. Accordingly, stockholders wishing to
avail themselves
of dissenters' rights under the WVCA are urged to read carefully
the discussion under "The Merger Agreement -- Dissenters' Rights"
and Appendix C to this Proxy Statement and should consult with
their own legal advisors prior to the Annual Meeting.
Market Prices
The Common Stock is traded on the National Association
of Securities Dealers, Inc. Automated Quotation ("NASDAQ")
National Market System under the symbol ALGH. On September 28,
1994, the day prior to the announcement by the Company that it
had reached an agreement in principle to merge with a wholly
owned subsidiary of ECA at a Merger Consideration of $12.00 in
cash per share,
the high and low reported sale prices for the Company's Common
Stock were $8-3/4 and $8-5/8, respectively (closing at $8-5/8).
The following table presents, for the periods indicated, the per
share high
and low sale prices for the Common Stock, as reported on the
NASDAQ National Market System. The Company did not pay any
dividends during such period. As of February 2, 1995 there were
approximately 1,600 holders of record of Common Stock.
Allegheny & Western Energy Corporation
High Low
Calendar Period
1992:
First Quarter $6-1/2 $4-1/4
Second Quarter 5-3/4 4-3/8
Third Quarter 6-5/8 5-1/8
Fourth Quarter 7-1/8 6-1/4
1993:
First Quarter 8-21/32 6-1/2
Second Quarter 9-3/4 7-3/4
Third Quarter 10-3/4 7-5/8
Fourth Quarter 8-5/8 6-3/8
1994:
First Quarter 8-7/8 6-5/8
Second Quarter 9-1/8 7-1/4
Third Quarter 11-1/8 7-7/8
Fourth Quarter 11 10-1/4
1995:
First Quarter 11-1/2 11-1/8
SELECTED FINANCIAL DATA OF
ALLEGHENY & WESTERN ENERGY CORPORATION
Allegheny & Western Energy Corporation and Subsidiaries
Fiscal Year Ended June 30,
INCOME STATEMENT DATA 1994 1993 1992 1991 1990
Total revenues $204,475,534 $185,534,169 $182,255,636 $187,454,769 $188,360,509
Total costs and expenses 195,168,095 180,550,254 178,384,872 192,634,343 187,553,186
Income (loss) before taxes on
income and cumulative
effect of change in
accounting principle 9,307,439 4,983,915 3,870,764 (5,179,574) 807,323
Provision (benefit) for
income taxes 1,867,859 1,237,933 196,296 (2,651,138) (2,176,781)
Income (loss) before
cumulative effect of
change in accounting principle 7,439,580 3,745,982 3,674,468 (2,528,436) 2,984,104
Cumulative effect prior to
July 1, 1993
of change in method of
accounting for income taxes 1,562,156 --- --- --- ---
Net income (loss) $ 9,001,736 $ 3,745,982 $3,674,468 $ (2,528,436) $2,984,104
Per share:
Income (loss) before
cumulative effect
of change in
accounting principle $ .97 $ .47 $ .45 $ (.31) $ .37
Cumulative effect prior
to July 1, 1993 of change
in method of accounting
for income taxes .20 --- --- --- ---
Net income (loss) $ 1.17 $ .47 $ .45 $ (.31) $ .37
Cash dividends per share $ --- $ --- $ --- $ --- $ ---
Weighted average number
of common shares outstanding 7,673,268 8,013,970 8,083,188 8,083,188 8,083,188
BALANCE SHEET DATA June 30,1994 June 30, 1993 June 30, 1992 June 30, 1991 June 30, 1990
Total assets $216,609,128 $195,680,299 $197,247,258 $180,383,633 $190,725,728
Long-term debt, less
current maturities $ 25,680,000 $ 32,430,000 $ 39,180,000 $ 45,930,000 $ 49,104,636
Stockholders' equity $101,659,969 $ 96,042,741 $ 94,010,900 $ 90,336,432 $ 92,864,868
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth certain information regarding the
Common Stock owned on February 14, 1995, by (i) each person or
"group," as such term is defined in Section 13(d)(3) of the
Securities
Exchange Act of 1934, as amended (the "Exchange Act"), who is
known by the Company to own beneficially more than 5% of the
Common Stock, (ii) each director of the Company and certain
executive
officers of the Company named under "Executive Compensation,"
below, and (iii) all directors and executive officers of the
Company as a group. Unless otherwise indicated, beneficial
ownership disclosed
consists of sole voting and sole investment power.
Amount and Nature
Name of of Beneficial
Beneficial Owner Ownership (1) Percent of Class (2)
The Guardian Life Insurance
Company of America (3)
201 Park Avenue South
New York, New York 10003 806,900 10.8%
Allen & Company Incorporated (4)
711 Fifth Avenue
New York, New York 10022 1,504,850 20.12%
FMR Corp. (5)
82 Devonshire Street
Boston, Massachusetts 02109 632,300 8.5%
John G. McMillian (6)
Allegheny & Western
Energy Corporation
300 Capitol Street, Suite 1600
Charleston, WV 25301 1,026,000 12.1%
Michael S. Berman 3,000 (7)
Michael S. Fletcher (8) 17,800 (7)
Richard L. Grant, Sr. (9) 27,600 (7)
Sidney S. Lindley 10,000 (7)
Rush Moody, Jr. 200 (7)
W. Merwyn Pittman (10) 16,000 (7)
Henry E. Tauber (11) 2,000 (7)
Jack H. Vaughn (12) 4,650 (7)
Harold M. Wit (13) 102,111 1.4%
All officers and directors
as a group (11 persons) (14) 1,219,361 14.3%
(1) Each director and officer disclaims beneficial ownership of securities of the Company owned by any company of which such
person is a director or officer.
(2) Based on 7,479,360 shares outstanding as of January 12, 1995.
(3) According to Schedule 13G filed on February 13, 1991, with the Securities and Exchange Commission (the "Commission"), this
includes 260,500 shares owned by the Guardian Life Insurance Company of America and 546,400 shares owned by
its affiliates. According to the Schedule 13G, the Guardian Life Insurance Company of America and its affiliates have
shared power to dispose of and to vote 546,400 shares.
(4) Includes 20,000 shares owned by American Diversified Enterprises, Inc., 617,249 shares owned by members of the Allen
family, of whom certain members are directors, officers and shareholders of Allen & Company Incorporated, its parent
and American Diversified Enterprises, Inc., and 139,577 shares owned by other officers and directors of Allen & Company
Incorporated (including Mr. Wit), ownership of which is disclaimed by Allen & Company Incorporated in a Schedule
13D filed with the Commission on March 29, 1991, as amended on October 17, 1991.
(5) According to Schedule 13G filed with the Commission on February 14, 1995, FMR has sole power to dispose of 632,300 shares.
(6) Includes options to purchase 1,000,000 shares of Common Stock.
(7) Less than one percent (1%).
(8) Includes options to purchase 16,800 shares of Common Stock.
(9) Includes options to purchase 27,100 shares of Common Stock.
(10) Includes options to purchase 15,000 shares of Common Stock.
(11) Includes 2,000 shares owned as custodian for a minor child, as to which Mr. Tauber disclaims beneficial ownership.
(12) Includes 500 shares owned by Mr. Vaughn directly, 1,550 shares owned jointly with his wife, 700 shares owned by his wife
directly and 1,900 shares owned by his children. Mr. Vaughn disclaims beneficial ownership of the shares held by his wife
directly and his children.
(13) Includes 100,961 shares owned by Mr. Wit and 1,150 shares owned by his wife, as to which Mr. Wit disclaims beneficial
ownership. Does not include 728,024 shares held by Allen & Company Incorporated, of which Mr. Wit is a managing director.
(14) Includes options to purchase 1,068,900 shares of Common Stock.
ELECTION OF DIRECTORS
The terms of all directors expire at the Annual
Meeting. Seven directors, all of whom currently are serving as
directors, have been nominated for reelection by the
stockholders. If said seven
nominees are elected, their terms of office will expire at the
earlier of (a) the next Annual Meeting of Stockholders or (b) the
Effective Time.
The persons named in the accompanying form of proxy for
the Annual Meeting have advised the Company that it is their
intention, unless authorization to do so is withheld, to vote the
shares covered
by proxies in the form solicited for the election of the seven
nominees listed below.
Should any of the nominees for the office of director
decline or become unable to accept nomination or election, it is
intended that the persons named in the accompanying form of proxy
will vote
for the election of such other persons for such office as the
Board may recommend in place of such nominees. The Board is not
aware of any circumstances under which the proposed directors
would decline or become unable to serve.
Name and Principal Director
Occupation or Employment Age Since
John G. McMillian 68 1987
Mr. McMillian was elected Chairman
of the Board and has served as Chairman,
President and Chief Executive Officer of
the Company since July 1987.
Mr. McMillian owned and operated Burger Boat
Company, Inc., a yacht construction
and repair company, from 1986 to 1989 and served as Chairman and
Chief Executive Officer of Northwest Energy Corporation from 1973
until 1983. He was also a creator
and principal U.S. sponsor of the Trans-Alaska Natural Gas
Transportation System, a 4,800 mile pipeline that may someday
deliver Alaska's vast gas reserves to the lower 48 states. Prior
to that, he was
an independent oil man with operations in the United States and
Canada. Mr. McMillian is also a director of Sun Bank Miami, N.A.
and Marker International. He is the chairman of the Company's
Executive Committee.
Michael S. Berman 55 1981
Mr. Berman has been President of
The Duberstein Group, Inc.,
which provides government relations,
planning and counseling services, since August 1989. From 1981
to August 1989, Mr. Berman, an attorney,
was a partner in the law firm of Kirkpatrick & Lockhart,
Washington, D.C.
Sidney S. Lindley 67 1990
From 1981 to 1986, Mr. Lindley
served as the President and a
director of Energy Ventures, Inc.,
a public company engaged in the
exploration and production of oil and gas. From 1986 to 1988, he
managed
private investing activities. From 1988 to 1990, Mr. Lindley was
associated with a private investment banking firm, Strevig &
Associates. From December 1990 to March 1992, Mr. Lindley
served as President
of TEX-HEX Corp., a wholly owned subsidiary of the Company.
Prior to 1981, he was Chairman of the Board of Champion
Chemicals, Inc. He currently serves as a director of A&W
Exploration New
Zealand, Limited, a wholly owned subsidiary of the Company and is
engaged as a consultant to the Company. Mr. Lindley is a member
of the Compensation Committee.
Rush Moody, Jr. 64 1987
Mr. Moody is Managing Partner
of the law firm of Andrews &
Kurth, L.L.P., and is located
in its Washington, D.C. office.
He has practiced law privately
for more than fifteen years. Mr. Moody was formerly
a Commissioner of the Federal Power Commission, the predecessor
of the Federal Energy Regulatory Commission. Mr. Moody serves as
a member of the Company's Executive, Audit and Compensation
Committees.
Henry E. Tauber 53 1993
Mr. Tauber is President and
Chief Executive Officer of
Marker International and President
of Marker USA and has served in
these capacities for more than the past five years. Mr. Tauber
is also the Vice
President and a Council Member of the International Ski
Federation. Mr. Tauber is a member of the Company's Audit
Committee.
Jack H. Vaughn 74 1981
Mr. Vaughn is currently Chairman
of the Board of ECOTRUST, a
private conservation group with
projects in Alaska, Washington,
Oregon and Western Canada.
From 1988 to 1992, he served as the United
States government's senior consultant in natural resources
management for Central America. Prior to that, Mr. Vaughn had
been founding Chairman of Conservation International in
Washington, D.C.
Mr. Vaughn also is a director of IMRE Corporation. Mr. Vaughn is
the Chairman of the Company's Compensation Committee.
Harold M. Wit 66 1981
Mr. Wit serves as a Managing
Director and a member of the
Executive Committee of Allen
& Company Incorporated, an
investment banking firm of
which he has been an officer and director for more than
the past five years. Mr. Wit is also a director of Toys "R" Us,
Inc. He is the Chairman of the Company's Audit Committee and a
member of its Executive Committee.
Pursuant to Section 16(a) of the Exchange Act and the
rules issued thereunder, the Company's directors, executive
officers and beneficial owners of more than 10% of the Common
Stock are required
to file reports of ownership and changes in ownership of the
Company's Common Stock with the Commission and NASDAQ. Copies of
such reports are required to be furnished to the Company. Based
solely upon its review of the copies of such reports furnished to
it, the Company believes that during its fiscal year ended June
30, 1994, except for the late filing of one Form 4 covering one
transaction
by each of Messrs. Grant, Fletcher, Pittman and Vaughn, all
Section 16(a) filing requirements applicable to its directors,
executive officers and greater than 10% beneficial owners of
Common Stock were met.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board held four regular meetings during fiscal year
1994. Each director attended at least 75% of the total number of
meetings of the Board and the Board committees of which he was a
member in fiscal year 1994, with the exception of Mr. Moody.
The Board has established an Executive Committee, an
Audit Committee and a Compensation Committee.
The Executive Committee consists of Mr. McMillian,
Chairman, and Messrs. Moody and Wit. The Executive Committee has
all the powers of the Board when the Board is not in session,
except
as limited by statute. The Executive Committee meets between
regular meetings of the Board and acts on matters when it is
inconvenient for the full Board to convene. The Executive
Committee also
performs the functions of a nominating committee, since the Board
does not have a nominating committee as such. Suggestions for
director nominees should be sent to the Company, attention:
Chairman of the Executive Committee. The Executive Committee
had no formal meetings during fiscal year 1994.
The Audit Committee consists of Mr. Wit, Chairman, and
Messrs. Moody and Tauber. The Audit Committee defines the scope
of the audit, reviews the auditor's report and comments (whether
made as part of the auditing procedure or from time to time
during the year), reviews the Company's internal control systems
with management and the independent public accountants and
recommends
the selection and appointment of the Company's independent public
accountants. During fiscal year 1994, the Audit Committee met
once.
The Compensation Committee consists of Mr. Vaughn,
Chairman, and Messrs. Lindley and Moody. The Compensation
Committee makes recommendations with respect to compensation
packages for executive officers and the granting of stock options
and stock awards. During fiscal year 1994, the Compensation
Committee met twice.
DIRECTOR COMPENSATION
Each director receives a monthly retainer of $1,000, a
$1,000 fee for each meeting of the Board attended and
reimbursement for expenses incurred for serving as a director.
Each committee chairman
receives a monthly retainer of $100 and each committee member
receives $500 for each committee meeting attended.
Mr. Lindley served as a consultant to the Company
during fiscal year 1994 and is performing consulting services in
fiscal year 1995. Mr. Lindley's services include, but are not
limited to, review
and consultation with management regarding potential acquisition
candidates and assistance with the Company's investment in New
Zealand. The agreement between the Company and Mr. Lindley is
such
that Mr. Lindley will provide consulting services for a period of
three years through February 28, 1995 in return for compensation
of $7,500 per month.
EXECUTIVE COMPENSATION
The following table sets forth a summary of
compensation paid or awarded by the Company in the last three
fiscal years to the chief executive officer and those executive
officers, in all capacities in which they served, whose total
annual salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
Other Restricted
Annual Stock Options/ LTIP All Other
Name and Fiscal Salary Bonus Compensation Awards SARs Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
John G. McMillian, 1994 287,053 0 134,520 (1) 0 500,000 (2) 0 0
Chairman,President and 1993 287,053 0 184,076 (1) 0 0 0 0
Chief Executive Officer 1992 277,650 0 N/A 0 0 0 N/A
Richard L. Grant, 1994 240,898 150,000 7,361 (3) 0 12,100 (2) 0 0
Secretary of the 1993 221,109 35,000 8,823 (3) 0 0 0 0
Company and President 1992 197,419 15,000 N/A 0 0 0 N/A
of Mountaineer
Michael S. Fletcher, 1994 188,202 100,000 14,854 (3) 0 6,800 (2) 0 0
Senior Vice President, 1993 172,741 35,000 4,798 (3) 0 0 0 0
Chief Financial Officer 1992 154,233 10,000 N/A 0 0 0 N/A
and Secretary of Mountaineer
W. Merwyn Pittman, Vice 1994 141,932 100,000 10,783 (3) 0 15,000 0 0
President, Chief Financial
Officer and Treasurer
____________________
(1) Other Annual Compensation consists of tax reimbursements and perquisites and other benefits. Perquisites and other
benefits include personal financial consulting services ($55,780 and $101,730 in fiscal 1994 and 1993, respectively).
(2) During fiscal 1994, for the purpose of extending the expiration date of previously granted options from February 15, 1994
until February 13, 1999, the Board of Directors granted replacement options (each at an exercise price of $8.07, which was the
exercise price of such previously granted options) to Messrs. McMillian, Grant and Fletcher. Additionally, on September 27, 1994,
for the purpose of extending the expiration date of other previously granted options from February 20, 1995 until September 26,
1999, the Board of Directors granted 500,000, 15,000 and 10,000 replacement options to Messrs. McMillian, Grant and Fletcher,
respectively (each at an exercise price of $8.25, which was the exercise price of such previously granted options).
(3) Other Annual Compensation consists of tax reimbursements.
The following table sets forth certain information concerning
options/SARs granted during fiscal 1994 to the named executives:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Number Percent of
Value at Assumed Annual
Securities Options/SARs Rates of Stock Price Ap-
Underlying Granted to Exercise preciation for Option Term
Options/SARs Employees in Price Per Expiration
Name Granted Fiscal 1994 Share Date 5% 10%
John G. McMillian(1) 500,000 93.6% $8.07 2/13/99 $591,521 $1,803,099
Richard L. Grant(1) 12,100 2.3% $8.07 2/13/99 $ 20,090 $ 50,904
Michael S. Fletcher(1) 6,800 1.3% $8.07 2/13/99 $ 11,290 $ 28,607
W. Merwyn Pittman(2) 15,000 2.8% $7.50 2/13/99 $ 28,665 $ 62,772
____________________
(1) During fiscal 1994, the Board of Directors granted replacement options (at the same exercise price) to Messrs. McMillian,
Grant and Fletcher for the purpose of extending from February 15, 1994 to February 13, 1999 the expiration date of certain
options previously granted to such officers. Additionally, on September 27, 1994, for the purpose of extending the expiration date
of previously granted options from February 20, 1995 until September 26, 1999, the Board of Directors granted
500,000, 15,000 and 10,000 replacement options to Messrs. McMillian, Grant and Fletcher, respectively (each at an exercise price of
$8.25, which was the exercise price of such previously granted options), as well as an aggregate of 33,500 replacement
options to certain other officers not named herein. All such replacement options were exercisable from the date of grant.
(2) Options granted to Mr. Pittman were exercisable from the date of grant.
The following table summarizes options and SARs
exercised during fiscal year 1994 and presents the value of
unexercised options and SARs held by the named executive officers
as of the end of the fiscal year:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR (1)
AND FISCAL YEAR-END OPTION/SAR VALUES
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs (2) at Options/SARs (2) at
June 30, 1994 June 30, 1994 (3)
Name Exercisable Unexercisable Exercisable Unexercisable
John G. McMillian 1,000,000 --- $90,000 ---
Richard L. Grant 27,100 --- 2,178 ---
Michael S. Fletcher 16,800 --- 1,224 ---
W. Merwyn Pittman 15,000 --- 11,250 ---
____________________
(1) Since no options were exercised by the above-named executive officers in fiscal 1994, no shares were acquired or value realized
upon the exercise of options by such officers in the last fiscal year.
(2) The Company has not issued any SARs as of June 30, 1994.
(3) Market value of underlying securities at fiscal year-end market price of $8.25 per share minus the exercise price.
Stock Option Plan
The Company's 1987 Stock Option Plan (the "1987 Plan"),
as amended, provides that a combined total of 1,500,000 incentive
and non-qualified options to purchase shares of the Company's
Common
Stock may be granted to certain key employees by the Board of
Directors. Incentive options must be granted with an exercise
price equal to the fair market value of a share of Common Stock
on the date
of grant. Non-qualified options may be granted at prices
determined by the Board of Directors. Options granted expire
five years from date of grant and may include vesting provisions;
however, in the
event of a change in control of the Company (as defined in the
1987 Plan), options granted vest immediately. Replacement
options may be granted in substitution for outstanding options,
which may be
at a lower price (but, in the case of incentive stock options, at
a purchase price not less than the fair market value of the
shares subject to the replacement option at the time of
substitution and the replaced
outstanding options may be canceled). The 1987 Plan also
provides that employees may be granted stock appreciation rights
("SAR's") at the discretion of the Board of Directors. Upon the
exercise of
an SAR, payment will be made to the grantee in an amount equal to
the excess of the fair market value of a share of Common Stock on
the date of exercise over the fair market value of a share of
Common
Stock on the date the SAR was granted. Payment may be made in
shares of Common Stock, in cash or partly in cash and partly in
shares of Common Stock, as the Board of Directors shall
determine.
When an SAR is exercised, the related stock option is
surrendered; when a stock option is exercised, the related SAR,
if any, is surrendered. No SARs have been granted under the 1987
Plan.
Retirement Income Plan
The Company offers virtually all employees a
defined-benefit Retirement Income Plan. The Retirement Income
Plan provides retirement income for employees and, if elected,
for survivors. Such
retirement income is related to final average annual compensation
during the highest consecutive 60 months in the last 120 months
of employment, years of credited service and age at date of
retirement.
The following table reflects the estimated annual
pension benefits payable (assuming the Retirement Income Plan
will continue in its present form) upon retirement at age 65 to
covered employees
under the Retirement Income Plan based upon various levels of
compensation and years of service.
PENSION PLAN TABLE
Years of Credited Service
Remuneration 15 20 25 30 35
$300,000 $ 31,500 $ 42,000 $ 52,500 $ 62,900 $ 66,700
250,000 31,500 42,000 52,500 62,900 66,700
200,000 31,500 42,000 52,500 62,900 66,700
175,000 31,500 42,000 52,500 62,900 66,700
150,000 31,500 42,000 52,500 62,900 66,700
125,000 25,700 34,200 42,800 51,300 54,400
100,000 19,800 26,500 33,100 39,700 42,200
The remuneration amounts listed above are within 10% of
the covered compensation of the executive officers named in the
Summary Compensation Table. Benefits reflected above are
computed based upon a straight-life annuity and are subject to
Social Security deductions.
As of June 30, 1994, years of credited service under
the Retirement Income Plan for each named executive officer were
as follows: Mr. McMillian, seven; Mr. Grant, eight; Mr.
Fletcher, seven; Mr. Pittman, one.
Key Executives' Supplemental Retirement Benefit Plan
The Company's Board of Directors has established a Key
Executives' Supplemental Retirement Benefit Plan (the "SERP") to
assist the Company and its subsidiaries in attracting and
retaining key
executive employees. The SERP provides for the payment of
compensation for varying periods of time upon an executive
employee reaching a specified retirement age or becoming
permanently disabled
while employed by the Company or its subsidiaries. The Company
funds the SERP through the purchase of individual life insurance
contracts of which the Company is the sole beneficiary. The
specific
level of compensation will be dependent upon the performance of
the life insurance contracts. In addition, the Company will
provide benefits to the employee's beneficiary should the
employee die while
employed by the Company or its subsidiaries. Except in the case
of a change of control (as defined in the SERP), benefits to be
paid upon retirement will not vest unless the employee continues
to be
employed by the Company or its subsidiaries through the specified
retirement age. Should such a change in control of the Company
occur, the employee will become entitled to a portion of his
retirement
benefit for each year of participation in the SERP. This portion
is based upon the number of years of participation in the SERP in
proportion to the total number of years until retirement for such
employee
from the time he or she became a participant in the SERP. In the
case of Messrs. Grant, Fletcher and Pittman, in the event of a
change of control of the Company, each will be entitled to their
full retirement
benefits under the SERP (see discussion under "Employment
Contracts" below). The Board of Directors, in its sole
discretion, may terminate the SERP at any time, in whole or in
part. See "The Merger Agreement -- Conflicts of Interest."
Employment Contracts
The Company has entered into employment agreements
dated as of September 14, 1993 and expiring on December 31, 1995,
subject to automatic extensions (the "1993 Employment
Agreements")
with Messrs. Grant, Fletcher and Pittman. As of March 29, 1995,
the Company also entered into amended and restated employment
agreements (the "1995 Employment Agreements") with Messrs. Grant,
Fletcher and Pittman, which will become effective and replace the
1993 Employment Agreements upon consummation of the Merger and
which terminate, in the case of Messrs. Grant and Fletcher, on
March 31, 1997, and, in the case of Mr. Pittman, upon one month's
notice.
Pursuant to the 1993 Employment Agreements, Messrs.
Grant, Fletcher and Pittman are paid annual base salaries of
$224,800, $175,616 and $135,000, respectively, and receive annual
increases which
are based primarily upon the percentage increases given by
Mountaineer to other employees whose performance is judged to be
above average. Among other provisions, the 1993 Employment
Agreements
also provide that in the event of a change in control of the
Company or Mountaineer, such officers would be entitled to
receive lump-sum amounts (the "2.95 Payments") equal to 2.95
times the yearly average
of their respective salaries together with any bonuses and
additional compensation paid to them during the three preceding
years (or the annualized average of such compensation if employed
less than three
years). The 1993 Employment Agreements further provide that,
upon a change in control, such officers' participation in the
Company's SERP would become fully vested and either immediately
payable
or funded in an amount sufficient to pay the annual SERP benefit
over an extended period of time in the future (the "SERP
Payment"). Additionally, the 1993 Employment Agreements provide
that, upon
a change of control, the Company would, at any such officers'
request, purchase his principal residence at the higher of its
fair market value or cost basis. Lastly, under the 1993
Employment Agreements,
in the event any of such officers became subject to additional
taxes (including any excise or income tax and any interest or
penalties) because any compensation resulting from a change in
control is deemed
an "excess parachute payment" under Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company would
make further "gross-up payments" in the amounts necessary for the
officers to receive the after-tax compensation intended absent
such special taxes.
The 1995 Employment Agreements eliminate the 2.95
Payments, the SERP Payment and the Company's obligation to make
"gross-up payments" to the affected officers and instead provide
for the
officers to receive future monthly payments in such amounts, and
commencing on such dates, as would result in a present value just
below the amount which would constitute a "parachute payment"
under
Section 280G of the Code. Additionally, under the 1995
Employment Agreements, the Company will, at any such officer's
request, purchase his principal residence, in the case of Messrs.
Grant and Fletcher,
within a certain time period and at fair market value and, in the
case of Mr. Pittman, at a fixed purchase price equal to his basis
therein. The 1995 Employment Agreements contemplate that Messrs.
Grant
and Fletcher will remain employees of Mountaineer until March 31,
1997, while Mr. Pittman will remain an employee of the Company on
a month-to-month basis. See "The Merger Agreement -- Conflicts
of Interest."
Letter Agreements
In order to ensure stability of operations in the event
an offer to acquire the Company were ever made, the Company, by
letters dated September 21, 1994 to fourteen officers and key
employees
of the Company and Mountaineer (including the executive officers
named in the Summary Compensation Table above), agreed to provide
such officers and employees with varying packages of benefits in
the event of such an offer, provided, in each case, that such
officer or employee continued his or her employment with the
Company until a change of control became effective (or, if
earlier, until the Company
terminated such officer's or employee's employment in
contemplation of a change of control). These benefits include
payment of an amount up to such officer's or employee's previous
year's base salary and/or his or her assigned Company car. See
"The Merger Agreement -- Conflicts of Interest."
CERTAIN TRANSACTIONS
In accordance with the Company's employee relocation
policies, the Company made a noninterest-bearing bridge loan of
$65,000 to Mr. Pittman to facilitate his relocation to
Charleston, West Virginia,
in connection with his acceptance of the positions of Vice
President, Chief Financial Officer and Treasurer of the Company.
The bridge loan was repaid in full on September 21, 1993.
Additionally, the
Company purchased Mr. Pittman's former residence at its appraised
fair market value during fiscal 1994 in connection with his
acceptance of employment with the Company.
The law firm of Andrews & Kurth, L.L.P., of which Mr.
Moody is managing partner, performed legal services for the
Company during fiscal year 1994 and is performing legal services
in fiscal year
1995. The Company believes that the fees paid by the Company to
Andrews & Kurth, L.L.P., during fiscal year 1994 were at rates
similar to those charged by comparable firms unaffiliated with
the Company and that such fees did not exceed 5% of such firm's
gross revenues.
Mr. Wit is a Managing Director and a member of the
Executive Committee of Allen & Company. Allen & Company provided
the Company with financial advisory services relating to the
Merger
and other matters and with brokerage services relating to the
Company's stock repurchase program during fiscal year 1994 and is
performing financial advisory services in fiscal year 1995.
During fiscal
1994, Allen & Company provided certain financial advisory,
brokerage and investment banking services to the Company but did
not receive any fees for such services, except for brokerage fees
aggregating
approximately $20,000 in connection with the Company's stock
repurchase program. Such fees did not exceed 5% of Allen &
Company's gross revenues. Fees relating to the Merger will be
paid during
the fiscal year in which the Merger is consummated. See "The
Merger Agreement -- Opinion of Financial Advisor to the Company."
COMPENSATION COMMITTEE REPORT
In 1992, the Commission amended the proxy disclosure
requirements covering compensation of executive officers. These
requirements call for a format that includes a report by the
Compensation
Committee on the Company's policies for making executive
compensation decisions (including the factors and criteria on
which the chief executive officer's pay is based), a series of
tables covering annual
and long-term compensation, and a performance graph comparing the
Company's five-year cumulative total stockholder return with the
cumulative return of a broad equity market index and another
selected index.
Overview
The Compensation Committee is responsible for
establishing and reviewing the Company's executive compensation
policies and for recommending to the Board of Directors on an
annual basis the
compensation to be paid to the executive officers of the Company.
In addition, the Compensation Committee advises the Board of
Directors on the administration of the Company's 1987 Plan (for
key employees) and administers the SERP (for key executive
employees). The Compensation Committee consists of Messrs.
Vaughn (Chairman), Lindley and Moody. None of the foregoing were
employees
of the Company or eligible to participate in any of the
compensation programs under the Compensation Committee's purview.
The Company's executive compensation, stock option and
supplemental retirement programs are designed to attract and
retain high-caliber executives and other key employees through
compensation
and benefits which are competitive within its industry and to
motivate these individuals to enhance profitability and
stockholder value by making them stockholders in the Company.
Each year, the
Compensation Committee reviews the Company's performance and the
compensation, benefits and stock ownership of its executives and
other key employees and compares them to industry peer companies.
(The industry group index in the Performance Graph below
includes, but is not limited to, the companies used for
compensation analysis.) The Compensation Committee has access
to, but is not required
to seek, advice and counsel from independent third parties in the
performance of its review.
On the Compensation Committee's advice, the Company
may, on a case-by-case basis, enter into employment agreements
with individual executives.
Base Salaries
The base salaries of the Company's executive officers
are intended to be generally competitive with the base salaries
of officers holding comparable positions at industry peer
companies. Base salaries
are determined by evaluating the responsibilities of the position
held and the experience and capability of the individual. In
addition, consideration is given to both national and local
factors in the marketplace
for executive talent. The Compensation Committee reviews and
recommends adjustments to individual salaries annually, based on
an overall evaluation of the performance of the Company and of
each executive officer.
Annual Bonus
The Compensation Committee may recommend that the Board
of Directors award annual cash bonuses to the Company's executive
officers and key employees, based on both the Company's
performance and each individual's contribution thereto. It may
also consider factors such as the bonus levels paid to officers
holding comparable positions at industry peer companies and
national and local
factors in the executive marketplace. The Compensation Committee
does not set any specific performance targets and has broad
discretion in evaluating executive officers and determining their
compensation.
Individual contributions are determined subjectively, on a
case-by-case basis.
During fiscal year 1994, discretionary bonuses were
paid to Messrs. Grant, Fletcher and Pittman. In connection
therewith, the Compensation Committee took special notice of the
Company's recent
financial performance and improved competitive position and the
fact that the Company was engaged in several expansion projects
which provided the potential for long-term earnings growth and
increased stockholder value.
Stock Options
The Company believes that encouraging stock ownership
by its management further aligns the interests of management and
stockholders in increasing profitability and stockholder value.
Under
the Company's 1987 Plan, and upon the advice of the Compensation
Committee, the Board of Directors periodically may grant to the
Company's key employees non-qualified or incentive stock options,
with a purchase price no less than the price of the Company's
stock on the date of grant. In addition, key employees may be
granted SARs under the 1987 Plan. In recommending that stock
options or
SARs be granted, such Committee typically considers factors
similar to those considered for annual bonuses. However, stock
options and SARs may be granted throughout the year and are less
dependent
on variables such as the Company's cash position than are annual
bonuses. During fiscal 1994, the Board of Directors granted Mr.
Pittman 15,000 options and also granted to Messrs. McMillian,
Grant
and Fletcher an aggregate of 518,900 options expiring February
13, 1999 to replace options which expired on February 15, 1994.
During fiscal 1995, the Board of Directors also granted to
Messrs. McMillian,
Grant and Fletcher an aggregate of 525,000 options expiring
September 26, 1999 to replace options which had a February 20,
1995 expiration date. See the Option/SAR Grants in Last Fiscal
Year table under "Executive Compensation" above.
Supplemental Retirement Benefits
In December 1992, following a study of benefit plans at
industry peer group companies, the Compensation Committee
recommended and the Board of Directors approved adoption of the
Company's
SERP. The SERP provides retirement benefits to certain executives
who remain in the Company's employ until retirement age and is
intended to be competitive with similar plans benefitting
executive officers
and key employees at such other companies. In determining the
estimated amounts of supplemental retirement benefits awarded to
participants under the SERP, the Compensation Committee and Board
of Directors considered the amounts awarded to individuals
holding comparable positions at industry peer companies, the
Company's performance in recent years and each individual's
contribution thereto.
In the future, the Board of Directors may, at any time and in its
sole discretion, terminate or amend the SERP and the benefits
awarded thereunder, with respect to any participant who has not
already died, become disabled or retired at the time of such
termination or amendment.
Chief Executive Officer's Compensation
As indicated in the Summary Compensation Table, during
the fiscal year just ended, Mr. McMillian received a base salary
of $287,053, and other annual compensation (including tax
reimbursements
and perquisites and other benefits) of $134,520. Since 1989, by
informal arrangement between Mr. McMillian and the Company's
Board of Directors, the chief executive officer's salary has been
fixed (with
certain minor adjustments). During this period, it has not been
the Company's practice to award an annual performance bonus to
its chief executive officer.
SUBMITTED BY THE COMPENSATION COMMITTEE:
Jack Vaughn, Chairman
Sidney S. Lindley
Rush Moody, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company's Compensation Committee
consists of Messrs. Vaughn, Lindley and Moody. As noted under
"Director Compensation" above, Mr. Lindley served as a consultant
to the Company during fiscal year 1994 and is performing
consulting services in fiscal year 1995. Mr. Lindley's services
include, but are not limited to, review and consultation with
management of potential
acquisition candidates and assistance with the Company's
investment in New Zealand. The agreement between the Company and
Mr. Lindley is such that Mr. Lindley will provide consulting
services for
a period of three years through February 28, 1995 in return for
compensation of $7,500 per month.
As noted under "Certain Transactions" above, the law
firm of Andrews & Kurth, L.L.P., of which Mr. Moody is managing
partner, performed legal services for the Company during fiscal
year 1994
and is performing legal services in fiscal year 1995. The fees
received from the Company by Andrews & Kurth, L.L.P., during
fiscal year 1994 did not exceed 5% of such firm's gross revenues.
Mr. McMillian serves on the Compensation Committee of
Marker International. Mr. Tauber, a director of the Company, is
President and Chief Executive Officer of Marker International.
PERFORMANCE GRAPH
The following graph compares the cumulative total
stockholder return on the Company's Common Stock with the
cumulative total return of the stocks included in the NASDAQ
Stock Market Index
and a peer group index (including NORAM Energy Corp. (formerly
known as Arkla, Inc.), Bow Valley Energy, Inc., The Columbia Gas
System, Inc., Consolidated Natural Gas Co., Equitable Resources
Inc., Maxus Energy Corporation, Pacific Enterprises, Presidio Oil
Company, Wainoco Oil Corporation and Washington Energy Co.) over
the five-year period ending June 30, 1994. The peer group index
was weighted according to the companies market capitalization.
The graph assumes that $100 was invested in the Company's Common
Stock and in the stock of the companies in the NASDAQ Stock
Market
Index and the peer group index, respectively, at June 30, 1989
and that all dividends were reinvested in the quarter received.
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL RETURN
GRAPH GOES HERE
THE MERGER AGREEMENT
The following information, insofar as it relates to
matters contained in the Merger Agreement, is qualified in its
entirety by reference to the Merger Agreement, which is
incorporated herein by
reference and appears as Appendix A to this Proxy Statement.
Stockholders are urged to read the Merger Agreement in its
entirety.
Parties to the Merger
The Company. Allegheny & Western Energy Corporation, a
West Virginia corporation, is a diversified natural gas company
and owns Mountaineer Gas Company, the largest gas distribution
utility
in West Virginia. The Company's principal executive offices are
located at 300 Capitol Street, Suite 1600, Charleston, West
Virginia 25301 and its telephone number is (304) 343-4567. For
more information
on the Company, reference is made to the Company's Annual Report
to Stockholders for the year ended June 30, 1994 and Quarterly
Reports for the quarter ended September 30, 1994 and the six
months
ended December 31, 1994, which are being mailed to stockholders
together with this Proxy Statement.
ECA. Energy Corporation of America, a Colorado
corporation, is a privately held diversified oil and gas company.
ECA's principal executive offices are located at 4643 South
Ulster Street, Suite 1100, Denver, Colorado 80237, and its
telephone number is (303) 694-2667. ECA's direct and indirect
subsidiaries own oil and gas
properties located primarily in the Appalachian area. Prior to
the Merger, ECA will become a West Virginia corporation.
ESC. Eastern Systems Corporation, a West Virginia
corporation, is a wholly owned subsidiary of ECA and was created
for the purpose of effecting the Merger. ESC's principal place
of business
is 501 56th Street, Charleston, West Virginia 25304, and its
telephone number is (304) 925-6100.
AESI. Appalachian Eastern Systems, Inc., a West
Virginia corporation, is a wholly owned subsidiary of ESC and was
created for the purpose of effecting the Merger. AESI's
principal place of
business is 501 56th Street, Charleston, West Virginia 25304, and
its telephone number is (304) 925-6100.
Security Ownership of Management of the Company and ECA
As of the Record Date, the directors and executive
officers of the Company beneficially owned, as a group, 150,461
outstanding shares of Common Stock (exclusive of 1,068,900
options to purchase
Common Stock), representing approximately 2.0% of the
then-outstanding shares of Common Stock. Such directors and
executive officers of the Company have indicated to the Company
that they intend
to vote their issued and outstanding shares of Common Stock "FOR"
election of the seven nominees named under "Election of
Directors" above, "FOR" approval of the Merger Agreement and
"FOR" approval of the proposal relating to other business.
Allen & Company has advised the Company that, as of the
Record Date, Allen & Company and certain of its directors,
officers and affiliates (including Mr. Wit) owned an aggregate of
1,504,850 shares of Common Stock, representing approximately 20%
of the then-outstanding shares of Common Stock. Allen & Company
has advised the Company that it intends to vote its shares of
Common Stock,
and that it believes such directors, officers and affiliates
intend to vote their shares of Common Stock, "FOR" election of
the seven nominees named under "Election of Directors" above,
"FOR" approval
of the Merger Agreement and "FOR" approval of the proposal
relating to other business.
As of the Record Date, ECA beneficially owned 322,500
shares of Common Stock, representing approximately 4.3% of the
then-outstanding shares of Common Stock. ECA has indicated to
the Company that it plans to vote all such shares "FOR" election
of the seven nominees named under "Election of Directors" above,
"FOR" approval of the Merger Agreement and "FOR" approval of the
proposal relating to other business.
The Merger
The Merger Agreement contemplates that ECA will acquire
the Company through the merger of its indirect wholly owned
subsidiary, AESI, with and into the Company, with the Company
being
the surviving corporation (in such capacity, the "Surviving
Corporation") and becoming an indirect wholly owned subsidiary of
ECA. As a result of the Merger, each share of Common Stock
outstanding
immediately prior to the Effective Time, other than shares of
Common Stock as to which dissenters' rights have been duly
asserted and perfected in accordance with West Virginia law and
shares held by
ECA or its subsidiaries, will be converted into the right to
receive the Merger Consideration of $12.00 in cash, without
interest. The amount of the Merger Consideration was determined
through arm's
length negotiations between the Company and ECA. After the
Effective Time, stockholders of the Company will no longer have
an equity interest in the Company.
As of the Effective Time, each share of Common Stock
held as treasury stock by the Company or held by ECA or its
subsidiaries will be canceled and retired and will cease to
exist, and no exchange
or payment will be made with respect to such shares.
Background of the Merger
On October 29, 1993, the WVPSC issued an order relating
to Mountaineer's 1993 request for an increase in its base rates.
In such order, the WVPSC put Mountaineer on notice that, in its
next
base rate filing, any savings generated by Mountaineer's
participation in the Company's consolidated tax return would be
passed through to Mountaineer's ratepayers unless persuasive
legal or accounting
arguments were presented to convince the WVPSC to act otherwise.
The Company's management and Board of Directors believed that
these events could reduce Mountaineer's revenues and the
Company's
income. Consequently, in late calendar year 1993, the Company's
Board of Directors began to evaluate alternative strategic
courses of action for the Company, such as a restructuring, a
sale of all or a portion
of Mountaineer or the Company, or a strategic acquisition or
acquisitions. The Board of Directors determined that in light
of, among other things, regulatory constraints on the rate of
return the Company
could earn on a strategic acquisition, value for the Company's
stockholders would be maximized through the sale of Mountaineer
or the Company to a well-situated buyer.
In January 1994, the Company retained Allen & Company
to assist it in this process. During the first half of calendar
year 1994, the Company either contacted or received unsolicited
inquiries from,
and pursued confidential discussions with, several potential
acquirors, including ECA. ECA first contacted Allen & Company on
an unsolicited basis in April 1994 to discuss the possible
acquisition of Allen
& Company's holdings of the Common Stock. In early 1994, prior
to the May 11, 1994 execution of a confidentiality agreement
between the Company and ECA, ECA had acquired a position
constituting
4.3% of the Company's outstanding Common Stock through open
market purchases. Pursuant to such confidentiality agreement,
the Company subsequently provided ECA with certain confidential
information
concerning its business, operations and finances. From May 1994
through August 1994, the Company continued discussions with ECA
as well as other potential acquirors. Throughout the
negotiations with
ECA and the other potential acquirors (which negotiations ranged
from discussions limited to public information to substantial
production of information pursuant to confidentiality agreements
and discussions
concerning price), Allen & Company provided the Company and its
Board of Directors with analytical support and advice.
After preliminary discussions during the spring and
early summer of 1994 in which ECA indicated an interest in
acquiring all of the outstanding shares of the Company's Common
Stock at a purchase
price in the range of $10 to $14 per share, and after further due
diligence, ECA in late August 1994 orally submitted an initial
proposal to acquire such shares at $11 per share. In September
1994, ECA
submitted a definitive offer to the Company for an increased cash
price of $12.00 per share. Management agreed to present ECA's
offer to the Company's Board of Directors at the Board's
regularly-scheduled meeting on September 27, 1994. During that
month, the Company continued discussions with those other
companies still interested in an acquisition of the Company or
Mountaineer; however,
none of these companies was willing to make a bid as favorable as
ECA's. At its meeting commenced on September 27, after
consideration of a number of factors (including those listed
below under "Reasons
for the Merger"), the Company's Board generally approved the
price offered by ECA and authorized management to continue
discussions with ECA to resolve other issues (including, among
other things,
the timing of various conditions to the Merger Agreement and the
Company's right to negotiate with unsolicited suitors) relating
to its bid. Allen & Company assisted the Company throughout
these discussions and negotiations.
On September 29, 1994, the Company and ECA reached an
agreement in principle, subject to the completion of final
documentation, for the Company to merge with and into ESC, at a
cash price
to the Company's stockholders of $12.00 per share, and the
Company issued a press release announcing that it had reached an
agreement in principle with an unnamed acquiror. After
conclusion of the
Company's Board meeting on September 30, the Merger Agreement was
finalized and signed, and the Company issued an additional press
release to such effect.
In November, 1994, subsequent to execution of the
Merger Agreement, the Company conducted discussions with another
potential acquiror which had made an unsolicited expression of
interest
in acquiring the Company subsequent to execution of the Merger
Agreement. However, such potential acquiror declined to make a
bid for the Company.
On February 3, 1995, ECA, ESC, AESI and the Company
signed the First Amendment to the Merger Agreement, amending the
Merger Agreement to provide that the Company should instead
be the Surviving Corporation in a merger with AESI.
Reasons for the Merger
At its meeting held on September 27, 1994 and continued
on September 30, 1994, the Company's Board of Directors
unanimously approved the Merger Agreement and determined that the
proposed
acquisition of the Company by ECA through the Merger, with a
Merger Consideration of $12.00 in cash per share, offers
significant financial benefits to, and is in the best interests
of, the Company's
stockholders. In reaching the foregoing conclusions, the
Company's Board of Directors considered a number of factors
including, without limitation, the following material factors:
(i) The Company's existing businesses, financial
condition, results of operations and prospects in light of its
regulatory environment.
(ii) The presentation by Allen & Company at the
Company's Board meeting on September 27 and 30, 1994 in
delivering its oral opinion (subsequently confirmed in writing)
that as of such date,
the Merger Consideration to be received by
the Company's stockholders was fair from a financial point of
view. (A copy of Allen & Company's written opinion appears as
Appendix B to this Proxy Statement.)
(iii) The historical and anticipated trading
prices of the Common Stock on the NASDAQ National Market System,
including the fact that the Merger Consideration represented a
39.13% premium over the closing price of the Common Stock
on the day before announcement of the Company's agreement in
principle to merge.
(iv) The process by and the extent to which the
Board and the Company's management and advisors considered the
Company's alternative strategic courses of action, including the
Company's discussions throughout calendar year 1994 with several
potential acquirors, including ECA.
(v) The process pursuant to which the Company's
management and advisors negotiated the terms and conditions of
the Merger Agreement.
(vi) The terms and conditions of the Merger
Agreement, including (a) the ability of the Company to furnish
information and engage in discussions or negotiations with other
bidders consistent with the fiduciary duties of the Board, (b)
the ability of the Company to enter into an agreement with a
higher bidder, subject to payment of a reasonable Break-up Fee
(as defined under "Amendment and Waiver; Termination" below),
and (c) ECA's agreement to pay a fee to the Company if, by
November 12, 1994, it had failed to obtain or arrange for
financing for the Merger.
The Board also considered, among other things, certain
regulatory and tax consequences and possible conflicts of
interest among certain of the Company's officers and advisors
with respect to the Merger. See "Regulatory Review," "Conflicts
of Interest" and "Certain Federal Income Tax Consequences" below.
The Board of Directors did not assign any relative
weights to the various factors listed above, but instead
considered them as a totality in reaching its decision.
Opinion of Financial Advisor to the Company
On September 27 and 30, 1994, Allen & Company, the
Company's financial advisor in connection with the Merger,
delivered to the Company's Board of Directors its presentation
and oral opinion,
which was subsequently confirmed in writing as of the date
hereof, to the effect that, as of the date hereof, the Merger
Consideration to be received by the Company's stockholders in the
Merger is fair
to the stockholders (other than ECA and its subsidiaries) from a
financial point of view. Allen & Company's opinion addressed
only the fairness, from a financial point of view, of the Merger
Consideration
and is not a recommendation to any stockholder of the Company as
to how such stockholder should vote at the Annual Meeting.
The full text of Allen & Company's opinion, dated as of
April 13, 1995, appears as Appendix B to this Proxy Statement.
Stockholders are urged to read such opinion in its entirety for a
description
of the procedures followed, assumptions made and matters
considered in and qualifications to, the review undertaken by
Allen & Company in connection therewith.
Prior to the delivery of its written opinion, Allen &
Company performed certain procedures to update some of the
analyses performed in connection with the delivery of its
presentation and oral
opinion at the Company's September Board meeting and reviewed
with the management of the Company the assumptions on which such
analyses were based. The results of such analyses were
consistent with those arrived at in connection with Allen &
Company's oral opinion.
In connection with its written opinion, Allen & Company
reviewed, among other things, the Merger Agreement, this Proxy
Statement, the Annual Reports to Stockholders and Annual Reports
on
Form 10-K of the Company for the five years ended June 30, 1994,
certain interim reports to stockholders and Quarterly Reports on
Form 10-Q, certain other communications from the Company to its
stockholders, and certain internal financial information and
analyses prepared by the Company's management. Allen & Company
also had discussions with members of the senior management of the
Company
regarding its past and current business operations, financial
condition and future prospects. In addition, Allen & Company
reviewed the reported price and trading activity for the Common
Stock, compared certain financial and stock market information
for the Company with similar information for certain other
companies the securities of which are publicly traded and
reviewed the financial terms of certain
recent business combinations and acquisitions.
In conducting its analysis and arriving at its opinion,
Allen & Company assumed and relied upon the accuracy and
completeness of all of the financial and other information
provided to it by the
Company, or that is publicly available, and did not attempt to
independently verify any of such information. Allen & Company
did not make an independent evaluation or conduct any appraisal
of the assets
and liabilities of the Company, nor was it furnished with any
such evaluation or appraisal. With respect to information
relating to the future business, operations and prospects of the
Company, Allen &
Company relied solely and exclusively upon information prepared
by the Company's management and provided to it by the Company and
assumed that such information reflects the best currently
available estimates and judgments of the Company with respect to
such information.
In its review, Allen & Company took into account an
assessment of general economic, market and financial conditions
and certain industry trends and related matters. Its opinion
necessarily is
based upon conditions as they currently exist and can be
evaluated only on the date thereof. Furthermore, for purposes of
its opinion, Allen & Company was not asked to consider, and did
not consider,
the effect of any federal, state or local tax laws on the Company
or its stockholders and has confined its review to the receipt by
such holders of the Merger Consideration.
The following is a summary of certain financial
analyses performed by Allen & Company in arriving at its written
opinion dated as of April 13, 1995, but does not purport to be a
complete description
of the analyses performed by Allen & Company for such purposes.
Comparable Public Company Analysis. Allen & Company
reviewed and compared certain actual and estimated financial,
operating and stock market information for the Company with
similar
information for certain selected publicly traded natural gas
distribution companies: Atmos Energy Corp., Connecticut Energy
Corp., Connecticut Natural Gas Corp., Consolidated Natural Gas
Co. Inc.,
Equitable Resources Inc., North Carolina Natural Gas Corp., New
Jersey Resources Corp., NORAM Energy Corp., Pacific Enterprises,
Piedmont Natural Gas Co. Inc., UGI Corp., United Cities Gas Co.
and Utilicorp United Inc. (collectively, the "Comparable
Companies"). The Comparable Companies were selected because they
were publicly traded companies that operate in similar or related
lines of
business as the Company. Allen & Company reviewed the Comparable
Companies in terms of various historical financial measures and
in terms of various multiples that certain of this information
represents
in comparison to certain other information. In particular, such
analysis indicated that, as of September 26, 1994, the day
preceding the meeting of the Company's Board of Directors
regarding, and two
days preceding the announcement of, the Merger, the market price
of shares as a multiple of latest twelve month ("LTM") earnings
ranged from 10.6x to 19.8x with a mean of 14.2x for the
Comparable Companies, versus a multiple of LTM earnings of 9.0x
for the Company. The analysis further indicated that the total
value (defined as equity market capitalization plus the principal
amount of outstanding
debt plus the book value of preferred stock, if any, less cash)
as a multiple of earnings before interest and taxes ("EBIT") (in
each case based on the LTM financial results) ranged from 5.9x to
13.3x, with
a mean of 9.7x, for the Comparable Companies, versus a multiple
of LTM EBIT of 7.9x for the Company. Allen & Company observed
that the multiples for the Company were lower than the means for
the Comparable Companies, that this was likely due in part to
relatively high levels of earnings and EBIT for the Company
during the period in question and that, unlike the Comparable
Companies, the
Company did not pay a dividend during the period analyzed. Based
upon a Merger Consideration of $12.00 per share, the multiple of
LTM earnings was 12.6x, which compares more favorably to the mean
earnings multiple, and the multiple of LTM EBIT was 10.0x, which
was higher than the mean LTM EBIT multiple for the Comparable
Companies.
Allen & Company also conducted the analysis of the
Comparable Companies as of March 31, 1995, which indicated that,
as of such date, the market price of shares of the Comparable
Companies
as a multiple of LTM earnings for such companies ranged from
11.6x to 20.1x, with a mean of 14.8x, and that the total value of
the Comparable Companies as a multiple of LTM EBIT for such
companies
ranged from 7.3x to 16.0x, with a mean of 11.7x. Considering
data as of March 31, 1995, but using the market price of the
Company on September 26, 1994 (the day preceding the meeting of
the Company's
Board of Directors regarding, and two days preceding the
announcement of, the Merger), the multiples of LTM earnings and
LTM EBIT for the Company were 10.3x and 9.7x, respectively, more
in line
with the respective means for the Comparable Companies as
compared to the analysis for such data as of September 26, 1994.
The multiples of LTM earnings and LTM EBIT for the Company based
upon the Merger Consideration of $12 per share were 14.3x and
12.0x, respectively, which compare more favorably to the mean
multiples for the Comparable Companies.
Comparison With Other Transactions. Allen & Company
reviewed publicly available information regarding certain
transactions, either consummated or pending, in the past five
years involving business
combinations or acquisitions of certain natural gas distribution
companies, including Texas Oil & Gas Corp., Entex, Inc.,
Diversified Energies, Inc., Louisiana General Services, Inc.,
Acadian Gas Group,
Iowa Southern Inc., Arkla Exploration Company and Greely Gas
Company. In this regard, and to the extent such information was
publicly available, Allen & Company analyzed the aggregate
transaction
value in such transactions as a multiple of LTM EBIT and the
aggregate equity value as a multiple of LTM earnings. Allen &
Company's analysis of the foregoing transactions indicated
multiples of LTM
EBIT which ranged from 2.9x to 26.5x, with a mean of 8.7x as
compared to a corresponding multiple of 10.0x for the Merger; and
a multiple of LTM earnings ranging from 8.6x to 34.2x, with a
mean of
12.2x, as compared to a corresponding multiple of 12.6x for the
Merger. The multiples for the Merger were higher than the mean
multiples for the foregoing transactions.
Allen & Company also reviewed publicly available
information regarding certain transactions in the past two years
involving all-cash acquisitions ranging from $50 million to $200
million in equity
value, including the acquisitions of Southwestern Electric
Service, Ohio Bancorp, Peoples Westchester Savings Bank,
Hall-Mark Electronics Corp., Mid-State Federal Savings & Loan
Association, Amoskeag
Co., Damon Corp., Fortune Bancorp Inc., GWC Corp., Home Federal
Bancorp of Missouri, Summit Health Limited, Electromedics Inc.,
TakeCare Inc., Pioneer Financial Corp., Germantown Savings Bank,
Adia Services Inc., Premiere Page Inc., Trident NGL Holding Inc.,
Knogo Corp. and Security First Corporation. These transactions
were selected because of their size relative to the Merger and
the amount
of publicly available information regarding them. Allen &
Company's analysis of the transactions indicated premiums paid
versus the respective closing prices immediately preceding the
relevant announcement
dates which ranged from a high of 88%, to a low that was a
discount of 8%, with a mean premium of 27%, as compared to a
corresponding premium, as determined as of September 28, 1994,
the last trading
day immediately preceding the announcement of the Merger, of 39%
to be paid by ECA in connection with the Merger. Allen & Company
then analyzed the premium to be paid by ECA in connection
with the Merger, expressed as a percentage of the average closing
prices for the Common Stock over the last twenty trading days
determined as of September 27, 1994, which equaled 45%.
Historical Relative Trading and Valuation Comparisons.
Allen & Company has examined the history of the trading prices
for the Common Stock of the Company, the ratio of the trading
price to
actual earnings and the ratio of the trading price to estimated
earnings, and the relationship between the movements in the
prices of such shares and ratios and movements in certain stock
indices. Allen
& Company also compared the Merger Consideration to be received
per share of Common Stock to the historical public trading prices
of the Common Stock and noted that such consideration represents
a premium over the historical trading prices.
The preparation of a fairness opinion is a complex
process and is not susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the
summary set forth above,
without considering the analyses as a whole, could create an
incomplete view of the processes underlying Allen & Company's
opinion. In arriving at its opinion, Allen & Company considered
the results
of all such analyses and did not assign any particular weight to
the results of any particular analysis. The analyses were
prepared for the purpose of Allen & Company's providing its
opinion as to the Merger
Consideration to be received by the Company's stockholders in the
Merger being fair to the stockholders from a financial point of
view and do not purport to be appraisals or to necessarily
reflect the prices
at which businesses or securities of the Company actually may be
sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be
significantly more
or less favorable than suggested by such analyses. The foregoing
summary is qualified by reference to the written opinion of Allen
& Company which is attached to this Proxy Statement as Appendix
B.
Allen & Company has advised the Company that, in the
ordinary course of business, it may trade the equity securities
of the Company for its own account or for the account of its
customers and, accordingly, may at any time hold a long or short
position in such securities.
Allen & Company was selected by the Company as its
financial advisor based on its reputation, experience and
expertise. Allen & Company is a nationally recognized investment
banking firm that
is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted
securities, private placements and valuations for estate,
corporate and other purposes. Allen & Company is familiar with
the Company, having acted as its financial advisor in connection
with, and having
participated in certain of the negotiations leading to, the
Merger. During the past two years, Allen & Company has provided
certain other financial advisory, brokerage and investment
banking services
to the Company but has not received any customary fees for such
services (exclusive of compensation to be received in connection
with the Merger), except for brokerage fees aggregating
approximately
$40,000 in connection with the Company's stock repurchase
program. The Company's Board of Directors was aware of Allen &
Company's equity ownership in the Company and believed that Allen
& Company, in contrast to an unaffiliated financial advisor,
would have an added incentive to obtain the best possible price
for the Company's stockholders. For a description of Allen &
Company's ownership
of the Company's Common Stock, see "Voting Securities and
Principal Holders Thereof".
Pursuant to a letter agreement (the "Engagement
Letter"), the Company retained Allen & Company as its financial
advisor in connection with its evaluation of alternative
strategic courses of action,
including a possible sale or disposition of stock or assets,
financing or investment or other transaction involving the
Company or its business (a "Transaction"), and including
responding to various unsolicited
approaches that had been received by the Company regarding a
Transaction. Under that engagement, Allen & Company agreed to
assist the Company regarding such alternative strategic courses
of action,
including the prospects of a Transaction, and to the extent
requested by the Company, to identify and contact other potential
buyers or investors. In addition, Allen & Company agreed to
assist the Company
in evaluating any offers or proposals received respecting any
Transaction. If the Company elected to proceed with any specific
proposal, Allen & Company agreed to assist the Company in
structuring,
negotiating and documenting, and otherwise assist in taking
necessary steps toward consummating, such proposed Transaction.
In addition, the Engagement Letter provided that, if appropriate
in view of
the nature and circumstances surrounding any particular
Transaction, and if requested by the Company, Allen & Company
would deliver an opinion to the Board of Directors of the Company
as to the
fairness, from a financial point of view, of the consideration to
be received by the Company's stockholders in connection with such
Transaction. Under the terms of the engagement, although Allen &
Company received no retainer, it is to receive a fee upon
consummation of any such Transaction (including the Merger) equal
to 2% of any and all Consideration (as defined in the Engagement
Letter)
paid or payable to the Company's securityholders in connection
with such Transaction up to the Threshold Amount (defined in the
Engagement Letter generally to mean the amount of Consideration
received
in such Transaction in excess of $10 per share of Common Stock)
and 4% of any and all Consideration in excess of the Threshold
Amount. Pursuant to the Engagement Letter, as compensation for
its
services in connection with the Merger, the Company will pay
Allen & Company a transaction fee of approximately $2.2 million,
if the Merger is consummated at a Consideration of $12.00 per
share. Whether
or not the Merger is consummated, the Company has agreed,
pursuant to the Engagement Letter, to reimburse Allen & Company
for all its reasonable out-of-pocket expenses, including the fees
and
disbursements of its counsel, incurred in connection with its
engagement by the Company and to indemnify Allen & Company
against certain liabilities and expenses in connection therewith.
Effective Time
The Effective Time with respect to the Merger will be
the date on which articles of merger are filed with, and a
certificate of merger has been issued by, the Secretary of State
of the State of West
Virginia in accordance with the WVCA. It is anticipated that
this will occur as promptly as practicable after receipt of all
necessary corporate approvals and regulatory review and the
expiration of all
applicable waiting periods in connection with approvals of
governmental authorities and after all conditions to the
consummation of the Merger Agreement have been satisfied or
waived.
Payment Procedures and Paying Agent
As soon as practicable after the Effective Time, ECA
will cause Bank of Nova Scotia, acting in its capacity as paying
agent for ECA (the "Paying Agent"), to mail to each former holder
of record of Common Stock a form of letter of transmittal,
together with instructions for the exchange of such holder's
certificates previously representing Common Stock for the Merger
Consideration. Stockholders should not send in any
stock certificates representing Common Stock until they receive
the letter of transmittal and instructions from the Paying Agent.
Promptly following the surrender by a stockholder to
the Paying Agent of one or more certificates previously
representing Common Stock, together with a properly completed and
executed letter
of transmittal, the Paying Agent will issue and mail to such
holder a check in the amount to which such holder is entitled.
After the Effective Time, there will be no transfers on
the Company's stock transfer books of Common Stock issued and
outstanding immediately prior to the Effective Time. No interest
will be
paid or accrued on the Merger Consideration, nor will any
dividends be paid to, or accrued for the benefit of, former
holders of Common Stock after the Effective Time. If
certificates previously representing
Common Stock are presented to the Company after the Effective
Time, they will be canceled and exchanged for the Merger
Consideration deliverable in respect thereof in accordance with
the foregoing procedures.
None of the Company, the Surviving Corporation, ECA,
the Paying Agent or any other person will be liable to any former
holder of Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property,
escheat or similar laws.
If a certificate for Common Stock has been lost, stolen
or destroyed, the Paying Agent will issue the Merger
Consideration properly payable in accordance with the Merger
Agreement upon receipt
of appropriate evidence as to such loss, theft or destruction,
appropriate evidence as to the ownership of such certificate by
the claimant and appropriate and customary indemnification.
The holders of any shares of Common Stock with respect
to which dissenters' rights have been properly perfected will
have the right to receive the fair value of such shares in
accordance with the
procedures described under "Dissenters' Rights" below and in
Appendix C to this Proxy Statement.
Representations and Warranties
The Company has made certain representations and
warranties to ECA, ESC and AESI in the Merger Agreement with
respect to, among other things, organization, authorization,
capitalization,
ownership of subsidiaries, financial statements and public
disclosure materials furnished in connection with the proposed
Merger and the absence of material adverse changes, and ECA, ESC
and AESI have made certain representations and warranties to the
Company with respect to, among other things, organization and
authorization.
Conditions to Consummation of the Merger
The respective obligations of ECA and AESI, on the one
hand, and the Company, on the other hand, to cause the Merger to
be consummated are subject to certain conditions, including the
following: (i) the approval of the Merger Agreement by the
holders of a majority of the shares of Common Stock outstanding
on the Record Date; (ii) satisfactory regulatory review; (iii)
the expiration or
termination of the applicable waiting period under the HSR Act
(which occurred on April 4, 1995); (iv) the representations and
warranties of the other party or parties to the Merger Agreement
being true
and correct in all material respects as of September 30, 1994 and
as of the date of the closing of the Merger, and the performance
by the other party or parties in all material respects of all
agreements
and covenants required by the Merger Agreement to be performed
thereby; (v) the absence of any statute, rule, regulation,
judgment, decree or injunction by a governmental authority of
competent jurisdiction
prohibiting consummation of the transactions contemplated by the
Merger Agreement or imposing material restrictions on ECA or the
Company in connection with the Merger or with respect to their
business
operations, either prior to or subsequent to the Merger; and (vi)
the delivery to each of various certificates and opinions. See
"Regulatory Review" below. The obligation of the Company to
cause the Merger
to be consummated is also subject to the condition that the
opinion of Allen & Company, a copy of which appears as Appendix B
hereto, shall not be withdrawn.
Amendment and Waiver; Termination
Amendment and Waiver. Prior to the Effective Time, any
provision of the Merger Agreement may, subject to the applicable
provisions of the WVCA, be modified or amended at any time by an
agreement in writing among the parties. The conditions to each
party's obligation to consummate the Merger may be waived by such
party in whole or in part to the extent permitted by applicable
law.
Termination. The Merger Agreement may be terminated,
and the Merger abandoned, prior to the Effective Time, either
before or after its approval by the Company's stockholders, as
follows: (i) by
the mutual consent of the Company and ECA; (ii) by either the
Company or ECA, in the event that (x) the Merger is not
consummated by June 30, 1995 (provided, that ECA may, in its sole
discretion,
extend such termination date during the pendency of any Higher
Proposal (as described under "No Solicitation; Higher Proposals"
below) and, if the transaction contemplated by such Higher
Proposal is
not consummated for a reasonable period thereafter, in order to
consummate the Merger), (y) the Company's stockholders fail to
approve the Merger Agreement at the Annual Meeting, or (z) a
breach,
which cannot be cured or is not cured within a reasonable time
following demand therefor by the other party hereto, of any
representation, warranty, covenant or agreement contained in the
Merger
Agreement which would constitute a Material Adverse Effect as
defined in the Merger Agreement; (iii) by ECA if either (x) the
Company shall have entered into an agreement with respect to a
Higher
Proposal and such agreement is in effect at the time of
termination or (y) the Company's Board of Directors shall have
withdrawn, modified in a manner adverse to ECA or AESI, or
refused to reaffirm
its recommendation that stockholders approve the Merger Agreement
(provided, that a temporary suspension of such recommendation
while the Board considers another bid shall not entitle ECA to
terminate
the Merger Agreement); and (iv) by the Company, if the
transaction contemplated by a Higher Proposal is consummated. In
the event that (i) any person or "group" (as such term is defined
in Section
13(d)(3) of the Exchange Act), other than ECA and its
subsidiaries and affiliates, becomes the beneficial owner of 51%
or more of the outstanding shares of Common Stock and the holders
of Common
Stock do not approve the Merger Agreement, or (ii) ECA terminates
the Merger Agreement pursuant to clause (iii)(x) of the preceding
sentence and the transaction contemplated by the Higher Proposal
referred to therein is consummated, the Company is required to
pay ECA $3,500,000 (the "Break-up Fee").
Regulatory Review
On November 17, 1994, ECA caused a petition requesting
WVPSC approval of the Merger to be filed with the WVPSC. The
WVPSC has scheduled a public hearing with respect thereto on
April 25, 1995.
Consummation of the Merger and payment of the Merger
Consideration were subject to expiration or termination of the
applicable waiting period under the HSR Act. Notification and
Report
Forms were filed with respect to the Merger with the Federal
Trade Commission and Justice Department by the principal
stockholder of ECA and by the Company on January 9 and 10, 1995,
respectively.
On February 9, 1995, the Company and ECA received requests for
additional information from the Justice Department, extending the
waiting period under the HSR Act. However, the waiting period
was terminated on April 4, 1995.
ECA and the Company are not aware of any governmental
approvals or actions that are required for consummation of the
Merger, except as described above. Should any such approval or
action
be required, it is presently contemplated that such approval or
action would be sought. If such approval or action is required,
there can be no assurance that satisfactory regulatory review
will occur, and
there can be no assurance as to the date any such review will be
completed. See "Conditions to Consummation of the Merger" and
"Amendment and Waiver; Termination" above.
Conduct of Business Pending the Merger
The Merger Agreement contains certain provisions
regarding the conduct of the Company's business pending
consummation of the Merger. In particular, the Company has
agreed that prior to
the Effective Time (except with ECA's consent, which may not be
unreasonably withheld), it will (a) conduct its business only in
the ordinary and usual course and use its best efforts to
preserve its business
organization intact and maintain its existing relations with
customers, suppliers, employees and business associates; (b) not
sell or pledge any stock owned by it in any of its subsidiaries;
(c) not amend its
Articles of Incorporation or By-Laws; (d) not split, combine or
reclassify the outstanding shares of Common Stock; (e) not
declare, set aside or pay any dividend or distribution payable in
cash, stock or
property; (f) not issue, sell, pledge, dispose of or encumber any
additional shares of, or securities convertible or exchangeable
for, or options, warrants, calls, commitments or other rights to
acquire any
shares of its capital stock or the capital stock of its
subsidiaries or any other property or assets (except pursuant to
options outstanding on September 30, 1994 under the Company's
1987 Plan); (g) not transfer,
lease, license, sell, pledge or dispose of any assets or incur or
modify any indebtedness or other liability, other than in the
ordinary and usual course of business; (h) not acquire directly
or indirectly any
shares of the Company's capital stock; (i) not authorize capital
expenditures in excess of $500,000 individually or $15 million in
the aggregate, or make any acquisition of, or investment in,
assets or stock
of any other person or entity in excess of $50,000; (j) not grant
any severance or termination pay to, or enter into any employment
or severance agreement with, any director, officer or other
employee of
the Company or any of its subsidiaries, nor establish, adopt,
enter into, make any new grants or awards under or amend, any
benefit plans (including any bonus, compensation or severance
plans or other
plans or arrangements for the benefit of any directors, officers
or employees) or any collective bargaining agreement, except for
amendments required by law, renewals of existing collective
bargaining
agreements and extension of existing employment contracts in
accordance with the terms thereof; (k) not, without consultation
with ECA, settle or compromise any material claims or litigation
or, except
in the ordinary course of business, modify, amend or terminate
any material contracts or waive, release or assign any material
rights or claims; (l) not make any tax election or permit any
insurance policy
naming it as a beneficiary or a loss payable payee to be canceled
or terminated without notice to ECA, except in the ordinary and
usual course of business; and (m) not authorize or enter into an
agreement to do any of the foregoing.
No Solicitation; Higher Proposals
The Company has agreed not to initiate or solicit,
directly or indirectly, any inquiries or the making of any
proposal or offer (an "Acquisition Proposal") with respect to a
merger, consolidation or
similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of,
the Company or any of its subsidiaries. The Company has also
agreed not to engage
in any negotiations or discussions with, or provide any
confidential information to, any person relating to an
Acquisition Proposal, or otherwise act to facilitate any effort
or attempt to make or implement
an Acquisition Proposal, except to the extent legally required
for the discharge by the Company's Board of Directors of its
fiduciary duties. The Merger Agreement requires the Company to
notify ECA
as promptly as practicable upon the occurrence of any of the
foregoing events.
The Merger Agreement also provides that if the Company
has received a bona fide written Acquisition Proposal which the
Board of Directors determines in good faith, after consultation
with its
financial advisors, is more favorable, from a financial point of
view, to the Company's stockholders than the Merger, taking into
account the financial responsibility of the party making the
proposal and such
party's ability, as then reasonably determinable by the Company,
to obtain satisfactory regulatory review of the proposed
transaction (a "Higher Proposal"), the Company will give ECA
written notice of the
Higher Proposal ten business days before entering into any
agreement with respect to the Higher Proposal or as soon as
practicable; provided, however, that if the Company fails to give
ten business days'
notice to ECA, such agreement must expressly permit the Company
to consider proposals which are more favorable from a financial
point of view than such Higher Proposal, without entitling such
other
party to any fees or other compensation, including by the grant
of an option. If ECA does not make a counter proposal that the
Company's Board of Directors believes in good faith, after
consultation with
its financial advisors, is more favorable, from a financial point
of view, to the Company's stockholders than such Higher Proposal,
the Company may enter into an agreement with respect to, and
consummate,
the Higher Proposal, subject to the provisions of the Merger
Agreement with respect to termination and the Break-up Fee. If
the Higher Proposal is not consummated for any reason, the Merger
Agreement will again be fully in effect.
Conflicts of Interest
Certain members of the Company's management and its
Board of Directors and certain of the Company's affiliates may be
deemed to have interests in the Merger in addition to their
interests, if
any, as stockholders of the Company generally. The Board was
aware of these factors and considered them, among other matters,
in approving the Merger Agreement and the transactions
contemplated thereby.
Stock Options. The Merger Agreement provides that, at
the Effective Time, holders of options outstanding under the 1987
Plan will receive a cash payment for each option held equal to
the Merger
Consideration minus the per-share exercise price of the option,
and such options will be canceled. Accordingly, at a Merger
Consideration of $12.00 per share, Messrs. McMillian, Grant,
Fletcher and Pittman
would receive cash payments of $3,840,000, $103,803, $64,224 and
$67,500, respectively, and four other officers of the Company and
Mountaineer would receive cash payments aggregating $125,625, for
a total of $4,201,152, in consideration of options cancelled at
the Effective Time. See "Voting Securities and Principal Holders
Thereof" and "Executive Compensation."
Employment Contracts. The 1995 Employment Agreements
between the Company and certain executive officers provide that,
upon consummation of the Merger and satisfaction of certain other
conditions, such officers will be entitled to receive future
monthly payments in such amounts, and commencing on such dates,
as would result in a present value just below the amount which
would constitute
a "parachute payment" under Section 280G of the Code
(approximately $802,000, $647,000 and $616,000 for Messrs. Grant,
Fletcher and Pittman, respectively, assuming an Effective Time of
June 1, 1995),
discounted at the applicable federal rate ("AFR") (assumed at the
date hereof to be the March 1995 rate of 9.34%), as specified in
Section 280G. The amount and timing of such payments cannot be
determined with certainty until the date on which the change of
control occurs, as they are dependent on the AFR then in effect
in accordance with Section 280G of the Code. These payments
contemplated
by the 1995 Employment Agreements supersede the Company's
obligation to make both the lump-sum payments to which such
officers would have been entitled under the change of control
provisions of
their 1993 Employment Agreements and the payments to which they
otherwise would have been entitled under the Company's SERP. The
1995 Employment Agreements additionally provide that the Company
will, at any such officer's request (within certain time
periods), purchase his principal residence at fair market value
or, in the case of one officer, his basis therein. See
"Executive Compensation -- Employment Contracts."
Letter Agreements. In order to ensure stability of
operations in the event an offer to acquire the Company were ever
made, the Company, by letters dated September 21, 1994 to
fourteen officers
and key employees of the Company and Mountaineer, agreed to
provide such officers and employees with varying packages of
benefits in the event of such an offer, provided, in each case,
that such officer
or employee continued his or her employment with the Company
until a change of control became effective (or, if earlier, until
the Company terminated such officer's or employee's employment in
contemplation of a change of control). These benefits, totalling
an estimated $562,900, include payment of an amount up to such
officer's or employee's previous year's base salary and/or his or
her assigned
Company car. Pursuant to these letters, each of the named
executive officers would be entitled to receive his Company car
(in addition to any other compensation or benefits to which such
officer is otherwise
entitled under an employment contract or otherwise). The Company
has estimated the value of each such officer's car to be as
follows: Mr. McMillian, $23,925; Mr. Grant, $20,175; Mr.
Fletcher, $15,625;
and Mr. Pittman, $16,475. The remaining ten officers and key
employees, as a group, would be entitled to receive cash payments
aggregating $386,650 and Company cars having a total value
estimated at
approximately $100,050 under the letter agreements.
SERP. The Company's SERP provides that, upon a "change
of control," participating employees will become entitled to
receive a portion of their retirement benefits for each year of
participation
in the SERP. Under the SERP, Mr. McMillian would be entitled to
receive future monthly payments of $3,333 for a period of 10
years commencing on his normal retirement date. In the case of
executive
officers who are party to the 1995 Employment Agreements, in the
event of a change in control, such officers will be entitled to
future payments in accordance with the terms of the 1995
Employment
Agreements. See "Employment Contracts" above and "Executive
Compensation -- Employment Contracts." As defined in the SERP, a
"change of control" would be deemed to occur upon approval by the
Company's stockholders of the Merger.
Indemnification. The Merger Agreement provides that
ECA shall, from and after the Effective Time, indemnify and hold
harmless each present and former director and officer of the
Company,
against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding,
or investigation,
whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective
Time, whether asserted or claimed prior to, at, or after the
Effective Time to
the fullest extent the Company would have been permitted under
West Virginia law and its By-laws to indemnify such person.
Financial Advisor. Allen & Company, a principal
stockholder of the Company, is acting as financial advisor to the
Company in connection with the Merger. Mr. Wit, one of the
Company's directors,
is a member of the Executive Committee of Allen & Company.
Pursuant to the Engagement Letter between Allen & Company and the
Company, if the Merger is consummated at a Merger Consideration
of $12.00 per share, Allen & Company will be entitled to receive
a fee of approximately $2.2 million, plus reimbursement of
expenses. If the Merger is not consummated, Allen & Company will
be entitled to receive reimbursement of expenses. See "Opinion
of the Financial Advisor" above.
Dissenters' Rights
Any stockholder who does not wish to receive the Merger
Consideration has the right to seek relief as a dissenting
stockholder under Sections 31-1-122 and 31-1-123 of the WVCA.
However, a
holder of shares of Common Stock shall only be entitled to such
rights if such holder complies with Section 31-1-123 of the WVCA.
The following summary does not purport to be a complete statement
of the method of compliance with Section 31-1-123 and is
qualified in its entirety by reference to that Section, which is
attached hereto as Appendix C.
A stockholder of the Company who wishes to exercise his
right to dissent (i) must file a written objection to the Merger
with the Company prior to or at the Annual Meeting and (ii) must
not vote
for the adoption of the Merger Agreement. Any stockholder
returning a blank executed proxy card will be deemed to have
voted "FOR" the Merger Agreement, thereby waiving any such
dissenters' rights.
A stockholder may dissent as to less than all of the shares
registered in his name. In that event, his rights shall be
determined as if the shares as to which he has dissented and his
other shares were registered in the names of different
stockholders.
If the Merger Agreement is approved by the required
vote, a stockholder who has complied with the procedure set forth
in the immediately preceding paragraph (a "Dissenting
Stockholder") may,
within ten days after the Annual Meeting, make written demand on
the Surviving Corporation for payment of the fair value of such
Dissenting Stockholder's shares. If the Merger is effected, the
Surviving
Corporation shall pay to such Dissenting Stockholder, upon
surrender of the certificate or certificates representing such
Dissenting Stockholder's dissenting shares, the fair value of the
shares of Common
Stock represented by such certificates as of the day prior to the
date of the Annual Meeting, excluding any appreciation or
depreciation in anticipation of the Merger.
Any written objection to the Merger Agreement or demand
for payment pursuant to the immediately preceding paragraphs
should be mailed or delivered to the Company (or the Surviving
Corporation, as the case may be) at 300 Capitol Street, Suite
1600, Charleston, West Virginia 25301, Attention: Secretary, or
delivered at the Annual Meeting. Because written objections
mailed to the
Company must be received prior to the Annual Meeting and demands
for payment must be received by the Company (or the Surviving
Corporation) within ten days after the date of the Annual
Meeting,
it is recommended, although not required, that a stockholder
using the mails use certified or registered mail, return receipt
requested, to confirm that he has made a timely delivery.
Any Dissenting Stockholder failing to make demand
within the ten-day period specified above shall be bound by the
terms of the Merger. Any Dissenting Stockholder making such
demand shall
be entitled only to payment of the fair value of such Dissenting
Stockholder's shares, and shall not be entitled to vote or to
exercise any other rights of a stockholder.
Once a demand for payment is made by a Dissenting
Stockholder, no such demand may be withdrawn without the consent
of the Company (or the Surviving Corporation). In addition, if
any of
(i) the Company (or the Surviving Corporation) consents to the
withdrawal of the demand, (ii) the Merger is abandoned or
rescinded or the stockholders fail to approve the Merger, (iii)
no demand or petition
for the determination of the fair value by a court of competent
jurisdiction has been made or filed within 30 days after the
Surviving Corporation receives written demand from any Dissenting
Stockholder,
or (iv) a court of general civil jurisdiction determines that the
stockholder is not entitled to the relief provided by Section
31-1-123 of the WVCA, then the stockholder will not have the
right to be paid the
fair value for his shares and his status as a stockholder will be
restored without prejudice to any corporate proceedings which may
have been taken during the interim.
Within 20 days after demanding payment for his shares,
each Dissenting Stockholder demanding payment must submit the
certificate or certificates representing his shares to the
Company (or the
Surviving Corporation) for notation thereon that such demand has
been made. His failure to do so shall, at the option of the
Company (or the Surviving Corporation), terminate his dissenter's
rights unless
a court of competent jurisdiction, for good and sufficient cause
shown, shall otherwise direct.
Within ten days after the consummation of the Merger,
the Surviving Corporation will give written notice of the Merger,
accompanied by the Company's most recent balance sheet and
profit-and-loss
statement, to each Dissenting Stockholder who has made a proper
demand and will offer to pay for his shares at a price deemed by
the Surviving Corporation to be the fair value thereof. If the
Surviving
Corporation and the Dissenting Stockholder agree upon the fair
value of such Dissenting Stockholder's shares within 30 days
after the consummation of the Merger, the Surviving Corporation
will pay for
the shares within 90 days after the consummation of the Merger,
upon surrender of the related certificate or certificates, and
the Dissenting Stockholder shall cease to have any interest in
such shares. If
the Surviving Corporation and the Dissenting Stockholder do not
so agree within 30 days after the consummation of the Merger,
then within 30 days after receipt of written demand from such
Dissenting
Stockholder (which written demand must be given by such
stockholder within 60 days after the Merger is consummated), the
Surviving Corporation must file a complaint in a court of general
civil jurisdiction
requesting that the fair value of such shares be determined. If
the Surviving Corporation fails to institute such proceedings,
any Dissenting Stockholder may do so in the name of the Surviving
Corporation.
All Dissenting Stockholders, wherever residing, may be made party
to the proceedings, and all Dissenting Stockholders who are
parties to the proceeding shall be entitled to judgment against
the Surviving
Corporation for the amount of the fair value of their shares.
The court may, if it so elects, appoint one or more persons as
appraisers to receive evidence and recommend a decision on the
question of fair value of the Dissenting Stockholders' shares.
A judgment against the Surviving Corporation, which
shall include interest, shall be payable only upon and
concurrently with the surrender to the Surviving Corporation of
the certificate or certificates
representing a Dissenting Stockholder's dissenting shares, and
upon payment of the judgment, the Dissenting Stockholder shall
cease to have any interest in such shares. The costs and
expenses of any such
proceeding (excluding the fees and expenses of counsel or expert
witnesses) shall be determined by the court and shall be assessed
against the Surviving Corporation.
If the court finds that a failure by Dissenting
Stockholders to accept an offer from the Surviving Corporation
was arbitrary, vexatious or not in good faith, any part of such
costs and expenses may
be assessed against any or all of such Dissenting Stockholders
who were party to the proceeding.
Failure to follow any step required by Section 31-1-123
of the WVCA in connection with the exercise of dissenters' rights
may result in the termination of such dissenters' rights.
Accounting Treatment
ECA intends to treat the Merger as a purchase for
accounting purposes.
Certain Federal Income Tax Consequences
The following discussion of the principal federal
income tax consequences of the Merger is based upon the
provisions of the Code, the regulations thereunder, judicial
authority, administrative rulings
and practice as of the date hereof and the advice of Stroock &
Stroock & Lavan, counsel to the Company. The following
discussion does not address the federal income tax consequences
to special classes
of taxpayers, including, without limitation, foreign
corporations, tax exempt entities and persons who acquired their
shares of Common Stock pursuant to the exercise of an employee
option or otherwise as compensation.
Stockholders are encouraged to consult their tax
advisors concerning the federal income tax consequences of the
Merger in their particular circumstances, as well as any tax
consequences arising under foreign, state or local law.
The cancellation of shares of Common Stock in exchange
for cash pursuant to the Merger will be a taxable transaction to
the holders thereof for federal income tax purposes and may also
be a taxable transaction under applicable state, local and other
tax laws.
In general, a stockholder who receives the Merger
Consideration will recognize gain or loss equal to the difference
between the adjusted tax basis of his shares of Common Stock and
the amount
of cash received in exchange therefor. Such gain or loss will be
capital gain or loss if, as should be the case for most holders
of Common Stock, the shares are capital assets in the hands of
the stockholder
and will be long-term capital gain or loss if the holding period
for the Common Stock is more than one year. The foregoing
discussion may not apply to stockholders who acquired their
Common Stock
pursuant to the exercise of stock options or other compensation
arrangements with the Company, who are not citizens or residents
of the United States or who are otherwise subject to special tax
treatment under the Code.
Each holder of Common Stock who receives the Merger
Consideration and each holder of an option outstanding under the
1987 Plan who receives a cash payment from ECA with respect
thereto
will, in general, be required to provide to the Paying Agent his,
her or its correct Social Security or other taxpayer
identification number, or in certain instances other information,
in order to avoid "back-up
withholding" requirements which might otherwise apply under the
Code. Any such person who does not furnish such information may
be subject to a penalty imposed by the Internal Revenue Service.
The federal income tax discussion set forth above does
not necessarily set forth all of the tax consequences of the
Merger that may be relevant to all stockholders in all
circumstances. Stockholders
should therefore consult their tax advisors as to the specific
tax consequences to them of the Merger, including the effects of
applicable state, local or other tax laws.
PROPOSALS FOR STOCKHOLDER APPROVAL
Proposal No. 1 - Election of Directors
Stockholders are asked to elect the following seven (7)
nominees to serve as directors of the Company until the earlier
of (a) the 1995 Annual Meeting of Stockholders (or until their
successors
are duly elected or appointed and qualified) or (b) the Effective
Time of the Merger: John G. McMillian, Michael S. Berman, Sidney
S. Lindley, Rush Moody, Jr., Henry E. Tauber, Jack H. Vaughn and
Harold M. Wit. The Board of Directors of the Company unanimously
recommends that stockholders vote "FOR" Proposal No. 1 relating
to election of the seven nominees named above.
Proposal No. 2 - Approval of the Merger Agreement
Stockholders are asked to approve the Merger Agreement,
a copy of which appears as Appendix A to this Proxy Statement,
and the transactions contemplated thereby. The Board of
Directors of the Company unanimously recommends that stockholders
vote "FOR" Proposal No. 2 relating to approval of the Merger
Agreement. The Board considered the matters discussed above
under "The Merger Agreement -- Conflicts of Interest" before
making such recommendation.
Proposal No. 3 - Other Business
Stockholders are asked to grant to the proxies named in
the accompanying proxy card the authority, in their discretion,
to vote upon such other matters as may properly come before the
Annual Meeting. The Board of Directors of the Company
unanimously recommends that stockholders vote "FOR" Proposal No.
3 relating to other business.
GENERAL
Independent Public Accountants
Arthur Andersen LLP, which audited the financial
statements of the Company for the last fiscal year, were
appointed as independent public accountants for the Company by
the Board of Directors
upon the recommendation of the Audit Committee. A representative
of Arthur Andersen LLP is expected to be present at the meeting,
will have an opportunity to make a statement if he desires to do
so and is expected to be available to respond to all appropriate
questions relating to the financial statements. Financial
officers of the Company will also be present and available to
respond to all appropriate
questions relating to the financial statements.
Stockholder Proposals
If the Merger is not consummated, the Company
anticipates that its Annual Meeting of Stockholders for the
fiscal year ending June 30, 1995 will occur at its traditional
time, in December 1995.
Consequently, a proposal submitted by a stockholder for action at
such meeting must be received at the Company's principal
executive office, 300 Capitol Street, Suite 1600, Charleston,
West Virginia 25301,
a reasonable time prior thereto, in order to be eligible for
inclusion in the Company's proxy statement therefor.
Other
The accompanying proxy is solicited by and on behalf of
the Board of Directors of the Company. The Annual Meeting is
called for the specific purposes set forth in the Notice of
Annual Meeting
of Stockholders, as discussed above, but in the event that other
matters are properly presented, the persons named as proxies will
vote upon such matters in their discretion.
Additional information may be found in the Company's
Annual Report to Stockholders for the year ended June 30, 1994
and Quarterly Reports for the quarter ended September 30, 1994
and the
six months ended December 31, 1994, which are being mailed to
stockholders together with this Proxy Statement.
The information in this Proxy Statement regarding ECA,
ESC and AESI has been provided by ECA, ESC and AESI.
Expenses and Procedures
The entire expense of preparing, assembling, printing
and transmitting the proxies and the material used in the
solicitation of proxies will be paid by the Company. Management
may use regular
employees (the exact number is not now known) of the Company to
solicit proxies either personally or by telephone, telegraph or
letter, including without limitation, through the use of the
mails. Such
employees will not receive additional remuneration therefor. The
Company has also retained Chemical Bank ("Chemical") to assist in
the solicitation of proxies, for which it will pay Chemical not
more than
$5,000 plus out-of-pocket expenses. The solicitations will
consist mainly of making arrangements with brokerage houses and
other custodians, nominees and fiduciaries to send this proxy
statement and the
accompanying documents to their principals. The cost of such
additional solicitations will also be borne by the Company.
ALLEGHENY & WESTERN ENERGY CORPORATION
By: John G. McMillian, Chairman, President
and Chief Executive Officer
APPENDIX A
AGREEMENT AND PLAN OF MERGER
among
ENERGY CORPORATION OF AMERICA, EASTERN SYSTEMS CORPORATION
and
ALLEGHENY & WESTERN ENERGY CORPORATION
Dated as of September 30, 1994
INDEX
Page No.
Parties. . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . 1
Article I The Merger; Closing; Effective Time. . 1
1.1 The Merger. . . . . . . . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . 1
1.3 Effective Time. . . . . . . . . . . . . . . 1
Article II Articles of Incorporation
and By-Laws of the Surviving Corporation . . . . . 1
2.1 The Articles of Incorporation . . . . . . . 1
2.2 The By-Laws . . . . . . . . . . . . . . . . 2
Article III Officers and Directors of
the Surviving Corporation. . . . . . . . . . . . . 2
3.1 Officers and Directors. . . . . . . . . . . 2
Article IV Conversion or Cancellation
of Shares in the Merger. 2
4.1 Conversion or Cancellation of Shares. . . . .2
4.2 Payment for Shares. . . . . . . . . . . . . 2
4.3 Dissenters' Rights. . . . . . . . . . . . . 3
4.4 Transfer of Shares After the Effective Time 3
Article V Representations and Warranties . . . . 3
5.1 Representations and Warranties of the
Company . . . . . . . . . . . . . . . . . . . . . . 3
(a) Corporate Organization and Qualification. . 3
(b) Authorized Capital. . . . . . . . 3
(c) Corporate Authority . . . . . . . 4
(d) Governmental Filings; No Violations . . . . 4
(e) Company Reports; Financial Statements . . . 4
(f) Absence of Certain Changes. . . . 5
(g) Litigation and Liabilities. . . . 5
(h) Employee Benefits . . . . . . . . 5
(i) Brokers and Finders . . . . . . . 6
(j) Takeover Statutes . . . . . . . . 6
(k) Environmental Matters . . . . . . 6
(l) Taxes . . . . . . . . . . . . . . 7
(m) Labor Matters . . . . . . . . . . 7
(n) Compliance with Laws. . . . . . . 7
(o) Title to Assets . . . . . . . . . 7
(p) Regulation as a Utility . . . . . 7
5.2 Representations and Warranties of Parent and
Merger Sub . . . . . . . . . . . . . . . . . . . . 7
(a) Corporate Organization and Qualification. . 7
(b) Corporate Authority . . . . . . . 8
(c) Governmental Filings; No Violations . . . . 8
(d) Regulation as a Utility . . . . . 8
(e) Ownership of Company Stock. . . . 8
Article VI Covenants . . . . . . . . . . . . . . 8
6.1 Interim Operations of the Company . . . . . 8
6.2 Acquisition Proposals . . . . . . . . . . .. 9
6.3 Meetings of the Company's Shareholders. . . 10
6.4 Filings; Other Action . . . . . . . . . . . 10
6.5 Access. . . . . . . . . . . . . . . . . . . 11
6.6 Notification of Certain Matters . . . . . . 11
6.7 Publicity . . . . . . . . . . . . . . . . . 11
6.8 Stock Options . . . . . . . . . . . . . . . 11
6.9 Reincorporation of Parent . . . . . . . . . 11
6.10 Financing . . . . . . . . . . . . . . . . . 11
6.11 Indemnification . . . . . . . . . . . . . . 11
Article VII Conditions . . . . . . . . . . . . . 12
7.1 Conditions to Obligations of Parent and
Merger Sub. . . . . . . . . . . . . . . . . . . . 12
(a) Shareholder Approval. . . . . . . 12
(b) Representations and Warranties. . 12
(c) Performance of Obligations. . . . 12
(d) Governmental and Regulatory Consents. . . . 12
(e) Litigation. . . . . . . . . . . . 12
(f) Legal Opinion . . . . . . . . . . 13
7.2 Conditions to Obligations of the Company. . 13
(a) Shareholder Approval. . . . . . . 13
(b) Representations and Warranties. . 13
(c) Performance of Obligations of
Parent and Merger Sub . . . . . . . . . 13
(d) Governmental Consents . . . . . . 13
(e) Order . . . . . . . . . . . . . . 13
(f) Fairness Opinion. . . . . . . . . 13
(g) Legal Opinion . . . . . . . . . . 13
Article VIII Termination . . . . . . . . . . . 13
8.1 Terminations by Mutual Consent. . . . . . . 13
8.2 Termination by Either Parent or the Company 13
8.3 Termination by Parent . . . . . . . . . . . 14
8.4 Termination by the Company. . . . . . . . . 14
8.5 Effect of Termination and Abandonment . . . 14
Article IX Miscellaneous and General . . . . . . 15
9.1 Payment of Expenses . . . . . . . . . . . . 15
9.2 Survival. . . . . . . . . . . . . . . . . . 15
9.3 Modification or Amendment . . . . . . . . . 15
9.4 Waiver of Conditions. . . . . . . . . . . . 15
9.5 Counterparts. . . . . . . . . . . . . . . . 15
9.6 Governing Law . . . . . . . . . . . . . . . 15
9.7 Notices . . . . . . . . . . . . . . . . . . 15
9.8 Entire Agreement, etc.. . . . . . . . . . . 15
9.9 Definition of "Subsidiary". . . . . . . . . 15
9.10 Definition of "Material Adverse Effect" and
"Material Adverse Change" . . . . . . . . . 16
9.11 Obligation of Parent. . . . . . . . . . . . 16
9.12 Captions. . . . . . . . . . . . . . . . . . 16
Schedule 5.1(h) Benefit Plans. . . . . . . . . . . 17
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter
called this "Agreement"), dated as of September 30, 1994, among
Allegheny & Western Energy Corporation, a West Virginia
corporation (the "Company"), Energy Corporation of America, a
Colorado corporation ("Parent") and Eastern Systems Corporation,
a West Virginia corporation and a wholly-owned subsidiary of
Parent
("Merger Sub"), the Company and Merger Sub sometimes being
hereinafter collectively referred to as the "Constituent
Corporations."
RECITALS
WHEREAS, the Boards of Directors of Parent
and the Company each have determined that it is in the best
interests of their respective shareholders for Parent to acquire
the Company upon the terms and subject to the conditions set
forth herein; and
WHEREAS, the Company, Parent and Merger Sub
desire to make certain representations, warranties, covenants and
agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the
premises, and of the representation, warranties, covenants and
agreements contained herein the parties hereto hereby agree as
follows:
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger. Subject to the terms and
conditions of this Agreement, at the Effective Time (as defined
in Section 1.3) the Company shall be merged with and into Merger
Sub and
the separate corporate existence of the Company shall thereupon
cease (the "Merger"). Merger Sub shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as
the "Surviving
Corporation") and shall continue to be governed by the laws of
the State of West Virginia and the separate corporate existence
of Merger Sub with all its rights, privileges, immunities, powers
and franchises
shall continue unaffected by the Merger. The Merger shall have
the effects specified in the West Virginia Corporation Act (the
"WVCA").
1.2. Closing. The closing of the Merger
(the "Closing") shall take place (i) at the offices of Goodwin &
Goodwin, 1500 One Valley Square, Charleston, West Virginia at
12:00 P.M. on the
first business day on which the last to be fulfilled or waived of
the conditions set forth in Article VII hereof shall be fulfilled
or waived in accordance with this Agreement or (ii) at such other
place and
time and/or on such other date as the Company and Parent may
agree.
1.3. Effective Time. As soon as
practicable following the Closing, and provided that this
Agreement has not been terminated or abandoned pursuant to
Article VIII hereof, the Company
and Merger Sub will cause Articles of Merger to be delivered to
the Secretary of State of West Virginia as provided in Section
31-1-36 of the WVCA. The Merger shall become effective on the
date on
which the Articles of Merger has been duly filed, and a
certificate of merger has been issued, by the Secretary of State
of West Virginia, and such time is hereinafter referred to as the
"Effective Time."
ARTICLE II
Articles of Incorporation and By-Laws
of the Surviving Corporation
2.1. The Articles of Incorporation. The
Articles of Incorporation ("Articles") of Merger Sub in effect at
the Effective Time shall be the Articles of the Surviving
Corporation, until duly
amended in accordance with the terms thereof and the WVCA.
2.2. The By-Laws. The By-Laws of Merger
Sub in effect at the Effective Time shall be the By-Laws of the
Surviving Corporation, until duly amended in accordance with the
terms thereof and the WVCA.
ARTICLE III
Officers and Directors of the Surviving Corporation
3.1. Officers and Directors. The directors
and officers of Merger Sub at the Effective Time shall, from and
after the Effective Time, be the directors and officers,
respectively, of the Surviving
Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation
or removal in accordance with the Surviving Corporation's
Articles and By-Laws.
ARTICLE IV
Conversion or Cancellation of Shares in the Merger
4.1. Conversion or Cancellation of Shares.
The manner of converting or canceling shares of the Company and
Merger Sub in the Merger shall be as follows:
(a) At the Effective Time, each share of
the Common Stock, par value $0.01 per share (a "Share"), of the
Company issued and outstanding immediately prior to the Effective
Time (other
than Shares owned by Parent, Merger Sub or any other subsidiary
of Parent (collectively, the "Parent Companies") or Shares which
are held by shareholders ("Dissenting Shareholders") exercising
appraisal
rights pursuant to Sections 31-1-122 and 31-1-123 of the WVCA)
shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive,
without interest,
an amount in cash (the "Merger Consideration") equal to $12.00.
All Shares (other than Shares owned by the Parent Companies), by
virtue of the Merger and without any action on the part of the
holders
thereof, shall no longer be outstanding and shall be canceled and
retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall thereafter cease
to have any rights with
respect to such Shares, except the right to receive the Merger
Consideration for such Shares upon the surrender of such
certificate in accordance with Section 4.2 or the right, if any,
to receive payment
from the Surviving Corporation of the "fair value" of such Shares
as determined in accordance with Section 31-1-123 of the WVCA.
(b) At the Effective Time, each Share
issued and outstanding at the Effective Time and owned by any of
the Parent Companies, and each Share issued and held in the
Company's treasury
at the Effective Time, shall, by virtue of the Merger and without
any action on the part of the holder thereof, cease to be
outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(c) At the Effective Time, each share of
Common Stock, par value $1.00 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall remain
outstanding
and each certificate therefor shall continue to evidence one
share of Common Stock of the Surviving Corporation.
4.2. Payment for Shares. Parent shall make
available or cause to be made available to the paying agent
appointed by Parent with the Company's prior approval (the
"Paying Agent") amounts
sufficient in the aggregate to provide all funds necessary for
the Paying Agent to make payments pursuant to Section 4.1(a)
hereof to holders of Shares issued and outstanding immediately
prior to the Effective
Time. Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each person who was, at
the Effective Time, a holder of record (other than any of the
Parent Companies)
of issued and outstanding Shares a form (mutually agreed to by
Parent and the Company) of letter of transmittal and instructions
for use in effecting the surrender of the certificates which,
immediately
prior to the Effective Time, represented any of such Shares in
exchange for payment therefor. Upon surrender to the Paying
Agent of such certificates, together with such letter of
transmittal, duly executed
and completed in accordance with the instructions thereto, the
Surviving Corporation shall promptly cause to be paid to the
persons entitled thereto a check in the amount to which such
persons are entitled,
after giving effect to any required tax withholdings. No
interest will be paid or will accrue on the amount payable upon
the surrender of any such certificate. If payment is to be made
to a person other
than the registered holder of the certificate surrendered, it
shall be a condition of such payment that the certificate so
surrendered shall be properly endorsed or otherwise in proper
form for transfer and
that the person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a person other
than the registered holder of the certificate surrendered or
establish to
the satisfaction of the Surviving Corporation or the Paying Agent
that such tax has been paid or is not applicable. One year
following the Effective Time, the Surviving Corporation shall be
entitled to cause
the Paying Agent to deliver to it any funds (including any
interest received with respect thereto) made available to the
Paying Agent which have not been disbursed to holders of
certificates formerly representing Shares outstanding on the
Effective Time, and thereafter
such holders shall be entitled to look to the Surviving
Corporation only as general creditors thereof with respect to the
cash payable upon
due surrender of their certificates. Notwithstanding the
foregoing, neither the Paying Agent nor any party hereto shall be
liable to any holder of certificates formerly representing Shares
for any amount
paid to a public official pursuant to any applicable abandoned
property, escheat or similar law. The Surviving Corporation
shall pay all charges and expenses, including those of the Paying
Agent, in connection
with the exchange of cash for Shares and Parent shall reimburse
the Surviving Corporation for such charges and expenses.
4.3. Dissenters' Rights. If any Dissenting
Shareholder shall be entitled to be paid the "fair value" of his
or her Shares, as provided in Section 31-1-123 of the WVCA, the
Company shall
give Parent notice thereof and Parent shall have the right to
participate in all negotiations and proceedings with respect to
any such demands. Neither the Company nor the Surviving
Corporation shall,
except with the prior written consent of Parent, voluntarily make
any payment with respect to, or settle or offer to settle, any
such demand for payment. If any Dissenting Shareholder shall
fail to perfect
or shall have effectively withdrawn or lost the right to dissent,
the Shares held by such Dissenting Shareholder shall thereupon be
treated as though such Shares had been converted into the Merger
Consideration pursuant to Section 4.1.
4.4. Transfer of Shares After the Effective
Time. No transfers of Shares shall be made on the stock transfer
books of the Surviving Corporation at or after the Effective
Time.
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the
Company. The Company hereby represents and warrants to Parent
and Merger Sub that:
(a) Corporate Organization and
Qualification. Each of the Company and its subsidiaries is a
corporation duly organized, validly existing and in good standing
under the laws of its respective
jurisdiction of incorporation and is in good standing as a
foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it
require such qualification,
except for such failure to so qualify or be in such good
standing, which, when taken together with all other such
failures, is not reasonably likely to have a Material Adverse
Effect (as such term is defined
in Section 9.10 hereof) on the Company and its subsidiaries taken
as a whole. Each of the Company and its subsidiaries has the
corporate requisite power and authority to carry on its
respective businesses
as they are now being conducted. The Company has made available
to Parent a complete and correct copy of the Company's Articles
and By-Laws, each as amended to date. The Company's Articles and
By-Laws so delivered are in full force and effect. Prior to the
date hereof, the Company has delivered to Parent a list of all
material corporations, partnerships, joint ventures and other
business entities
in which it or any of its subsidiaries directly or indirectly
owns an interest and its and such subsidiaries' direct or
indirect share, partnership or other ownership interest of each
such entity. None of such
entities (other than Mountaineer Gas Company ("Mountaineer")),
whether or not a material entity, is a "public-utility company",
and none of such entities (whether or not a material entity) is a
"holding
company", a "subsidiary company" or an "affiliate" of any
public-utility company other than Mountaineer within the meaning
of Sections 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Public
Utility Holding
Company Act of 1935, as amended (the "Holding Company Act").
(b) Authorized Capital. The authorized
capital stock of the Company consists of 20,000,000 Shares, of
which 7,479,360 Shares were outstanding on September 26, 1994 and
629,442 Shares
were held in treasury, and 5,000,000 shares of Preferred Stock,
without par value (the "Preferred Shares"), no shares of which
were outstanding on the date hereof. All of the outstanding
Shares have been
duly authorized and are validly issued, fully paid and
nonassessable. The Company has no Shares or Preferred Shares
reserved for issuance, except that, as of September 26, 1994,
there were 1,084,900 Shares
reserved for issuance pursuant to the 1987 Stock Option Plan (the
"Stock Plan"). Except as set forth in the disclosure letter to
be delivered to Parent within five business days after the date
hereof (the
"Disclosure Letter"), each of the outstanding shares of capital
stock of each of the Company's subsidiaries is duly authorized,
validly issued, fully paid and nonassessable and owned, either
directly or indirectly,
by the Company, free and clear of all liens, pledges, security
interests, claims or other encumbrances. Except as set forth
above, there are no shares of capital stock of the Company
authorized, issued or
outstanding and except as set forth above, there are no
preemptive rights nor any outstanding subscriptions, options,
warrants, rights, convertible or exchangeable securities or other
agreements or commitments
of any character relating to the issued or unissued capital stock
or other securities of the Company or any of its subsidiaries.
After the Effective Time the Surviving Corporation will have no
obligation to
issue, transfer or sell any Shares or common stock of the
Surviving Corporation pursuant to any Benefit Plan (as defined in
Section 6.1(d)).
(c) Corporate Authority. Subject only to
approval of this Agreement by the holders of a majority of the
outstanding Shares, the Company has the requisite corporate power
and authority
and has taken all corporate action necessary in order to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement is a valid and binding
agreement
of the Company enforceable against the Company in accordance with
its terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and similar laws relating to or
affecting
creditors' rights generally and court decisions with respect
thereto or to general principles of equity.
(d) Governmental Filings; No Violations.
(i) Except as set forth in the Disclosure Letter, other than the
filing required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976
(the "HSR Act"), the filing of a proxy statement with the
Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated
thereunder, filings provided for in Section 1.3, and any required
approval under West Virginia law (the
"Governmental Filings"), no notices, reports or other filings are
required to be made by the Company with, nor are any consents,
registrations, approvals, permits or authorizations required to
be obtained
by the Company from, any governmental or regulatory authority,
agency, commission or other entity, domestic or foreign
("Governmental Entity"), in connection with the execution and
delivery of this
Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby, the failure to make or
obtain any or all of which is reasonably likely to have a
Material Adverse
Effect, or could prevent, materially delay or materially burden
the transactions contemplated by this Agreement.
(ii) Except as to matters described in the
Disclosure Letter, the execution and delivery of this Agreement
by the Company do not, and the consummation by the Company of the
transactions
contemplated by this Agreement will not, constitute or result in
(i) a breach or violation of, or a default under, the Articles or
By-Laws of the Company or the comparable governing instruments of
any of
its subsidiaries, (ii) except as disclosed in the Company Reports
(as hereinafter defined), a breach or violation of, a default
under or the triggering of any payment or other material
obligations pursuant
to, any of the Company's existing Benefit Plans or any grant or
award made under any of the foregoing, (iii) a breach or
violation of, or a default under, the acceleration of or the
creation of a lien, pledge,
security interest or other encumbrance on assets (with or without
the giving of notice or the lapse of time) pursuant to, any
provision of any agreement, lease, contract, note, mortgage,
indenture, arrangement
or other obligation ("Contracts") of the Company or any of its
subsidiaries or any law, rule, ordinance or regulation or
judgment, decree, order, award or governmental or
non-governmental permit or license
to which the Company or any of its subsidiaries is subject or
(iv) any change in the rights or obligations of any party under
any of the Contracts, except, in the case of clause (iii) or (iv)
above, for such
breaches, violations, defaults, accelerations or changes that,
alone or in the aggregate, are not reasonably likely to have a
Material Adverse Effect or that could not prevent, materially
delay or materially
burden the transactions contemplated by this Agreement. The
Disclosure Letter sets forth, to the best knowledge of the
officers of the Company, a list of any consents required under
any Contracts to be
obtained prior to consummation of the transactions contemplated
by this Agreement (whether or not subject to the exception set
forth with respect to clause (iii) above). The Company will use
its best
reasonable efforts to obtain the consents referred to in the
Disclosure Letter.
(e) Company Reports; Financial Statements.
The Company has delivered to Parent each registration statement,
schedule, report, proxy statement or information statement
publicly filed
by it since June 30, 1994 ("Audit Date"), including, without
limitation, the Company's Annual Report on Form 10-K for the year
ended June 30, 1994, each in the form (including exhibits and any
amendments
thereto) filed with the SEC (collectively, the "Company
Reports"). As of their respective dates, the Company Reports did
not, and any Company Reports filed with the SEC subsequent to the
date hereof
will not, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances in which
they were made, not misleading. Each of the consolidated balance
sheets included in or incorporated by reference into the Company
Reports (including the related notes and schedules) fairly
presents the
consolidated financial position of the Company and its
subsidiaries as of its date and each of the consolidated
statements of income and of changes in stockholders' equity
included in or incorporated by
reference into the Company Reports (including any related notes
and schedules) fairly presents the results of operations, and
changes in stockholders' equity, as the case may be, of the
Company and its
subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit
adjustments which will not be material in amount or effect), in
each case in accordance
with generally accepted accounting principles consistently
applied during the periods involved, except as may be noted
therein. Other than the Company Reports, the Company has not
filed any other definitive
reports or statements with the SEC since June 30, 1994. To the
Company's best knowledge, except as set forth in the Disclosure
Letter, the Company Reports set forth all refund obligations of
the Company
and any other regulatory obligations which are reasonably likely
to have a Material Adverse Effect.
(f) Absence of Certain Changes. Except as
disclosed in the Company Reports filed with the SEC prior to the
date hereof or in the Disclosure Letter, since June 30, 1994, the
Company
and its subsidiaries have conducted their respective businesses
only in, and have not engaged in any material transaction other
than according to, the ordinary and usual course of such
businesses and there
has not been (i) any Material Adverse Change (as defined in
Section 9.10 hereof) in the Company and its subsidiaries taken as
a whole or any development or combination of developments of
which
management of the Company has knowledge which is reasonably
likely to result in any Material Adverse Change; (ii) any
declaration, setting aside or payment of any dividend or other
distribution with respect
to the capital stock of the Company; or (iii) any change by the
Company in accounting principles, practices or methods. Since
June 30, 1994, except as disclosed in the Company Reports filed
with the SEC
prior to the date hereof, except as set forth in the Disclosure
Letter and other than in the ordinary course, there has not been
any increase in the compensation payable or which could become
payable by
the Company and its subsidiaries to their officers or key
employees, or any amendment of any Benefit Plans or collective
bargaining agreements.
(g) Litigation and Liabilities. Except as
disclosed in the Company Reports filed with the SEC prior to the
date hereof or in the Disclosure Letter, there are no (i) civil,
criminal or admin-
istrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the knowledge of the management of the
Company, threatened against the Company or any of its
subsidiaries or
(ii) obligations or liabilities, whether or not accrued,
contingent or otherwise, including, without limitation, those
relating to matters involving any Environmental Law (as
hereinafter defined), or any other
facts or circumstances of which the management of the Company is
aware that could result in any claims against or obligations or
liabilities of the Company or any of its subsidiaries, that,
alone or in the
aggregate, are reasonably likely to have a Material Adverse
Effect.
(h) Employee Benefits. (i) The
descriptions in the Company Reports of all Benefit Plans required
to be described therein are accurate in all material respects.
The Benefit Plans and
all other benefit plans, contracts or arrangements (regardless of
whether they are funded or unfunded or foreign or domestic)
covering employees or former employees of the Company and its
subsidiaries
(the "Employees"), including, but not limited to, "employee
benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") are
listed in
Schedule 5.1(h). True and complete copies of all Benefit Plans
and such other benefit plans, contracts or arrangements,
including, but not limited to, any trust instruments and/or
insurance contracts, if
any, forming a part of any such plans and agreements, and all
amendments thereto, as well as all collective bargaining
agreements and all amendments thereto, as well as any side
letters and memoranda
of agreement, have been made available to Parent.
(ii) All employee benefit plans, other than
"multiemployer plans" within the meaning of Sections 3(37) or
4001(a)(3) of ERISA, covering Employees (the "Plans"), to the
extent subject to
ERISA, are in substantial compliance with ERISA. Except as set
forth in the Disclosure Letter, each Plan which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA
("Pension
Plan") and which is intended to be qualified under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"),
has received a favorable determination letter from the Internal
Revenue
Service, and the Company is not aware of any circumstances likely
to result in revocation of any such favorable determination
letter. There is no pending or threatened litigation relating to
the Plans which,
if adversely determined, would have a Material Adverse Effect on
the Company and its subsidiaries. Neither the Company nor any
subsidiary has engaged in a transaction with respect to any Plan
that,
assuming the taxable period of such transaction expired as of the
date hereof, could subject the Company or any of its subsidiaries
to a tax or penalty imposed by either Section 4975 of the Code or
Section
502(i) of ERISA in an amount which would have a Material Adverse
Effect.
(iii) No liability under Subtitle C or D of
Title IV of ERISA has been or, based on any prior event known to
the Company, is expected to be incurred by the Company or any
subsidiary
with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by any of them, or the
single-employer plan
of any entity which is considered one employer with the Company
under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). Neither the Company nor any ERISA Affiliate has had
an obligation to contribute to a "multi-employer plan" within the
meaning of Section 4001(a)(3) of ERISA. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA
for which the
30-day reporting requirement has not been waived, has been
required to be filed for any Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(iv) All contributions required to be made
under the terms of any Plan have been timely made. Neither any
Pension Plan nor any single-employer plan of an ERISA Affiliate
has an
"accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither the Company nor its Subsidiaries has provided, or is
required
to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(v) Except as set forth in the Disclosure
Letter, under each Pension Plan which is a single-employer plan
and which is subject to Title IV of ERISA, as of the last day of
the most recent
plan year ended prior to the date hereof, the actuarially
determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the
basis of the actuarial
assumptions contained in the Plan's most recent actuarial
valuation), did not exceed the then current value of the assets
of such Plan, and there has been no Material Adverse Change in
the financial condition
of such Plan since the last day of the most recent plan year.
(vi) Neither the Company nor the
subsidiaries have any obligations for retiree health and life
benefits under any Plan, except as set forth on Schedule 5.1(h).
Except as set forth in the
Disclosure Letter, there are no restrictions on the rights of the
Company or the subsidiaries to amend or terminate any such Plan
without incurring any liability thereunder.
(vii) There are no Benefit Plans covering
foreign Employees.
(i) Brokers and Finders. Neither the
Company nor any of its officers, directors or employees has
employed any broker or finder or incurred any liability for any
brokerage fees, commissions
or finders fees in connection with the transactions contemplated
herein, except that the Company has employed Allen & Company
Incorporated as its financial advisors, the arrangements with
which have
been disclosed in writing to Parent prior to the date hereof.
(j) Takeover Statutes. Other than any
regulatory Governmental Filings, no "fair price", "moratorium",
"control share acquisition" or other similar antitakeover statute
or regulation is applicable
to the Company, the Shares, the Merger or the transactions
contemplated hereby.
(k) Environmental Matters. Except as
disclosed in the Company Reports filed with the SEC prior to the
date hereof or in the Disclosure Letter and except for such
matters that, alone
or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on the Company and its subsidiaries taken as a
whole, (i) the Company and its subsidiaries have complied with
all applicable
Environmental Laws (as hereinafter defined); (ii) to the
knowledge of the Company the properties presently or formerly
owned or operated by the Company or its subsidiaries (including,
without limitation,
soil, groundwater or surface water on, under or adjacent to the
properties, and buildings thereon) (the "Properties") are not
contaminated with any Hazardous Substance (as hereinafter
defined) and do
not otherwise, except in compliance with applicable Environmental
Law, contain any Hazardous Substance, underground storage tanks
or asbestos and have not been used as a dump, sanitary landfill
or
hazardous waste disposal site (provided, however, that with
respect to Properties formerly owned or operated by the Company,
such representation is limited to the period prior to the
disposition of such
Properties by the Company or one of its subsidiaries); (iii)
neither the Company nor any of its subsidiaries has received any
notices, demand letters or request for information from any
Governmental Entity
or any third party indicating that the Company may be in
violation of, or liable under, any Environmental Law and none of
the Company, its subsidiaries or the Properties are subject to
any court order,
administrative order or decree arising under any Environmental
Law, (iv) no Hazardous Substance has been disposed of,
transferred, released or transported from any of the Properties
during the time such
Property was owned or operated by the Company or one of its
subsidiaries, other than as permitted under applicable
Environmental Law, (v) there are no circumstances or conditions
involving the Company
or its subsidiaries that are reasonably likely to result in
liability or costs under any Environmental Law and (vi)
PCB-containing oils have never been present on the Properties.
"Environmental Law" means (i) any Federal,
state, foreign or local law, statute, ordinance, rule,
regulation, code, license, permit, authorization, approval,
consent, common law, legal doctrine,
order, judgment, decree, injunction, requirement or agreement
with any governmental entity, (x) relating to the protection,
preservation or restoration of the environment (including,
without limitation, air,
water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any other
natural resource), or to human health or safety, or (y) the
exposure to, or
the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production,
release or disposal of Hazardous Substances, in each case as
amended and as now in effect.
"Hazardous Substance" means any substance listed, defined,
designated or classified as hazardous, toxic or radioactive, or
otherwise regulated under any Environmental Law, whether by type
or by quantity,
including any petroleum and petroleum products and any substance
containing any such substance as a component.
(l) Taxes. Except as set forth in the
Disclosure Letter, all material federal, state, local and foreign
tax returns required to be filed by or on behalf of the Company
or any of its subsidiaries
have been timely filed or requests for extensions have been
timely filed and any such extension shall have been granted and
not have expired, and all such filed returns are complete and
accurate in all material
respects. All taxes required to be paid as shown on returns
filed by the Company have been paid in full or adequate provision
has been made for any such taxes on its balance sheet (in
accordance with
generally accepted accounting principles). As of the date of
this Agreement, there is no audit examination, deficiency or
refund litigation with respect to any taxes of the Company that
have resulted in
or might reasonably be expected to result in a determination that
would have a material adverse effect on it. All taxes, interest,
additions and penalties due with respect to completed and settled
examinations
or concluded litigation relating to the Company have been paid in
full or adequate provision has been made for any such taxes on
its balance sheet (in accordance with generally accepted
accounting
principles). The Company has not executed an extension or waiver
of any statute of limitations on the assessment or collection of
any material tax due that is currently in effect.
(m) Labor Matters. Except as set forth in
its Disclosure Letter, neither the Company nor any of its
subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract
or other agreement or understanding with a labor union or labor
organization, nor is it or any of its subsidiaries the subject of
any material proceeding asserting that it or any subsidiary has
committed an
unfair labor practice or is seeking to compel it to bargain with
any labor union or labor organization, nor is there any strike or
other labor dispute involving it or any of its subsidiaries
pending or, to its
knowledge, threatened.
(n) Compliance with Laws. Each of the
Company and its subsidiaries has all permits, licenses,
certificates of authority, orders, and approvals of, and has made
all filings, applications, and
registrations with, Governmental Entities that are required in
order to permit it to carry on its business as it is presently
conducted, except for such permits, licenses, certificates,
orders and approvals the
absence of which, individually or in the aggregate, have not had
and are not reasonably likely to have a Material Adverse Effect
on it; all such permits, licenses, certificates of authority,
orders and approvals
are in full force and effect, and, to the best of its knowledge,
no suspension or cancellation of any of them is threatened.
(o) Title to Assets. Each of the Company
and its subsidiaries has good and marketable title to its
properties and assets (other than property as to which it is
lessee), except for such defects
in title that, individually or in the aggregate, have not had and
are not reasonably likely to have a Material Adverse Effect.
(p) Regulation as a Utility. Mountaineer,
a direct wholly-owned subsidiary of the Company, operates and is
regulated as a public utility only in the State of West Virginia
and, except as
set forth in the Disclosure Letter, neither the Company nor any
of its subsidiaries is subject to regulation as a public utility
or public service company (or similar designation) by any other
state in the United
States or any foreign country. The Company is an exempt holding
company under Section 3(a)(1) of the Holding Company Act.
5.2. Representations and Warranties of
Parent and Merger Sub. Parent and Merger Sub represent and
warrant to the Company that:
(a) Corporate Organization and
Qualification. Each of Parent and Merger Sub is a corporation
duly organized, validly existing and in good standing under the
laws of its respective
jurisdiction of incorporation and is in good standing as a
foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it
require such qualification
except for such failure to so qualify or to be in such good
standing, which, when taken together with all other such
failures, is not reasonably likely to have a material adverse
effect on the financial condition,
properties, business or results of operations of Parent and its
subsidiaries, taken as a whole.
(b) Corporate Authority. Parent and Merger
Sub each has the requisite corporate power and authority and has
taken all corporate action necessary in order to execute and
deliver this
Agreement and to consummate the transactions contemplated hereby.
This Agreement is a valid and binding agreement of Parent and
Merger Sub enforceable against Parent and Merger Sub in
accordance
with its 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.
(c) Governmental Filings; No Violations.
(i) Other than the Governmental Filings and the filing of Form
U-3A-2 by Parent, no notices, reports or other filings are
required to be made
by Parent and Merger Sub with, nor are any consents,
registrations, approvals, permits or authorizations required to
be obtained by Parent and Merger Sub from, any Governmental
Entity in connection
with the execution and delivery of this Agreement by Parent and
Merger Sub and the consummation of the transactions contemplated
hereby by Parent and Merger Sub, the failure to make or obtain
any
or all of which could prevent, materially delay or materially
burden the transactions contemplated by this Agreement.
(ii) The execution and delivery of this
Agreement by Parent and Merger Sub do not, and the consummation
of the transactions contemplated hereby by Parent and Merger Sub
will not,
constitute or result in (i) a breach or violation of, or a
default under, the Articles or By-Laws of Parent or Merger Sub or
(ii) a breach or violation of, a default under, the acceleration
of or the creation
of a lien, pledge, security interest or other encumbrance on
assets (with or without the giving of notice or the lapse of
time) pursuant to, any provision of any Contract of Parent or
Merger Sub or any law,
ordinance, rule or regulation or judgment, decree, order, award
or governmental or non-governmental permit or license to which
Parent or Merger Sub is subject, except, in the case of clause
(ii) above,
for such breaches, violations, defaults or accelerations that,
alone or in the aggregate, could not prevent, materially delay or
materially burden the transactions contemplated by this
Agreement.
(d) Regulation as a Utility. None of
Parent, Merger Sub nor any of their respective subsidiaries is a
"public utility company" or a "holding company", "subsidiary
company" or "affiliate" of
any public utility company within the meaning of Sections
2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Holding Company Act.
(e) Ownership of Company Stock. On the
date hereof, the Parent Companies, their respective "subsidiary
companies" and "affiliates" (within the meaning of Sections
2(a)(8) and 2(a)(11)
of the Holding Company Act) and all persons with whom they might
constitute a "group" (as such term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended), collectively,
own less than five percent of the outstanding Shares.
ARTICLE VI
Covenants
6.1. Interim Operations of the Company.
The Company covenants and agrees that, from the date hereof to
the earlier of the Effective Time and the termination of this
Agreement (unless
Parent shall otherwise consent in writing, such consent to be
timely given and not to be unreasonably withheld, and except as
otherwise contemplated by this Agreement):
(a) the business of the Company and its
subsidiaries shall be conducted only in the ordinary and usual
course and, to the extent consistent therewith, each of the
Company and its subsidiaries
shall use its best efforts to preserve its business organization
intact and maintain its existing relations with customers,
suppliers, employees and business associates; provided, however,
that, without limitation,
the Company shall be entitled to file a request for increased
base rates with the Public Service Commission of West Virginia
(the "PSCVW");
(b) the Company shall not (i) sell or
pledge or agree to sell or pledge any stock owned by it in any of
its subsidiaries; (ii) amend its Articles or By-Laws; (iii)
split, combine or reclassify
the outstanding Shares; or (iv) declare, set aside or pay any
dividend or distribution payable in cash, stock or property with
respect to the capital stock of the Company;
(c) neither the Company nor any of its
subsidiaries shall (i) issue, sell, pledge, dispose of or
encumber any additional shares of, or securities convertible or
exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire,
any shares of its capital stock of any class of the Company or
its subsidiaries or any other property or assets except that, in
the case of the
Company, Shares may be issued pursuant to options outstanding on
the date hereof under the Stock Plan; (ii) transfer, lease,
license, guarantee, sell, mortgage, pledge, dispose of or
encumber any assets
or incur or modify any indebtedness or other liability other than
in the ordinary and usual course of business; (iii) acquire
directly or indirectly by redemption or otherwise any shares of
the capital stock
of the Company; or (iv) authorize individual capital expenditures
in excess of $500,000 or, in the aggregate, in excess of $15
million (it being agreed that the Company shall inform Parent of
any individual
capital expenditures in excess of $250,000) or make any
acquisition of, or investment in, assets or stock of any other
person or entity in excess of $50,000;
(d) neither the Company nor any of its
subsidiaries shall grant any severance or termination pay to, or
enter into any employment or severance agreement with any
director, officer or other
employee of the Company or such subsidiaries; and neither the
Company nor any of its subsidiaries shall establish, adopt, enter
into, make any new grants or awards under or amend, any bonus,
profit sharing,
thrift, compensation, stock option, restricted stock, pension,
retirement, employee stock ownership, deferred compensation,
employment, termination, severance, "change of control" or other
plan, agreement,
trust, fund, policy or arrangement for the benefit of any
directors, officers or employees (the "Benefit Plans") or any
collective bargaining agreement, except for amendments required
by law and except that
(i) the Company may, in the ordinary course of business,
negotiate and enter into a renewed collective bargaining
agreement with the Oil, Chemical and Atomic Workers International
Union Locals 3-372
and 3-628 in Charleston and Huntington, West Virginia, following
expiration of their previous collective bargaining agreement on
January 5, 1995, or with any other union upon expiration of its
previous
collective bargaining agreement and (ii) the Board of Directors
of the Company, in its sole discretion, may extend the employment
contracts of Richard L. Grant, Michael S. Fletcher and W. Merwyn
Pittman
in accordance with the terms thereof;
(e) neither the Company nor any of its
subsidiaries shall, without consultation with Parent, settle or
compromise any material claims or litigation or, except in the
ordinary and usual course
of business, modify, amend or terminate any of its material
Contracts or waive, release or assign any material rights or
claims;
(f) neither the Company nor any of its
subsidiaries shall make any tax election or permit any insurance
policy naming it as a beneficiary or a loss payable payee to be
canceled or terminated
without notice to Parent, except in the ordinary and usual course
of business; and
(g) neither the Company nor any of its
subsidiaries will authorize or enter into an agreement to do any
of the foregoing.
6.2. Acquisition Proposals. (a) The
Company agrees that neither the Company nor any of its
subsidiaries nor any of the respective officers and directors of
the Company or any of its
subsidiaries shall, and the Company shall direct and use its
reasonable best efforts to cause its employees, agents and
representatives (including, without limitation, any investment
banker, attorney or
accountant retained by the Company or any of its subsidiaries)
not to, initiate or solicit, directly or indirectly, any
inquiries or the making of any proposal or offer (including,
without limitation, any proposal
or offer to shareholders of the Company) with respect to a
merger, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any
equity securities of,
the Company or any of its subsidiaries (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal")
or, except to the extent legally required for the discharge by
the Company's
Board of Directors of its fiduciary duties as determined in good
faith by such Board, after consultation with counsel, engage in
any negotiations concerning, or provide any confidential
information or data
to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise act to facilitate any effort
or attempt to make or implement an Acquisition Proposal. The
Company will
immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing and
will promptly request each
person which has heretofore executed a confidentiality agreement
in connection with its consideration of acquiring the Company to
return to the Company or destroy, in accordance with the terms of
such
confidentiality agreement, all confidential information
heretofore furnished to such person by or on behalf of the
Company. The Company will take the necessary steps to inform the
individuals or entities
referred to in the first sentence hereof of the obligations
undertaken in this Section 6.2. The Company will notify Parent
as promptly as practicable if any such inquiries or proposals are
received by, any
such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with the
Company or if the Board of Directors determines in accordance
with this Section 6.2
that its fiduciary duties require certain actions, provided, that
Parent agrees not to contact any parties identified by the
Company.
(b) If the Company has received a bona fide
written Acquisition Proposal that the Company's Board of
Directors determines in good faith, after consultation with its
financial advisors,
is more favorable, from a financial point of view, to the
shareholders of the Company than the Merger, taking into account
the financial responsibility of the party making the proposal and
such party's ability,
as then reasonably determinable by the Company, to obtain
regulatory approvals for the proposed transaction (a "Higher
Proposal"), the Company will give Parent written notice of the
Higher Proposal ten
business days before entering into any agreement with respect to
the Higher Proposal or as soon as practicable; provided, however,
that if the Company fails to give ten business days' notice to
Parent, such
agreement must expressly permit the Company to consider proposals
which are more favorable from a financial point of view than such
Higher Proposal, without entitling such other party to any fees
or
other compensation, including by the grant of an option. If
Parent does not make a counter proposal that
the Company's Board of Directors believes in good faith, after
consultation with its financial advisors, is more favorable, from
a financial point of view, to the shareholders of the Company
than such Higher
Proposal, the Company shall be free to enter into an agreement
with respect to, and consummate, the Higher Proposal and shall
have no obligation to continue to pursue the Merger during the
pendency
of the Higher Proposal, but this Agreement shall not terminate
until the earlier of (i) such consummation and (ii) termination
of this Agreement pursuant to Article VIII hereof. If the Higher
Proposal
is not consummated for any reason, this Agreement, including all
the Company's obligations hereunder, shall again be fully in
effect. The procedure in this paragraph (b) (including the
determination of
favorableness from a financial point of view) shall apply at any
time any third party shall make a proposal while there is a
pending transaction between Parent and the Company.
6.3. Meetings of the Company's
Shareholders. The Company will take, consistent with applicable
law and its Articles and By-Laws, all action necessary to convene
a meeting of holders
of Shares as promptly as practicable to consider and vote upon
the approval of this Agreement and the Merger. Subject to
fiduciary requirements of applicable law, the Board of Directors
of the Company
shall recommend such approval and the Company shall take all
lawful action to solicit such approval. At any such meeting of
the Company all of the Shares then owned by the Parent Companies
will be
voted, and Parent and Merger Sub will use their best efforts to
cause any shares owned by their respective "subsidiary
companies", "affiliates" or persons with whom they might
constitute a "group" (as such
terms are used in Section 5.2(e) above) to be voted, in favor of
approval of this Agreement. The Company's proxy statement with
respect to such meeting of shareholders (the "Proxy Statement"),
at the
date thereof and at the date of such meeting, will not include an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein,
in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply
to the extent that any such untrue statement of a material fact
or omission
to state a material fact was made by the Company in reliance upon
and in conformity with written information concerning the Parent
Companies furnished to the Company by Parent specifically for use
in the Proxy Statement. The Proxy Statement shall not be filed,
and no amendment or supplement to the Proxy Statement will be
made by the Company, without consultation with Parent and its
counsel.
6.4. Filings; Other Action. Each party
hereto shall cooperate with each other party and use all
reasonable efforts to promptly prepare and file all necessary
documentation, to effect all
necessary applications, notices, petitions, filings and other
documents, to obtain as promptly as practicable all necessary
permits, consents, approvals and authorizations of all third
parties and Governmental
Entities necessary or advisable to consummate the transactions
contemplated by this Agreement. Each party shall have the right
to review in advance, and to the extent practicable each will
consult the
other on, in each case subject to applicable laws relating to the
exchange of information, all the information relating to the
other party and any of its subsidiaries which appear in any
filing made with, or
written materials submitted to, any third party or any
Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto
shall act reasonably and as promptly as practicable. Each party
hereto agrees that it will keep the other party apprised of the
status of matters relating to completion of the transactions
contemplated herein.
Each party shall, and shall cause each of its subsidiaries to,
use its best efforts (i) to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements
which may be imposed
on such party or any of its subsidiaries with respect to the
Merger and, subject to the conditions set forth in Article VII
hereof, to consummate the transactions contemplated by this
Agreement and (ii) to
obtain (and to cooperate with the other party to obtain) any
permit, consent, approval or authorization of, or any exemption
by, any Governmental Entity and any other public or private third
party which
is required to be obtained by such party or any of its
subsidiaries in connection with the Merger and the transactions
contemplated by this Agreement, provided that nothing herein
shall be deemed to obligate
Parent and Merger Sub to take any action out of the ordinary
course with respect to the business, property or operations of
Parent or any of its subsidiaries or of the Surviving Corporation
or become subject
to any law, rule or regulation to which it is not presently
subject purely in order to obtain any such permit, consent,
approval, authorization or exemption. Each party will promptly
cooperate with and furnish
information to each other party in connection with any such
condition or restriction suffered by, or requirement imposed
upon, any of them or any of their subsidiaries in connection with
the foregoing.
6.5. Access. Upon reasonable notice, the
Company shall (and shall cause each of its subsidiaries to)
afford Parent's officers, employees, counsel, accountants and
other authorized
representatives ("Representatives") access, during normal
business hours throughout the period prior to the Effective Time
(or if earlier, the termination of this Agreement), to its
properties, books, Contracts
and records and, during such period, the Company shall (and shall
cause each of its subsidiaries to) furnish promptly to Parent all
information concerning its business, properties and personnel as
Parent
or its Representatives may reasonably request, provided that no
investigation pursuant to this Section 6.5 shall affect or be
deemed to modify any representation or warranty made by the
Company. Any
information so obtained by Parent will be subject to the terms of
the Confidentiality Agreement between Parent and the Company,
dated May 11, 1994.
6.6. Notification of Certain Matters. The
Company shall give prompt notice to Parent of: (a) any notice
of, or other communication relating to, any default or event
that, with notice or
lapse of time or both, would become a default, received by the
Company or any of its subsidiaries subsequent to the date of this
Agreement and prior to the Effective Time (or, if earlier, the
termination
of this Agreement), under any Contract material to the financial
condition, properties, business, results of operations or
prospects of the Company and its subsidiaries taken as a whole to
which the Company
or any of its subsidiaries is a party or is subject; (b) any
matter occurring after the date hereof which would have been
disclosed on the Disclosure Letter if it had occurred prior to
the date hereof; and
(c) any Material Adverse Change with respect to the Company and
its subsidiaries taken as a whole or the occurrence of any event
which, so far as reasonably can be foreseen at the time of its
occurrence,
is reasonably likely to result in any such Material Adverse
Change. Each of the Company and Parent shall give prompt notice
to the other party of any notice or other communication from any
third party
alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this
Agreement.
6.7. Publicity. The first press release
after the signing of this Agreement shall be a joint press
release, and thereafter the Company and Parent shall, to the
extent possible given their
respective disclosure obligations, consult with each other prior
to issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby
and prior to making
any filings with any Governmental Entity or with any national
securities exchange with respect thereto.
6.8. Stock Options. Prior to the Effective
Time, the Company shall take such actions as may be necessary
such that at the Effective Time each stock option outstanding
pursuant to the
Stock Plan ("Option"), whether or not then exercisable, shall be
canceled and only entitle the holder thereof, upon surrender
thereof, to receive an amount in cash equal to the difference
between the Merger
Consideration and the exercise price per Share of such Option
multiplied by the number of Shares subject to such Option.
6.9. Reincorporation of Parent. Prior to
the Effective Time, Parent shall take all actions necessary so
that it shall be a West Virginia corporation.
6.10. Financing. Parent shall use its best
efforts to obtain on reasonable terms all financing required to
consummate the transactions contemplated by this Agreement.
6.11. Indemnification. (a) From and after
the Effective Time, Parent agrees that it will indemnify and hold
harmless each present and former director and officer of the
Company, determined
as of the Effective Time (the "Indemnified Parties"), against any
costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing
or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after
the Effective Time, to the fullest extent that the Company would
have been permitted under West Virginia law and its By-Laws in
effect
on the date hereof to indemnify such person (and Parent shall
also advance expenses as incurred to the fullest extent permitted
under applicable law provided the person to whom expenses are
advanced
provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to
indemnification); provided that any determination required to be
made with respect to whether
an officer's or director's conduct complies with the standards
set forth under West Virginia law and the Company's By-Laws shall
be made by independent counsel jointly selected by the Surviving
Corporation
and the Indemnified Party.
(b) Any Indemnified Party wishing to claim
indemnification under paragraph (a) of Section 6.11, upon
learning of any such claim, action, suit, proceeding or
investigation, shall promptly
notify Parent thereof. In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) Parent or the Surviving
Corporation shall have the right
to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party and Parent shall not be
liable to such Indemnified Parties for any legal expenses of
other counsel or any other
expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, (ii) the Indemnified Parties
will cooperate in the defense of any such matter and (iii) Parent
shall not
be liable for any settlement effected without its prior written
consent; and provided further that Parent shall not have any
obligation hereunder to any Indemnified Party when and if a court
of competent
jurisdiction shall ultimately determine, and such determination
shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited
by applicable
law.
ARTICLE VII
Conditions
7.1. Conditions to Obligations of Parent
and Merger Sub. The respective obligations of Parent and Merger
Sub to consummate the Merger are subject to the fulfillment of
each of the
following conditions, any or all of which may be waived in whole
or in part by Parent or Merger Sub, as the case may be, to the
extent permitted by applicable law:
(a) Shareholder Approval. This Agreement
shall have been duly approved by the holders of a majority of the
Shares, in accordance with applicable law and the Articles and
By-Laws of
the Company;
(b) Representations and Warranties. The
representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects as
of the date of
this Agreement and as of the Closing Date as though made on and
as of the Closing Date, except as otherwise required by this
Agreement (provided that, to the extent that any executive
officer of Parent
had knowledge on the date of this Agreement that any such
representation or warranty was not true and correct in all
material respects as of the date of this Agreement, such matters
as to which knowledge
existed shall be waived with respect to this condition; and
provided, further, that any changes in the operating results of
the Company which are attributable to weather conditions or the
failure to request,
after consultation with Parent, or obtain increased base rates
from the PSCWV shall not be deemed material), and Parent shall
have received a certificate signed on behalf of the Company by
the Chairman,
President and Chief Executive Officer and by the Chief Financial
Officer of the Company to such effect;
(c) Performance of Obligations. The
Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement
at or prior to the Closing
Date, and Parent shall have received a certificate signed on
behalf of the Company by the Chairman, President and Chief
Executive Officer and by the Chief Financial Officer of the
Company to such effect;
(d) Governmental and Regulatory Consents.
The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated and,
other than
the filings provided for in Section 1.3, all Governmental Filings
required to be made prior to the Effective Time by the Company
with, and all consents, approvals and authorizations required to
be obtained
prior to the Effective Time by the Company from, any Governmental
Entity in connection with the execution and delivery of this
Agreement by the Company and the consummation of the transactions
contemplated hereby by the Company, Parent and Merger Sub, the
failure of which to obtain is reasonably likely to have a
Material Adverse Effect, shall have been made or obtained (as the
case may be),
all on terms reasonably satisfactory to Parent and the SEC shall
have taken no action which would cause Parent to reasonably
believe that, as a result of the Merger, it will not be an exempt
holding company
under Section 3(a)(1) of the Holding Company Act;
(e) Litigation. No United States or state
court or other Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any
statute, rule,
regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and
prohibits consummation of the transactions contemplated by this
Agreement
or imposes material restrictions on Parent or the Company in
connection with consummation of the Merger or with respect to
their business operations, either prior to or subsequent to the
Merger (collectively, an "Order"); and
(f) Legal Opinion. The Board of Directors
of Parent shall have received from Robinson & McElwee a written
opinion, dated as of the Effective Time, covering the due
incorporation and
good standing of the Company and Mountaineer and the matters set
forth in Section 5.1(c) hereof.
7.2. Conditions to Obligations of the
Company. The obligations of the Company to consummate the Merger
are subject to the fulfillment of each of the following
conditions, any or all
of which may be waived in whole or in part by the Company to the
extent permitted by applicable law:
(a) Shareholder Approval. This Agreement
shall have been duly approved by the holders of a majority of the
Shares, in accordance with applicable law and the Articles and
By-Laws of the Company;
(b) Representations and Warranties. The
representations and warranties of Parent and Merger Sub set forth
in this Agreement shall be true and correct in all material
respects as of the
date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except as otherwise required by
this Agreement, and the Company shall have received a certificate
signed
on behalf of Parent and Merger Sub by the respective chief
executive officers and chief financial officers of Parent and
Merger Sub to such effect;
(c) Performance of Obligations of Parent
and Merger Sub. Parent and Merger Sub shall each have performed
in all material respects all obligations required to be performed
by it under
this Agreement at or prior to the Closing Date, and the Company
shall have received certificates signed on behalf of Parent and
Merger Sub by the respective chief executives and by the chief
financial officers
of Parent and Merger Sub to such effect;
(d) Governmental Consents. The waiting
period applicable to the consummation of the Merger under the HSR
Act shall have expired or been terminated and, other than the
filings provided
for in Section 1.3, all Governmental Filings required to be made
prior to the Effective Time by Parent and Merger Sub with, and
all consents, approvals, permits and authorizations required to
be obtained
prior to the Effective Time by Parent and Merger Sub from, any
Governmental Entity in connection with the execution and delivery
of this Agreement by Parent and Merger Sub and the consummation
of the transactions contemplated hereby by Parent, Merger Sub and
the Company, the failure of which to obtain is reasonably likely
to have a Material Adverse Effect, shall have been made or
obtained (as the case may be);
(e) Order. There shall be in effect no Order;
(f) Fairness Opinion. The Board of
Directors of the Company shall have received from Allen & Company
Incorporated its written opinion, dated as of the date the Proxy
Statement is
first mailed to the Company's stockholders and not subsequently
withdrawn, and satisfactory in form and substance to such Board
in its sole discretion, that the consideration received by the
stockholders
of the Company in the Merger is fair to such stockholders; and
(g) Legal Opinion. The Board of Directors
of the Company shall have received from Goodwin & Goodwin a
written opinion, dated as of the Effective Time, covering the due
incorporation
and good standing of Parent and Merger Sub and the matters set
forth in Section 5.2(b) hereof.
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent. This
Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the
approval by holders
of Shares, by the mutual consent of Parent and the Company, by
action of their respective Boards of Directors.
8.2. Termination by Either Parent or the
Company. This Agreement may be terminated and the Merger may be
abandoned by action of the Board of Directors of either Parent or
the
Company if (i) the Merger shall not have been consummated by June
30, 1995 whether or not such date is before or after the approval
by holders of Shares, provided, that Parent may, upon written
notice,
in its sole discretion extend such termination date during the
pendency of any Higher Proposal and if such Higher Proposal is
not consummated for a reasonable period thereafter in order to
consummate
the Merger, or (ii) the approval of shareholders required by
Section 7.1(a) shall not have been obtained in a vote taken at a
meeting duly convened therefor.
8.3. Termination by Parent. This Agreement
may be terminated and the Merger may be abandoned at any time
prior to the Effective Time, before or after the approval by
holders of Shares,
by action of the Board of Directors of Parent, if (x) the Company
shall have failed to comply with any of the covenants or
agreements contained in this Agreement to be complied with or
performed by
the Company at or prior to such date of termination or breached
any of its representations and warranties which breach cannot be
cured or is not cured within a reasonable time following demand
therefor,
where such failure or breach has a Material Adverse Effect on the
Company and its subsidiaries taken as a whole, (y) the Company
shall have entered into an agreement with respect to a Higher
Proposal
in accordance with Section 6.2 hereof and such agreement shall be
in effect at the time of termination or (z) the Board of
Directors of the Company shall have withdrawn or modified in a
manner adverse
to Parent or Merger Sub its recommendation that shareholders
approve this Agreement or the Merger or the Board of Directors of
the Company, upon request by Parent, shall fail to reaffirm such
recommendation, or shall have resolved to do any of the
foregoing; provided, however, that a temporary suspension of such
Board's recommendation while it considers another bid shall not
trigger this clause
(z). In addition, subject to its obligations in Section 8.5(b)
hereof, Parent may terminate this Agreement (i) within five
business days after delivery of the Disclosure Letter if the
changes in such document
from the draft delivered as of the date hereof would, in the
aggregate, constitute a Material Adverse Change with respect to
the Company and its subsidiaries taken as a whole or (ii) on
November 12, 1994
if by that time it shall have failed to obtain or arrange for
financing for the transactions contemplated hereby on terms
reasonably satisfactory to it.
8.4. Termination by the Company. This
Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the
approval by the holders
of Shares by action of the Board of Directors of the Company, if
(x) Parent or Merger Sub shall have failed to comply in any
material respect with any of the covenants or agreements
contained in this
Agreement to be complied with or performed by Parent or Merger
Sub at or prior to such date of termination or breached in any
material respect any of its representations and warranties, which
breach
cannot be cured, or is not cured within a reasonable time
following demand therefor or (y) a Higher Proposal shall have
been consummated, provided that the Company shall have complied
with the provisions of Section 6.2.
8.5. Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and abandonment
of the Merger pursuant to this Article VIII, no party hereto (or
any
of its directors or officers) shall have any liability or further
obligation to any other party to this Agreement, except as
provided in Section 8.5(b) below and Section 9.2 and except that
nothing herein will
relieve any party from liability for any breach of this
Agreement.
(b) If (x) after the date hereof (i) any
corporation, partnership, person, other entity or group (as such
term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended)
other than Parent or Merger Sub or any of their respective
subsidiaries or affiliates (collectively, a "Person") shall have
become the beneficial owner of 51 percent or more of the
outstanding Shares, and
(ii) the holders of Shares do not approve this Agreement and the
Merger or (y) the Parent shall have terminated this Agreement
pursuant to Section 8.3(y) hereof and the transaction
contemplated by the
agreement referred to in Section 8.3(y) shall have been
consummated, then the Company, if requested by Parent, shall
promptly, but in no event later than (A) in the case of (x)
above, two days after the
later of (i) and (ii) in (x), or (B) in the case of (y) above,
two days after the later of such request and consummation, pay
Parent a fee of $3.5 million which amount shall be payable in
same day funds,
provided, that no fee shall be payable pursuant to this Section
8.5(b) if Parent shall be in material breach of its obligations
hereunder. If Parent shall terminate this Agreement pursuant to
subsection (ii)
of the last sentence of Section 8.3, Parent shall within two days
of such termination pay the Company a fee of $3.5 million by wire
transfer of same day funds. The Company and Parent acknowledge
that
the agreements contained in this Section 8.5(b) are an integral
part of the transactions contemplated in this Agreement, and
that, without these agreements, they would not enter into this
Agreement;
accordingly, if either party fails to promptly pay the amount due
pursuant to this Section 8.5(b), and, in order to obtain such
payment, the other party commences a suit which results in a
judgment against
such party for the fee set forth in this Section 8.5 (b), such
party shall pay to the other party its costs and expenses
(including reasonable attorneys' fees) in connection with such
suit, together with interest
on the amount of the fee at the prime rate of Morgan Guaranty
Trust Company of New York on the date such payment was required
to be made.
ARTICLE IX
Miscellaneous and General
9.1. Payment of Expenses. Whether or not
the Merger shall be consummated, each party hereto shall pay its
own expenses incident to preparing for, entering into and
carrying out this
Agreement and the consummation of the Merger.
9.2. Survival. The agreements of the
Company, Parent and Merger Sub contained in Sections 4.2 (but
only to the extent that such Section expressly relates to actions
to be taken after the
Effective Time), 4.3, 4.4, 6.8 and 9.1 shall survive the
consummation of the Merger. The agreements of the Company,
Parent and Merger Sub contained in Sections 8.5 and 9.1 or in the
last sentence of
Section 6.5 shall survive the termination of this Agreement. All
other representations, warranties, agreements and covenants in
this Agreement shall not survive the consummation of the Merger
or the termination of this Agreement.
9.3. Modification or Amendment. Subject to
the applicable provisions of the WVCA, at any time prior to the
Effective Time, the parties hereto may modify or amend this
Agreement, by
written agreement executed and delivered by duly authorized
officers of the respective parties and, if Parent so requests,
the Company agrees to amend this Agreement so that the Company is
the Surviving
Corporation.
9.4. Waiver of Conditions. The conditions
to each of the parties' obligations to consummate the Merger are
for the sole benefit of such party and may be waived by such
party in whole
or in part to the extent permitted by applicable law.
9.5. Counterparts. For the convenience of
the parties hereto, this Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an
original instrument, and all such counterparts shall together
constitute the same agreement.
9.6. Governing Law. This Agreement shall
be governed by and construed in accordance with the laws of the
State of West Virginia.
9.7. Notices. Any notice, request,
instruction or other document to be given hereunder by any party
to the others shall be in writing and delivered personally or
sent by registered or certified
mail, postage prepaid, courier service or facsimile transmission
if to Parent or Merger Sub, addressed to Parent or Merger Sub, as
the case may be, at Energy Corporation of America, 4643 South
Ulster
Street, Suite 1100, Denver, Colorado, 80237, Attention: John
Mork, facsimile (303) 694-2763 (with copies to Thomas Goodwin,
Goodwin & Goodwin, 1500 One Valley Square, Charleston, W. Va.
25301,
facsimile (304) 344-9692 and Benjamin F. Stapleton, Sullivan &
Cromwell, 125 Broad Street, New York, New York 10004, facsimile
(212) 558-3342); and if to the Company, addressed to the Company
at
Grand Bay Plaza, 2665 South Bayshore Drive, Coconut Grove,
Florida 33133, Attention: President, facsimile (305) 358-5468
(with a copy to Mark A. Rosenbaum, Esq., Stroock & Stroock &
Lavan, 7 Hanover
Square, New York, New York 10004, facsimile (212) 806-6006), or
to such other persons or addresses as may be designated in
writing by the party to receive such notice.
9.8. Entire Agreement, etc. This Agreement
(including the Disclosure Letter and any exhibits, schedules or
Annexes hereto) (a) constitutes the entire agreement, and
supersedes all other
prior agreements, understandings, representations and warranties
both written and oral, among the parties, with respect to the
subject matter hereof, and (b) shall not be assignable by
operation of law or
otherwise and is not intended to create any obligations to, or
rights in respect of, any persons other than the parties hereto;
provided, however, that Parent may designate, by written notice
to the Company,
another wholly-owned direct or indirect subsidiary to be a
Constituent Corporation in lieu of Merger Sub, in the event of
which, all references herein to Merger Sub shall be deemed
references to such other
subsidiary except that all representations and warranties made
herein with respect to Merger Sub as of the date of this
Agreement shall be deemed representations and warranties made
with respect to such
other subsidiary as of the date of such designation.
9.9. Definition of "Subsidiary". When a
reference is made in this Agreement to a subsidiary of a party,
unless expressly otherwise provided herein the word "subsidiary"
shall mean any
corporation or other organization whether incorporated or
unincorporated of which at least a majority of the securities or
interests having by the terms thereof ordinary voting power to
elect at least a majority
of the board of directors or others performing similar functions
with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by
any one or more of
its subsidiaries, or by such party and one or more of its
subsidiaries.
9.10. Definition of "Material Adverse
Effect" and "Material Adverse Change". As used in this
Agreement, a "Material Adverse Effect" or a "Material Adverse
Change" shall mean, with
respect to any person or persons, a material adverse effect on,
or a material adverse change in, the financial conditions,
properties, business, results of operations or prospects of such
person or persons;
provided, however, that a Material Adverse Effect or a Material
Adverse Change shall not include any general economic and market
changes including, without limitation (i) any general suspension
of trading
in, or limitation on prices for, or material change in prices of,
securities generally on any national securities exchange or in
the over-the-counter markets, (ii) the declaration of a banking
moratorium or any
suspension of payments in respect of banks in the United States,
(iii) the commencement or continuation of a war, armed
hostilities or other international or nation calamity directly or
indirectly involving
the United States; (iv) any limitation (whether or not mandatory)
by any U.S. governmental authority or agency on the extension of
credit by banks or other financial institutions; (v) any general
decline in
economic conditions in the gas utility industry as a whole or in
general economic conditions in any geographic region of the
United States; and (vi) in the case of any of the events
described in the foregoing
clauses (i) through (v), a material acceleration or worsening
thereof.
9.11. Obligation of Parent. Whenever this
Agreement requires Merger Sub to take any action, such
requirement shall be deemed to include an undertaking on the part
of Parent to cause Merger Sub to take such action.
9.12. Captions. The Article, Section and
paragraph captions herein are for convenience of reference only,
do not constitute part of this Agreement and shall not be deemed
to limit or otherwise affect any of the provisions hereof.
IN WITNESS WHEREOF, this Agreement has been
duly executed and delivered by the duly authorized officers of
the parties hereto on the date first hereinabove written.
ENERGY CORPORATION OF AMERICA
By /s/ John Mork
EASTERN SYSTEMS CORPORATION
By /s/ John Mork
ALLEGHENY & WESTERN ENERGY CORPORATION
By /s/ John G. McMillian
Schedule 5.1(h)
Benefit Plans, Contracts or Arrangements
Schedule
Reference Discussion
5.1(h)(i) Allegheny & Western Energy Corp./Gas Access Systems
A. Insurance benefits provided at no cost to
employees through fully-insured coverage contract with The
Guardian Life Insurance Company of America.
Major medical with prescription drug benefits
Life
Accidental death and dismemberment
Weekly disability
Long-term disability - administrative employees only
Dental
B. Employment Agreement - W. Merwyn Pittman, Vice
President, Chief Financial Officer and Treasurer
C. 1987 Stock Option Plan - Options to purchase
1,500,000 shares authorized
D. Key Executives' Supplemental Retirement Benefit Plan
E. Key Employee Reassurance Letters
F. Executive Fringe Benefits - Company auto, personal
financial services, club dues, tax reimbursements
G. Participant in Retirement Income Plan for Mountaineer Gas
Company
Mountaineer Gas Company
A. Insurance benefits provided at various cost
levels and deductibles through combination of self-funded/fully
insured plans. Life, major medical, dental and vision plans are
available to early retirees who meet certain qualifications.
Life
Accidental death and dismemberment
Voluntary personal accident
Long-term disability
Major medical
Dental
Vision
B. Employment Agreements - Richard L. Grant, President; Michael
S.Fletcher, Senior Vice President, Chief Financial Officer
C. Participant in 1987 Stock Option Plan
D. Participant in A&W Key Executives' Supplemental Retirement
Benefit Plan
E. Participant in A&W Key Employee Reassurance Letters
F. Executive Fringe Benefits - Company auto, personal financial
services, club dues, tax reimbursements
G. Retirement Income Plan for Mountaineer Gas Company
H. Employees' Thrift Plan of Mountaineer Gas Company
I. Collective bargaining agreements (6)
Beckley, WV Local 3-628 of Oil, Chemical and Atomic Workers
International Union
Charleston and Huntington, WV Locals 3-372, 3-628 of Oil,
Chemical and Atomic Workers International Union
Weirton, WV Local 496 of The Utility Workers Union of
America
Elkins, WV Local 420 of The Utility Workers Union of
America
Wheeling and Elkins, WV Local 420-496 (Clerical) of The
Utility Workers Union of America
Wheeling, WV Local 420 of The Utility Workers Union of
America
FIRST AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER
FIRST AMENDMENT (the "First Amendment"), dated as of
February 3, 1995, among Allegheny & Western Energy Corporation, a
West Virginia corporation (the "Company"), Energy Corporation
of America, a Colorado corporation ("Parent"), Eastern Systems
Corporation, a West Virginia corporation and a wholly-owned
subsidiary of Parent ("ESC"), and Appalachian Eastern Systems,
Inc., a West
Virginia corporation and an indirect wholly-owned subsidiary of
Parent ("AESI"), to the AGREEMENT AND PLAN OF MERGER, dated as of
September 30, 1994, among the Company, Parent and ESC
(the "Merger Agreement").
RECITALS
WHEREAS, the Boards of Directors of Parent and the
Company each determined that it is in the best interests of their
respective shareholders for Parent to acquire the Company upon
the terms
and subject to the conditions set forth in the Merger Agreement;
and
WHEREAS, the Company, Parent, ESC and AESI desire to
amend the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and of
the representations, warranties, covenants and agreements
contained herein the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms used but
not defined herein shall have the meanings ascribed to them in
the Merger Agreement.
2. Amendment.
2.1 Parties to the Merger. All references to
"Merger Sub" in the Merger Agreement shall be deemed to refer to
AESI as of the date of this First Amendment.
2.1 The Merger. Section 1.1 of the Merger
Agreement shall be deleted and replaced in its entirety with the
following:
Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3) Merger Sub
shall be merged with and into the Company and the separate
corporate existence
of Merger Sub shall thereupon cease (the "Merger").
The Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving
Corporation") and shall
continue to be governed by the laws of the State of
West Virginia and the separate corporate existence of the Company
with all its rights, privileges, immunities, powers and
franchises shall continue
unaffected by the Merger. The Merger shall have the
effects specified in the West Virginia Corporation Act (the
"WVCA").
2.2 Articles of Incorporation and By-Laws of the
Surviving Corporation. Sections 2.1 and 2.2 of the Merger
Agreement shall be deleted and replaced in their entirety with
the following:
2.1 The Articles of Incorporation. The Articles
of Incorporation ("Articles") of the Company in effect at the
Effective Time shall be the Articles of the Surviving
Corporation, until duly amended
in accordance with the terms thereof and the WVCA.
2.2 The By-Laws. The By-Laws of the Company in
effect at the Effective Time shall be the By-Laws of the
Surviving Corporation, until duly amended in accordance with the
terms thereof and the WVCA.
2.3 Conversion or Cancellation of Shares in the
Merger. Paragraph 4.1(c) of the Merger Agreement shall be
deleted and replaced in its entirety with the following:
At the Effective Time, each share of Common
Stock, par value $1.00 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Merger
Sub or the holders of such shares, be converted into one share of
Common Stock of the Surviving Corporation.
2.4 Modification or Amendment. Section 9.3 of
the Merger Agreement shall be amended by the deletion of the
phrase "and, if the Parent so requests, the Company agrees to
amend this Agreement so that the Company is the Surviving
Corporation."
3. Counterparts. For the convenience of the
parties hereto, this First Amendment may be executed in any
number of counterparts, each such counterpart being deemed to be
an original instrument, and all such counterparts shall together
constitute the same agreement.
4. Merger Agreement. Except as herein
expressly amended, the Merger Agreement is ratified and confirmed
in all respects and shall remain in full force and effect in
accordance with its
terms. All references to the Merger Agreement shall mean such
Agreement as amended hereby and as may in the future be amended,
restated, supplemented or modified from time to time.
5. Governing Law. This First Amendment shall
be governed by and construed in accordance with the laws of the
State of West Virginia.
IN WITNESS WHEREOF, this First Amendment has been duly
executed and delivered by the duly authorized officers of the
parties hereto as of the date first hereinabove written.
ENERGY CORPORATION OF AMERICA
By /s/ John Mork
EASTERN SYSTEMS CORPORATION
By /s/ John Mork
APPALACHIAN EASTERN SYSTEMS, INC.
By /s/ John Mork
ALLEGHENY & WESTERN ENERGY CORPORATION
By /s/ John G. McMillian
APPENDIX B
April 13, 1995
The Board of Directors of
Allegheny & Western Energy Corporation
300 Capitol Street, Suite 1600
Charleston, West Virginia 25301
Gentlemen:
We understand that Allegheny & Western Energy Corporation, a West
Virginia corporation (the "Company"), is contemplating a merger
(the "Merger") with Appalachian Eastern Systems, Inc., a West
Virginia
corporation ("AESI") and an indirect wholly-owned subsidiary of
Energy Corporation of America, a Colorado corporation ("ECA"),
pursuant to an Agreement and Plan of Merger dated as of September
30, 1994 and amended as of February 3, 1995 (the "Agreement of
Merger") among the Company, AESI, ECA and Eastern Systems
Corporation, a West Virginia corporation and wholly owned
subsidiary
of ECA. Subject to its terms and conditions, the Agreement of
Merger will entitle the holders of the shares of common stock,
par value $0.01, of the Company (the "Shares") to convert such
Shares into
the right to receive $12.00 per share net to the seller in cash
(the "Merger Consideration") at the closing of the Merger.
At your request, this will confirm our oral opinion delivered to
you on September 27, 1994 as to the fairness, from a financial
point of view, of the Merger Consideration to be received by the
holders of
Shares (other than ECA and its subsidiaries) under the Agreement
of Merger.
Allen & Company Incorporated ("Allen"), as part of its investment
banking business, is regularly engaged in the valuation of
businesses and the securities of such businesses in connection
with mergers and
acquisitions, negotiated underwritings, private placements and in
valuations for corporate and other purposes. Over the years
Allen has provided various investment banking and financial
advisory services
to the Company, and in June, 1994 the Company engaged Allen to
act as its financial advisor in connection with its evaluation of
strategic alternatives, including a possible sale or disposition
of stock or
assets, financing or investment or other transactions involving
the Company or its business, and including responding to various
unsolicited inquiries that had been received by the Company
regarding such
a transaction. We direct your attention to the engagement letter
between the Company and Allen for the specific terms of such
engagement. In addition, as you know, Harold M. Wit, a managing
director
of Allen, is a director and stockholder of the Company. Allen
owns an aggregate of 728,024 Shares of the Company, and Mr. Wit
and certain other persons who are officers or directors of Allen
own an aggregate of 724,706 Shares of the Company.
In arriving at our opinion set forth below, we have
conducted reviews, performed analyses and participated in
discussions as follows:
(i) our review of the Agreement of Merger,
including the exhibits thereto;
(ii) our review and analyses of the Company's
Annual Reports to Stockholders and Annual Reports on Form 10-K
for each of the fiscal years ended June 30, 1990 through 1994 and
the Company's Quarterly Reports on Form 10-Q for
the quarter ended September 30, 1994 and the six months ended
December 31, 1994, in addition to certain other historical
business and financial information of the Company made
available to us by the Company;
(iii) our review of a draft of the Proxy Statement
relating to the Annual Meeting of Stockholders to be held on May
16, 1995 regarding the approval of the Merger;
(iv) our discussions with the senior management
of the Company regarding the Company's past and current financial
performance and current financial condition;
(v) our review of information regarding the
Company's future prospects, which was prepared by the Company's
management, as well as our discussions with the Company's senior
management regarding the Company's future business,
operations and prospects;
(vi) a review of certain information from
publicly available sources regarding the financial condition, the
historical results of operations and future business prospects of
certain public companies which we deemed to be relevant to our
analysis of the Merger and our comparison of such information to
the respective information of the Company;
(vii) a review of certain information from
publicly available sources regarding the terms and conditions of
certain acquisitions and other transactions which we deemed to be
relevant to our analysis of the Merger and our comparison of such
information to the terms of the Agreement of Merger;
(viii) our review of the historical and current
market prices, trading volumes and ownership of the Shares and
market data for publicly traded securities of other companies we
believe to be comparable to the Company; and
(ix) our performance of such other financial
studies, analyses and investigations, and review of such other
information as we deemed appropriate to enable us to render our
opinion.
In our review, we have also taken into account an assessment of
general economic, market and financial conditions and certain
industry trends and related matters. Our opinion necessarily is
based upon
conditions as they exist and can be evaluated on the date hereof.
In conducting our analysis and arriving at our opinion
hereinafter expressed, we have assumed and relied upon the
accuracy and completeness of all of the financial and other
information provided
to us by the Company, or that is publicly available, and have not
attempted to independently verify any of such information. We
were not retained to and have not made an independent evaluation
or
conducted any appraisal of the assets and liabilities of the
Company, nor have we been furnished with any such evaluation or
appraisal. With respect to information relating to the future
business, operations
and prospects of the Company, we have relied solely and
exclusively upon information prepared by the Company's management
and provided to us by the Company as set forth above, and we have
been
advised, and have so assumed, that such information reflects the
best currently available estimates and judgments of the Company
with respect to such information.
For purposes of the opinion hereby expressed, we have
not been asked to consider, and we have not considered, the
effect of any federal, state or local tax laws on the Company or
the holders of
Shares and have confined our review to the receipt by the holders
of Shares of the Merger Consideration. Furthermore, the opinion
hereby expressed does not constitute a recommendation by our firm
that any holder of the Shares vote to approve the Merger.
Based upon and subject to the foregoing, it is our
opinion that, as of the date hereof, the Merger Consideration to
be received by the holders of Shares (other than ECA and its
subsidiaries) under
the terms of the Agreement of Merger is fair, from a financial
point of view, to such holders of Shares.
This letter is addressed to the Board of Directors of
the Company and may not be relied upon, quoted, or made available
to any third party without our prior written consent, except for
its inclusion
in full in the Proxy Statement to be disseminated to the
Company's shareholders in connection with their consideration of
the Agreement of Merger and in any other filings by the Company
required under
applicable securities laws in connection with the Agreement of
Merger. The opinion rendered herein is given as of the date
hereof, and is limited in scope and subject matter as set forth
herein. No other
opinions should be inferred beyond the opinion expressly stated
herein.
Very truly yours,
ALLEN & COMPANY INCORPORATED
By:/s/ Richard L. Fields
Richard L. Fields
Managing Director
APPENDIX C
WEST VIRGINIA CORPORATION ACT
Section 31-1-123. RIGHTS OF DISSENTING SHAREHOLDERS; PROCEDURE
FOR PURCHASING OF DISSENTING SHAREHOLDERS' SHARES; CIVIL ACTION
FOR DETERMINING VALUE OF SHARES; PROCEDURE FOR TRANSFERRING OF
SUCH SHARES TO CORPORATION AND PAYMENT THEREFOR.
(a) Any shareholder electing to exercise his right to
dissent, pursuant to section one hundred twenty-two [SECTION 31-1-122]
of this article, shall file with the corporation, prior to or at
the meeting of
shareholders at which such proposed corporate action is submitted
to a vote, a written objection to such proposed corporate action.
If such proposed corporate action be approved by the required
vote
and such shareholder shall not have voted in favor thereof, such
shareholder may, within ten days after the date on which the vote
was taken or if a corporation is to be merged without a vote of
its
shareholders into another corporation, any of its shareholders
may, within fifteen days after the plan of such merger shall have
been mailed to such shareholders, make written demand on the
corporation,
or, in the case of a merger or consolidation, on the surviving or
new corporation, domestic or foreign, for payment of the fair
value of such shareholder's shares, and, if such proposed
corporate action is
effected, such corporation shall pay to such shareholder, upon
surrender of the certificate or certificates representing such
shares, the fair value thereof as of the day prior to the date on
which the vote
was taken approving the proposed corporate action, excluding any
appreciation or depreciation in anticipation of such corporate
action. Any shareholder failing to make demand within the
ten-day period
shall be bound by the terms of the proposed corporate action.
Any shareholder making such demand shall thereafter be entitled
only to payment as in this section provided and shall not be
entitled to vote
or to exercise any other rights of a shareholder.
(b) No such demand may be withdrawn unless the
corporation shall consent thereto. If, however, such demand
shall be withdrawn upon consent, or if the proposed corporate
action shall be
abandoned or rescinded or the shareholders shall revoke the
authority to effect such action, or if, in the case of a merger,
on the date of the filing of the articles of merger the surviving
corporation, is the
owner of all the outstanding shares of the other corporations,
domestic and foreign, that are parties to the merger, or if no
demand or petition for the determination of fair value by a court
of general civil
jurisdiction have been made or filed within the time provided in
subsection (e) of this section, or if a court of general civil
jurisdiction shall determine that such shareholder is not
entitled to the relief provided
by this section, then the right of such shareholder to be paid
the fair value of his shares shall cease and his status as a
shareholder shall be restored, without prejudice to any corporate
proceedings which
may have been taken during the interim.
(c) Within ten days after such corporate action is
effected, the corporation, or, in the case of a merger or
consolidation, the surviving or new corporation, domestic or
foreign, shall give written
notice thereof to each dissenting shareholder who has made demand
as herein provided, and shall make a written offer to each
shareholder to pay for such shares at a specified price deemed by
such
corporation to be fair value thereof. Such notice and offer
shall be accompanied by a balance sheet of the corporation the
shares of which the dissenting shareholder holds, as of the
latest available date
and not more than twelve months prior to the making of such
offer, and a profit and loss statement of such corporation for
the twelve months' period ended on the date of such balance
sheet.
(d) If within thirty days after the date on which such
corporate action is effected the fair value of such shares is
agreed upon between any such dissenting shareholder and the
corporation, payment
therefor shall be made within ninety days after the date on which
such corporate action was effected, upon surrender of the
certificate or certificates representing such shares. Upon
payment of the agreed
value the dissenting shareholder shall cease to have any interest
in such shares.
(e) If within such period of thirty days, a dissenting
shareholder and the corporation do not so agree, then the
corporation shall within thirty days after receipt of written
demand from any dissenting
shareholder, which written demand must be given within sixty days
after the date on which such corporate action was effected, file
a complaint in a court of general civil jurisdiction requesting
that the fair
value of such shares be found and determined, or the corporation
may file such complaint at any time within such sixty-day period
at its own election. Such complaint shall be filed in any court
of general
civil jurisdiction in the county in which the principal office of
the corporation is situated, or, if there be no such office in
this State, in the county in which any dissenting shareholder
resides or is found or
in which the property of such corporation, or any part of it, may
be. If the corporation shall fail to institute such proceedings,
any dissenting shareholder may do so in the name of the
corporation. All
dissenting shareholders wherever residing, may be made parties to
the proceedings as an action against their shares quasi in rem.
A copy of the complaint shall be served on each dissenting
shareholder
who is a resident of this State in the same manner as in other
civil actions. Dissenting shareholders who are non-residents of
this State shall be served a copy of the complaint by registered
or certified mail,
return receipt requested. In addition, service upon such
nonresident shareholders shall be made by publication, as
provided in Rule 4(e)(2) of the West Virginia Rules of Civil
Procedure. All shareholders
who are parties to the proceeding shall be entitled to judgment
against the corporation for the amount of the fair value of their
shares. The court may, if it so elects, appoint one or more
persons as appraisers
to receive evidence and recommend a decision on the question of
fair value. The appraisers shall have such power and authority
as shall be specified in the order of their appointment or any
subsequent
appointment. The judgment shall be payable only upon and
concurrently with the surrender to the corporation of the
certificate or certificates representing such shares. Upon
payment of the judgment,
the dissenting shareholder shall cease to have any interest in
such shares.
The judgment shall include an allowance for interest at
such rate as the court may find to be fair and equitable in all
the circumstances, from the date on which the vote was taken on
the proposed corporate action to the date of payment.
The costs and expenses of any such proceeding shall be
determined by the court and shall be assessed against the
corporation, but all or any part of such costs and expenses may
be apportioned
and assessed as the court may deem equitable against any or all
of the dissenting shareholders who are parties to the proceeding
to whom the corporation shall have made an offer to pay for the
shares
if the court shall find that the action of such shareholders in
failing to accept such offer was arbitrary or vexatious or not in
good faith. Such expenses shall include reasonable compensation
for and reasonable
expenses of the appraisers, but shall exclude the fees and
expenses of counsel for and experts employed by any party; but if
the fair value of the shares as determined materially exceeds the
amount which
the corporation offered to pay therefor, or if no offer was made,
the court in its discretion may award to any shareholder who is a
party to the proceeding such sum as the court may determine to be
reasonable compensation to any expert or experts employed by the
shareholder in the proceeding. Any party to the proceeding may
appeal any judgment or ruling of the court as in other civil
cases.
(f) Within twenty days after demanding payment for his
shares, each shareholder demanding payment shall submit the
certificate or certificates representing his shares to the
corporation for notation
thereon that such demand has been made. His failure to do so
shall, at the option of the corporation, terminate his rights
under this section unless a court of general civil jurisdiction,
for good and sufficient
cause shown, shall otherwise direct. If shares represented by a
certificate on which notation has been so made shall be
transferred, each new certificate issued therefor shall bear
similar notation, together
with the name of the original dissenting holder of such shares,
and a transferee of such shares shall acquire by such transfer no
rights in the corporation other than those which the original
dissenting
shareholder had after making demand for payment of the fair value
thereof.
(g) Shares acquired by a corporation pursuant to
payment of the agreed value therefor or to payment of the
judgment entered therefor, as in this section provided, may be
held and disposed of
by such corporation as in the case of other treasury shares,
except that, in the case of a merger or consolidation, they may
be held and disposed of as the plan of merger or consolidation
may otherwise provide.
ALLEGHENY & WESTERN ENERGY CORPORATION
300 Capitol Street,
Suite 1600
Charleston, West Virginia 25301
This Proxy is solicited on behalf of the Board
of Directors of Allegheny & Western Energy Corporation.
The undersigned holder of Common Stock of
ALLEGHENY & WESTERN ENERGY CORPORATION (the "Company") hereby
constitutes and appoints JOHN G. McMILLIAN, RUSH MOODY, JR. and
RICHARD L. GRANT and each of them attorneys
and proxies with full power of substitution to each, for and in
the name of the undersigned to vote the shares of Common Stock of
the Company, which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of
the Company to be held at The Charleston Marriott Hotel, 200 Lee
Street East, Charleston, West Virginia 25301 on Tuesday, May 16,
1995 at 10:30 a.m. Eastern Daylight Savings Time or at any and
all adjournments thereof, on all matters as may properly come
before the meeting. The undersigned hereby revokes any and all
proxies heretofore given with respect to such meeting.
A majority of such attorneys and proxies
present at the meeting shall and may exercise the powers granted
hereunder.
Receipt is acknowledged of the Notice of
Annual Meeting of Stockholders dated April 13, 1995 and the Proxy
Statement accompanying said notice.
THE BOARD OF DIRECTORS OF THE COMPANY
RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
Said attorneys are hereby instructed to vote as specified below.
(If no specification is made, this proxy will be voted FOR items
1, 2 and 3 below.)
X Please mark
your vote
as this [Number of shares]
COMMON
1. Election of the following seven (7) nominees to serve as
directors until the next annual meeting of stockholders and until
their successors are elected and qualified. Nominees: John G.
McMillian, Michael S. Berman, Sidney S. Lindley, Rush Moody, Jr.,
Henry E. Tauber, Jack H. Vaughn and Harold M. Wit.
FOR / / WITHHELD / / FOR ALL NOMINEES EXCEPT AS NOTED / /
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided below.)
2. Approval of the Amended and Restated Agreement and Plan of
Merger, dated as of September 30, 1994 and amended as of February
3, 1995, a copy of which appears as Appendix A to the Proxy
Statement, and the transactions contemplated thereby.
FOR / / AGAINST / / ABSTAIN / /
3. In their discretion, to vote upon such other business as may
properly come before the meeting or any adjournment thereof.
FOR / / AGAINST / / ABSTAIN / /
Please sign your name as it appears herein. In the case of
joint owners or tenants in common, each should sign. If signing
as trustee, guardian or in any other representative capacity or
on behalf of a corporation or partnership, please indicate
your title.
Signature ________________________ Date_______________
Signature _______________________ Date_______________