Exhibit 10.2

Execution Version

 

STOCK PURCHASE

AND

ICPA ASSIGNMENT AGREEMENT

 

Between

ALLEGHENY ENERGY, INC.,

ALLEGHENY ENERGY SUPPLY COMPANY, LLC

 

And

BUCKEYE POWER GENERATING, LLC

 

Dated as of May 17, 2004

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STOCK PURCHASE

AND

ICPA ASSIGNMENT AGREEMENT

 

THIS AGREEMENT, dated as of May 17, 2004, is between ALLEGHENY ENERGY, INC., a
Maryland corporation (successor by merger to West Penn Electric Company)
(“AEI”), ALLEGHENY ENERGY SUPPLY COMPANY, LLC, a Delaware limited liability
company (“AES”, each of AES and AEI, individually, and, together, jointly and
severally, “Allegheny”) and BUCKEYE POWER GENERATING, LLC, an Ohio limited
liability company (“Purchaser”).

 

Allegheny owns 9,000 issued and outstanding shares (the “OVEC Shares”) of Ohio
Valley Electric Corporation, an Ohio corporation (“OVEC”), representing 9.0% of
the total number of issued and outstanding shares of OVEC. This Agreement
provides for the purchase by Purchaser from Allegheny of all of Allegheny’s OVEC
Shares, and the transfer and assignment by Allegheny to Purchaser, and the
assumption by Purchaser, of all of Allegheny’s rights and obligations under the
ICPA (as defined below).

 

FOR GOOD AND VALUABLE CONSIDERATION, Purchaser and Allegheny agree as follows:

 

1. Sale and Purchase of OVEC Shares. At the Effective Time (as defined in
Section 10), Allegheny will transfer to Purchaser, and Purchaser will acquire,
all of Allegheny’s OVEC Shares, free and clear of any lien, pledge, charge,
equity, encumbrance, or claim. Allegheny and Purchaser agree that no provision
of this Agreement shall be construed to include or cover any shares in OVEC or
rights or obligations in the ICPA (as defined below) owned or held by Allegheny
other than the OVEC Shares and corresponding rights and obligations under the
ICPA; it being understood that the 3,500 shares of OVEC and corresponding 3.5%
interest in the ICPA referenced therein of Monongahela Power Company are not
included by any term of this Agreement.

 

2. ICPA.

 

(a) Assignment of ICPA. At the Effective Time, Allegheny and the Purchaser will
enter into an assignment and assumption agreement in mutually satisfactory form
(the “ICPA Assignment Agreement”), providing for the immediate transfer and
assignment by Allegheny to Purchaser, and the assumption by Purchaser, of (i)
all of AES’s rights and obligations, from and after the New ICPA Effective Date
(as defined below), under that certain Inter-Company Power Agreement, dated July
10, 1953, by and among OVEC, AES (as successor by assignment to The Potomac
Edison Company and West Penn Power Company), FirstEnergy Generation Corporation
(as successor by assignment to The Toledo Edison Company, Ohio Edison Company,
and Pennsylvania Power Company), Appalachian Power Company (formerly Appalachian
Electric Power Company), The Cincinnati Gas & Electric Company, Columbus
Southern Power Company (formerly Columbus and Southern

 

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Ohio Electric Company), The Dayton Power and Light Company, Indiana Michigan
Power Company (formerly Indiana & Michigan Electric Company), Kentucky Utilities
Company, Louisville Gas and Electric Company, Monongahela Power Company, Ohio
Power Company (formerly The Ohio Power Company), and Southern Indiana Gas and
Electric Company, as heretofore and hereafter modified (the “Original ICPA”),
(ii) all of Allegheny’s rights and obligations under that certain Amended and
Restated Inter-Company Power Agreement, dated as of March 13, 2006, by and among
the parties to the Original ICPA (the “New ICPA”), and (iii) any other rights
Allegheny may have to electric power and energy from the OVEC Entities (as
defined below) after the New ICPA Effective Date associated with its ownership
of the OVEC Shares (such rights, together with the Original ICPA and the New
ICPA, the “ICPA”). As used in this Agreement, “New ICPA Effective Date” means
the first to occur of (v) March 13, 2006; (w) the date of any material breach or
material default by AES under the ICPA; (x) the date, following expiration of
all applicable notice and cure periods, if any, of any default by Allegheny in
the payment when due (whether upon maturity or upon acceleration or otherwise)
of any indebtedness for borrowed money or interest or other amounts due in
respect thereof (or any obligation having the effect of a borrowing of money)
under any indenture, credit agreement or other similar agreement or arrangement
of Allegheny filed or required to be filed by Item 601(b)(10) of Regulation S-K
(or any successor regulation) as an exhibit to AEI’s or AES’s Form 10-K for the
year ended December 31, 2003 or any succeeding fiscal year (or, if AEI or AES is
not then subject to the requirement to file a Form 10-K, that was filed as an
exhibit to the last Form 10-K that AEI or AES was required to file or that would
be required to be filed if AEI or AES were then subject to such requirement);
(y) the date of the expiration of all applicable notice and cure periods for any
default by Allegheny under any indenture, credit agreement or other similar
agreement or arrangement of Allegheny, filed or required to be filed by Item
601(b)(10) of Regulation S-K (or any successor regulation) as an exhibit to
AEI’s or AES’s Form 10-K for the year ended December 31, 2003 or any succeeding
fiscal year (or, if AEI or AES is not then subject to the requirement to file a
Form 10-K, that was filed as an exhibit to the last Form 10-K that AEI or AES
was required to file or that would be required to be filed if AEI or AES were
then subject to such requirement), that evidences or relates to any indebtedness
for borrowed money (or any obligation having the effect of a borrowing of money)
and that entitles a creditor of Allegheny to declare such indebtedness or
obligation due and payable prior to the specified maturity thereof; or (z) the
date upon which AEI or AES shall commence or become the subject of any voluntary
or involuntary bankruptcy, insolvency, reorganization, liquidation or similar
proceeding or case.

 

(b) New ICPA Effective Date Payments. If the New ICPA Effective Date occurs on a
date earlier than March 13, 2006, and the assignment of Allegheny’s rights and
obligations under the ICPA described in Section 2(a)(i) above becomes effective,
upon the occurrence of any one or more of the events listed as items (x), (y) or
(z) under the definition of New ICPA Effective Date above, Purchaser will pay to
Allegheny an amount equal to $26,667 per day for each day from and after the New
ICPA Effective Date until March 12, 2006. If the New ICPA Effective Date occurs
on a date earlier than March 13, 2006, and the assignment of Allegheny’s rights
and obligations under the ICPA described in

 

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Section 2(a)(i) above becomes effective, upon the occurrence of the event listed
as item (w) under the definition of New ICPA Effective Date above, Purchaser
will pay to Allegheny an amount equal to $8,333 per day for each day from and
after the New ICPA Effective Date until March 12, 2006.

 

3. Payment of Purchase Price. In consideration for the OVEC Shares and the
transfer and assignment of the ICPA, Purchaser will pay to Allegheny a purchase
price of Ninety-Nine Million Dollars ($99,000,000), payable as follows:

 

(a) Payment at the Effective Time. At the Effective Time, Purchaser will pay
Allegheny Ninety Three Million Dollars ($93,000,000) in cash, subject to
adjustment as provided in Section 3(c) below.

 

(b) Purchase Price Holdback. Purchaser shall hold back from the purchase price
Six Million Dollars ($6,000,000) (the “Holdback Amount”), with such Holdback
Amount to accrue interest at a rate per annum equal to 3% plus the rate
indicated by Telerate at Page 3750 (rounded upward to the nearest thousandth) as
having been quoted by the British Bankers Association at 11:00 A.M. London time
on the date of this Agreement for the offering of U.S. dollar deposits in the
London interbank market for the period of one year. The Holdback Amount plus all
interest accrued will be paid to Allegheny, or retained by Purchaser, when, as
and to the extent provided in Section 12(g) of this Agreement.

 

(c) Purchase Price Adjustment. The purchase price payable at the Effective Time
as provided in Section 3(a) above shall be (i) reduced by the amount of any
dividends, distributions, credits or other payments that Allegheny may receive
or become entitled to receive prior to the Effective Time, directly or
indirectly, in its capacity as a shareholder of OVEC or a party to the ICPA, or
otherwise, arising out of or attributable to (w) amounts received or to be
received by OVEC from the United States of America, acting by and through the
Secretary of Energy, the statutory head of the Department of Energy (“DOE”)
pursuant to that certain Settlement Agreement, dated as of February 11, 2004,
between OVEC and DOE (“DOE Benefits Settlement Payments”), (x) the sale by any
of the OVEC Entities of any electric generating facilities or other assets, (y)
the sale by any of the OVEC Entities of electric power and energy from any
electric generating facilities owned by any of the OVEC Entities other than
pursuant to the ICPA, or (z) any other circumstance or event except the
provision by OVEC to its shareholders of a reasonable return on equity at times
and in amounts consistent with OVEC’s past practices; it being understood that
Allegheny shall retain all other dividends, distributions, credits or other
payments; (ii) increased by the amount of any capital contributions or payments
made by Allegheny to OVEC, and required to be made by Allegheny and the other
OVEC shareholders or parties to the ICPA, after the date of this Agreement and
prior to the Effective Time because of the acceleration of the debt obligation
incurred by OVEC to purchase the selective catalytic reduction equipment (other
than an acceleration attributable to any default or breach on the part of
Allegheny).

 

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(d) Allocation of Purchase Price. The purchase price shall be allocated among
Allegheny such that 93.0% of the purchase price will be allocated to AES, and
7.0% of the purchase price will be allocated to AEI.

 

4. General Representations and Warranties by Allegheny. Allegheny represents and
warrants to Purchaser as follows:

 

(a) Ownership of the OVEC Shares. AEI owns beneficially and of record the OVEC
Shares, and it has the right to transfer to Purchaser beneficial and record
ownership of the OVEC Shares, free and clear of any lien, pledge, charge,
equity, encumbrance, or claim. The OVEC Shares are validly issued, fully paid,
and non-assessable. The OVEC Shares owned by AEI constitute 9.0% of the total
number of issued and outstanding shares of OVEC.

 

(b) ICPA. AES is a party to the ICPA. Neither AES, nor, to the Best Knowledge of
Allegheny, any other party to the ICPA, is in default thereunder. The ICPA is
valid, enforceable in accordance with its terms, and in full force and effect.
Allegheny has provided to Purchaser a copy of the ICPA as currently in effect.
The ICPA has not been amended or modified since it was modified by that certain
Modification No. 15 thereto dated as of April 30, 2004 and amended and restated
by the New ICPA.

 

(c) Organization; Corporate Power. Each of AEI and AES is an entity duly
organized under the laws of the state of its organization or incorporation and
has all requisite power and authority to own or lease its properties and assets
and to conduct its business as it is presently being conducted.

 

(d) Authority. This Agreement has been duly authorized by all necessary action
on the part of Allegheny.

 

(e) No Conflict. Except as set forth in Schedule 4(e) – Allegheny Conflicts,
neither the execution and delivery of this Agreement, nor the completion of the
transactions contemplated by this Agreement, will (i) violate, conflict with, or
constitute a default (or an event that, with notice or lapse of time or both,
would constitute a default) under any agreement or commitment (including any
agreement or commitment made in connection with a proposed sale or other
disposition of Allegheny to any person or organization, whether through a sale
of assets or stock, a merger, or other business combination) to which any of
Allegheny or its affiliates is a party or by which any of them may be bound,
(ii) violate any law, rule, or regulation, or any judgment, decree, or order, of
any court or other governmental body, applicable to Allegheny or any of its
affiliates, (iii) result in any charge, equity, security interest, lien, pledge,
mortgage, restriction, option, or claim (“Encumbrance”) upon the OVEC Shares or
its rights under the ICPA, or (iv) violate or be in conflict with any provision
of the organizational or governance documents of Allegheny.

 

(f) No Litigation or Claims; No Governmental Investigation. Schedule 4(f) –
Allegheny Litigation describes all pending and, to the Best Knowledge of
Allegheny,

 

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threatened actions, suits, claims (including products liabilities and warranties
claims) or proceedings against Allegheny or relating to any of its affiliates,
any of its assets, the OVEC Shares or the ICPA that calls into question or could
be reasonably expected to affect the right or ability of Allegheny to consummate
the transactions contemplated by this Agreement. Allegheny has not received
written notice that it is the subject of any investigation or inquiry by any
governmental authority relating to the OVEC Shares or the ICPA. No third party
has asserted any claim against Allegheny or any of its affiliates that,
individually or in the aggregate, will have, or would reasonably be expected to
affect the right or ability of Allegheny to consummate the transactions
contemplated by this Agreement or result in or form the basis of any such
action, suit, claim, proceeding or investigation.

 

(g) No Material Adverse Change. Since the date of the last financial statements
of Allegheny included in the most recent report on Form 10-K filed with the
United States Securities and Exchange Commission (the “SEC”), there has not been
any material adverse change in the financial condition, results of operations,
business, or prospects of Allegheny which could be reasonably expected to affect
the right or ability of Allegheny to consummate the transactions contemplated by
this Agreement.

 

(h) Consents and Approvals. Schedule 4(h) – Allegheny Consents contains a list
of all consents and approvals that are required to be obtained in connection
with the performance of Allegheny’s obligations hereunder, and no other consents
and approvals are required in connection with the performance of Allegheny’s
obligations hereunder.

 

5. Representations and Warranties by Allegheny Concerning OVEC. Allegheny
represents and warrants to Purchaser as follows:

 

(a) Information Concerning OVEC. Except as disclosed on Schedule 5(a) –
Information Concerning OVEC, there is no information provided to Allegheny by
any OVEC Entity or otherwise known to Allegheny which Allegheny reasonably
believes, to the Best Knowledge of Allegheny, could result in a material adverse
change in the financial condition, results of operations, business, or prospects
of any OVEC Entity.

 

(b) Organization; Corporate Power; No Subsidiaries; Directors and Officers. Each
of OVEC and Indiana-Kentucky Electric Corporation, an Indiana corporation
(“IKEC”; with OVEC, individually, an “OVEC Entity”, and, collectively, the “OVEC
Entities”) is an entity duly organized under the laws of the state in which it
was organized, and each OVEC Entity has all requisite power and authority to own
or lease its properties and assets and to conduct its business as it is
presently being conducted. No OVEC Entity owns any capital stock of, or other
equity interest in, any corporation, limited liability company, partnership, or
other entity, except that OVEC owns all of the issued and outstanding shares of
capital stock of IKEC.

 

(c) No Conflict. To the Best Knowledge of Allegheny, except as set forth in
Schedule 5(c) – Conflicts, neither the execution and delivery of this Agreement,
nor the

 

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completion of the transactions contemplated by this Agreement, will (i) violate,
conflict with, or constitute a default (or an event that, with notice or lapse
of time or both, would constitute a default) under any agreement or commitment
to which any of the OVEC Entities is a party or by which any of them may be
bound, (ii) violate any law, rule, or regulation, or any judgment, decree, or
order, of any court or other governmental body, applicable to any of the OVEC
Entities, or (iii) violate or be in conflict with any provision of the
organizational or governance documents of any OVEC Entity.

 

(d) Capitalization. Except as set forth in Schedule 5(d)—Capitalization, there
are (A) no outstanding options, offers, warrants, conversion rights, contracts,
agreements or other rights to subscribe for or to purchase from any OVEC Entity,
or agreements obligating any OVEC Entity to issue, transfer or sell (whether
formal or informal, written or oral, firm or contingent), shares of capital
stock or other securities of any OVEC Entity (whether debt, equity or a
combination of debt and equity) or obligating any OVEC Entity to grant, extend
or enter into any such agreement and (B) no agreements or other understandings
(whether formal or informal, written or oral, firm or contingent) which require
or may require any OVEC Entity to repurchase any of its capital stock. There are
no preemptive or similar rights with respect to any OVEC Entity’s capital stock.
To the Best Knowledge of Allegheny, except as set forth in Schedule 5(d), no
OVEC shareholder is a party to any voting agreements, voting trusts, proxies or
any other agreements, instruments or understandings with respect to the voting
of any shares of the capital stock of any OVEC Entity, or any agreement with
respect to the transferability, purchase or redemption of any shares of the
capital stock of any OVEC Entity.

 

(e) Financial Statements of the OVEC Entities; No Undisclosed Liabilities.
Attached to this Agreement as Schedule 5(e) – Financial Statements are the
following financial statements of the OVEC Entities (collectively, the
“Financial Statements”): (i) audited balance sheets of each OVEC Entity as of
December 31, 2003, 2002 and 2001 and (ii) audited income statements of each OVEC
Entity for the years ended December 31, 2003, 2002 and 2001. The audited balance
sheets of each OVEC Entity as of December 31, 2003 are hereafter referred to as
the “December 31, 2003 Balance Sheets”. These Financial Statements were prepared
by OVEC’s independent certified public accountant in accordance with GAAP
applied on a consistent basis. To the Best Knowledge of Allegheny, no OVEC
Entity has any liabilities or loss contingencies, whether or not required to be
disclosed in the Financial Statements (including footnote disclosure), except
for liabilities shown in the December 31, 2003 Balance Sheets and current
liabilities, not unusual in nature or amount, incurred by any OVEC Entity in the
ordinary course of business since December 31, 2003.

 

(f) No Litigation or Claims; No Governmental Investigation. Schedule 5(f) –
Litigation describes all pending actions, suits, claims (including products
liabilities and warranties claims) or proceedings against any OVEC Entity or
relating to any OVEC Entity, any of its assets, or the OVEC Shares. To the Best
Knowledge of Allegheny, no OVEC Entity is the subject of any investigation or
inquiry by any governmental authority. To the Best Knowledge of Allegheny, no
third party has asserted any claim against any

 

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OVEC Entity that, individually or in the aggregate, will have, or would
reasonably be expected to have, a material adverse effect on any OVEC Entity.

 

(g) Environmental Matters. To the Best Knowledge of Allegheny and except as
disclosed on Schedule 5(g) – Environmental Matters:

 

(i) the OVEC Entities have not received any notice, request for information,
citation, complaint, summons or order relating to any material violation or
alleged violation of, or any liability under any Environmental Laws in
connection any OVEC Entity, relating to any OVEC Entity, any of its assets or
the OVEC shares during the past three years or, if not resolved, any previous
years; and

 

(ii) there are no writs, injunctions, decrees, orders or judgments outstanding,
or any actions, suits, proceedings or investigations pending or threatened,
relating to compliance with or liability under any Environmental Laws in
connection with any OVEC Entity, relating to any OVEC Entity, any of its assets
or the OVEC shares.

 

(h) Compliance with Laws. To the Best Knowledge of Allegheny, each OVEC Entity
complies with all applicable laws, including but not limited to any laws,
regulations, permits, authorizations and requirements relating to environment,
health and safety, and laws relating to employment practices, product safety,
and safety in the work place.

 

(i) Right to Power and Energy from OVEC. No person or entity, other than the
parties to the ICPA, has any presently existing rights to any electric power and
energy from OVEC, except for up to 50 megawatts of arranged power and energy
under Contract No. DE-AC05-03OR22988 between OVEC and DOE.

 

(j) OVEC Operating Budgets. Allegheny has provided to Purchaser a copy of the
approved (or proposed if not yet approved) operating budgets for OVEC for years
2004, 2005 and 2006.

 

(k) ICPA. At the Effective Time, the ICPA will be valid, enforceable in
accordance with its terms and in full force and effect, and neither AES, nor, to
the Best Knowledge of Allegheny, any other party to the ICPA, shall be in
default thereunder.

 

6. Representations and Warranties by Purchaser. Purchaser represents and
warrants to Allegheny, as follows:

 

(a) Organization; Standing; Corporate Power. Purchaser is a limited liability
company duly organized, validly existing, and in good standing under the laws of
the State of Ohio and has the necessary power to execute and deliver this
Agreement and to perform its obligations under this Agreement.

 

(b) Authority. This Agreement been duly authorized by all necessary action on
the part of Purchaser.

 

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(c) No Conflict. Neither the execution and delivery of this Agreement, nor the
completion of the transactions contemplated by this Agreement, will (i) violate,
conflict with, or constitute a default (or an event that, with notice or lapse
of time or both, would constitute a default) under any agreement or commitment
(including any commitment made in connection with a proposed sale or other
disposition of Purchaser, whether through a sale of assets or stock, a merger,
or other business combination) to which Purchaser is a party or by which it may
be bound, (ii) violate any law, rule, or regulation, or any judgment, decree, or
order, of any court or other governmental body, applicable to Purchaser, (iii)
result in any Encumbrance upon any of the assets of Purchaser, or (iv) violate
or be in conflict with any provision of the articles of organization, operating
agreement or other governance agreement of Purchaser.

 

(d) No Finder’s Fee or Brokerage Commission. Purchaser has no obligation to pay
a finder’s fee or brokerage commission in connection with the transactions
contemplated by this Agreement.

 

(e) Ownership. All of the issued and outstanding ownership interests in
Purchaser are owned beneficially and of record by Buckeye Power, Inc., an Ohio
nonprofit corporation (“Buckeye Power”).

 

(f) Consents and Approvals. Schedule 6(f)- Purchaser Consents contains a list of
all consents and approvals that are required to be obtained in connection with
the performance of Purchaser’s obligations hereunder, and no other consents and
approvals are required in connection with the performance of Purchaser’s
obligations hereunder.

 

(g) Power Purchase Agreement. Buckeye Power and Purchaser have entered into a
Power Purchase Agreement, dated as of even date herewith (the “Buckeye PPA”).
The Buckeye PPA is valid, enforceable in accordance with its terms, and in full
force and effect. Purchaser has provided Allegheny with a copy of the Buckeye
PPA as currently in effect.

 

7. Covenants.

 

(a) By Allegheny. From the date of this Agreement to the Effective Time, except
as expressly provided in this Agreement or as otherwise agreed in writing by
Purchaser, Allegheny will:

 

(i) Operate Businesses in Ordinary Course; Maintain Business Relationships; Etc.
Not vote the OVEC Shares or exercise any of its other rights as a shareholder in
any way inconsistent with causing each OVEC Entity (A) to operate its business
in the ordinary course, as previously and ordinarily conducted, (B) to use all
reasonable efforts to maintain its relationships with employees and others with
whom it has business relations, (C) not to declare, pay, or agree to declare or
pay any dividends except in

 

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the ordinary course and not unusual in type or amount, (D) not to redeem or
agree to redeem any OVEC shares or other equity interests in any OVEC Entity,
(E) not to issue or agree to issue any OVEC shares, any other equity interests
in any OVEC Entity, or any options, warrants, or other rights to purchase OVEC
shares or other equity interest in any OVEC Entity, (F) to pay trade creditors
in accordance with each OVEC Entity’s normal credit terms and to collect from
account debtors in accordance with each OVEC Entity’s normal collection
practices, (G) not to borrow any funds in amounts exceeding normal working
capital requirements, (H) not to change the compensation or benefits (including
any severance or change in control benefits) of its directors, officers, or
employees, other than normal merit increases to employees who are not directors
or officers that are consistent in nature and amount with past practices, (I)
not to enter into any material contract, lease, or license (Purchaser will
promptly respond to a request to consent to any such contract, lease, or license
and will not unreasonably withhold its consent).

 

(ii) Assist in Purchaser’s Investigation. Cause each OVEC Entity to continue to
furnish Purchaser with information about each OVEC Entity and its business,
assets, and liabilities and to permit Purchaser’s representatives to review its
books and records; to talk with its employees (to the extent necessary to update
Purchaser’s due diligence); and to visit its facilities. Purchaser will conduct
its investigation in a manner that does not unreasonably disrupt the business of
any OVEC Entity and will preserve the confidentiality of all information that it
receives from each OVEC Entity or Allegheny.

 

(iii) ICPA. Use its commercially reasonable efforts to obtain the consent of any
third parties, including the other parties to the ICPA, to the assignment and
transfer of the ICPA to Purchaser, keep Purchaser informed of any material
developments affecting or arising out of the ICPA, provide Purchaser with the
opportunity to review and comment on drafts of any amendments or modifications
to the ICPA, and not enter into any amendments or modifications to the ICPA
unless the terms and conditions thereof do not affect in any manner the rights
or obligations of the parties under the New ICPA.

 

(iv) OVEC. Keep Purchaser informed of any material developments affecting OVEC,
including, without limitation, the status of any financings or refinancings of
OVEC’s debt.

 

(v) Financing and Investment Grade Credit Rating. Cooperate with Purchaser in
Purchaser’s efforts to obtain financing and an Investment Grade Credit Rating
(as defined below) for the transactions contemplated hereunder, including,
without limitation, by agreeing to such modifications to

 

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the Buckeye PPA as Purchaser’s lenders or credit rating agencies may reasonably
request and that do not materially and adversely affect the assurance afforded
to Allegheny by the Buckeye PPA for the payment and performance of Purchaser’s
obligations under this Agreement.

 

(b) Covenants of Allegheny respecting the ICPA. From the date that is 20 days
after the expiration of the Modified Election Period (as such term is defined in
that certain Unanimous Consent and Waiver Agreement dated as of April 30, 2004
by and among the parties to the ICPA (the “Unanimous Consent and Waiver
Agreement”)) and until the New ICPA Effective Date:

 

(i) Amendments to ICPA. Allegheny will keep Purchaser informed of any material
developments affecting or arising out of the ICPA, provide Purchaser with the
opportunity to review and comment on drafts of any amendments or modifications
to the ICPA, and not enter into any amendments or modifications to the ICPA
unless the terms and conditions thereof do not affect in any manner the rights
or obligations of the parties under the New ICPA.

 

(ii) Performance under ICPA. Allegheny will retain and perform all of its rights
and obligations under the ICPA and not transfer any of its rights or obligations
under the ICPA without the prior written consent of Purchaser.

 

(iii) Waiver; Bankruptcy. Allegheny irrevocably waives, and agrees that, in the
event of any voluntary or involuntary bankruptcy, insolvency, reorganization or
liquidation proceeding or case with respect to Allegheny (a “Bankruptcy”), it
will not assert in such Bankruptcy or in any action or proceeding in connection
with such Bankruptcy, any defense, claim or counterclaim (i) that the ICPA
Assignment Agreement or the ICPA is not a legal, valid and binding obligation of
Allegheny or is not enforceable against Allegheny in accordance with its terms;
or (ii) that may be asserted as a bar to the remedy of specific performance of
the ICPA Assignment Agreement by the Purchaser or the ICPA by the parties
thereto, regardless, in the case of either (i) and (ii), of the theory upon
which such defense, claim or counterclaim may be based, including, but not
limited to, any theory based on the adequacy of a remedy at law. Without
limiting the foregoing in any way, Allegheny irrevocably waives any protection
it may be entitled to under Sections 365(C)(1) and 365(C)(2) of the Bankruptcy
Reform Act of 1978, as amended (the “Bankruptcy Code”), or any successor
provision of law of similar import, with respect to the ICPA Assignment
Agreement or the ICPA in the event of a Bankruptcy. Specifically, in the event
that the trustee or the debtor-in-possession in a Bankruptcy takes any action
(including, but not limited to, the institution of any action, suit or other
proceeding in a Bankruptcy for the purpose of enforcing the obligations of
Allegheny under the ICPA Assignment Agreement or the ICPA), Allegheny shall not
assert any defense, claim or counterclaim denying liability under

 

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the ICPA Assignment Agreement or the ICPA on the basis that the ICPA Assignment
Agreement or the ICPA or any provision of the ICPA Assignment Agreement or the
ICPA is an executory contract that cannot be assumed, assigned or enforced or on
any other theory directly or indirectly based on Section 365(C)(1) or 365(C)(2)
of the Bankruptcy Code or any successor provision of law of similar import
(including, but not limited to, any theory that the ICPA Assignment Agreement or
the ICPA or any provision of the ICPA Assignment Agreement or the ICPA is a
contract to make a loan, or to extend other debt financing or financial
accommodations, to or for the benefit of Allegheny or any other person). If a
Bankruptcy shall occur, Allegheny agrees, after the occurrence of the
Bankruptcy, to reconfirm in writing its pre-petition waiver of any protection it
may be entitled to under Sections 365(C)(1) and 365(C)(2) of the Bankruptcy
Code; provided, however, that in any event Allegheny shall not ask the
Bankruptcy Court for permission or otherwise seek to (x) reject the ICPA
Assignment Agreement or the ICPA without first offering in writing to assign and
delegate to Purchaser, without the payment of any consideration to or by
Purchaser, all of Allegheny’s rights, titles, interests, duties, obligations and
liabilities thereunder which offer Purchaser shall have 10 days from the date of
its receipt thereof to accept or reject; or (y) assume and assign to any other
person or entity the ICPA Assignment Agreement or the ICPA without first
offering in writing to assume and assign to Purchaser the ICPA Assignment
Agreement and the ICPA on the same terms and conditions as in the proposed
assignment to any such person or entity which offer Purchaser shall have 10 days
from the date of its receipt thereof to accept or reject.

 

(c) Covenant by Allegheny Respecting DOE Benefits Settlement Payments and Other
Distributions. Allegheny shall pay to Purchaser an amount equal to (i) any
distributions, credits or other payments that Allegheny may receive or become
entitled to receive under the ICPA from and after the Effective Time and prior
to the New ICPA Effective Date arising out of or attributable to (w) the DOE
Benefits Settlement Payments, (x) the sale by any of the OVEC Entities of any
electric generating facilities or other assets, or (y) the sale by any of the
OVEC Entities of electric power and energy from any electric generating
facilities owned by any of the OVEC Entities other than pursuant to the ICPA,
and (ii) any decrease in capital contributions or payments required to be made
by Allegheny to OVEC after the Effective Time and prior to the New ICPA
Effective Date (the “Adjustment Period”) because of (x) any decrease in
expenditures made by OVEC for capital improvements below the level of
expenditures set forth in the approved (or proposed if not yet approved) monthly
operating budgets for OVEC (heretofore provided to Purchaser by Allegheny) for
the Adjustment Period (such monthly

 

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operating budgets to be pro-rated for any partial months during the Adjustment
Period based on the number of days in such month) by more than 20% in the
aggregate or (y) any decrease in expenditures made by OVEC for operation and
maintenance expenses below the level of expenditures set forth in the approved
(or proposed if not yet approved) monthly operating budgets for OVEC (heretofore
provided to Purchaser by Allegheny) for the Adjustment Period (such monthly
operating budgets to be pro-rated for any partial months during the Adjustment
Period based on the number of days in such month) by more than 10% in the
aggregate (but without duplicating any reduction of the purchase price pursuant
to Section 3(c) above). Any payment to Purchaser under this subsection (c) shall
be made within five (5) days of any such distribution, credit, capital
contribution or other payment by wire transfer of immediately available federal
funds to an account designated by Purchaser.

 

(d) By Both Parties.

 

(i) From the date that is 20 days after the expiration of the Modified Election
Period (as such term is defined in the Unanimous Consent and Waiver Agreement)
to the Effective Time, unless otherwise agreed in writing by the parties,
Purchaser and Allegheny will use all reasonable efforts to satisfy the
conditions to closing at or before the date that is 385 days following the
expiration of the Modified Election Period (as such term is defined in the
Unanimous Consent and Waiver Agreement). Purchaser and Allegheny will notify
each other of any event that occurs, or condition that comes to their attention,
that may delay the Effective Time or that constitutes a breach of their
respective representations and warranties in this Agreement and will use all
reasonable efforts to mitigate any such delay or to cure any such breach.

 

(ii) Without limiting the foregoing, Purchaser will, and Allegheny will, if
required, cause each OVEC Entity to, (A) make the filings required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR
Act”), within 34 days after the expiration of the Modified Election Period (as
such term is defined in the Unanimous Consent and Waiver Agreement), (B) comply
at the earliest practicable date with any request by the Federal Trade
Commission or the Department of Justice for additional information or documents
under the HSR Act, and (C) cooperate with the other party in connection with
making any filing under the HSR Act and in connection with the resolution of any
investigation or other inquiry by the Federal Trade Commission, the Department
of Justice, or any other governmental authority.

 

(iii) Without limiting the foregoing, Allegheny and the Purchaser will each, as
promptly as practical after the date that is 20 days after the expiration of the
Modified Election Period (as such term is defined in the Unanimous Consent and
Waiver Agreement), make all filings and take all such other actions as are
required, and that may be reasonably taken, to obtain, in the case of Allegheny,
the consents and approvals of third parties listed on Schedule 4(h), and, in the
case of Purchaser, the consents and approvals of third parties listed on
Schedule 6(f). Allegheny and Purchaser

 

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will cooperate with each other and support each other’s efforts to obtain all
required consents and approvals of third parties.

 

(e) By Purchaser.

 

(i) Purchaser shall pay to Allegheny the amount of any capital contributions or
payments made by Allegheny to OVEC, and required to be made by Allegheny and the
other OVEC shareholders or parties to the ICPA, after the Effective Time and
prior to the New ICPA Effective Date (the “Adjustment Period”) because of (x)
the acceleration of the debt obligation incurred by OVEC to purchase the
selective catalytic reduction equipment (other than an acceleration attributable
to any default or breach on the part of Allegheny), (y) expenditures by OVEC for
capital improvements exceeding the approved (or proposed if not yet approved)
monthly operating budgets for OVEC (heretofore provided to Purchaser by
Allegheny) for the Adjustment Period (such monthly operating budgets to be
pro-rated for any partial months during the Adjustment Period based on the
number of days in such month) by more than 20% in the aggregate, or (z)
expenditures by OVEC for operation and maintenance expenses exceeding the
approved (or proposed if not yet approved) monthly operating budgets for OVEC
(heretofore provided to Purchaser by Allegheny) for the Adjustment Period (such
monthly operating budgets to be pro-rated for any partial months during the
Adjustment Period based on the number of days in such month) by more than 10% in
the aggregate (but without duplicating any increase of the purchase price
pursuant to Section 3(c) above).

 

(ii) Purchaser will cooperate with Allegheny and OVEC in obtaining all
regulatory approvals necessary for the effectiveness of the ICPA.

 

(iii) Purchaser shall not terminate the Buckeye PPA prior to the Effective Time.

 

(iv) Purchaser shall use commercially reasonable efforts to obtain and maintain
through the Effective Time a credit rating for its long-term unsecured
non-credit enhanced indebtedness of either (x) at least BBB- from Standard &
Poor’s or (y) at least Baa3 from Moody’s Investors Service, Inc. (an “Investment
Grade Credit Rating”). If Purchaser is unable to obtain an Investment Grade
Credit Rating within 90 days after the date of this Agreement, either party may
terminate this Agreement by providing written notice thereof to the other party.

 

(f) No Shop. Except for making the Offer in accordance with Section 15 hereof,
(i) Allegheny will not, and will cause its affiliates and its and their
respective directors, officers, employees, agents, and advisors not to, solicit
offers from, negotiate with, execute agreements with, or provide non-public
information to, any party other than Purchaser with respect to the possible sale
or other disposition of the OVEC Shares or the transfer and assignment of
Allegheny’s rights and obligations under the ICPA, and (ii)

 

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Allegheny will, and will cause its affiliates and its and their respective
directors, officers, employees, agents, and advisors to, cease any current
discussions with any party other than Purchaser concerning any such sale or
other disposition or transfer and assignment. Notwithstanding anything to the
contrary in this Section 7(f), for a period of forty five (45) days following
the date of this Agreement, Allegheny, its affiliates, and its and their
respective directors, officers, employees, agents, and advisors may negotiate
with, carry on discussions with, execute agreements with, or provide non-public
information to, any Sponsoring Company under the ICPA with respect to the
possible sale or other disposition of the OVEC Shares or the transfer and
assignment of Allegheny’s rights and obligations under the ICPA.

 

(g) Seat on OVEC Board of Directors. Commencing no later than the date that is
20 days after the expiration of the Modified Election Period (as such term is
defined in the Unanimous Consent and Waiver Agreement), Allegheny shall use its
commercially reasonable best efforts to secure and retain for Purchaser two
seats on the Board of Directors of OVEC to be held by Purchaser’s
representatives as soon as practicable after the Effective Time, and Allegheny
shall cause two of its representatives on the Board of Directors of OVEC to
resign if and when a representative of Purchaser is elected to the Board of
Directors of OVEC. Until a representative of Purchaser is elected to the Board
of Directors of OVEC, two of Allegheny’s representatives on the Board of
Directors of OVEC shall vote from and after the Effective Time in the manner
directed by Purchaser and shall inform Purchaser of all matters discussed at
each and every meeting of the Board of Directors of OVEC.

 

8. Purchaser’s Conditions to Closing. Purchaser’s obligation to complete the
purchase of the OVEC Shares and the assumption of AES’s rights and obligations
under the ICPA pursuant to the terms of this Agreement is conditioned upon the
satisfaction or waiver by Purchaser of the following conditions:

 

(a) Performance of Obligations. Allegheny has performed in all material respects
the obligations under this Agreement that are to be performed by it at or before
the Effective Time.

 

(b) Representations and Warranties Are True; Certification. The representations
and warranties made by Allegheny in this Agreement continue to be true in all
material respects as of the Effective Time as though they were made at the
Effective Time. Allegheny shall have delivered to Purchaser a certificate duly
executed by an appropriate officer of Allegheny dated as of the Effective Time
to the effect that (i) Allegheny has performed in all material respects the
obligations under this Agreement that are to be performed by it at or before the
Effective Time; (ii) the representations and warranties made by Allegheny in
this Agreement continue to be true in all material respects as of the Effective
Time as though they were made at the Effective Time; (iii) the ICPA has been
executed and delivered by AES and the other parties to the ICPA; (iv) the ICPA
is valid, enforceable in accordance with its terms and in full force and effect,
and AES is not, and to the Best Knowledge of Allegheny no other party to the
ICPA is, in default thereunder; and

 

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(v) Allegheny has provided to the Purchaser a copy of the ICPA as executed and
delivered by the parties thereto and copies of all amendments or modifications
to the ICPA.

 

(c) No Material Adverse Change. There is no material adverse change in the
financial condition, results of operations, business, or prospects of any OVEC
Entity since December 31, 2003. Since the date of the last financial statements
of Allegheny included in the most recent report on Form 10-K filed with the SEC,
there has not been any material adverse change in the financial condition,
results of operations, business, or prospects of Allegheny which could be
reasonably expected to affect the right or ability of Allegheny to consummate
the transactions contemplated by this Agreement and perform its obligations in
connection therewith.

 

(d) HSR Act. If applicable, the waiting period or periods under the HSR Act have
expired or been terminated early, and neither the Federal Trade Commission, the
Justice Department, or any other governmental authority has advised Purchaser
that it will seek to enjoin the sale of the OVEC Shares or the transfer and
assignment of the ICPA to Purchaser under this Agreement, require any
significant divestiture by Purchaser or any OVEC Entity, or impose restrictions
on the operation of any business by Purchaser or any OVEC Entity.

 

(e) Consents and Approvals. The consents and approvals of the SEC, FERC, lenders
of OVEC or Allegheny, and the other third parties identified on Schedules 4(h)
and 6(f) required in connection with the transactions contemplated hereunder,
including the sale of the OVEC Shares to Purchaser and the transfer and
assignment of the ICPA to Purchaser (the “Required Consents”), have been
obtained and remain in full force and effect and not subject to any pending
appeal, intervention or similar proceeding or any unsatisfied condition that may
result in modification or revocation thereof. All consents to the assignment and
transfer of the ICPA to Purchaser shall have been obtained on terms and
conditions which the Purchaser deems satisfactory in its sole and absolute
discretion.

 

(f) ICPA. The ICPA shall have been executed and delivered by AES and the other
parties to the ICPA. The ICPA shall be valid, enforceable in accordance with its
terms, and in full force and effect, and no party thereto, including AES, shall
be in default thereunder. There shall have been no amendments or modifications
to the ICPA since the ICPA was modified by that certain Modification No. 15
thereto dated as of April 30, 2004 and amended and restated by the New ICPA,
except for any such amendments or modifications that do not affect in any manner
the rights or obligations of the parties under the New ICPA. AES shall have
entered into the ICPA Assignment Agreement, effective as of the Effective Time.

 

(g) Financing. Purchaser shall have obtained a commitment for financing of the
payment of the purchase price hereunder on terms and conditions and from a
lender or lenders satisfactory to Purchaser in its sole and absolute discretion,
except that Purchaser shall not have the right to terminate this Agreement and
to decline to close the transactions

 

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contemplated hereby by reason of the failure of this condition unless Purchaser
exercises such right no later than 90 days after the date of this Agreement.

 

9. Allegheny’s Conditions to Closing. Allegheny’s obligation to complete the
sale of the OVEC Shares and the assignment of AES’s rights and obligations under
the ICPA pursuant to the terms of this Agreement is conditioned upon the
satisfaction or waiver by Allegheny of the following conditions:

 

(a) Performance of Obligations. Purchaser has performed in all material respects
the obligations under this Agreement that are to be performed by it at or before
the Effective Time.

 

(b) Representations and Warranties Are True; Certification. The representations
and warranties made by Purchaser in this Agreement continue to be true in all
material respects as of the Effective Time as though they were made at the
Effective Time. Purchaser shall have delivered to Allegheny a certificate to the
effect of clause (a) above and this clause (b) duly executed by an appropriate
officer of Purchaser.

 

(c) HSR Act. If applicable, the waiting period or periods under the HSR Act have
expired or been terminated early, and neither the Federal Trade Commission, the
Justice Department, or any other governmental authority has advised any OVEC
Entity that it will seek to enjoin the sale of the OVEC Shares to Purchaser
under this Agreement, require any significant divestiture by Purchaser or any
OVEC Entity, or impose restrictions on the operation of any business by
Purchaser, AES or any OVEC Entity.

 

(d) Consents and Approvals. The Required Consents have been obtained and remain
in full force and effect and not subject to any pending appeal, intervention or
similar proceeding or any unsatisfied condition that may result in modification
or revocation thereof.

 

(e) ICPA Assignment Agreement. Purchaser shall have entered into the ICPA
Assignment Agreement, effective as of the Effective Time.

 

10. Closing; Effective Time.

 

(a) The closing of the sale and purchase of the OVEC Shares and the transfer and
assignment of the ICPA pursuant to this Agreement will occur within five
business days after all of the conditions to closing have been satisfied or
waived and will be effective as of the close of business on that date or such
other date and time as the parties may agree (the “Effective Time”). As of the
Effective Time, upon satisfaction or waiver of the conditions to closing,
Purchaser will pay the portion of the purchase price referred to in Section 3 to
be paid at the Effective Time, by wire transfer of immediately available federal
funds to an account designated by Allegheny, upon receipt of certificates for
the OVEC Shares, duly endorsed by AEI for transfer to Purchaser or accompanied
by duly executed stock powers, and the ICPA Assignment Agreement and the
certificate referred to in Section 8(b) above signed by an appropriate officer
of Allegheny.

 

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(b) The parties will execute and deliver all other documents, and take all
further actions, necessary to complete the sale and purchase of shares and to
carry out the other transactions contemplated by this Agreement.

 

(c) The parties acknowledge that time is of the essence and, therefore, agree to
use all reasonable efforts to complete the sale and purchase of shares and the
other transactions contemplated by this Agreement on or before the date that is
385 days following the expiration of the Modified Election Period (as such term
is defined in the Unanimous Consent and Waiver Agreement), except that the
foregoing shall not impose any obligation on a party to waive or modify any of
that party’s conditions to closing. Any party may terminate this Agreement if
the Effective Time does not occur before the date that is 385 days following the
expiration of the Modified Election Period (as such term is defined in the
Unanimous Consent and Waiver Agreement), unless the delay in the Effective Time
results from the failure, by the party seeking to terminate this Agreement, to
perform its obligations under this Agreement. Termination of this Agreement by
any party will not relieve the other party of any liability that it may have for
a breach of the representations, warranties, or covenants made by it in this
Agreement. If Purchaser does not satisfy its condition to closing set forth in
Section 8(g) hereof, and notify Allegheny of Purchaser’s satisfaction of such
condition to closing, on or before 90 days after the date of this Agreement,
Allegheny shall have the right to terminate this Agreement by providing written
notice thereof to Purchaser. Allegheny must exercise this right to terminate
within 10 days after the end of such 90 day period.

 

11. Survival of Representations, Warranties, and Covenants. The representations,
warranties, and covenants made by Purchaser and Allegheny in this Agreement will
survive for the periods set forth below:

 

(a) With respect to the representations and warranties in Sections 4(a), (c),
and (d), without limitation as to time; with respect to all other
representations and warranties in Section 4, for a period of 24 months following
the Effective Time.

 

(b) With respect to the representations and warranties in Sections 5(b), (d),
(i) and (k), without limitation as to time; with respect to all other
representations and warranties in Section 5, for a period of 24 months following
the Effective Time, except that the representations and warranties in the last
sentence of Section 5(d) and the last sentence of Section 5(e) shall not survive
past the Effective Time.

 

(c) With respect to the representations and warranties in Sections 6(a), (b) and
(e), without limitation as to time; with respect to all other representations
and warranties in Section 6, for a period of 24 months following the Effective
Time.

 

Any claim brought within the periods described above will continue to survive
until it is resolved. A claim for a breach of the covenants made by Purchaser or
Allegheny in this Agreement may, subject to any applicable statute of
limitations, be brought at any time.

 

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12. Indemnification.

 

(a) Indemnification by Allegheny. Subject to the limitations in Sections 11,
12(c) and 12(d), Allegheny will indemnify Purchaser against any expense, loss,
liability, or claim (including attorneys’ fees and reimbursable expenses)
(“Losses”) incurred by Purchaser by reason of (i) the incorrectness of any of
the representations or warranties made by Allegheny in this Agreement, or (ii)
the breach by Allegheny of any of the covenants made by it in this Agreement.

 

(b) Indemnification by Purchaser. Subject to the limitations in Sections 11,
12(c) and 12(d), Purchaser will indemnify Allegheny against any Losses incurred
by Allegheny by reason of (i) the incorrectness of any of the representations or
warranties made by Purchaser in this Agreement, (ii) the breach by Purchaser of
any of the covenants made by Purchaser in this Agreement or (iii) a final
judicial determination or settlement agreement or consent decree after the
Effective Time to which Allegheny is party that requires Allegheny, solely by
reason of its having been a shareholder of OVEC, to pay fines or penalties
relating to, or to pay all or any part of any amount the OVEC Entities are
required to pay for fines or penalties or the installation of emission control
equipment relating to, any alleged violation of the federal Clean Air Act New
Source Review (“NSR”) or Prevention of Significant Deterioration (“PSD”)
requirements, 42 USC 7470 et. seq. and 42 USC 7501 et seq., because of Major
Modifications (as defined in the 40 CFR Part 52) by any OVEC Entity to any OVEC
facility prior to the Effective Time that allegedly triggered such NSR or PSD
requirements.

 

(c) Threshold.

 

(i) Purchaser will not be entitled to indemnification under Section 12(a)(i) for
the incorrectness of any of the representations or warranties made by Allegheny
in this Agreement, and Allegheny will not be entitled to indemnification under
Section 12(b)(i) for the incorrectness of any of the representations or
warranties made by Purchaser in this Agreement, unless the aggregate amount of
the Losses for which it would otherwise be entitled to indemnification exceeds
Eight Hundred Fifty Thousand Dollars ($850,000). Once the aggregate amount of
the Losses exceeds Eight Hundred Fifty Thousand Dollars ($850,000), Purchaser or
Allegheny, as the case may be, will be entitled to indemnification for the full
amount of the Losses.

 

(ii) Allegheny will not be entitled to indemnification under Section 12(b)(iii)
with respect to NSR requirements relating to the OVEC Entities unless and until
it has incurred in excess of One Hundred Thousand Dollars ($100,000) of Losses
in the aggregate with respect thereto. In such event, Purchaser shall be liable
to Seller for Losses in excess of such amount.

 

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The foregoing thresholds do not apply to indemnification for breach of any of
the covenants made by Purchaser or Allegheny in this Agreement.

 

(d) Cap. The obligation of Allegheny to indemnify Purchaser for breach of any of
Allegheny’s covenants or obligations in this Agreement will not exceed in the
aggregate the purchase price paid to Allegheny hereunder. The obligation of
Allegheny to indemnify Purchaser for breach of any of Allegheny’s
representations and warranties in this Agreement will not exceed Thirty Five
Million Dollars ($35,000,000) in the aggregate. The obligation of Purchaser to
indemnify Allegheny for breach of any of Purchaser’s covenants or obligations in
this Agreement will not exceed in the aggregate the purchase price paid to
Allegheny hereunder, except that the obligation of Purchaser to indemnify
Allegheny under Section 12(b)(iii) of this Agreement shall not exceed Ten
Million Dollars ($10,000,000) in the aggregate. The obligation of Purchaser to
indemnify Allegheny for breach of any of Purchaser’s representations and
warranties in this Agreement will not exceed Thirty Five Million Dollars
($35,000,000) in the aggregate.

 

(e) Right to Set-Off. Purchaser will be entitled to set-off, against the amounts
that it is required to pay to Allegheny under Section 3, the amount of any
indemnification to which it is entitled under this Section 12. Purchaser will
give written notice to Allegheny of any such set-off.

 

(f) Notice of Third-Party Claims. If a third party asserts a claim for which any
of the parties is entitled to indemnification under this Section 12, the party
against whom the claim is asserted will give prompt notice of the claim to the
party required to pay the indemnification (the “Indemnifying Party”). The
failure to give any such notice will not, however, relieve the Indemnifying
Party of its obligation to indemnify the other party. The Indemnifying Party
will have the right to assume control of the defense against the claim, at its
expense, and to compromise and settle the claim; except that, Allegheny may not,
without the prior written consent of Purchaser, compromise or settle any claim
in a manner that would impair the value of any assets or rights of Purchaser or
any OVEC Entity or that would interfere with the continued operation of their
respective businesses. Both parties will cooperate reasonably in any such
defense. If the Indemnifying Party does not assume control of the defense, the
party against whom the claim is asserted will have the right, at the expense of
the Indemnifying Party, to undertake the defense and to compromise or settle the
claim as it deems appropriate.

 

(g) Procedures with respect to the Holdback Amount. If at any time from and
after the Effective Time through the New ICPA Effective Date, Allegheny breaches
any of its covenants in Section 7(b) of this Agreement, Purchaser shall have the
right to retain from the Holdback Amount an amount equal to Purchaser’s
proportionate share of any Losses incurred by the OVEC Entities, and any
additional direct Losses incurred by Purchaser, arising out of or related to the
breach (the “Holdback Claim”). Purchaser shall give notice to Allegheny of any
Holdback Claim by delivering a written notice (the “Holdback Claim Notice”) to
Allegheny as soon as reasonably practicable after Purchaser has knowledge of the
facts underlying the Holdback Claim. The Holdback Claim Notice shall set forth a

 

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description of the Holdback Claim and the amount due to Purchaser as a result of
the Holdback Claim (which may be an estimate if the exact amount has not been
determined). No Holdback Claim Notice will be timely made if made greater than
45 days after the New ICPA Effective Date (the “Holdback Expiration Date”).
Allegheny may dispute the validity or amount of a Holdback Claim by delivering
to Purchaser, within twenty (20) days after delivery to Allegheny of the
Holdback Claim Notice, a written notice setting forth its basis for disputing
the Holdback Claim, the portion of the Holdback Claim that it disputes, and (if
applicable) the portion of the Holdback Claim that it does not dispute. The sum
of all amounts relating to Holdback Claims that Allegheny does not dispute shall
be referred to herein as the “Undisputed Holdback Amount”, the sum of all
amounts relating to Holdback Claims that Allegheny does dispute shall be
referred to herein as the “Disputed Holdback Amount” and the amount, if any by
which the Holdback Amount exceeds the sum of the Undisputed Holdback Amount and
the Disputed Holdback Amount shall be referred to as the “Unclaimed Holdback
Amount”. On the New ICPA Effective Date, the Holdback Amount shall be disbursed
to Allegheny, or retained by Purchaser, as follows: (i) the Undisputed Holdback
Amount shall be retained by Purchaser; (ii) the Unclaimed Holdback Amount less
One Million Dollars ($1,000,000) shall be disbursed to Allegheny; and (iii) the
Disputed Holdback Amount shall be retained by Purchaser pending mutual agreement
of Allegheny and Purchaser as to its disposition or, in the absence of such
agreement, a final, non-appealable order of a court of competent jurisdiction
respecting the disposition thereof, at which time Purchaser will retain or
disburse the Disputed Holdback Amount in accordance with such agreement or
order, as the case may be. On the 46th day following the New ICPA Effective Date
the One Million Dollars ($1,000,000) remaining as Holdback Amount shall be
disbursed in the same manner as immediately above. The provisions of this
Section 12(g) are intended to facilitate Purchaser’s right to be indemnified for
any breaches of Section 7(b) and are not a limitation on Purchaser’s right to be
indemnified under Section 12(a)(ii) with respect to any such breach.

 

13. Break-Up Fees.

 

(a) If the Effective Time does not occur and this Agreement is terminated by
Purchaser by reason of the failure of any of the closing conditions specified in
Sections 8(a) or (b) and Allegheny directly or indirectly sells the OVEC Shares
or its rights and obligations under the ICPA to any person or entity other than
the Purchaser within three years of the date of this Agreement, Allegheny will
pay Purchaser Two Million Dollars ($2,000,000).

 

(b) If the Effective Time does not occur and this Agreement is terminated by
Allegheny by reason of failure of any of the closing conditions specified in
Sections 9(a) or (b) and Purchaser purchases any shares or rights, directly or
indirectly, in OVEC from any third party within three years of the date of this
Agreement, Purchaser will pay Allegheny Two Million Dollars ($2,000,000).

 

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(c) If the Effective Time does not occur and this Agreement is terminated by
reason of failure of the closing condition specified in Sections 8(g) or under
Section 7(e)(iv), Purchaser will pay to Allegheny Two Million Dollars
($2,000,000).

 

(d) The break-up fees contained in this Section 13 shall be in addition to all
other rights and remedies either party may have against the other party for any
breaches of this Agreement. The obligations contained in this Section 13 shall
survive any termination of this Agreement except termination pursuant to Section
15.

 

14. Miscellaneous.

 

(a) Expenses. Each of the parties will pay its own expenses incurred in
connection with the negotiation, execution, and performance of this Agreement
and the completion of the transactions contemplated by this Agreement, including
fees and reimbursable expenses of counsel, accountants, and other advisors.

 

(b) “Best Knowledge of Allegheny”. For purposes of this Agreement, the phrase
“Best Knowledge of Allegheny” means the actual knowledge of David Benson, James
Garlick, or Thomas Kalup. Allegheny represents and warrants that such persons
are presently Allegheny’s representatives on the Board of Directors of OVEC.

 

(c) Entire Agreement. This Agreement and its Exhibits and Schedules contain the
entire understanding among Purchaser and Allegheny on their subject matter, and
there are no representations, warranties, or covenants by or among them other
than those set forth in this Agreement and its Exhibits and Schedules.

 

(d) Waiver. Any of the terms or conditions of this Agreement may be waived in
writing at any time by the party that is entitled to the benefit of that term or
condition.

 

(e) Governing Law; Dispute Resolution. The validity, interpretation, and
enforceability of this Agreement will be governed by the laws of the State of
Ohio. In the event of a dispute regarding this Agreement or the transactions
contemplated by it, the parties will use all reasonable efforts to resolve the
dispute on an amicable basis. If the dispute is not resolved on that basis
within 60 days, the parties may take whatever legal action they deem
appropriate, or may enter into mediation or arbitration if mutually agreeable.

 

(f) Notices. Any notice or other communication required or permitted under this
Agreement will be adequately given when it is personally delivered; when it is
sent by fax, with confirmation of receipt; or one day after it is sent by
overnight courier paid by the sender, and addressed

 

To Purchaser at:

 

Buckeye Power Generating, LLC

 

6677 Busch Boulevard

Columbus, Ohio 43229

Attention: President

 

22

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with a copy to:

 

Thompson Hine LLP

10 West Broad Street

Columbus, Ohio 43215

Attention: Robert P. Mone

 

To Allegheny:

 

Allegheny Energy, Inc.

800 Cabin Hill Drive

Greensburg, PA 15601-1689

Attention: President

Fax: (724) 830-5151

 

Allegheny Energy Supply Company, LLC

4350 Northern Pike – 4 North

Monroeville, PA 15146-2841

Attention: President

Fax: (412) 856-2789

 

with a copy to:

 

Gray, Plant, Mooty, Mooty & Bennett, P.A.

500 IDS Center

80 South Eighth Street

Minneapolis, MN 55402-3796

Attention: Joseph Kinning, Esq.

Fax (612) 632-4444

 

Any party may change the address or fax number to which notices or other
communications are to be given by furnishing the other party with written notice
of the change.

 

(g) Confidentiality. Purchaser agrees that, unless and until the Effective Time
has taken place, Purchaser and its officers, directors, and other
representatives will hold in strict confidence, and will not use to the
detriment of any OVEC Entity or Allegheny, all data and information about the
business of the OVEC Entities or Allegheny disclosed to them by the OVEC
Entities or Allegheny in connection with this transaction or this Agreement
(except for any data or information that is publicly available or is disclosed
to them by a source other than any OVEC Entity or Allegheny). If the transaction
contemplated by this Agreement is not completed, Purchaser will, upon reasonable
request

 

23

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by Allegheny, return to Allegheny or destroy any written documents in
Purchaser’s possession that include such data or information, including
worksheets, reports, lists, memoranda, and other documents prepared by or made
available to Purchaser.

 

(h) Notices to Third Parties and Publicity. All notices to third parties and
publicity concerning the transaction contemplated by this Agreement will be
jointly planned and coordinated by Purchaser and Allegheny. No party may act in
this regard without the prior consent of the others; however, this consent will
not be unreasonably withheld.

 

(i) Assignment. Neither of the parties may assign this Agreement without the
prior written consent of the other party; except that Purchaser may assign this
Agreement to any direct or indirect wholly owned subsidiary of Purchaser,
provided any such assignment does not relieve Purchaser of its obligations
hereunder.

 

(j) Preamble; Headings. The preamble to this Agreement, and the headings used in
this Agreement, are for convenience of reference only and are not intended to
affect the interpretation of this Agreement.

 

(k) Counterparts and Facsimile Signatures. This Agreement may be executed in one
or more counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument, and by facsimile.

 

15. Right of First Offer. In accordance with Section 12.193 of the Original
ICPA, Section 9.183 of the New ICPA, and the Unanimous Consent and Waiver
Agreement, Allegheny shall make an offer (“Offer”) to the other Sponsoring
Companies (as such term is defined in the ICPA) by providing an Offer Notice (as
such term is defined in the ICPA) to the other Sponsoring Companies within three
days after the date of this Agreement. Allegheny shall provide Purchaser an
opportunity to review and comment on Allegheny’s proposed draft of its Offer
Notice prior to its distribution to the other Sponsoring Companies.
Notwithstanding any review and comment by Purchaser on Allegheny’s proposed
draft of its Offer Notice, Allegheny agrees that the purchase price set forth in
the Offer Notice shall not exceed $107 million, and that the Offer Notice shall
contain such other terms as will permit Allegheny to transfer and assign its
rights and obligations under the ICPA to Purchaser in accordance with the terms
of this Agreement in the event the Offer is not accepted by any other Sponsoring
Companies. If the Offer is accepted by, and approved by the Board of Directors
of, one or more of the other Sponsoring Companies in accordance with Section
12.193 of the Original ICPA, Section 9.183 of the New ICPA, and the Unanimous
Consent and Waiver Agreement or if, within 45 days of the date of this
Agreement, Allegheny enters into a definitive agreement with a Sponsoring
Company for the sale and purchase of the OVEC Shares, and the transfer and
assignment of Allegheny’s rights and obligations under the ICPA, this Agreement
will immediately and automatically terminate, and Allegheny and Purchaser shall
have no liabilities or obligations hereunder; provided, however, that Allegheny
shall pay Purchaser (i) Five Hundred Thousand Dollars ($500,000) in cash within
10 days of termination of this Agreement, and (ii) One Million Five Hundred
Thousand Dollars ($1,500,000) in cash upon

 

24

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the closing of the sale and purchase of the OVEC Shares, and the transfer and
assignment of Allegheny’s rights and obligations under the ICPA. If the Offer is
not accepted by, and approved by the Board of Directors of, one or more of the
other Sponsoring Companies in accordance with Section 12.193 of the Original
ICPA, Section 9.183 of the New ICPA, and the Unanimous Consent and Waiver
Agreement, or if, within 45 days of the date of this Agreement, Allegheny does
not enter into a definitive agreement with a Sponsoring Company for the sale and
purchase of the OVEC Shares, and the transfer and assignment of Allegheny’s
rights and obligations under the ICPA, this Agreement shall continue in full
force and effect in accordance to its terms. Allegheny’s obligations under this
Section 15 shall survive any termination of this Agreement.

 

16. Escrow. Upon the signing of this Agreement, Purchaser will deposit Two
Million Dollars ($2,000,000) with Wells Fargo National Association (the “Escrow
Agent”), as escrow agent, pursuant to such form of escrow agreement as
Purchaser, Allegheny and Escrow Agent mutually agree (the “Escrow Agreement”),
which will be paid to Allegheny upon the termination of this Agreement under the
condition of Section 13(c) above. Immediately upon the satisfaction of the
condition of Section 8(g), Purchaser shall place an additional Three Million
Dollars ($3,000,000) with the Escrow Agent such that Purchaser will have a total
of Five Million Dollars ($5,000,000) in escrow pursuant to this Section 16.
Allegheny will have the right to recover from this $5,000,000 escrow any amount
which Allegheny is entitled to indemnification for under Section 12(b). Any
interest accrued on the escrow amounts described in this Section 16 will be
disbursed to Purchaser periodically as provided in the Escrow Agreement. Any
payment of any escrow amounts to Allegheny pursuant to this Section 16 are in
addition to any other remedies to which Allegheny may be entitled under this
Agreement. The Escrow Agreement shall terminate at the earlier of the
termination of this Agreement or the Effective Time, and, except as otherwise
provided in this Section 16, any amounts in escrow, including accrued interest,
at the time of the termination of the Escrow Agreement shall be disbursed to
Purchaser provided, however, that if Allegheny has any unsatisfied claims under
the Escrow Agreement the Escrow Agreement will not terminate until final
resolution of such unsatisfied claims.

 

[Signature Page Follows]

 

25

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IN WITNESS WHEREOF, Purchaser and Allegheny have executed this Agreement as of
the date first written above.

 

ALLEGHENY ENERGY, INC. By:    

Its:

    ALLEGHENY ENERGY SUPPLY COMPANY, LLC By:    

Its:

    BUCKEYE POWER GENERATING, LLC By:    

Its:

   

 

26

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DISCLOSURE SCHEDULE

 

ALLEGHENY ENERGY, INC. AND

ALLEGHENY ENERGY SUPPLY COMPANY, LLC (“ALLEGHENY”)

 

DATED AS OF MAY 17, 2004

 

This schedule and the disclosures set forth herein (the “Schedule”) are
delivered in connection with that certain Stock Purchase and ICPA Assignment
Agreement dated as of May 17, 2004, between Allegheny Energy, Inc., Allegheny
Energy Supply Company, LLC, and Buckeye Power Generating, LLC (the “Agreement”).
Capitalized terms used in this Schedule but not defined herein shall have the
meanings ascribed to such terms in the Agreement.

 

The Schedule numbers set forth below correspond to the section numbers in the
Agreement. Any disclosure made in any part of this Schedule which should, based
upon the substance of such disclosure, be applicable to another part of this
Schedule shall be deemed to be made with respect to such other Schedule,
regardless of whether or not a specific reference is made thereto. The headings
or any subheadings of any Schedule have been inserted for convenience of
reference only and shall not be deemed to be part of this Schedule.

 

To the extent that this Schedule contains exceptions to the representations and
warranties set forth in Sections 4 and 5 of the Agreement, the inclusion of an
item on this Schedule shall not be deemed an admission by Allegheny that such
item is material or that it will have a material adverse effect.

 

1

--------------------------------------------------------------------------------

 

DISCLOSURE SCHEDULE

 

Schedule 4(e)

 

Allegheny Conflicts

 

None

 

2

--------------------------------------------------------------------------------

 

DISCLOSURE SCHEDULE

 

Schedule 4(f)

 

Allegheny Litigation

 

None

 

3

--------------------------------------------------------------------------------

 

DISCLOSURE SCHEDULE

 

Schedule 4(h)

 

Allegheny Consents

 

OVEC Specific Approvals

 

Each of the OVEC Sponsoring Companies must fail to exercise each of their right
of first offer under the ICPA before Allegheny may assign its rights and
obligations under the ICPA.

 

Consent to the assignment of all of Allegheny’s rights and obligations under the
ICPA and the transfer of the OVEC Shares to Purchaser by XL Capital Assurance,
as the insurance wrap provider and guarantor to bondholders, under a $305
million bond financing that is wrapped by a credit-insurance policy, primarily
documented by an Indenture and an Insurance and Reimbursement Agreement, both
dated as of December 21, 2001.

 

Consent to the assignment of all of Allegheny’s rights and obligations under the
ICPA and the transfer of the OVEC Shares to Purchaser by certain required
lenders under a $60 million term loan facility, primarily documented by a Term
Credit Agreement, dated as of March 25, 2003, among OVEC, a syndicate of banks
and LaSalle Bank N.A., as administrative agent.

 

Consent to the assignment of all of Allegheny’s rights and obligations under the
ICPA and the transfer of the OVEC Shares to Purchaser by KeyBank, N.A. and
certain required lenders under a 364-day revolving loan facility, primarily
documented by a 364-day Credit Agreement, dated as of August 10, 2001, among
OVEC, a syndicate of lenders and KeyBank N.A., as administrative agent.

 

Approvals of Transaction in Connection with Stock Purchase and ICPA

 

Assignment Agreement

 

Approval of the transactions contemplated under this Agreement by the Federal
Energy Regulatory Commission pursuant to a 203 filing.

 

All applicable waiting periods (and any extensions of such waiting periods)
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, have
expired or otherwise been terminated.

 

4

--------------------------------------------------------------------------------

Approval of the transactions contemplated under this Agreement by the Securities
and Exchange Commission.

 

ICPA Approvals

 

Approval of the ICPA by the Federal Energy Regulatory Commission pursuant to a
205 filing.

 

Approval of the ICPA by the Virginia State Corporation Commission.

 

Filing with the Public Service Commission of West Virginia.

 

Filing with the Indiana Regulatory Commission.

 

Consent or approval of, or filings or negotiations with, the Kentucky Public
Service Commission may be required.

 

Filing with, or consent or approval of, the Securities and Exchange Commission
under the Public Utility Holding Company Act of 1935, if required.

 

5

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DISCLOSURE SCHEDULE

 

Schedule 5(a)

 

Information Concerning OVEC

 

OVEC’s purchase and installation of flu-gas desulpherization equipment, i.e.
scrubbers, on the generation units at the Clifty Creek and Kyger Creek Stations

 

National, regional and local market conditions generally affecting OVEC

 

All information contained in the 2002 Annual Report of OVEC

 

6

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DISCLOSURE SCHEDULE

 

Schedule 5(c)

 

OVEC Conflicts

 

See Schedule 4(h) to this Agreement for OVEC Specific Approvals and ICPA
Approvals

 

7

--------------------------------------------------------------------------------

 

DISCLOSURE SCHEDULE

 

Schedule 5(d)

 

OVEC Capitalization

 

None

 

8

--------------------------------------------------------------------------------

 

DISCLOSURE SCHEDULE

 

Schedule 5(e)

 

OVEC Financial Statements

 

See Financial Statements as of December 31, 2002 and 2001 attached in the 2002
Annual Report for OVEC at http://www.ovec.com/AnnualReport02.pdf

 

See Financial Statements as of December 31, 2003 at
http://www.ovec.com/ConFinancials.html

 

9

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DISCLOSURE SCHEDULE

 

Schedule 5(f)

 

OVEC Litigation

 

A. OVEC Corporate Litigation

 

1. AEI Coal

 

OVEC is a party to a certain coal supply agreement between OVEC, as buyer, and
Horizon Natural Resources Sale Company (n/k/a AEI Coal Sales Company, Inc.)
(“AEI Coal”), as seller, dated April 25, 2000 (as amended, the “Coal Supply
Agreement”). Coal Ventures Holding Company, Inc., Horizon NR, LLC (n/k/a AEI
Resources, Inc) and Zeigler Coal Holding Company, all debtors and
debtors-in-possession, are jointly and severally guarantors (collectively, the
“Guarantors”) of the Coal Supply Agreement under the guarantee attached to the
Coal Supply Agreement (the “Guarantee”). AEI Coal repeatedly failed and refused
to provide the quantity of coal required under the Coal Supply Agreement despite
demands by OVEC that it comply with its contractual obligations under the
Agreement. To date, AEI Coal has failed to deliver hundreds of thousands of tons
of coal required under the Coal Supply Agreement.

 

On or about September 26, 2001, AEI Coal, Horizon Natural Resources Holding
Company, LLC (n/k/a AEI Holding Company, Inc.) (“AEI Holding”), Bluegrass Coal
Development Co. (“Bluegrass”) and Evergreen Mining Co. (“Evergreen”) commenced
an action against OVEC and other defendants in the Commonwealth of Kentucky Boyd
Circuit II Division (the “Kentucky State Court”), Case No. 01-CI-00935 (the
“Kentucky Litigation”), alleging, among other claims, fraud, breach of contract
and duress and seeking, inter alia, to rescind the Coal Supply Agreement. On
November 6, 2001, OVEC filed its

 

10

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answer to the Kentucky complaint and asserted counterclaims against AEI (the
“OVEC Counterclaims”).

 

On February 26, 2002, AEI Coal, AEI Holding, Bluegrass and Evergreen filed an
amended complaint in the Kentucky Litigation (the “First Amended Complaint”).
OVEC’s claims arising out of and relating to the Coal Litigation and the Coal
Supply Agreement (the “Litigation Claims”) are in the multi-million dollar
range. On February 28, 2002, AEI Coal, AEI Holding, Bluegrass and Evergreen and
various affiliated companies (collectively, the “AEI Debtors”) commenced
voluntary petitions for reorganization under Chapter 11 of Title 11, United
States Code (the “Bankruptcy Code”) in the Bankruptcy Court.

 

In response to OVEC’s objection to the AEI Debtors’ Chapter 11 Plan dated
February 28, 2002 (the “AEI Plan”), the order confirming the AEI Plan dated
April 17, 2002 (the “AEI Confirmation Order”) provided that the OVEC
Counterclaims were unimpaired, passed through the AEI Debtors’ Chapter 11 cases
and were unaffected by the confirmation of the AEI Plan.

 

On March 11, 2002, counsel for AEI Coal, AEI Holding, Bluegrass and Evergreen
confirmed by letter to counsel for OVEC that OVEC need not answer the amended
complaint, which was directed only to another defendant in the Kentucky
Litigation. On or about April 26, 2002, AEI Coal, AEI Holding, Bluegrass and
Evergreen filed a second amended complaint (the “Second Amended Complaint”) in
the Kentucky Litigation.

 

On May 20, 2002, OVEC filed its answer to the second amended complaint (the
“OVEC Answer II”) in the Kentucky Litigation and reasserted the OVEC

 

11

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Counterclaims against AEI Coal (together with the second amended complaint, the
“Coal Litigation”). On November 13, 2002, the reorganized AEI Debtors, Horizon
Natural Resources Sales Company, Horizon Natural Resources Holding Company, LLC,
Coal Ventures Holding Company, Inc., AEI Resources, Inc. and Zeigler Coal
Holding Company, Blue Grass and Evergreen and various other affiliated companies
(collectively, the “Horizon Debtors”) commenced voluntary petitions for
reorganization under Chapter 11 of the Bankruptcy Code.

 

Pursuant to the automatic stay imposed by Section 362 of the Bankruptcy Code,
the Coal Litigation against the Horizon Debtors has been stayed. No motion to
lift the automatic stay has been filed by OVEC.

 

OVEC filed a proof of claim asserting (a) various claims for amounts payable and
breach of obligations under the Coal Supply Agreement, the Guarantee and other
related agreements as set forth in the Coal Litigation; (b) contingent and/or
unliquidated claims relating to breaches and failures to perform obligations,
including indemnity obligations, under the Coal Supply Agreement, the Guarantee
and other related agreements, including but not limited to (i) contingent,
unliquidated claims for future liabilities under the Coal Supply Agreement, the
Guarantee and other related agreements, (ii) contingent, unliquidated claims for
indemnification relating to any losses or liabilities from the Coal Litigation
and (iii) contingent, unliquidated claims for indemnification relating to any
losses or liabilities for breach of representation and warranties under Article
XIII of the Coal Supply Agreement; (c) a guarantee claim for OVEC’s contingent
and/or unliquidated claims relating to breaches and failures to perform
obligations, including indemnity obligations, under the Coal Supply Agreement
against Coal Ventures Holding

 

12

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Company, Inc., Horizon Natural Resources Holding Company, LLC and Zeigler Coal
Holding Company; and (d) various claims against each of the Horizon Debtors set
forth in the OVEC Counterclaims.

 

2. American Commercial Barge Line

 

On July 29, 1980, American Commercial Barge Line LLC (“ACBL”) and
Indiana-Kentucky Electric Corporation (“IKEC”) entered into a coal barge
agreement (as amended, the “Contract”) pursuant to which ACBL transported coal
owned by IKEC from the Loading Points (as defined in the Contract) of
third-party coal suppliers to IKEC’s coal unloading docks. Pursuant to the terms
of the Contract, IKEC had an option to extend the Contract up to and including
August 31, 2009.

 

By Motion to Reject Executory Contract (Coal Barging Agreement, as Amended, With
Indiana-Kentucky Electric Corporation), dated March 17, 2003 (the “Motion”),
ACBL and certain of its subsidiaries (collectively, the “Debtors”) sought to
reject the Contract. On April 8, 2003, the United States Bankruptcy Court for
the Southern District of Indiana (New Albany Division)(the “Bankruptcy Court”)
entered an Agreed Order (the “Agreed Order”) Granting Debtors’ Motion To Reject
Executory Contract (Coal Barging Agreement, As Amended, With Indiana-Kentucky
Electric Corporation) effective as of April 3, 2003 (the “Effective Date”).

 

As a result of the rejection of the Contract, IKEC filed a proof of claim for
damages for, inter alia, (i) breach of ACBL’s performance and other obligations
under the Contract for the period commencing after the Effective Date through
August 31, 2009; (ii) the actual costs IKEC incurred to obtain emergency barge
services; and (iii) contingent and/or unliquidated claims relating to breaches
and failures to perform obligations, including indemnity obligations, under the
Contract.

 

13

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B. OVEC Environmental Litigation - IKEC

 

1. Clifty Creek Station

 

On December 26, 2002, Save The Valley (STV), Hoosier Environmental Council
(HEC), and Citizens Action Coalition of Indiana (CAC) filed an appeal of the
renewed operating permit for the fly ash landfill at IKEC’s Clifty Creek Station
with the Indiana Office of Environmental Adjudication (OEA). The appeal alleged
that the Indiana Department of Environmental Management (IDEM) did not properly
public notice the renewal permit and that the permit should not have been issued
considering surface water, groundwater and fugitive dust problems at the site.

 

IKEC intervened in the appeal in support of IDEM. IDEM allowed IKEC to take the
lead in defending the permit action, and IKEC chose to challenge the
environmental groups’ legal standing under Indiana law on the grounds that the
groups were “not persons adversely affected by the permit action.” On June 23,
2003, the OEA ruled against IKEC on the standing issue, and on July 3, 2003 IKEC
and IDEM appealed OEA’s decision to the Marion County Superior Court. On October
27, 2003, the Marion Superior Court reversed the OEA decision and ruled that the
groups did not have standing to appeal the permit. The environmental groups have
now asked the Indiana State Court of Appeals to review the Marion Superior
Court’s decision and the court has agreed to do so. The State Court of Appeals
has not yet established a schedule to review the decision.

 

14

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2. North Madison & Liberty Ridge Monitoring Stations

 

On March 7, 2001, IKEC submitted a waiver request to IDEM requesting approval to
discontinue operation of the North Madison SO2 ambient air monitoring station
and the Liberty Ridge meteorological monitoring station, both associated with
the Clifty Creek Station. The basis of the request was that the stations were no
longer needed to assure compliance with the ambient air quality standards for
SO2 since no exceedances had been measured over a 30 plus year period and the
plant had recently significantly reduced SO2 emissions in response to the Acid
Rain Rules. On May 15, 2001, IDEM denied the request, and on May 31, 2001, IKEC
appealed IDEM’s denial to the OEA. On May 8, 2003, the OEA upheld IDEM’S denial.
On June 4, 2003, IKEC appealed OEA’s decision to the Marion County Superior
Court. Oral arguments were held before the Marion Superior Court on March 11,
2004, and the court’s decision is pending.

 

C. Employee/Other Litigation

 

1. Ronald K. Barnes – Harbor Boat Operator at the Clifty Creek Plant. On
4/16/99, Mr. Barnes alleges that he injured his back while pulling an employee
from the Ohio River who was struck by a barge haul cable which had broken and
knocked the employee into the river. Mr. Barnes filed a Jones Act suit in the
United States District Court, Eastern District of Kentucky in April 2002. The
Company is insured under the Jones Act by MOAC (A CNA Maritime Division) who has
hired attorneys to defend the claim. Depositions have been taken and the case is
scheduled to go to trial 12/21/04. A settlement demand has not been made.

 

2. Keith A. Tanner – Transmission Mechanic A in the System Division. On July 5,
2001, Mr. Tanner was burned when he contacted a 12,000 volt conductor resulting
in the loss of his left arm at the shoulder and his right arm below the elbow.
He filed an intentional tort claim against the Company in Franklin, Ohio, County
Common Pleas Court on April 26, 2002. Motions for Summary Judgment were filed on
March 5, 2004. The case is scheduled to go to trial on November 8, 2004. Company
is represented by Jim Blake from the law firm of Day, Ketterer, Raley, Wright &
Rybolt. A settlement demand has not been made.

 

3.

Cheryl L. Maddox – Maintenance Mechanic B at the Clifty Creek Plant. Ms. Maddox
was discharged on 2/19/03 for altering the return to work date on a

 

15

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doctor’s statement and insubordination and abusive, threatening, and profane
language when confronted about the statement. Ms. Maddox filed an EEOC charge
against the Company alleging discrimination due to sex and retaliation for which
we received a no probable cause finding. She then filed suit in August 2003 in
United States District Court, Southern District of Indiana alleging
discrimination. We are currently responding to Interrogatories and a Request for
Production of Documents. Company is represented by Mr. Douglas Bates from the
law firm of Stites & Harbison. A settlement demand has not been made.

 

4. Chester Willis – A contractor employee performing work at the Kyger Creek
Plant. On 9/24/01, Mr. Willis was working in a coal bunker when coal spilled
from the conveyor belt into the bunker and onto Mr. Willis allegedly causing him
to suffer a back injury. He filed suit in Gallia, Ohio, County Common Pleas
Court on 9/11/03. The Company is insured by Chubb who has hired Mr. Jim Blake to
represent the Company. Depositions are now being taken. A settlement demand has
not been made.

 

D. Asbestos Litigation

 

1. On 12/11/02, Charlotte Johnson, surviving spouse of Joseph Johnson, brought
suit against Air Products & Chemicals, Et Al (which included Ohio Valley
Electric Corporation) in Maryland alleging Mr. Johnson died of mesothelioma
resulting from exposure to asbestos – containing products while working as a
contractor employee at the Kyger Creek Plant. The Company filed a Motion To
Dismiss Claims Against It And “Kyger Creek Power” on 7/3/03, on the grounds that
the Court does not have jurisdiction over the Company and the claims against the
Company are time – barred. The law firm of Kramon & Graham, P.A. located in
Baltimore, Maryland is defending the Company.

 

2. On April 28, 2003, the Company was served with a summons and complaint in the
case of a group of plaintiffs vs 20th Century Glove Corporation of Texas, Et Al
(including Ohio Valley Electric Corporation) which was filed in the Circuit
Court of Kanawha County, West Virginia. (See note below).

 

3. On June 19, 2003, the Company was served with a summons in the case of a
group of plaintiffs vs 20th Century Glove Corporation of Texas, Et Al (including
Ohio Valley Electric Corporation) which was filed in the Circuit Court of
Kanawha County, West Virginia. (See note below).

 

4. On January 27, 2004, the Company was served with a summons and complaint in
the case of Sue Ellen Guinn vs 20th Century Glove Corporation, Et Al (including
Ohio Valley Electric Corporation) which was filed in the Circuit Court of
Kanawha County, West Virginia. (See note below).

 

16

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5. On February 5, 2004, the Company was served with a summons and complaint in
the case of Jon T. Chatham vs A. W. Chesterton Company, Et Al (including
Indiana-Kentucky Electric Corporation) which was filed in the Marion County
Superior Court, Indiana. (See note below).

 

NOTE:    The cases described in items D - 2., 3., 4., and 5. above have been
referred to Mr. Richard C. Polley of Dickie, McCamey & Chilcote who has been
retained by the Company to handle these asbestos claims in litigation. Mr.
Polley also represents subsidiaries of American Electric Power Company, Inc.
(AEP). These cases may be settled using the AEP Settlement Guidelines.

 

17

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DISCLOSURE SCHEDULE

 

Schedule 5(g)

 

OVEC Environmental Matters

 

See Schedule 5(f), OVEC Litigation, to this Agreement

 

18

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SCHEDULE 6(F) – PURCHASER CONSENTS

 

Set forth below is a list of all consents and approvals that are required to be
obtained in connection with the performance of Purchaser’s obligations under
this Agreement.

 

1. Approval of the transactions contemplated under this Agreement by the Federal
Trade Commission, the Department of Justice, and all other relevant government
agencies under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, without the requirement of any significant divestiture by the Purchaser
or any OVEC Entity, or the imposition of restrictions on the operation of any
business by Purchaser or any OVEC Entity.

 

2. All required approvals of the ICPA, including, without limitation, to the
extent necessary, by applicable state public utility commissions, and acceptance
for filing and approval of the ICPA as a rate schedule by the Federal Energy
Regulatory Commission (“FERC”).

 

3. All required approvals of the assignment of all of Allegheny’s rights and
obligations under the ICPA to Purchaser, including, without limitation, to the
extent necessary, by the FERC, Allegheny’s and OVEC’s lenders, the other parties
to the ICPA, and the Securities and Exchange Commission.

 

4. All required approvals of the transfer of the OVEC Shares to Purchaser,
including, without limitation, to the extent necessary, by the Securities and
Exchange Commission.

 

5. All required approvals of the Buckeye PPA, including, without limitation, to
the extent necessary, acceptance for filing and approval of the Buckeye PPA as a
rate schedule by the FERC.

 

1