UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
---------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- -------------------
Commission file number 1-12859
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CTG RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
Connecticut 06-1466463
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Columbus Boulevard, Hartford, Connecticut 06103
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(Address of principal executive offices) (Zip Code)
(860) 727-3010
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (applicable only
to Corporate Issuers). Number of shares of common stock outstanding as of
the close of business on February 1, 1999: 8,648,029.
<PAGE>
FINANCIAL STATEMENTS
CTG RESOURCES, INC.
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company believes that
the disclosures are adequate to make the information presented not
misleading, it is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Company's annual report on Form 10-K. In the opinion of the
Company, all adjustments necessary to present fairly the consolidated
financial position of CTG Resources, Inc. as of December 31, 1998 and 1997
and the results of its operations and its cash flows for the three months
and twelve months ended December 31, 1998 and 1997 have been included. The
results of operations for such interim periods are not necessarily
indicative of the results for the full year.
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<S> <C> <C> <C>
Dec. 31, Sept. 30, Dec. 31,
ASSETS 1998 1998 1997
------ --------- --------- ---------
Plant and Equipment:
Regulated energy $ 450,897 $ 447,463 $ 426,915
Unregulated energy 63,202 63,079 60,615
Construction work in progress 3,777 3,647 8,075
--------- --------- ---------
517,876 514,189 495,605
Less-Allowance for depreciation 180,326 176,173 165,555
--------- --------- ---------
337,550 338,016 330,050
--------- --------- ---------
Investments, at equity 11,341 11,821 11,118
--------- --------- ---------
Current Assets:
Cash and cash equivalents 981 1,264 3,527
Accounts and notes receivable 46,470 34,796 45,341
Allowance for doubtful accounts (3,389) (3,283) (3,551)
Accrued utility revenue 17,892 3,789 20,313
Inventories 19,210 17,852 14,414
Prepaid expenses 5,743 11,707 5,213
--------- --------- ---------
86,907 66,125 85,257
--------- --------- ---------
Deferred Charges and Other Assets:
Unrecovered future taxes 9,654 10,734 14,111
Other assets 30,976 32,485 23,161
--------- --------- ---------
40,630 43,219 37,272
--------- --------- ---------
$ 476,428 $ 459,181 $ 463,697
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS (Concluded)
(Dollars in Thousands)
<S> <C> <C> <C>
Dec. 31, Sept. 30, Dec. 31,
CAPITALIZATION AND LIABILITIES 1998 1998 1997
------------------------------ --------- --------- ---------
Capitalization:
Common Stock $ 67,448 $ 67,448 $ 67,569
Retained Earnings 59,908 56,447 55,868
--------- --------- ---------
127,356 123,895 123,437
Unearned compensation -
Restricted stock awards (449) (498) (932)
--------- --------- ---------
Common stock equity 126,907 123,397 122,505
Preferred stock, not subject to
mandatory redemption 879 879 883
Long-term debt 217,540 215,852 187,374
--------- --------- ---------
345,326 340,128 310,762
--------- --------- ---------
Current Liabilities:
Current portion of long-term debt 3,234 5,733 4,085
Notes Payable 15,000 2,000 30,500
Accounts payable and accrued expenses 31,705 30,813 32,369
Refundable purchased gas costs 4,059 1,640 5,577
Accrued liabilities 1,001 5,024 8,211
--------- --------- ---------
54,999 45,210 80,742
--------- --------- ---------
Deferred Credits:
Deferred income taxes 53,169 50,175 45,642
Unfunded deferred income taxes 9,654 10,734 14,111
Investment tax credits 2,707 2,761 2,927
Refundable taxes 4,314 4,252 3,491
Other 6,259 5,921 6,022
--------- --------- ---------
76,103 73,843 72,193
--------- --------- ---------
$ 476,428 $ 459,181 $ 463,697
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except for per share data)
Three Months Ended
December 31,
----------------------------
<S> <C> <C>
1998 1997
---------- ----------
Operating Revenues $ 81,679 $ 92,396
Less: Cost of Energy 44,390 51,292
State Gross Receipts Tax 2,809 3,369
---------- ----------
Operating Margin 34,480 37,735
---------- ----------
Other Operating Expenses:
Operations & maintenance expenses 13,811 13,523
Depreciation 5,000 4,689
Income taxes 4,462 6,238
Other taxes 1,815 1,813
---------- ----------
25,088 26,263
---------- ----------
Operating Income 9,392 11,472
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 7 49
Equity in partnership earnings 494 874
Other income 373 188
Income Taxes (316) (561)
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558 550
---------- ----------
Interest and Debt Expense 4,258 3,899
---------- ----------
Net Income 5,692 8,123
Less-Dividends on Preferred Stock 15 15
---------- ----------
Net Income Applicable to Common Stock $ 5,677 $ 8,108
========== ==========
Income Per Average Share of
Common Stock:
Basic $ 0.66 $ 0.85
========== ==========
Fully diluted $ 0.65 $ 0.85
========== ==========
Average Common Shares Outstanding
During the Period:
Basic 8,648,029 9,521,734
========== ==========
Fully diluted 8,679,829 9,576,483
========== ==========
Dividends Per Share of Common Stock $ 0.26 $ 0.25
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except for per share data)
Twelve Months Ended
December 31,
----------------------------
<S> <C> <C>
1998 1997
---------- ----------
Operating Revenues $ 272,031 $ 308,692
Less: Cost of Energy 143,782 167,971
State Gross Receipts Tax 9,100 11,006
---------- ----------
Operating Margin 119,149 129,715
---------- ----------
Operating Expenses:
Operations & maintenance expenses 54,273 56,500
Depreciation 19,616 18,461
Income taxes 10,434 17,219
Other taxes 7,451 7,600
---------- ----------
91,774 99,780
---------- ----------
Operating Income 27,375 29,935
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 19 125
Equity in partnership earnings 2,891 2,933
Other deductions (597) 19
Income Taxes (641) (923)
---------- ----------
1,672 2,154
---------- ----------
Interest and Debt Expense 16,283 13,607
---------- ----------
Net Income 12,764 18,482
Less-Dividends on Preferred Stock 61 61
---------- ----------
Net Income Applicable to Common Stock $ 12,703 $ 18,421
========== ==========
Income Per Average Share of
Common Stock:
Basic $ 1.47 $ 1.78
========== ==========
Fully diluted $ 1.44 $ 1.78
========== ==========
Average Common Shares Outstanding
During the Period:
Basic 8,651,127 10,354,387
========== ==========
Fully diluted 8,843,005 10,368,187
========== ==========
Dividends Per Share of Common Stock $ 1.01 $ 1.39
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Three Months Ended
December 31,
----------------------
<S> <C> <C>
1998 1997
---- ----
Cash Flows from Operations $ (6,681) $(10,284)
-------- --------
Cash Flows for Investing Activities:
Capital expenditures (5,413) (4,322)
Cash distributions received from
investments 974 244
Other, net 879 2,265
-------- --------
Net cash used in investing activities (3,560) (1,813)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (2,231) (2,178)
Issue/(repurchase) of common stock, net - (52,839)
Other stock activity, net - (2)
Issuance of long-term debt 35,000 64,000
Principal retired on long-term debt (5,011) (815)
Short-term debt (17,800) 3,000
-------- --------
Net cash provided by
financing activities 9,958 11,166
-------- --------
Decrease in Cash and
Cash Equivalents (283) (931)
Cash and Cash Equivalents at
Beginning of Period 1,264 4,458
-------- --------
Cash and Cash Equivalents at
End of Period $ 981 $ 3,527
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Dollars in Thousands)
Three Months Ended
December 31,
----------------------
<S> <C> <C>
1998 1997
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Net Income $ 5,692 $ 8,123
-------- --------
Adjustments to reconcile net income
to net cash:
Depreciation and amortization 5,170 4,895
Provision for uncollectible accounts 1,336 1,732
Deferred income taxes, net 3,002 1,285
Equity in partnership earnings (494) (874)
Change in assets and liabilities:
Accounts receivable (12,821) (18,037)
Accrued utility revenue (14,103) (15,689)
Inventories (1,358) 3,170
Purchased gas costs 2,419 863
Prepaid expenses 5,964 3,690
Accounts payable and accrued expenses (3,131) (544)
Other assets/liabilities 1,643 1,102
-------- --------
Total adjustments (12,373) (18,407)
-------- --------
Cash flows from operations $ (6,681) $(10,284)
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 6,637 $ 3,869
======== ========
Income taxes/(refunds) $ (294) $ 1,614
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Twelve Months Ended
December 31,
----------------------
<S> <C> <C>
1998 1997
---- ----
Cash Flows from Operations $ 30,368 $ 27,389
-------- --------
Cash Flows for Investing Activities:
Capital expenditures (23,526) (25,293)
Purchase of cogeneration assets (17,067) -
Cash distributions received from
investments 3,173 1,805
Other,net (485) 2,109
-------- --------
Net cash used in investing activities (37,905) (21,379)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (8,710) (14,348)
Issuance/(repurchase) of common
stock, net (112) (53,473)
Other stock activity, net (2) 486
Issuance of long-term debt 45,600 64,000
Principal retired on long-term debt (16,285) (22,084)
Short-term debt (15,500) 21,500
-------- --------
Net cash provided/(used) by
financing activities 4,991 (3,919)
-------- --------
Increase/(Decrease) in Cash and
Cash Equivalents (2,546) 2,091
Cash and Cash Equivalents at
Beginning of Period 3,527 1,436
-------- --------
Cash and Cash Equivalents at
End of Period $ 981 $ 3,527
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Dollars in Thousands)
Twelve Months Ended
December 31,
----------------------
<S> <C> <C>
1998 1997
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Net Income $ 12,765 $ 18,482
-------- --------
Adjustments to reconcile net income
to net cash:
Depreciation and amortization 20,578 19,162
Provision for uncollectible accounts 4,648 4,259
Deferred income taxes, net 8,131 5,119
Equity in partnership earnings (2,891) (2,933)
Change in assets and liabilities:
Accounts receivable (5,083) (8,576)
Accrued utility revenue 2,421 (3,938)
Inventories (4,796) (422)
Purchased gas costs (1,518) 2,262
Prepaid expenses (530) (1,505)
Accounts payable and accrued expenses (7,410) (2,516)
Other assets/liabilities 4,053 (2,005)
-------- --------
Total adjustments 17,603 8,907
-------- --------
Cash flows from operations $ 30,368 $ 27,389
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 12,823 $ 11,991
======== ========
Income taxes $ 8,027 $ 8,358
======== ========
</TABLE>
<PAGE>
"UNAUDITED"
CTG RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
(Thousands of Dollars)
(1) Long-term Debt
In October 1998, CTG's wholly-owned, unregulated subsidiary, The Energy
Network, Inc. ("TEN") issued $15,000 of Senior Secured Notes, due in
2010, at 6.9%. The full amount of the principal is due at maturity.
The proceeds were used to repay short-term debt that was used to
finance the purchase and repowering of the Hartford Hospital
cogeneration facility. The September 30, 1998, financial statements
reflect the classification of the debt that was retired as a result of
this refinancing as long-term debt.
In October 1998, the Company issued a total of $20,000 of MTNs at
6.04%, due 2008. These MTNs are unsecured and have no call provisions
or sinking fund requirements. The proceeds were used primarily to
refinance $15,800 of short-term debt that was outstanding at fiscal
year-end 1998. The long-term debt amount shown on the balance sheet at
September 30, 1998, includes $15,800 of these MTNs.
In October 1998, the Company exercised its option to redeem $2,500 in
principal of its 9.16%, Series AA First Mortgage Bonds in addition to
the scheduled redemption of $2,500, for a total of $5,000.
(2) Legal Proceedings
In 1995 certain Connecticut plumbers and HVAC contractors filed a class
action suit against CTG's wholly-owned regulated gas distribution
subsidiary, Connecticut Natural Gas Corporation ("CNG"), and the
State's two other local natural gas distribution companies ("LDCs"),
claiming that the LDCs engaged in unfair trade practices relating to
customer service work. The plumbers and contractors assert claims for
profits which they allege were lost during prior years. In January
1998, the court granted CNG's motion to strike all but one count of the
complaint: the antitrust conspiracy claim. The plumbers and
contractors subsequently filed two additional lawsuits against CNG
alleging violations arising from the same business activities as in the
first lawsuit. All of the cases were assigned to the State's complex
litigation docket. In February 1999, the court denied the motion of
the plumbers and contractors to certify a class action in one of the
three cases. There has not been any settlement demand or formal
statement of alleged damages. As a result, management cannot estimate
the Company's potential exposure related to these claims. The Company
is vigorously defending this matter.<PAGE>
(3) Adriaen's Landing
During fiscal 1998, the Company was approached by local businesses and
government agencies regarding the development of a stadium for the New
England Patriots football team, along with a convention center and
hotel and retail, recreational and housing facilities. The
development, known as Adriaen's Landing, is to be built on a site that
includes the Company's headquarters, gas operations center and steam
and chilled water production facilities. In order to accommodate the
development as currently planned, the Company would be required to
relocate those facilities. A relocation would have a significant
impact on the Company's business and operations during the transition.
The Company believes that the Adriaen's Landing project would be
beneficial to the Greater Hartford area and provides an opportunity for
new customers to the Company. The Company has indicated its
willingness to relocate provided that the relocation is accomplished in
a way that will not materially disadvantage the Company or its
customers.
The Adriaen's Landing site, including the Company's property, contains
contaminants, some of which originated during the Company's former gas
manufacturing activities. The Company believes that if the development
activities trigger the remediation of contamination on the Company's
property, the cost of the remediation should be regarded as part of the
project development costs. Prior decisions of the Connecticut
Department of Public Utility Control ("DPUC") indicate that the costs
of remediating property that is found to have been contaminated by a
gas utility's former gas manufacturing activities are generally
recoverable from the utility's customers.
Discussions concerning the relocation of the Company's facilities
continued during the first quarter of fiscal 1999. Although agreement
has not yet been reached concerning the manner of the relocation and
the payment of relocation and any related remediation costs, the
Company expects to be able to reach an agreement that will be
satisfactory to the Company. If an agreement cannot be reached, the
Secretary of the Office of Policy and Management of the State of
Connecticut has the authority under recently enacted legislation to
condemn the property on which the Company's facilities are located for
use as a stadium. Although the Company would be entitled to just
compensation for the value of its properties taken, as well as certain
relocation costs, the ultimate amount of the compensation in any such
condemnation would be subject to court determination.
(4) Reclassifications
Certain prior year amounts have been reclassified to conform with
current year classifications.<PAGE>
"UNAUDITED"
CTG RESOURCES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 1998
(Dollars in Thousands Except for Per Share Amounts)
CTG Resources, Inc. ("the Company" or "CTG") is a holding company and parent
of the Connecticut Natural Gas Corporation ("CNG") and The Energy Network,
Inc. ("TEN"). CNG is an energy provider engaged in the regulated
distribution, sale and transportation of natural gas. TEN holds and
operates, through divisions or wholly-owned subsidiaries, CTG's unregulated,
diversified businesses which are primarily engaged in district heating and
cooling and also include the Company's equity investments in two
partnerships, one of which is the Iroquois Gas Transmission System
("Iroquois").
RESULTS OF OPERATIONS
The Company recorded consolidated earnings per share of $.66 for the quarter
and $1.47 for the twelve months ended December 31, 1998, compared to $.85
for the quarter, and $1.78 for the twelve months ended December 31, 1997.
The principal factors which affected fiscal 1999 earnings are warmer winter
heating season weather and lower weighted average shares outstanding as a
result of the October 1997 stock repurchase.
Operating Margin
The following table presents the changes in gas revenues, gas operating
margin, heating degree days (a measure of weather) and gas deliveries for
all periods reported in the statements of income:
<TABLE>
Three Months Ended Twelve Months Ended
December 31, December 31,
<S> <C> <C> <C> <C>
1998 1997 1998 1997
-------- -------- -------- --------
Gas Revenues $ 77,055 $ 87,627 $251,309 $286,672
======== ======== ======== ========
Gas Operating Margin $ 31,716 $ 34,720 $105,672 $114,677
======== ======== ======== ========
Heating Degree Days 1,960 2,269 5,234 6,156
===== ===== ===== =====
Commodity and
Transportation
Volumes(mmcf):
Firm Gas Sales 5,953 7,260 19,289 22,799
Interruptible Gas
Sales 2,584 2,886 8,753 9,630
Off-System Gas
Sales 3,906 2,163 13,203 9,080
Transportation
Services 1,281 1,102 4,555 4,073
------ ------ ------ ------
Total 13,724 13,411 45,800 45,582
====== ====== ====== ======
</TABLE>
<PAGE>
Gas operating margin is equal to gas revenues less the cost of gas and
Connecticut gross revenues tax. A lower gas operating margin was earned in
both the first quarter and twelve months ended periods of fiscal 1999 as
compared to fiscal 1998. Warmer weather during the winter heating season is
the principal reason for this decrease in gas operating margin. Although
overall gas throughput is higher in fiscal 1999, the warmer winter weather
has resulted in fewer sales of gas to the higher-margin firm and
interruptible classes of customers for winter heating.
Any change in the volumes of sales to firm customers has the greatest impact
on operating margins. The Company continues to add firm heating customers
from year to year, but the full potential benefit to earnings from these
additional heating customers is somewhat diminished by the effects of the
warmer winter weather.
Although interruptible sales were also lower, the contribution from
interruptible margins was higher in fiscal 1999. The negative impact of
lower sales because of the warmer weather was offset by the benefit of lower
gas costs. Off-system sales have been higher in fiscal 1999. These sales
increased the contribution to margin and offset some of the negative impacts
discussed above.
Weather Stabilization Program
In September 1998, CNG purchased an insurance product for the winter heating
season (November through March). The program is designed to reduce the
effects of abnormal winter weather on earnings. This program helps to
offset lost margins and thus provides the Company with additional earnings
in the event of significantly warmer winter weather in return for an
insurance premium which increases in the event of significantly colder
winter weather. Benefits received or premiums paid are recorded as
corporate insurance credits or costs. In the first quarter of fiscal 1999
the Company recorded a benefit to earnings from this program of
approximately $379, net of income taxes.
Operations and Maintenance Expenses
Consolidated operations and maintenance ("O&M") expenses are higher in the
three months ended December 31, 1998 as compared to the three months ended
December 31, 1997 and lower in the twelve months ended December 31, 1998 as
compared to the twelve months ended December 31, 1997. In the first quarter
of fiscal 1999 the Company began to record operating expenses for the
cogeneration plant which was purchased by TEN in June 1998, subsequently
repowered, and brought on line in December 1998 to serve a large local
hospital complex (See Earnings from Diversified Operations, below). Absent
this item, consolidated O&M expenses are lower from year to year between the
two comparable first quarters. The Company has recorded many variations in
O&M expenses between all comparable periods which tend to offset each other,
as discussed below.
Between the comparable first quarters ended December 31, 1998 and 1997,
lower costs have been incurred for pension related costs, corporate
insurance and bad debts. Higher expenses have been recorded for
compensation, computer-related services and other outside purchased
services.
In the twelve months ended December 1998, as compared to the twelve months
ended December 1997, lower expenses have been recorded for corporate
insurance, workers' compensation insurance, amortized costs related to<PAGE>
regulatory proceedings, and other outside purchased services. Increases in
expenses were recorded in the areas of compensation and computer related
services.
Pension costs reflect a reduction in expenses because of favorable plan
performance and changes in actuarial assumptions in the plans. Corporate
insurance costs reflect the benefit of the weather stabilization insurance
program described above. Workers' Compensation insurance costs have declined
because of lower actual and projected claims realized as a result of the
Company's aggressive management of claims. Variations in levels of bad debt
expenses typically relate to customers' natural gas bills and actual
collection levels. Compensation expenses reflect increases in wages and
salaries as well as higher payments made related to incentive awards and
commissions. Changes in levels of expenses for other outside purchased
services primarily reflect higher costs for legal services and lower costs
for communications services.
Income Taxes
Recorded income taxes were lower for both the three and twelve months ended
December 1998, as compared to 1997, primarily because of lower taxable
income. Other factors include a gradual phase-in of a lower State of
Connecticut corporate income tax rate and income tax benefits related to
changes in required levels of income tax reserves resulting from the
resolution of various tax audits.
Other Income (Deductions)
Other Deductions for the twelve months ended December 31, 1998 include costs
related to the closing of certain diversified operations during fiscal 1998,
as discussed below. Without the impact of these costs, the Company would
have recorded Other Income in all periods.
Between the comparable three months ended periods, higher income from
merchandising operations and from the investment of trust funds and lower
costs for life insurance premiums are partially offset by higher promotional
and advertising expenses.
In the twelve months ended December 31, 1998, as compared to the twelve
months ended December 31, 1997, higher income from merchandising operations,
lower costs for life insurance premiums and lower promotional and
advertising expenses are partially offset by less income from investments.
Interest and Debt Expense
Higher interest and debt expense has been recorded in fiscal 1999 primarily
because of additional long-term debt issued during the first quarter of both
fiscal 1999 and fiscal 1998 (See Financing Activities).
Earnings from Diversified Businesses
The Company's diversified, unregulated businesses recorded a loss of $(.01)
per share for the quarter and no earnings per share for the twelve months
ended December 1998, compared to earnings per share of $.06 for the quarter
and $.25 for the twelve months ended December 1997. The cost of the added
debt issued to finance the repurchase of CTG Common Stock by TEN in October<PAGE>
1997 reduced December 1998 earnings per share by $(.02) for the quarter and
$(.17) for the twelve months ended December 1998.
The reduction in both the three months and twelve months ended December 31,
1998 earnings, as compared with similar periods ending December 31, 1997,
reflects lower sales for both steam and hot water for heating, because of
the warmer winter weather, and costs related to new business development
activities. These items which reduced income in fiscal 1999 were partially
offset by higher chilled water sales and lower energy and production costs
for district heating and cooling. The twelve months ended December 1998
also includes charges to income related to the wind down of certain
operations in fiscal 1998.
In June 1998, TEN purchased a cogeneration facility which supplies a major
local hospital with steam and electricity and sells electricity to the local
electric utility. The repowering of this facility was completed and the
hospital complex began to receive steam and chilled water from TEN in
December 1998.
TEN's earnings from its equity interest in two partnerships are lower in
fiscal 1999. The majority of these earnings are from Iroquois, and in
August 1998 Iroquois' approved tariffs allowed by the Federal Energy
Regulatory Commission were reduced, resulting in lower income.
MATERIAL CHANGES IN FINANCIAL CONDITION
Cash Flows
Negative cash flows from operations are frequently experienced during the
first quarter of the fiscal year which begins the winter heating season.
This occurs because the Company must pay for large quantities of natural gas
in advance of the receipt of payments from customers. This lag between when
gas is consumed and when payment for it is received creates the need to
provide cash for operations from other sources.
Available short-term borrowings and cash on hand provided the necessary cash
for the Company's operations, dividend payments, long-term debt principal
payments and construction expenditures during the first quarter of both
fiscal 1999 and 1998.
Proceeds from long-term debt issued in the first quarter of fiscal 1999 were
used to refinance short-term debt. Long-term debt issued in the first
quarter of fiscal 1998 was used to finance a stock repurchase and to retire
existing short-term debt.
In the twelve months ended December 31, 1998 and 1997, available cash from
operations, together with short-term borrowings, paid for expenses related
to operations and for construction, dividends and principal payments on
long-term debt.
Financing Activities
In October 1998, the Company exercised its option to redeem $2,500 in
principal of its 9.16%, Series AA First Mortgage Bonds in addition to the
scheduled redemption of $2,500, for a total of $5,000.
<PAGE>
In October 1998, the Company refinanced $30,800 of short-term borrowings
with long-term debt. TEN issued $15,000 of Senior Secured Notes, due in
2010, at 6.9%. The full amount of the principal is due at maturity. The
proceeds were used to repay short-term debt that was used to finance the
purchase and repowering of a local cogeneration facility. CNG issued a
total of $20,000 of MTNs at 6.04%, due 2008. These MTNs are unsecured and
have no call provisions or sinking fund requirements. The proceeds were
used primarily to refinance short-term debt that was outstanding. The
September 30, 1998, balance sheet reflects $15,000 of TEN's and $15,800 of
CNG's short-term debt amounts that were retired in this financing as long-
term debt.
In the first quarter of fiscal 1999 the Company renewed TEN's expiring 364-
day, $10,000 line of credit through September 28, 1999.
Forward Equity Purchase Agreement
In a Forward Equity Purchase Agreement dated October 1, 1997, and amended
October 14, 1998, CTG has committed to fund from $7,500 to $16,100 per year
into TEN from 1998 through 2009 for an aggregate additional cash infusion
into TEN of $122,600. As a provision of this agreement, CTG is restricted
from declaring or paying any dividends or distributions to its holders of
common stock if any amounts due and payable under this agreement are in
arrears.
The Energy Network Alliance
In October 1998, TEN entered into a marketing alliance with Pratt & Whitney
Canada, Inc., Carrier Corporation and Oxford Technologies, Inc. to provide
energy for heating, cooling and electricity to large commercial, industrial
and institutional facilities by combining cogeneration and district energy.
As its role in this alliance, TEN would own and operate the district energy
plants which will be installed on-site at each facility and equipped with
state-of-the-art energy systems provided by the other members of the
alliance. TEN's participation in this alliance is in keeping with TEN's
strategic plan to focus its investments in fixed assets in capital intensive
businesses.
Market Risk
The Company's exposure to market risk comes primarily from changing natural
gas prices. All of the Company's gas sales are designed to fully recover
the Company's cost of gas. The Company passes on to its firm customers
changes in gas costs from those reflected in its tariffs under purchased gas
adjustment provisions allowed by the Connecticut Department of Public
Utility Control ("DPUC"). Interruptible and off-system sales are priced
competitively at not less than the Company's cost of gas associated with
those sales plus applicable taxes and margin. Some interruptible and off-
system sales are made under fixed price sales contracts. For such sales the
Company secures its margin and protects against potential losses that could
be caused by changes in gas prices by buying and storing natural gas for
these contracts at a fixed price at the beginning of the contract period.
Transportation services are also delivered at cost-based rates.<PAGE>
All but one issue of the Company's long-term debt are at fixed rates of
interest. The $10,600 of Industrial Revenue Variable Rate Demand Bonds
issued by TEN in October 1998 are at a variable rate of interest which is
set weekly. The Company has no derivative or hedging agreements.
Adriaen's Landing
During fiscal 1998, the Company was approached by local businesses and
government agencies regarding the development of a stadium for the New
England Patriots football team, along with a convention center and hotel and
retail, recreational and housing facilities. The development, known as
Adriaen's Landing, is to be built on a site that includes the Company's
headquarters, gas operations center and steam and chilled water production
facilities. In order to accommodate the development as currently planned,
the Company would be required to relocate those facilities. A relocation
would have a significant impact on the Company's business and operations
during the transition. The Company believes that the Adriaen's Landing
project would be beneficial to the Greater Hartford area and provides an
opportunity for new customers to the Company. The Company has indicated its
willingness to relocate provided that the relocation is accomplished in a
way that will not materially disadvantage the Company or its customers.
The Adriaen's Landing site, including the Company's property, contains
contaminants, some of which originated during the Company's former gas
manufacturing activities. The Company believes that if the development
activities trigger the remediation of contamination on the Company's
property, the cost of the remediation should be regarded as part of the
project development costs. Prior decisions of the DPUC indicate that the
costs of remediating property that is found to have been contaminated by a
gas utility's former gas manufacturing activities are generally recoverable
from the utility's customers.
Discussions concerning the relocation of the Company's facilities continued
during the first quarter of fiscal 1999. Although agreement has not yet
been reached concerning the manner of the relocation and the payment of
relocation and any related remediation costs, the Company expects to be able
to reach an agreement that will be satisfactory to the Company. If an
agreement cannot be reached, the Secretary of the Office of Policy and
Management of the State of Connecticut has the authority under recently
enacted legislation to condemn the property on which the Company's
facilities are located for use as a stadium. Although the Company would be
entitled to just compensation for the value of its properties taken, as well
as certain relocation costs, the ultimate amount of the compensation in any
such condemnation would be subject to court determination.
Offer to Purchase District Heating and Cooling Facilities
On February 5, 1999, the Company received an unsolicited offer from the
Connecticut Resources Recovery Authority ("CRRA") to purchase the Company's
district heating and cooling ("DHC") assets. The Company is evaluating the
offer. The CRRA is a quasi-governmental authority that owns waste-to-energy
facilities in Connecticut, including a plant that generates steam and
electricity from a site near the Company's DHC system in Hartford,
Connecticut. Certain of the Company's DHC facilities that are the subject
of the offer are located on the site of the proposed Adriaen's Landing
project (See Adriaen's Landing, above).
<PAGE>
Legal Proceedings
In 1995 certain Connecticut plumbers and HVAC contractors filed a class
action suit against CNG and the State's two other local natural gas
distribution companies ("LDCs"), claiming that the LDCs engaged in unfair
trade practices relating to customer service work. The plumbers and
contractors assert claims for profits which they allege were lost during
prior years. In January 1998, the court granted CNG's motion to strike all
but one count of the complaint: the antitrust conspiracy claim. The
plumbers and contractors subsequently filed two additional lawsuits against
CNG alleging violations arising from the same business activities as in the
first lawsuit. All of the cases were assigned to the State's complex
litigation docket. In February 1999, the court denied the motion of the
plumbers and contractors to certify a class action in one of the three
cases. There has not been any settlement demand or formal statement of
alleged damages. As a result, management cannot estimate the Company's
potential exposure related to these claims. The Company is vigorously
defending this matter.
YEAR 2000 COMPLIANCE
CTG 's State of Readiness
CTG has been preparing for Year 2000 ("Y2k") issues for a number of years.
In 1989, CTG started the implementation of a Long-Range Information Systems
Plan that addressed the replacement or redevelopment of all key CTG
applications. All systems replaced or redeveloped since 1989 were required
to be Y2k compliant. In January 1998, a task force was organized to address
all Y2k issues throughout CTG operations. The task force, headed by a Y2k
compliance officer, is comprised of individuals from every business unit
within CTG and is charged with assembling an inventory of date impacted
systems, identifying critical vendors and customers for compliance,
prioritizing non-compliant systems, identifying critical dates for
compliance, developing and executing test plans for all critical high
priority application programs and embedded technology, developing
contingency plans for non-compliant vendors and systems, and certifying that
all systems and critical vendors are compliant. A subcommittee was also
formed to communicate with the Board of Directors, customers, stockholders,
DPUC, vendors, and employees of CTG regarding the status of CTG activities.
All of the above-noted activities of the task force, with the exception of
developing contingency plans and the system testing and certification
phases, were completed during the last quarter of calendar year 1998.
Contingency plans will be completed during the first quarter of calendar
1999. The testing and certification of systems and critical vendors will be
completed during the remaining months of calendar 1999.
The purpose of system tests is to verify that the date-sensitive features of
these systems will perform properly in the year 2000. CTG has four systems
that are not compliant at this time (Payroll/HR, Computer Aided Dispatch,
Supervision Control and Data Acquisition, and TEN's financial system).
Through the normal replacement schedule, these systems will be brought into
compliance by calendar year-end 1999.
In April 1998, a letter and survey were sent to CTG's vendors requesting a
status of their Y2k efforts. In September 1998, a second letter and survey
were sent to vendors which did not respond. For all critical vendors which
are not Y2k compliant by the critical dates identified, CTG will make
arrangements for alternate suppliers and service providers. This process
will continue to take place throughout 1999. Parts and materials purchased<PAGE>
from non-compliant vendors which are critical to CTG's operations will be
acquired in adequate quantities and inventoried prior to the end of 1999.
Although not all vendors have returned surveys, no third parties with whom
CTG has significant business relationships have disclosed problems which
would indicate the potential for business interruptions.
Costs to Address CTG's Year 2000 Issues
CTG has not incurred significant incremental costs, nor does it expect to
incur significant outside consulting costs, relating to the Y2k issue. In
accordance with the aforementioned Long-Range Information Systems Plan, CTG
has been replacing or redeveloping its major computer applications during
the past decade and the timetable called for by this plan was not
accelerated as a result of the advent of the Y2k issue.
Risks of CTG's Year 2000 Issues
CTG's current schedule is subject to change, depending on developments that
may arise through unforeseen business circumstances and through the
remediation and testing phases of our compliance effort. CTG also depends
upon third parties, including customers, suppliers, government agencies and
financial institutions, to reliably deliver products and services. Although
CTG has not received responses from all third parties, CTG has not
identified any known Y2k-related event, trend, demand, commitment, or
uncertainty which would likely have a material effect on CTG's business,
results of operations, liquidity, capital resources or financial condition.
CTG has canvassed its critical vendors and no such vendor has indicated it
will not be Y2k compliant. CTG has assigned critical dates for vendors to
show compliance throughout 1999. If a vendor does not show compliance by a
specific date, CTG will either find a replacement vendor or develop a work-
around for such noncompliance.
Based on the current schedule for completion of Y2k tasks, CTG believes its
planning is adequate to secure Y2k readiness of critical systems and
operations. CTG is not able to predict all the factors that could cause
actual results to differ materially from its current expectations regarding
its Y2k readiness. However, if CTG and/or third parties with whom CTG has a
significant business relationships fail to achieve Y2k readiness with
respect to critical systems or operations, there could be a material adverse
effect on CTG's results of operations and financial position.
CTG's Contingency Plans
CTG's contingency plans include selecting alternate vendors that are Y2k
compliant, using back-up systems which do not rely on computers, and
obtaining and stocking critical parts and materials. Critical dates for
compliance have been established for systems and vendors utilized throughout
CTG. These critical dates have been established in order to allow sufficient
time for CTG to either remediate any date-sensitive features in existing
computer software and applications critical to CTG's business or to acquire
services and products from alternate providers who are Y2k compliant.
Contingency planning is an ongoing process and will continue throughout
1999.<PAGE>
FORWARD LOOKING INFORMATION
This report and other Company reports, including filings with the Securities
and Exchange Commission, press releases and oral statements, contain forward
looking statements. Such statements include but are not limited to
disclosures about Adriaen's Landing, an Offer to Purchase District Heating
and Cooling Facilities, Operating Margin, the Weather Stabilization Program,
changes in Operating and Maintenance expenses, Income Taxes, Market Risk,
Legal Proceedings, Year 2000 Compliance, a Forward Equity Purchase Agreement
and the Energy Network Alliance.
Forward looking statements are made based upon management's expectations and
beliefs concerning future developments and their potential effect upon the
Company. The Company cautions that, while it believes such statements to be
reasonable and makes them in good faith, actual results almost always vary
from expectations, and the differences between assumed facts or basis and
actual results can be material, depending upon the circumstances. Investors
should be aware of important factors that could have a material impact on
future results. These factors include, but are not limited to, weather, the
regulatory environment, legislative and judicial developments which affect
the Company or significant groups of its customers, economic conditions in
the Company's service territory, fluctuations in energy-related commodity
prices, customer conservation efforts, financial market conditions, interest
rate fluctuations, customers' preferences, unforeseen competition, and other
uncertainties, all of which are difficult to predict and beyond the control
of the Company.<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
--------------------------
In 1995 certain Connecticut plumbers and HVAC contractors filed a class
action suit against CNG and the State's two other local natural gas
distribution companies ("LDCs"), claiming that the LDCs engaged in unfair
trade practices relating to customer service work. The plumbers and
contractors assert claims for profits which they allege were lost during
prior years. In January 1998, the court granted CNG's motion to strike all
but one count of the complaint: the antitrust conspiracy claim. The
plumbers and contractors subsequently filed two additional lawsuits against
CNG alleging violations arising from the same business activities as in the
first lawsuit. All of the cases were assigned to the State's complex
litigation docket. In February 1999, the court denied the motion of the
plumbers and contractors to certify a class action in one of the three
cases. There has not been any settlement demand or formal statement of
alleged damages. As a result, management cannot estimate the Company's
potential exposure related to these claims. The Company is vigorously
defending this matter.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
99(1) Exhibit Index
3(1) Amended and Restated Certificate of Incorporation
3(2) Amended and Restated By-Laws
10(126) Memorandum of Agreement among The Energy Network, Inc.,
Pratt & Whitney Canada Inc., Oxford Technologies, Inc. and
Carrier Corporation
10(127) Independent Consulting Agreement between The Energy
Network, Inc. and Oxford Technologies, Inc.
10(128) Amendment to the 364-day Revolving Credit Agreement between
The Energy Network, Inc. and Fleet National Bank
10(129) Tenth Amendment to the Connecticut Natural Gas Corporation
Employee Savings Plan
10(130) Tenth Amendment to the Connecticut Natural Gas Corporation
Union Employee Savings Plan
27 Financial Data Schedule
(b) A current report on Form 8-K was filed dated December 1, 1998 to report
the declaration of a dividend distribution of one right for each share
of Common Stock, to file a copy of a press release announcing the
declaration of the dividend distribution of one right for each share of
Common Stock, and to file copies of the Rights Agreement and the Form
of Letter to Shareholders.<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CTG RESOURCES, INC.
Date 02/12/99 By: S/ Andrew H. Johnson
-------------------- -----------------------------------
(Andrew H. Johnson)
Treasurer and Chief Accounting Officer
(On behalf of the registrant and as
Chief Accounting Officer)
<PAGE>
Exhibit 99.1
Page 1 of 1
CTG RESOURCES, INC.
Quarterly Report on Form 10-Q
Exhibit Index
Quarter Ended December 31, 1998
Document
Item Description Description
------------ ----------- ------------
99(1) Exhibit Index Ex-99.1
3(1) Amended and Restated Certificate of Ex-3.1
Incorporation
3(2) Amended and Restated By-laws Ex-3.2
10(126) Memorandum of Agreement among The Ex-10.126
Energy Network, Inc., Pratt &
Whitney Canada Inc., Oxford
Technologies, Inc. and Carrier
Corporation
10(127) Independent Consulting Agreement Ex-10.127
between The Energy Network, Inc.
and Oxford Technologies, Inc.
10(128) Amendment to the 364-day Revolving Ex-10.128
Credit Agreement between The Energy
Network, Inc. and Fleet National
Bank
10(129) Tenth Amendment to the Connecticut Ex-10.129
Natural Gas Corporation Employee
Savings Plan
10(130) Tenth Amendment to the Connecticut Ex-10.130
Natural Gas Corporation Union
Employee Savings Plan
27 Financial Data Schedule Ex-27
<PAGE>
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CTG RESOURCES, INC.
Article I - Name
The name of the corporation is CTG Resources, Inc.
Article II - Purpose
The purpose of the corporation is to engage in any business
or activity for which corporations may be formed under the
Business Corporation Act of the State of Connecticut (the "Act").
Article III - Capital Stock
A. The classes of shares and the number of shares in each
class that the corporation is authorized to issue are as follows:
20,000,000 shares of Common Stock; and
2,000,000 of Preferred Stock, issuable in one or more
series as hereinafter provided.
B. Each share of Common Stock shall be equal to every
other share of Common Stock in every respect. Subject to the
rights of the Preferred Stock, the shares of Common Stock then
outstanding shall be entitled to receive the net assets of the
corporation upon dissolution.
C. The Board of Directors shall have authority to issue
shares of Preferred Stock from time to time on such terms as they
may determine, to divide the Preferred Stock into one or more
series and, in connection with the issuance of shares of
Preferred Stock and the creation of any series thereof, to fix by
resolution or resolutions the designations, preferences,
limitations and relative rights thereof, to the full extent now
or hereafter permitted by law; provided, however, that upon the
dissolution of the corporation the shares of Preferred Stock then
outstanding shall have the right to receive the liquidation
value, if any, specified for those shares upon their issuance
before any assets of the corporation are distributed with respect
to the Common Stock.
D. No holders of the capital stock of the corporation
shall have a preemptive right to acquire the corporation's
unissued shares, whether now or hereafter authorized. <PAGE>
E. The holders of Common Stock shall each be entitled to
one vote per share for the election of directors and on all other
matters submitted to a vote of shareholders of the corporation,
and the holders of Preferred Stock shall have such rights, if
any, as may be fixed and determined by the Board of Directors.
Article IV - Board of Directors
A. The government and direction of the affairs of the
Corporation shall be vested in a Board of Directors consisting of
not be less than ten (10) nor more than sixteen (16), who shall
be chosen in the manner hereinafter provided and shall hold their
offices until others are elected and have qualified in their
places as directors. Said directors, a majority of whom shall be
a quorum for the transaction of business, shall appoint such
officers as said directors consider desirable.
B. The directors of the corporation shall be divided into
three classes: Class I, Class II and Class III. Such classes
shall be as nearly equal in number as possible. The term of
office of the initial Class I directors shall expire at the
Annual Meeting of Shareholders in 1998; the term of office of the
initial Class II directors shall expire at the Annual Meeting of
Shareholders in 1999; and the term of office of the initial Class
III directors shall expire at the Annual Meeting of Shareholders
in 2000; or in each case thereafter when their respective
successors are elected and have qualified or upon their earlier
death, resignation or removal. At each annual election held
after the initial election of directors according to class, the
directors chosen to succeed those whose terms then expire shall
be identified as being of the same class as the directors they
succeed and shall be elected for a term expiring at the third
succeeding Annual Meeting of Shareholders or in each case
thereafter when their respective successors are elected and have
qualified or upon their earlier death, resignation or removal.
If the number of directorships is changed, any increase or
decrease in directors shall be apportioned among the classes so
as to maintain all classes as nearly equal in number as possible.
No decrease in the number of directorships shall shorten the term
of any director. Any director elected to fill a vacancy not
resulting from an increase in the number of directorships shall
have the same remaining term as that of his predecessor. No
qualification for the office of director shall apply to any
director in office at the time such qualification was adopted or
any successor director elected by the directors to fill the
unexpired term of a director.
C. No director shall be removed except by the affirmative
vote of seventy-five percent (75%) or more of the outstanding
-2-<PAGE>
shares of capital stock of the corporation entitled to vote
generally in the election of directors, considered for the
purpose of this Article IV as one class.
D. Notwithstanding any other provisions of this
Certificate of Incorporation or the Bylaws of the corporation
(and notwithstanding that a lesser percentage may be specified by
law, this Certificate of Incorporation or the Bylaws of the
corporation), the provisions of this Article IV may not be
repealed or amended in any respect, nor may any provision be
adopted inconsistent with such provisions, unless such action is
approved by the affirmative vote of the holders of not less than
seventy-five percent (75%) of the outstanding shares of capital
stock of the corporation entitled to vote generally in the
election of directors, considered for the purpose of this Article
IV as one class.
Article V - Limitation of Liability
A. The personal liability of a director to the corporation
or its shareholders for monetary damages for breach of duty as a
director shall be limited to the amount of compensation received
by the director for serving the corporation during the calendar
year in which the violation occurred (and if the director
received no such compensation from the corporation during the
calendar year of the violation, such director shall have no
liability to the corporation or its shareholders for breach of
duty) if such breach did not:
1. involve a knowing and culpable violation of law by
the director;
2. enable the director or an associate, as defined in
Section 33-840 of the Act, as in effect at the time of the
violation, to receive an improper personal economic gain;
3. show a lack of good faith and a conscious
disregard for the duty of the director to the corporation
under circumstances in which the director was aware that his
conduct or omission created an unjustifiable risk of serious
injury to the corporation;
4. constitute a sustained and unexcused pattern of
inattention that amounted to an abdication of the director's
duty to the corporation; or
5. create liability under Section 33-757 of the Act,
as in effect at the time of the violation.
B. The personal liability of a director to the corporation
-3-<PAGE>
or its shareholders for breach of duty as a director shall
further be limited to the full extent allowed by the Act as it
may be amended from time to time.
C. Any repeal or modification of this Article V shall not
adversely affect any right or protection of a director of the
corporation existing at the time of such repeal or modification.
Article VI - Fair Price Provision
A. In addition to the requirements of the provisions of
this Certificate of Incorporation and whether or not a vote of
the shareholders is otherwise required, the affirmative vote of
the holders of not less than seventy-five percent (75%) of the
Voting Stock (as defined below) shall be required for the
approval or authorization of any Business Transaction (as defined
below) with a Related Person (as defined below) or any Business
Transaction in which a Related Person has an interest (except
proportionately as a shareholder); provided, however, that such
seventy-five percent (75%) voting requirement shall not be
applicable if:
1. the Disinterested Directors (as defined below) who
at the time constitute at least one-third of the total
number of directorships of the corporation, having expressly
approved the Business Transaction by at least a two-thirds
vote of such Disinterested Directors, or
2. all of the following conditions are satisfied:
(a) The Business Transaction is a merger,
consolidation or share exchange and the cash or fair market
value (as determined by two-thirds of the Disinterested
Directors) of the property, securities or other
consideration to be received per share by holders of Common
Stock of the corporation (other than such Related Person) in
the Business Transaction is at least equal in value to such
Related Person's Highest Purchase Price (as defined below);
(b) After such Related Person has become the
Beneficial Owner (as defined below) of not less than ten
percent (10%) of the Voting Stock of the corporation and
prior to the consummation of such Business Transaction, such
Related Person shall not have become the Beneficial Owner of
any additional shares of Voting Stock of securities
convertible into Voting Stock, except (A) as part of the
transaction which resulted in such Related Person becoming
the Beneficial Owner of not less than ten percent (10%) of
the Voting Stock or (B) as a result of a pro rata stock
dividend or stock split; and,
-4-<PAGE>
(c) Prior to the consummation of such Business
Transaction, such Related Person shall not have directly or
indirectly, (i) received the benefit (except proportionately
as a shareholder) of any loans advances, guarantees, pledges
or other financial assistance or tax credits provided by the
corporation or any of its Subsidiaries (as defined below) or
(ii) caused any material change in the corporation's
business or equity capital structure including the issuance
of shares of capital stock of the corporation to any third
party.
B. For the purpose of this Article VI:
1. The term "Business Transaction" shall mean (i) any
merger, consolidation or share exchange involving the
corporation or a Subsidiary (as defined below) of the
corporation, (ii) any sale, lease, exchange, transfer or
other disposition (in one transaction or a series of
transactions) including without limitation a mortgage or any
other security device, of all or any Substantial Part (as
defined below) of the assets either of the corporation or of
a Subsidiary of the corporation, (iii) any sale, lease,
exchange, transfer or other disposition of all or any assets
of any entity to the corporation or a Subsidiary of the
corporation if such assets have a fair market value equal to
or greater than twenty percent (20%) of the fair market
value of the total assets of the corporation and its
Subsidiaries, (iv) the issuance, sale, exchange, transfer or
other disposition by the corporation or a Subsidiary of the
corporation of any securities of the corporation or any
Subsidiary of the corporation, (v) any recapitalization or
reclassification of the corporation's securities (including,
without limitation, any reverse stock split) or other
transaction that would have the effect of either increasing
the proportionate share of the outstanding shares of any
class of equity or convertible securities of the corporation
or its Subsidiaries Beneficially Owned (as defined below) by
a Related Person or increasing the voting power of a Related
Person with respect to the corporation or any of its
Subsidiaries, (vi) any liquidation, spinoff, splitoff,
splitup or dissolution of the corporation and (vii) any
agreement, contract or other arrangement providing for any
of the transactions described in this definition of Business
Transaction.
2. The term "Related Person" shall mean and include
(i) any individual, corporation, partnership, group,
association or other person or entity which, together with
its Affiliates (as defined below) and Associations (as
defined below), is the Beneficial Owner of not less than ten
-5-<PAGE>
percent (10%) of the Voting Stock of the corporation at the
time the definitive agreement providing for the Business
Transaction (including any amendment thereof) was entered
into, or at the time a resolution approving the Business
Transaction was adopted by the Board of Directors of the
corporation, or as of the record date for the determination
of shareholders entitled to notice of and to vote on, or
consent to, the Business Transaction, and (ii) any Affiliate
or Associate of any such individual, corporation,
partnership, group, association or other person or entity
provided, however, and notwithstanding anything in the
foregoing to the contrary the term "Related Person" shall
not include the corporation, a corporation in which the
corporation owns, directly or indirectly, a majority of each
class of equity security, any employee stock ownership
benefit plan of the corporation or any Subsidiary of the
corporation, or any trustee of, or fiduciary with respect
to, any such plan when acting in such capacity.
3. Shares shall be "Beneficially Owned" and a person
shall be a "Beneficial Owner" of any shares of Voting Stock
(whether or not owned or recorded):
(a) With respect to which such person or any
Affiliate or Associate of such person directly or indirectly
has or shares voting power, including the power to vote or
to direct the voting power, including the power to vote or
to direct the voting of such shares of stock and/or
investment power, including the power to dispose of or to
direct the disposition of such shares of stock.
(b) Which such person or any Affiliate or
Associate of such person has the right to acquire (whether
such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights warrants or options, or otherwise, and/or
the right to vote or direct the voting stock pursuant to any
agreement, arrangement or understanding (whether such right
is exercisable immediately or only after the passage of
time); or
(c) Which are Beneficially Owned within the
meaning of (a) or (b) above by any other person with which
such first mentioned person or any of its Affiliates or
Associates has any agreement, arrangement or understanding,
written or oral, with respect to acquiring, holding, voting
or disposing of any shares of stock of the corporation or
any Subsidiary of the corporation or acquiring, holding or
disposing of all or substantially all, or any Substantial
Part, of the assets of business of the corporation or a
-6-<PAGE>
Subsidiary of the corporation.
For the purpose only of determining whether a person is the
Beneficial Owner of a percentage specified in this Article
VI of the outstanding Voting Shares, such shares shall be
deemed to include any Voting Shares which may be issuable
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants, options or otherwise and which are deemed to be
beneficially owned by such person pursuant to the foregoing
provisions of this Article VI.
4. The term "Highest Purchase Price" shall mean the
highest amount of consideration paid by such Related Person
for a share of Common Stock of the corporation within two
(2) years prior to the date such Related Person became a
Related Person or in the transaction which resulted in such
Related Person becoming the Beneficial Owner of not less
than ten percent (10%) of the Voting Stock, provided,
however, that the Highest Purchase Price shall be
appropriately adjusted to reflect the occurrence of any
reclassification, recapitalization, stock split, reverse
stock split or other readjustment in the number of
outstanding shares of Common Stock of the corporation, or
the declaration of a stock dividend thereon, between the
last date upon which such Related Person paid the Highest
Purchase Price to the effective date of the Business
Transaction.
5. The term "Substantial Part" shall mean more than
twenty percent (20%) of the fair market value of the total
assets of the entity in question, as reflected on the most
recent consolidated balance sheet of such entity existing at
the time the shareholders of the corporation would be
required to approve or authorize the Business Transaction
involving the assets constituting any such Substantial Part.
6. In the event of a merger in which the corporation
is the surviving corporation, for the purpose of
subparagraph A.2(a) of this Article VI, the phrase
"property, securities or other consideration to be received"
shall include without limitation, Common Stock of the
corporation retained by its existing shareholders.
7. The term "Voting Stock" shall mean all outstanding
shares of capital stock of the corporation entitled to vote
generally in the election of directors, considered for the
purpose of this Article VI as one class; provided, however,
that if the corporation has shares of Voting Stock entitled
to more or less than one vote for any such share, each
-7-<PAGE>
reference in this Article VII to a proportion of shares of
Voting Stock shall be deemed to refer to such proportion of
the votes entitled to be cast by such shares.
8. The term "Disinterested Director" shall mean any
member of the Board who is not affiliated with a Related
Person and who was a director of the corporation prior to
the time the Related Person became a Related Person, and any
successor to such Disinterested Director who is not
affiliated with a Related Person and was recommended before
being elected by a majority of the then Disinterested
Directors or was elected by a majority of the then
Disinterested Directors. Officers of the corporation who
are also members of its Board of Directors may qualify as
Disinterested Directors, even though they may have a
personal stake in the outcome of a proposed Business
Transaction because of their employment by the corporation.
9. The term "Affiliate," used to indicate a
relationship to a specified person, shall mean a person that
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control
with such specified person.
10. The term "Associate," used to indicate a
relationship with a specified person, shall mean (i) any
person of which such specified person is an officer,
director or partner or is, directly or indirectly, the
beneficial owner of 5% or more of any class of equity
securities, (ii) any person that is an officer, director or
partner of the specified person or that, directly or
indirectly, beneficially owns 5% or more of any class of
equity security of the specified person, (iii) any trust or
estate in which such specified person has a substantial
beneficial interest or as to which such specified person
serves as a trustee or in a similar fiduciary capacity, (iv)
any relative or spouse of a specified person or any person
described in clause (ii), or any relative of such spouse,
except relatives more remote than first cousin, or (v) any
other member or partner in a partnership, limited
partnership, syndicate or other group of which the specified
person is a member or partner and which is acting together
for the purpose of acquiring, holding or disposing of any
interest in the corporation; provided that nothing in this
subsection 10 shall result in the corporation or a
corporation in which the corporation owns, directly or
indirectly, a majority of each class of equity security
being an Associate.
11. The terms "Subsidiary" or "Subsidiaries" shall
mean a corporation or corporations in which a majority of
-8-<PAGE>
any class of equity security is owned, directly or
indirectly, by the corporation.
C. For the purpose of this Article VI, if the
Disinterested Directors constitute at least one-third of the
entire Board of Directors, then two-thirds of such Disinterested
Directors shall have the power to make a good faith
determination, on the basis of information known to them, of: (i)
the number of shares of voting Stock of which any person is the
Beneficial Owner, (ii) whether a person is an Affiliate or
Associate of another, (iii) whether a person has an agreement,
arrangement or understanding with another as to the matters
referred to in the definition of Beneficial Owner herein, (iv)
whether the assets subject to any Business Transaction constitute
a Substantial Part, (v) whether any Business Transaction is one
in which a Related Person has an interest (except proportionately
as a shareholder), (vi) whether a Related Person has, directly or
indirectly, received the benefits or caused any of the changes
referred to in subparagraph A.2(c) of this Article VI and (vii)
such other matters with respect to which a determination is
required under this Article VI.
D. Nothing contained in this Article VI shall be construed
to relieve any Related Person from any fiduciary obligation
imposed by law.
E. Notwithstanding any other provisions of this
Certificate of Incorporation or the Bylaws of the corporation
(and notwithstanding that a lesser percentage may be specified by
law, this Certificate of Incorporation or the Bylaws of the
corporation), the provisions of this Article VI may not be
repealed or amended in any respect, nor may any provision be
adopted inconsistent with this Article VI, unless such action is
approved by the affirmative vote of the holders of not less than
seventy-five percent (75%) of the Voting Stock.
-9-<PAGE>
CERTIFICATE OF AMENDMENT
STOCK CORPORATION
Office of the Secretary of the State
30 Trinity Street/ P.O. Box 150470
Hartford, CT 06115-0470/new/1-97
FILING #0001926207 PG 01 OF 06 VOL B-00238
FILED 12/15/1998 12:36 PM PAGE 03151
SECRETARY OF THE STATE
CONNECTICUT SECRETARY OF THE STATE
---------------------------------------------------------------
1. NAME OF CORPORATION
CTG Resources, Inc.
---------------------------------------------------------------
2. THE CERTIFICATE OF INCORPORATION IS (check A., B. or C.):
__X__ A. AMENDED.
_____ B. AMENDED AND RESTATED.
_____ C. RESTATED.
----------------------------------------------------------------
3. TEXT OF EACH AMENDMENT/RESTATEMENT:
See Exhibit A attached hereto.
---------
The amendment was adopted andd approved by the Board of
Directors of the Company at a meeting duly called and held
on December 1, 1998.
(Please reference an 8 1/2 x 11 attachment if additional space is
needed)
--------------------------------------------------------------
-10-<PAGE>
FILING #0001926207 PG 01 OF 06 VOL B-00238
FILED 12/15/1998 12:36 PM PAGE 03151
SECRETARY OF THE STATE
CONNECTICUT SECRETARY OF THE STATE
---------------------------------------------------------------
4. VOTE INFORMATION (check A., B. or C.)
_____ A. The resolution was approved by shareholders as follows:
(set forth all voting information required by Conn. Gen. Stat.
section 33-800 as amended in the space provided below)
-----------------------------------------------------------------
__X__ B. The amendment was adopted by the Board of Directors
without shareholder action. No shareholder vote was
required for adoption.
_____ C. The amendment was adopted by the incorporators without
shareholder action. No shareholder vote was required
for adoption.
----------------------------------------------------------------
5. EXECUTION
----------------------------------------------------------------
Dated this 15th day of December, 1998
-----------------------------------------------------------------
Arthur C. Marquardt President S/ Arthur C. Marquardt
----------------------------------------------------------------
Print or type name of Capacity of Signature
Signatory Signatory
-11-<PAGE>
FILING #0001926207 PG 01 OF 06 VOL B-00238
FILED 12/15/1998 12:36 PM PAGE 03151
SECRETARY OF THE STATE
CONNECTICUT SECRETARY OF THE STATE
Exhibit A
---------
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CTG RESOURCES, INC.
RESOLVED, that, pursuant to the authority vested in the
Board of Directors of the Company in accordance with the
provisions of the Amended and Restated Certificate of
Incorporation, Article III of the Amended and Restated
Certificate of Incorporation of this Company be, and it hereby
is, amended by adding after Paragraph C of Article III of the
Amended and Restated Certificate of Incorporation a new
subparagraph C.1 as set forth below:
1. Series A Junior Participating Preferred Stock
(a) There is established hereby a series of Serial
Preferred Stock that shall be designated Series A Junior
Participating Preferred Stock (hereinafter sometimes
called this "Series" or the "Series A Junior
Participating Preferred Stock") and that shall have the
terms set forth in this subparagraph C.1.
(b) The number of shares of this Series shall be
200,000.
(c) (i) The holders of record of shares of Series A
Junior Participating Preferred Stock shall be entitled to
receive, when and as declared by the Directors in
accordance with the terms hereof, out of funds legally
available for the purpose, cumulative quarterly dividends
payable in cash on the first day of January, April, July
and October in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share of Series A Junior
Participating Preferred Stock or fraction of a share of
Series A Junior Participating Preferred Stock in an
amount per share (rounded to the nearest cent) equal to
the greater of (A) $1.00 per share or (B) subject to the
-12-<PAGE>
FILING #0001926207 PG 01 OF 06 VOL B-00238
FILED 12/15/1998 12:36 PM PAGE 03151
SECRETARY OF THE STATE
CONNECTICUT SECRETARY OF THE STATE
provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and
100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions
(other than a dividend payable in shares of Common Stock,
or a subdivision of the outstanding Common Stock (by
reclassification or otherwise)), declared on the Common
Stock since the immediately preceding Quarterly Dividend
Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any
share of Series A Junior Participating Preferred Stock or
fraction of a share of Series A Junior Participating
Preferred Stock. In the event the Company shall at any
time declare or pay any dividend on the Common Stock
payable in Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock) into a greater or
lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Series
A Junior Participating Preferred Stock were entitled
immediately prior to such event under clause (B) of the
preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately
prior to such event.
(ii) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Junior
Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such
Series A Junior Participating Preferred Stock, unless the
date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of
shares of Series A Junior Participating Preferred Stock
entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. No
dividends shall be paid upon or declared and set apart
for any Series A Junior Participating Preferred Stock for
-13-<PAGE>
FILING #0001926207 PG 01 OF 06 VOL B-00238
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SECRETARY OF THE STATE
CONNECTICUT SECRETARY OF THE STATE
any dividend period unless at the same time a dividend
for the same dividend period, ratably in proportion to
the respective annual dividend rates fixed therefor,
shall be paid upon or declared and set apart for all
Serial Preferred Stock of all series then outstanding and
entitled to receive such dividend. The Directors may fix
a record date for the determination of holders of shares
of Series A Junior Participating Preferred Stock entitled
to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 40 days
prior to the date fixed for the payment thereof.
(d) The Series A Junior Participating Preferred Stock
is not redeemable.
(e) (i) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of
the Company (hereinafter referred to as a "Liquidation"),
no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon
Liquidation) to the Series A Junior Participating
Preferred Stock, unless, prior thereto, the holders of
shares of Series A Junior Participating Preferred Stock
shall have received at least an amount per share equal to
one hundred times the then applicable Purchase Price as
defined in the Rights Agreement, as the same may be from
time to time amended in accordance with its terms (which
Purchase Price is $65.00 as of December 1, 1998), subject
to adjustment from time to time as provided in the Rights
Agreement, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not
earned or declared, to the date of such payment, provided
that the holders of shares of Series A Junior
Participating Preferred Stock shall be entitled to
receive at least an aggregate amount per share, subject
to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed
per share to holders of Common Stock (the "Series A
Junior Participating Preferred Stock Liquidation
Preference").
(ii) In the event, however, that the net assets
of the Company are not sufficient to pay in full the
amount of the Series A Junior Participating Preferred
Stock Liquidation Preference and the liquidation
preferences of all other series of Serial Preferred
Stock, if any, which rank on a parity with the Series A
Junior Participating Preferred Stock as to distribution
-14-<PAGE>
FILING #0001926207 PG 01 OF 06 VOL B-00238
FILED 12/15/1998 12:36 PM PAGE 03151
SECRETARY OF THE STATE
CONNECTICUT SECRETARY OF THE STATE
of assets in Liquidation, all shares of this Series and
of such other series of Serial Preferred Stock shall
share ratably in the distribution of assets (or proceeds
thereof) in Liquidation in proportion to the full amounts
to which they are respectively entitled.
(iii) In the event the Company shall at any time
declare or pay any dividend on the Common Stock payable
in consolidation of the outstanding Common Stock (by
reclassification or otherwise than by payment of a
dividend in Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately
prior to such event pursuant to the proviso set forth in
paragraph (i) above, shall be adjusted by multiplying
such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the
number of shares of Common Stock that were outstanding
immediately prior to such event.
(iv) The merger or consolidation of the Company
into or with any other corporation, or the merger of any
other corporation into it, or the sale, lease or
conveyance of all or substantially all of the property or
business of the Company, shall not be deemed to be a
Liquidation for the purpose of this subparagraph (e).
(f) The Series A Junior Participating Preferred Stock
shall not be convertible into Common Stock.
-15-<PAGE>
FILING #0001926207 PG 01 OF 06 VOL B-00238
FILED 12/15/1998 12:36 PM PAGE 03151
SECRETARY OF THE STATE
CONNECTICUT SECRETARY OF THE STATE
STATE OF CONNECTICUT )
) SS. HARTFORD
OFFICE OF THE SECRETARY OF THE STATE)
I hereby certify that this is a true copy of record
In this Office
In Testimony whereof, I have hereunto set my hand,
and affixed the Seal of said State, at Hartford,
this 16th day of December A.D. 1998.
S/ Miles S. Rapaport
---------------------------------------------------
SECRETARY OF THE STATE
-16-<PAGE>
AMENDED AND RESTATED
BY-LAWS OF CTG RESOURCES, INC.
ARTICLE I
DIRECTORS
---------
Section 1. The Board of Directors shall consist of not less
than ten (10) and not more than sixteen (16) persons who shall be
stockholders of the Company and who shall, except as provided in
section 5 of this Article 1, be elected by the stockholders by
ballot in the manner prescribed by law and according to the
provisions of the Certificate of Incorporation of the Company
pertaining to classification of the Board of Directors.
Section 2. The directors of the company shall be divided
into three classes: Class I, Class II and Class III. Such
classes shall be as nearly equal in number as possible. The term
of office of the initial Class I directors shall expire at the
annual meeting of stockholders in 1998; the term of office of the
initial Class II directors shall expire at the annual meeting of
stockholders in 1999; and the term of office of the initial Class
III directors shall expire at the annual meeting of stockholders
in 2000; or in each case thereafter when their respective
- 1 -<PAGE>
successors are elected and have qualified or upon their earlier
death, resignation or removal. At each annual election held
after the initial election of directors according to class, the
directors chosen to succeed those whose terms then expire shall
be identified as being of the same class as the directors they
succeed and shall be elected for a term expiring at the third
succeeding annual meeting of stockholders or in each case
thereafter when their respective successors are elected and have
qualified or upon their earlier death, resignation or removal.
If the number of directorships is changed, any increase or
decrease in directors shall be apportioned among the classes so
as to maintain all classes as nearly equal in number as possible.
No decrease in the number of directorships shall shorten the term
of any director. Any director elected to fill a vacancy not
resulting from an increase in the number of directorships shall
have the same remaining term as that of his predecessor. No
qualification for the office of director shall apply to any
director in office at the time such qualification was adopted or
any successor director elected by the directors to fill the
unexpired term of a director.
Section 3. A regular meeting of the Board of Directors
shall be held without notice other than this By-law, immediately
after, and at the same place as, each annual meeting of
stockholders. Additional regular meetings of the Board of
Directors may be held without notice at such time and such place
as shall from time to time be determined by the Board of
Directors, provided, however, that the Board of Directors shall
meet at least quarterly. Special meetings of the Board may be
- 2 -<PAGE>
called at any time by the Chairman or by the President, and also
shall be called on the written request of a majority of the Board
addressed to the Chairman or the President.
Section 4. Notice of any special meeting shall be given to
each director at his business or residence in writing, by
facsimile, telephone, telegraph or other form of wire or wireless
communication, or by mail or private carrier. If mailed, such
notice shall be deposited in the United States mails so
addressed, with postage thereon prepaid, at least five (5) days
before such meeting. If by facsimile or electronic transmission,
such notice shall be transmitted at least twenty-four (24) hours
before such meeting. If by telephone, the notice shall be given
at least twelve (12) hours prior to the time set for the meeting.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be
specified in the notice of such meeting, except for amendments to
these By-laws as provided under Section 1 of Article XI hereof.
A meeting may be held at any time without notice if all the
directors are present or if those not present waive notice of the
meeting in writing, either before or after such meeting.
Section 5. At any meeting of the Board of Directors, a
majority shall be a quorum for the transaction of business, but
any meeting may be adjourned from time to time by the vote of the
directors present.
Section 6. A vacancy in the Board of Directors caused by a
director's death, resignation, removal from office, or order of a
court, or caused by an increase in the number of directorships
within the range established by the Certificate of Incorporation
- 3 -<PAGE>
of the Company may be filled for the applicable term by action of
the sole remaining director in office or at a meeting of the
Board of Directors by the concurring vote of a majority of the
remaining directors in office, though such remaining directors
are less than a quorum, though the number of directors at the
meeting is less than a quorum and though such majority is less
than a quorum.
Section 7. No director shall be removed except by the
affirmative vote of seventy-five percent (75%) or more of the
outstanding shares of capital stock of the Company entitled to
vote generally in the election of directors, considered as one
class for the purpose of this Section 7 of Article I.
ARTICLE II
INDEMNITY
---------
Section 1. The Company shall indemnify its directors,
officers, employees and agents to the fullest extent permitted by
law and the Certificate of Incorporation. The Company shall
advance the payment of legal expenses to a director, officer,
employee or agent in the defense of any claim for which
indemnification may be available to the fullest extent permitted
by law and the Certificate of Incorporation.
ARTICLE III
OFFICERS
--------
Section 1. The officers of the Company shall be a President, a
- 4 -<PAGE>
Secretary, a Treasurer and, at the discretion of the Board of
Directors, a Chairman and one or more Executive Vice Presidents,
Senior Vice Presidents, Vice Presidents, Assistant Vice
Presidents, Assistant Secretaries, Assistant Treasurers and such
other officers as the Board of Directors may deem advisable. The
chief executive officer shall be a director. One person may hold
two or more offices. All officers shall be elected or appointed
annually by the Board of Directors.
Section 2. The Board of Directors by a two-thirds vote of their
number shall have power to and may at any time remove from office
any of the officers elected or appointed by them.
Section 3. In case of death, removal or resignation of any of
the officers of the Company, the directors may supply the vacancy
thus created until the next election.
ARTICLE IV
DUTIES OF THE CHAIRMAN AND PRESIDENT
------------------------------------
Section 1. The Chairman, if such office shall be filled by the
Board of Directors, shall, when present, preside at all meetings
of the Board and of the stockholders. He shall be an executive
officer of the Company, shall be the representative of the Board
of Directors and, if the Board so determines, shall be the chief
executive officer of the Company, and, while chief executive
officer, his title shall be Chairman and Chief Executive Officer.
He shall perform such additional duties as may be assigned to him
from time to time by the Board.
Section 2. The President shall be an executive officer of the
- 5 -<PAGE>
Company and, if the Board of Directors so determines or does not
fill the office of Chairman, shall be the chief executive officer
of the Company. If the President be not the chief executive
officer of the Company, he shall perform such duties as shall be
assigned to him by the Chairman or by the Board of Directors.
Section 3. The chief executive officer of the Company shall have
direct and active supervision and control of the business and
affairs of the Company.
ARTICLE V
DUTIES OF THE VICE PRESIDENT
----------------------------
Section 1. The Executive Vice President, Senior Vice Presidents,
Vice Presidents, and Assistant Vice Presidents shall perform such
duties as may be assigned by the chief executive officer of the
Board of Directors.
ARTICLE VI
DUTIES OF THE SECRETARY AND ASSISTANT SECRETARY
------------------------------------------------
Section 1. The Secretary shall record all the votes of the
Company and the minutes of its transactions in a book to be kept
for that purpose. He shall under the direction of the chief
executive officer be present at all meetings of the Board and
keep a record of proceedings in a minute book. He shall notify
the stockholders of the annual and any special meetings, and
shall notify the members of the Board of Directors of all regular
and special meetings of the Board. He shall have charge of the
transfer of stock and the registry of any bonds of the Company
- 6 -<PAGE>
and shall keep records thereof in such manner as the Board of
Directors shall from time to time direct. He shall perform all
the duties that are customary and incident to the office of
Secretary in like companies.
Section 2. The Assistant Secretary shall perform the duties
of the Secretary in case of the absence or disability of the
Secretary, and shall at all times render such assistance as the
Secretary may require.
ARTICLE VII
DUTIES OF THE TREASURER AND ASSISTANT TREASURERS
-------------------------------------------------
Section 1. The Treasurer shall keep full and accurate
accounts of receipts and disbursements and shall deposit the
Company's funds in the name and to the credit of the Company in
such depositories as may be determined by the Board of Directors.
He shall have charge of the money, notes, bills and checks of the
Company, and may accept and endorse the same. He shall make such
reports of the receipts and disbursements in such form and detail
and at such time as the Board may direct.
Section 2. The Assistant Treasurer shall perform the duties
of the Treasurer in case of the absence or disability of the
Treasurer, and shall at all times render such assistance as the
Treasurer may require.
Section 3. Checks on funds of the Company, except in
payment of dividends, shall be signed by any one of the
following: the Chairman, the President, a Vice President whose
duties relate primarily to responsibility for the financial
- 7 -<PAGE>
aspects of the business of the Company, the Treasurer, an
Assistant Treasurer, the Controller and such other person or
persons as the Board of Directors may determine from time to
time.
ARTICLE VIII
COMMITTEES
----------
Section 1. The Board of Directors may create one or more
committees and appoint members of the Board to serve on them.
Each committee shall have two or more members, who shall serve at
the pleasure of the Board. The creation of a committee and
appointment of members to it shall be approved by the greater of
a majority of all the directors in office when the action is
taken or the number of directors otherwise required to take
action. A committee may exercise any of the authority of the
Board delegated to it; EXCEPT that a committee may not:
(i) authorize distributions; (ii) approve or propose to
stockholders action for which Connecticut law requires
stockholder approval; (iii) fill vacancies on the Board or any
Board committee; (iv) amend the Certificate of Incorporation when
the Board is permitted to do so without stockholder approval;
(v) adopt, amend or repeal these By-laws; (vi) approve a plan of
merger not requiring stockholder approval; (vii) authorize or
approve reacquisition of shares of Company stock, except
according to a formula or method prescribed by the Board; or
(viii) authorize or approve the issuance or sale or contract for
sale of shares, or determine the designation and relative rights,
- 8 -<PAGE>
preferences and limitations of a class or series of shares unless
authorized by the Board with specifically prescribed limits.
Section 2. There shall be an Executive Committee consisting
of such directors as may be chosen by the Board of Directors.
The Executive Committee shall have charge of all matters which
may be referred to it by the Board of Directors and generally
have oversight and authority with regard to all business of the
Company when the Board of Directors is not in session.
Section 3. There shall be an Audit Committee consisting of
such directors as may be chosen by the Board of Directors. The
Audit Committee shall recommend to the Board of Directors a firm
of independent public accountants to audit the books and accounts
of the Company. The Committee also shall review the reports
prepared by the independent public accountants and recommend to
the directors any actions deemed appropriate in connection with
the reports. The Committee shall have such other powers and
duties as the Board may designate.
Section 4. There shall be a Compensation Committee
consisting of such directors as may be chosen by the Board of
Directors. The Compensation Committee shall establish salaries
and benefits for all officers, subject to approval by the
directors. The Committee shall approve all organizational
matters pertaining to officers and employees and review all
Company compensation and benefit programs, subject also to
approval. The Committee shall have such other powers and duties
as the Board may designate.
Section 5. There shall be a Committee on Directors
consisting of such directors as may be chosen by the Board of
- 9 -<PAGE>
Directors. The Committee on Directors shall consider candidates
for vacancies among directors, including written stockholder
recommendations, and recommend nominees when the need arises.
The Committee also shall recommend assignments of directors to
the various committees of the Board of Directors. The Committee
shall have such other powers and duties as the Board may
designate.
Section 6. There shall be a Pension & Investment Committee
consisting of such directors as may be chosen by the Board of
Directors. The Pension & Investment Committee shall oversee the
financial management of all qualified and non-qualified plans of
deferred compensation, trusts relating to such plans, and similar
arrangements sponsored by the Company. The Committee shall
recommend contributions and amendments to such plans, and shall
have the authority to select, remove, review the performance of,
and allocate assets among managers, trustees, insurance companies
and other financial advisors as necessary to fully discharge its
duties. The Committee shall have such other powers and duties as
the Board may designate.
Section 7. All committees shall report their actions and
recommendations to the Board of Directors at the next ensuing
meeting of the Board. A majority of each committee shall
constitute a quorum for the transaction of business. The Board
of Directors shall fix the remuneration of directors and for
membership on committees.
- 10 -<PAGE>
ARTICLE IX
MEETING OF STOCKHOLDERS
-----------------------
Section 1. The annual meeting of the stockholders of the
Company for the election of directors and the transaction of such
other business as may properly come before the meeting shall be
held on such day and at such hour as shall be determined by
resolution of the Board of Directors.
A special meeting of the stockholders shall be called at any
time by the Chairman of the Board, by the Secretary in conformity
with the vote of the Board of Directors, on the written request
of a majority of the directors addressed to the chief executive
officer of the Company or by the President on the written request
of stockholders holding at least thirty-five percent (35%) of the
voting power of all shares entitled to vote at the meeting.
Section 2. Written or electronic notice, stating the place,
day and hour of the meeting and the purpose or purposes for which
the meeting is called, shall be prepared and delivered by the
Company not less than ten (10) days nor more than sixty (60) days
before the date of the meeting, to each stockholder of record
entitled to vote at such meeting. Such further notice shall be
given as may be required by law. Written notice is effective
upon deposit in the United States mail, as evidenced by the
postmark, if mailed, postage prepaid and correctly addressed to
the stockholder's address shown in the Company's current record
of stockholders, and electronic notice is effective when
transmitted to the stockholder in a manner authorized by the
stockholder. Electronic notice is defined as a notice that is
- 11 -<PAGE>
transmitted by any process of communication that is suitable for
the retention, retrieval and reproduction of information by the
recipient and which does not directly involve the physical
transfer of paper. Any previously scheduled meeting of the
stockholders may be postponed by resolution of the Board of
Directors upon public notice given prior to the time previously
scheduled for such meeting of stockholders.
Section 3. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the
voting power of the outstanding shares of the Company entitled to
vote generally in the election of directors (the "Voting Stock"),
represented in person or by proxy, shall constitute a quorum at a
meeting of stockholders, except that when specified business is
to be voted on by a class or series voting as a class, the
holders of a majority of the shares of such class or series shall
constitute a quorum for the transaction of such business. The
chairman of the meeting or the holders of a majority of the
voting power of the shares of Voting Stock so represented may
adjourn the meeting from time to time, whether or not there is
such a quorum (or in the case of specified business to be voted
on by a class or series, the chairman or, the holders of a
majority of the shares of such class or series so represented may
adjourn the meeting with respect to such specified business). No
notice of the time and place of adjourned meetings need be given
except as required by law. The stockholders present at a duly
organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
- 12 -<PAGE>
Section 4. Stockholders may vote at any meeting either in
person or by a proxy that meets the requirements of the
Connecticut Business Corporation Act as it may be amended from
time to time.
Section 5. (A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of Directors
of the Company and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders
(a) pursuant to the Company's notice of meeting delivered
pursuant to Section 2 of Article IX of these By-laws, (b) by or
at the direction of the Chairman or the Board of Directors or (c)
by any stockholder of the Company who is entitled to vote at the
meeting, who complied with the notice procedures set forth in
clauses (2) and (3) of this paragraph (A) and this By-law and who
was a stockholder of record at the time such notice is delivered
to the Secretary of the Company.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to
clause (c) of paragraph (A)(1) of this By-law, the stockholder
must have given timely notice thereof in writing to the Secretary
of the Company. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of
the Company not less than seventy (70) days nor more than ninety
(90) days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced by more than twenty (20)
days, or delayed by more than seventy (70) days, from such
anniversary date, notice by the stockholder to be timely must be
- 13 -<PAGE>
so delivered not earlier than the ninetieth (90th) day prior to
such annual meeting and not later than the close of business on
the later of the seventieth (70th) day prior to such annual
meeting or the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made. Such
stockholder's notice shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or reelection
as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including such person's written
consent to being named in the proxy statement as a nominee and to
serving as a director if elected; (b) as to any other business
that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (c) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination
or proposal is made (i) the name and address of such stockholder,
as they appear on the Company's books, and of such beneficial
owner and (ii) the class and number of shares of the Company
which are owned beneficially and of record by such stockholder
and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this By-law to the contrary, in the event
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that the number of directors to be elected to the Board of
Directors of the Company is increased and there is no public
announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by
the Company at least seventy (70) days prior to the first
anniversary of the preceding year's annual meeting, a
stockholder's notice required by this By-law shall also be
considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to
the Secretary at the principal executive offices of the Company
not later than the close of business on the tenth (10th) day
following the day on which such public announcement is first made
by the Company.
(B) Special Meetings of Stockholders. Only such business
shall be conducted at a special meeting of stockholders as shall
have been brought before the meeting pursuant to the Company's
notice of meeting pursuant to Section 2 of Article IX of these
By-laws (including any such notice upon the request of the
holders of thirty-five percent (35%) of the voting power of the
shares entitled to vote at the meeting). Nominations of persons
for election to the Board of Directors may be made at a special
meeting of stockholders at which directors are to be elected
pursuant to the notice of meeting (a) by or at the direction of
the Board of Directors or (b) by any stockholder of the Company
who is entitled to vote at the meeting, who complies with the
notice procedures set forth in this By-law and who is a
stockholder of record at the time such notice is delivered to the
Secretary of the Company. Nominations by stockholders of persons
- 15 -<PAGE>
for election to the Board of Directors may be made at such a
special meeting of stockholders if the stockholder's notice as
required by paragraph (A)(2) of this By-law shall be delivered to
the Secretary at the principal executive offices of the Company
not earlier than the ninetieth (90th) day prior to such special
meeting and not later than the close of business on the later of
the seventieth (70th) day prior to such special meeting or the
tenth (10th) day following the day on which public announcement
is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such
meeting.
(C) General. (1) Only persons who are nominated in
accordance with the procedures set forth in this By-law shall be
eligible to serve as directors and only such business shall be
conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in
this By-law. Except as otherwise provided by law, the
Certificate of Incorporation or these By-laws, the chairman of
the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in
this By-law and, if any proposed nomination or business is not in
compliance with this By-law, to declare that such defective
proposal or nomination shall be disregarded.
(2) For purposes of this By-law, "public announcement"
shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news
service or in a document publicly filed by the Company with the
- 16 -<PAGE>
Securities and Exchange Commission pursuant to Section 13, 14 or
15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
By-law, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this By-law.
Nothing in this By-law shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Company's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 6. The chairman of the meeting shall fix and
announce at the meeting the date and time of the opening and the
closing of the polls for each matter upon which the stockholders
will vote at a meeting.
Section 7. (a) The Company shall appoint one or more
inspectors to act at a meeting of stockholders and make a written
report of the inspectors' determinations. Each inspector shall
take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of
the inspector's ability.
- 17 -<PAGE>
ARTICLE X
CERTIFICATES OF STOCK
----------------------
Section 1. Certificates of stock shall be issued to the
stockholders and transfer of them made by the Secretary when
required. The certificates shall be signed by the Chairman, the
President or Vice President and by the Secretary or Assistant
Secretary, the signatures of whom may be facsimiles,
countersigned by the transfer agent, and sealed with the common
seal of the Company or a facsimile thereof. A transfer agent and
a registrar of the stock may be appointed by the Board of
Directors. Transfers of stock shall be made upon the books of
the Company by the stockholder in person or by attorney duly
authorized upon surrender of the certificates.
Section 2. The Board of Directors may close the transfer
books in its discretion for a period not exceeding ten (10) days
preceding any meeting of the stockholders or preceding the day
appointed for the payment of a dividend and the Board may in its
discretion fix a record date for the determination of
stockholders entitled to a vote at any meeting or to receive the
payment of a dividend.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
--------------------------
Section 1. Amendments to the By-laws may be made at any
special or stated meeting of the Board of Directors by vote or
consent of at least two-thirds of the entire number of directors,
- 18 -<PAGE>
provided that no amendment shall be made unless the notice of the
meeting shall specify the amendment as the purpose or one of the
purposes of the meeting.
Section 2. Amendments to the By-laws may be made at any
annual or special meeting of the stockholders by vote of the
holders of at least two-thirds of the voting power of shares
entitled to vote thereon, provided that no amendment shall be
made unless the notice of the meeting shall specify the amendment
as the purpose or one of the purposes of the meeting.
(As adopted on March 25, 1997,
effective at the close of business,
March 31, 1997; as amended on
December 1, 1998)
- 19 -<PAGE>
This Memorandum of Agreement ("Agreement") dated as of this 23rd day of
October, 1998, is executed by the parties identified below, each of which is
referred to individually as a "PARTY" and collectively as the "PARTIES":
a) THE ENERGY NETWORK, INC. ("TEN"), a Connecticut
corporation and wholly-owned subsidiary of CTG
Resources, Inc., with offices at 60 Columbus Boulevard,
Hartford, CT;
b) PRATT & WHITNEY CANADA INC. ("P&WC"), a Canadian
corporation, with offices at 1000 Marie-Victorin,
Longueuil, Quebec, Canada, J4G 1A1;
c) OXFORD TECHNOLOGIES, INC. ("Oxford"), a Connecticut
corporation, with offices at 221 South Street, Building
"H", New Britain, CT; 06051; and
d) CARRIER CORPORATION ("Carrier"), a Delaware
corporation, with offices at P.O. Box 4800, 6304
Carrier Parkway, Syracuse, NY.
WHEREAS, the Parties have held discussions among themselves concerning the
development, construction and operation of certain district energy and co-
generation facilities; and
WHEREAS, the Parties consider there to exist a market among customers who
will seek to out-source the responsibilities attendant to such facilities;
and
WHEREAS, each of the Parties possesses specific skills, experience and
capabilities that are complementary to the other Parties and that in
combination can, in the opinion of the Parties, enable such district energy
and co-generation facilities to be developed; and
WHEREAS, the Parties now seek to establish their agreement that will
facilitate and enable them to pursue such out-sourcing opportunities;
NOW, THEREFORE, in consideration of the promises and mutual agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
SECTION 1. SCOPE OF AGREEMENT
1.1 OBJECTIVE/SCOPE OF AGREEMENT: The Parties are interested in
entering into a marketing arrangement as set forth herein whereby
the Parties' specific skills, experience, and capabilities are
used to identify, propose and facilitate the implementation of
"out-sourced" (i.e. contracted out development, ownership and
operation) district energy (electric, heating and cooling) and
"out-sourced" co-generation (primary electric power with heat
recovery for value added) power projects for small to medium size
industrial, commercial, and institutional customers, using P&WC's
- 1 -<PAGE>
0.4 MW - 3.5 MW gas turbines, in either new (greenfield) or
retrofit of existing facilities in the New York State and New
England (i.e. specifically the states of Massachusetts, Maine,
Connecticut, New Hampshire, Rhode Island and Vermont) area (the
"Projects"). The foregoing description shall not preclude the
Parties from unanimously agreeing, from time to time, to jointly
pursue other out-sourced district energy and out-sourced co-
generation opportunities in other geographic areas.
1.2 PRELIMINARY UNDERSTANDING: Each of the Parties shall exercise
reasonable efforts in performing the obligations set forth herein
and co-operate in good faith with the other Parties to that end as
set forth herein. This Agreement represents the preliminary
understanding of the Parties with respect to the subject matter
hereof. Each Project in which the Parties participate is expected
to necessitate contract documents and other arrangements specific
to that Project.
1.3 ROLE OF THE PARTIES: Subject to the terms hereof, each Party
shall have the following roles in respect of any Projects awarded
pursuant hereto:
a) TEN shall serve as the lead entity. TEN may request the
efforts and lead the activities of the other Parties in all
aspects that relate to the preparation of proposals in
respect of Projects, in accordance with the terms hereof.
TEN shall be under no obligation to incur any third party
costs in connection with the preparation or development of
proposals other than as expressly set forth herein or
pursuant hereto. TEN also shall have the right, but not the
obligation, to: i) serve as the Prime Contractor (as
hereafter defined) with individual customers either as the
sole Prime Contractor or co-Prime Contractor with Carrier and
to ii) own and operate the Projects. TEN or an affiliated
company shall be entitled to bid on the provision of natural
gas and transportation service to Projects within the
territory of TEN or its affiliate, and natural gas only to
Projects outside its territory, the whole subject to Section
1.4 hereof.
In its role as owner/operator and/or Prime Contractor, TEN
shall also supply or manage the supply of, as appropriate,
all other engineering design, material and services
procurement, construction services, and initial system check-
out, start-up, and commissioning necessary to create a
"turnkey" facility.
b) P&WC will be entitled to bid on the supply and maintenance of
the gas turbine engines for all Projects whose requirements
dictate engines in the 0.4 MW to 3.5 MW range ("Engines") and
related engineering maintenance services, it being understood
that it shall do so either by supplying same itself or
- 2 -<PAGE>
through another entity under any packaging agreement it may
enter into (as same may be amended, supplemented, restated or
replaced from time to time the "Packaging Agreement"), which
packager may also become a party to this Agreement. In the
event that the packager becomes a party to this Agreement,
P&WC shall be relieved from its obligations hereunder to the
extent that they are being performed by the packager
including the obligations set forth in Section 5.3 hereof.
It is understood that P&WC s obligations in connection with
any Project under this Agreement shall be subject to P&WC
establishing a Packaging Agreement with a packager suitable,
in P&WC s sole opinion, for packaging its engines. In the
event that i) such Packaging Agreement is not established;
ii) such Packaging Agreement is terminated, iii) the packager
has withdrawn from this Agreement; or iv) the packager has
failed to fully support the goals, objectives and intent of
this Agreement, in P&WC s opinion, P&WC may send a notice to
the packager terminating this Agreement as it relates to the
packager and either aa) nominate a replacement for the
packager, bb) directly supply the Engines itself, or cc)
itself withdraw from this Agreement, at P&WC s sole option.
The Parties also agree that, notwithstanding anything herein
to the contrary, P&WC shall be free to enter into a Packaging
Agreement with and sell Engines to a packager that does not
enter into or adhere to this Agreement, in whole or in part,
and shall not be in breach of this Agreement as a result of
any such Packaging Agreement or sales pursuant thereto,
including where the Engine is ultimately destined for use in
a potential Project. P&WC will use reasonable efforts to
participate in sales presentations, as appropriate. P&WC
shall not, and shall not be obliged to, be the Prime
Contractor or contracting party with any Project customer.
c) Oxford will have a business development role within such
geographic region as the Parties have designated in
accordance with Section 1.1. Oxford will participate in sales
presentations, as appropriate. The Parties expect that TEN
will enter into a sales agreement with Oxford that, among
other things, specifies the nature of the sales activities to
be conducted by Oxford, which such sales agreement, including
the remuneration payable thereunder, to be unanimously
approved by the Parties. Notwithstanding the approval of this
sales agreement by P&WC and Carrier, TEN shall remain solely
responsible for all of its obligations thereunder without
contribution or indemnification from P&WC or Carrier.
d) Carrier will be the supplier of HVAC systems and services
used in Projects. Carrier may act as Prime Contractor, where
applicable. Carrier Regional Sales Offices are expected to be
significant contributors to promotional activity.
None of the Parties shall be obligated to do so, but each of them
- 3 -<PAGE>
may, with the consent of the other Parties (other than TEN where
such consent is not required), acquire equity in any Project,
provided however that the Parties recognize that TEN is expected
to furnish and own all of the equity in Projects executed
hereunder. All services and materials which any Party (other than
TEN) supplies as an in kind contribution with the consent of the
other Parties pursuant hereto shall be considered by the Committee
as a potential equity investment in the Project in accordance with
Section 5.3b).
This Section sets forth the anticipated functions of the Parties
in respect to any Project without creating any obligation on the
part of any Party which is not evidenced by a contract executed
pursuant to a Prime Contract (as hereafter defined) with a Project
customer.
1.4 COMPETITIVENESS OF PARTY CONTRACTS: The Prime Contractor on any
Project shall use its best efforts to secure customer approval of
the other Parties as sub-contractors. Any such contract proposed
to be entered into between the Prime Contractor with any Party or
affiliate of any Party, must be negotiated in good faith on an
arm s-length basis and must have terms that are reasonable in view
of those available in the market from unaffiliated third parties.
SECTION 2. ACCESS TO INFORMATION; CONFIDENTIALITY
2.1 ACCESS TO INFORMATION: Subject to the terms of this Section 2 and
the Proprietary Information Agreement (as hereafter defined), each
Party shall provide to the other Parties data, documents, and any
other information that is, in the disclosing Party s sole opinion,
pertinent to the objectives stated herein at Section 1.1 and any
particular Project.
2.2 CONFIDENTIALITY: The Parties hereto have entered into a
Proprietary Information Agreement dated April 22, 1998 and
attached hereto and incorporated herein as Annex A (as same may be
amended, renewed, extended, supplemented, restated or replaced
from time to time the "Proprietary Information Agreement"). The
obligations of each Party to the Proprietary Information Agreement
shall remain in effect for the term specified therein,
notwithstanding the termination or expiration of this Agreement,
and the Proprietary Information Agreement is hereby amended to
extend the term thereof to be co-terminous with this Agreement.
The Parties agree that the terms of this Agreement shall
constitute "Proprietary Information" under the Proprietary
Information Agreement and shall be treated as such in accordance
with the terms thereof.
2.3 PROPERTY RIGHTS: It is understood and agreed that no license,
express or implied, under any copyright, patents, trade secrets or
know how ("Know How") of any Party is granted hereunder or by any
disclosure of confidential or proprietary information hereunder or
- 4 -<PAGE>
under the Proprietary Information Agreement. Each Party shall
retain all of its property rights in any such Know How which it
possessed prior to the date of this Agreement and the property
rights to any new Know How developed by that Party, either alone
or in conjunction with other Parties, during the performance of
its obligations hereunder shall, subject to any restrictions
imposed by any Prime Contract, vest in such Party.
2.4 NO PRESS RELEASES: Each Party agrees that it shall not, without
the other Parties' written consent, issue a press release or have
any contact with or respond to the news media with any sensitive
or confidential information with respect to this Agreement or any
Project or proposed Project.
SECTION 3. EXCLUSIVITY
During the term of the Agreement and any extension thereof agreed to by
the Parties, the Parties hereto agree to refer to TEN potential
Projects (i.e. projects which meet the definition of "Projects" set
forth in Section 1.1) in accordance with Section 5.2 hereof and to work
exclusively with each other to propose and facilitate the
implementation of Projects that have been determined will be pursued
pursuant to the terms hereof. For greater clarity, no Party shall
participate in any competing proposals in respect of Projects that have
been determined will be pursued hereunder, unless it is not awarded a
sub-contract pursuant hereto. It is further agreed that any Party that
has voted to reject a potential Project shall not participate, directly
or indirectly, in such potential Project for a period of twelve (12)
months following formal rejection of such potential Project by such
Party although the Parties who have voted to approve such Project may
nevertheless pursue same, either jointly or individually.
Notwithstanding the foregoing or anything herein to the contrary, if
the Party which voted to reject a Project can demonstrate that it was
actively pursuing such potential Project on a non out-sourced basis or
that the potential Project did not otherwise meet the definition of
"Project" hereunder, including at the time it was brought to the
attention of the Parties for the purposes of a vote hereunder, such
Party may continue to pursue such Project on such basis.
SECTION 4. MANAGEMENT, RELATIONSHIP
4.1 COMMITTEE: The Parties activities hereunder in respect of
Projects shall be directed by an executive committee (the
"Committee") comprised of four (4) members, each one representing
a Party. Each Party may, at any time, change its member of the
Committee or appoint an alternate during its member s absence.
Appointments shall be effected by written notice to the other
Parties. The Committee shall, among other things, meet at least
quarterly (which meetings may include telephonic meetings, and the
minutes of which shall be recorded in writing) to discuss the
status of Project related activities, to schedule and coordinate
future activities, to select consultants and other advisors, to
- 5 -<PAGE>
prepare budgets, and conduct such other business as the Committee
determines to be consistent with this Agreement.
Each of the Parties hereby designates the following Committee
members:
TEN James P. Laurito
P&WC Michael Foley
Oxford Nicholas F. DeFelice Sr.
Carrier Roger D. Morey
4.2 VOTING: Except as expressly set forth in this Agreement, all
decisions (including all technical and financial decisions and the
approval of Projects and Project proposals) with respect to this
Agreement, as well as all decisions regarding basic policies and
procedures, shall require the unanimous consent of the Parties
acting through the Committee.
4.3 RELATIONSHIP: The business relationship intended by this
Agreement is one of team members with one or more of the Parties
acting as Prime Contractor and some as sub-contractor. This
relationship is not intended to be and shall not be construed as
creating any fiduciary relationship, an agency or joint venture,
partnership, consortium or formal business organization or
association of any kind; each Party is and shall remain an
independent contractor. No other relationship shall be created by
any reference to the parties operating as a "team" for the
purposes hereof. No Party shall have any right, power or
authority to create any obligations, express or implied on behalf
of any other Party. For greater certainty, the Parties hereby
agree that no Party shall be obliged to grant any form of
financial assistance or guarantee pursuant hereto unless it has
expressly agreed to do so. Each Party shall pay all wages,
salaries and other amounts due its respective employees and shall
be responsible for all obligations respecting them relating to
income tax withholdings, unemployment insurance premiums, health
care and pension plan contributions and other similar
responsibilities. Notwithstanding anything herein to the contrary,
the obligations of the Parties shall be limited to the co-
operation set forth herein in respect of the referral, proposal,
and facilitation of the implementation of Projects by way of
appropriate sub-contracts.
SECTION 5. PROJECT DEVELOPMENT PROCESS
5.1 MARKETING: Each Party is expected to designate a marketing/sales
resource person to participate as necessary on a
Marketing/Business Development Team ("Team") led by TEN.
Accordingly, each of the Parties hereby designates the following
Team members which may be changed at any time by the appointing
Party:
TEN William Reis
- 6 -<PAGE>
P&WC E. A. Traynor
Oxford Scott F. DeFelice
Carrier Rolando A. Furlong
The Team will produce a marketing, sales, and promotional plan
consistent with objectives of the Parties in accordance with this
Agreement and which fully leverages the skills and name brand
recognition of the Parties. Following approval by the Committee,
it is expected that the Parties will share, in the proportions
agreed to by the Committee, all costs thereof, including design
and production of marketing plan materials to be distributed by
the Parties and other Committee pre-approved advertising expenses.
5.2 LEAD GENERATION AND EVALUATION: Each Party will refer to TEN
potential Projects (i.e. projects which meet the definition of
"Projects" set forth in Section 1.1) brought to its attention, for
the consideration of the Committee. Each such potential Project
will be recorded in a log maintained by TEN. The Committee shall
establish criteria by which all such potential Projects are
evaluated, and shall determine whether to submit proposals in all
instances within a specific period. If the Committee determines
that it will not submit a proposal with respect to any potential
Project, then any Party may do so individually or with other
Parties, the whole subject to Section 3 hereof.
No potential Project opportunity shall become a Project governed
by the terms of this Agreement unless unanimously approved by the
Committee.
5.3 PROPOSAL PREPARATION:
a) The Parties shall use reasonable efforts to prepare
competitive proposals in connection with the Projects.
b) TEN will direct the preparation of all Project proposals, and
shall prepare an estimate of i) any third party (including
architectural or application engineering capabilities) costs,
ii) any in kind contribution by the Parties, or iii) any
other costs that fall outside the normal scope of the
Parties' respective roles as set forth in Section 1.3 hereof,
that are necessary to prepare a proposal, such costs and
contributions not to be incurred unless and until the
Committee agrees as to the manner in which they are to be
incurred, evaluated, allocated and assumed. The Parties shall
submit to TEN data and information concerning such Party's
share of the proposed contract including a proposed price
(and, where requested by TEN, a breakdown of the proposed
price as between goods and services supplied) for use in
proposal preparation, shall make available appropriate
personnel to work on its portion of the proposal, and shall
provide reasonable assistance to TEN in preparation of the
proposal. Without limiting the generality of the foregoing,
- 7 -<PAGE>
each Party commits to use reasonable efforts to provide such
reasonable and appropriate application engineering
capabilities on the preparation of their individual share of
the proposal in respect of Projects identified and accepted
by the Committee as such supplying Party determines in
accordance with their roles identified in Section 1.3.
c) TEN shall prepare the proposal, integrate the information
provided by the other Parties, and, after Committee approval,
submit the proposal to Project customers and shall include in
the proposal each Party's proposed price for each Party's
share of the contract. TEN shall have responsibility for the
content of the proposal and agrees to consult with the other
Parties, before submission of the proposal.
d) TEN shall identify each Party as a proposed sub-contractor
and shall describe in the proposal each Party s role.
e) TEN shall be responsible for any communications with the
Project customer and agrees to give the other Parties an
opportunity to be present at meetings with the Project
customer.
f) TEN agrees to consult with, and obtain the concurrence of the
other Parties, before making any changes in the proposal.
g) TEN agrees to keep the other Parties fully advised of any
changes in the proposal or the Project customer s
requirements and timely advised of the status of the
proposal.
h) TEN shall use efforts that are reasonable and diligent after
submission of the proposal to the customer to obtain the
Project contract award. The other Parties shall assist in
such efforts, as TEN may reasonably request.
5.4 CONTRACT EXECUTION PHASE: Upon acceptance of a proposal by a
Project customer, TEN shall prepare and execute all necessary
documents with the customer (the "Prime Contract"), unless TEN and
the other Parties consider it appropriate that another Party act
in this ("Prime Contractor") capacity, with such Party s consent.
The Prime Contractor shall be solely responsible to the Project
customer for performance under the Prime Contract. Each Party is
obliged to comply with terms of contracts signed by such Party
with any other Party in connection with any Project, pursuant to
receipt of Prime Contract by TEN or Carrier. Upon receipt of
contract, the Prime Contractor (TEN and/or Carrier) will issue
purchase orders and execute other appropriate contract documents
with the other relevant Parties in connection with each such
Party s role as set forth in Section 1.3 hereof, subject to
reasonable negotiations on the terms of such purchase orders and
contract documents and to the terms of the Packaging Agreement it
- 8 -<PAGE>
being understood that the Project proposal and contract with the
Project customer shall not contain any indemnities, warranties,
covenants, undertakings or obligations which are greater in scope
that those provided pursuant to each individual contract document,
purchase order and/or Packaging Agreement. Upon execution of such
purchase orders, or contract documents, the obligations of the
Parties hereunder, other than those referred to in Section 12.7,
shall cease in respect of such Project.
5.5 POST COMPLETION: TEN expects to, and may at its option, assume
all responsibility for operation and administration of Projects
following their completion.
SECTION 6. COSTS; LIMITATION; REPRESENTATIONS
6.1 COSTS: Each Party is responsible for its own costs and expenses
in respect of this Agreement and any Project except as otherwise
specifically agreed in this Agreement or otherwise in writing.
6.2 LIMITATION: Notwithstanding any other provisions of this
Agreement, in no event shall a Party, or its directors, officers,
employees and agents, by reason of any of their respective acts or
omissions relating to the development, negotiation, design,
financing, acquisition, ownership, construction, operation or
maintenance of any Project or relating to any of their obligations
under this Agreement, be liable to any other Party whether in
contract, tort, misrepresentation, warranty, negligence, strict
liability or otherwise for any special, indirect, incidental,
consequential, punitive or exemplary damages arising out of or in
connection with this Agreement, or the performance, non-
performance or breach thereof, even if such Party has been advised
of the possibility of same or even if same were reasonably
foreseeable.
6.3 REPRESENTATIONS AND WARRANTIES: Each Party represents and warrants
that (a) it is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is
organized; (b) it has the necessary power and authority to enter
into and perform its obligations under this Agreement; (c) it has
duly authorized the person(s) signing this Agreement to execute
this Agreement on its behalf; and (d) the execution and delivery
of this Agreement and its performance by such Party will not
violate, result in a breach of or conflict with, its
organizational documents or the terms of any other agreement
binding on such Party. Except as set forth in this Section 6.3,
the Parties make no other representation, warranty or guarantee.
SECTION 7. TERM; TERMINATION; WITHDRAWAL
7.1 TERM: This Agreement shall have an initial term of two (2) years
commencing as of the date hereof. It will renew automatically for
additional terms of one year each, unless terminated by all the
- 9 -<PAGE>
Parties.
7.2 WITHDRAWAL BY ANY PARTY: Notwithstanding any other provision
contained in this Agreement, any Party, in its sole and absolute
discretion and upon thirty (30) days written notice to the other
Parties, shall have the absolute right to withdraw from this
Agreement at any time. Upon a withdrawal by a Party from this
Agreement, this Agreement shall continue in effect with respect to
the non-withdrawing Parties. Upon withdrawal by any Party, the
other Parties shall be entitled to complete the development of any
Projects for which a contract with a Project customer has been
executed exclusive of the withdrawing Party, and the withdrawing
Party and its affiliates agree not to participate in the
development and acquisition of such Projects for which a contract
with a Project customer has been executed in any manner for a
twelve (12) month period following such withdrawal, including
acting as consultant, and for a period of twelve (12) months in
respect of any Project which it voted to reject pursuant to
Section 3 hereof.
7.3 DEEMED WITHDRAWAL: If any Party (a) suffers a change in control
(i.e. with respect to Parties which are not publicly traded or
whose ultimate parent company is not publicly traded, the direct
or indirect authority to or right, by ownership of voting equity,
contract or otherwise to elect a majority of the board of
directors or other governing body of the subject person), that
would in the other Parties opinion adversely affect this
Agreement (b) files a voluntary petition in bankruptcy or seeks
liquidation, reorganization, stay, moratorium or other form of
debtor's relief under applicable laws, (c) consents to a
bankruptcy or insolvency proceeding involuntarily brought against
it or admits in writing its inability to pay its debt as they
become due, (d) has an involuntary bankruptcy or insolvency
proceeding brought against it and such proceeding is not timely
contested or is not dismissed within sixty (60) days, (e) makes a
general assignment for the benefit of creditors, or a receiver,
trustee, liquidator or officer with similar powers is appointed
with respect to its properties, or (f) materially breaches any of
its material obligations under this Agreement, including, but not
limited to, repeatedly failing to participate in meetings or
decisions without valid cause, paying any costs it has agreed to
pay on a timely basis after written notice, or otherwise
faithfully discharging its material obligations to the other
Parties hereunder or pursuant hereto (including repeated breaches
by any Party of any sub-contract in respect of a Project), then
all the other Parties shall have the right to give written notice
to such Party that it will be deemed to have withdrawn from this
Agreement unless such failure is cured within thirty (30) days.
If the Party receiving such notice does not timely cure the
default, then the other Parties (acting unanimously) may declare
such Party as having withdrawn from this Agreement. A Party that
is deemed to have withdrawn from this Agreement shall not
- 10 -<PAGE>
participate in the development and acquisition of any Project for
which a Contract with a Project customer has been executed
pursuant hereto or which had been referred to TEN or the Committee
for consideration prior to such deemed withdrawal for a twelve
(12) month period following such withdrawal, including acting as a
consultant.
7.4 CONTINUED PERFORMANCE: Notwithstanding anything herein that may be
construed to the contrary, a withdrawing Party (whether under
Section 7.2 or 7.3 hereof) shall remain fully obligated to
perform all of its obligations under or pursuant to this Agreement
which were incurred prior to withdrawal in respect of a Project
which the Parties have i) accepted to pursue in accordance with
the terms hereof or ii) for which a contract with a Project
customer has been signed.
SECTION 8. FORCE MAJEURE
No Party shall be responsible for any failure to perform or for any
delay in performance of the terms of this Agreement where the failure
or delay is due to acts of God or the public enemy, war, riot, embargo,
fire, explosion, sabotage, flood, accident; strikes, lockouts or other
labour disturbances from whatever cause arising; enactment,
promulgation or issuance of any laws, regulations, orders or decrees of
any competent governmental, regulatory or judicial authority; or,
without limiting the foregoing, any circumstances of like or different
character beyond such Party's control.
SECTION 9. GOVERNING LAW; ARBITRATION; REMEDIES
9.1 GOVERNING LAW: This Agreement shall be interpreted in accordance
with and governed by the laws of the State of Connecticut, without
regard to the conflicts of law principles thereof. The UNITED
NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF
GOODS shall not apply to this Agreement, and the Prime Contractor
shall use its best efforts to exclude same under any contract with
any Project customer.
9.2 ARBITRATION: All disputes arising in connection with or under
this Agreement other than in respect of the Proprietary
Information Agreement or the Packaging Agreement shall be finally
settled by arbitration, using the AMERICAN ARBITRATION ASSOCIATION
RULES then in effect (the "Rules") by arbitrators appointed in
accordance with the Rules. The arbitration shall he held in
Hartford, Connecticut (USA) and the arbitration proceedings shall
be conducted, and the award shall be rendered, in the English
language. All decisions rendered by arbitrators shall be final,
binding and non-appealable. This agreement to arbitrate shall be
binding upon the successors, assigns and any trustee or receiver
of any Party. The arbitrators shall have the right and obligation
to award attorneys fees and costs to the prevailing Party(ies)
arbitration.
- 11 -<PAGE>
9.3 REMEDIES: In the event of any breach or threatened breach of this
Agreement by any Party hereto, the other Parties shall be entitled
to equitable relief through an injunction in addition to any other
rights and remedies available to it.
9.4 NON-RECOURSE: The obligations of the Parties under this Agreement
are obligations of the Parties only and no recourse shall be
available against any officer, director, stockholder or, except as
permitted under applicable law, partner of any Party.
SECTION 10. COMPLIANCE WITH LAWS
Each Party shall comply with all applicable federal, provincial, state
and municipal laws, rules and regulations in effect or hereafter
adopted (including with the U.S. FEDERAL PROCUREMENT INTEGRITY ACT)
relating to its efforts hereunder and shall defend, indemnify and hold
the other Parties harmless from and against any and all losses, costs,
expenses (including reasonable attorney's fees and disbursements),
taxes, penalties, fines, liabilities, claims or damages resulting from
or in any manner connected with any non-compliance thereto.
SECTION 11. NOTICE
Any notice, demand or other communication required or permitted to be
given to any Party shall be in writing and shall be:
a) personally delivered to such Party;
b) sent by prepaid overnight courier; or
c) sent by facsimile transmission or similar method of
recorded communication, charges prepaid, confirmed by
prepaid overnight courier.
Any notice, demand or other communication given pursuant to
subparagraphs (a), (b) and (c) above shall be delivered or sent to the
intended recipient at its address indicated on the signature pages
hereof.
Any Party may from time to time change its address by written notice to
the other Party given in accordance with the provisions hereof.
Any notice, demand or other communication delivered in accordance with
paragraph (a) above shall be deemed to have been received on the first
business day following the date of its delivery; if sent in accordance with
paragraph (b) above, it shall be deemed to have been received on the second
business day following the date it was so sent; and if sent in accordance
with paragraph c) above, it shall be deemed to have been received on the
first business day following the date of its transmission by facsimile or
similar method of recorded communication. Any notice of change of address
shall be deemed to be received only when actually received.
SECTION 12. GENERAL
- 12 -<PAGE>
12.1 PREAMBLE; INTEGRATION: The preamble and Exhibits hereto shall
form an integral part hereof as if recited at length. The terms
and provisions contained in this Agreement constitute the entire
agreement between the Parties with respect to the subject matter
hereof.
12.2 NO WAIVER: No amendment or waiver of this Agreement shall be
binding unless executed in writing by all of the Parties. No
waiver of any of the provisions of this Agreement shall constitute
a waiver of any other provision (whether or not similar) nor shall
such waiver constitute a continuing waiver unless otherwise
expressly provided.
12.3 BINDING NATURE AND ASSIGNMENT: This Agreement will be binding on
and enure to the benefit of the Parties hereto and their
respective successors and permitted assigns. No Party may assign
this Agreement or any of their rights or obligations hereunder or
delegate the performance thereof to a third party (subject to the
Packaging Agreement) without the prior written consent of the
other Parties.
12.4 SEVERABILITY: Any provision in this Agreement which is held to be
illegal or unenforceable in any jurisdiction shall be ineffective
to the extent of such illegality or unenforceability without
invalidating the remaining provisions and any such illegal or
unenforceable provision shall be deemed to be restated to reflect
as nearly as possible the original intention of the Parties in
accordance with applicable law.
12.5 EXTENDED MEANINGS: In this Agreement, words importing the
singular number include the plural and vice versa and words
importing gender include all genders. The word "person" includes,
subject to the context in which it appears, an individual,
partnership, association, body corporate, trustee, executor,
administrator or legal representative.
12.6 HEADINGS: The division of this Agreement into Sections,
subsections and Annexes and the insertion of headings are for
convenience of reference only and shall not affect its
construction or interpretation.
12.7 SURVIVAL: The following provisions shall survive the expiration
of termination of this Agreement, including the withdrawal, deemed
or voluntary, of any Party:
SECTION 2.2 Confidentiality
SECTION 2.3 Property Rights
SECTION 6.2 Limitation of Liability
SECTION 7 Termination
SECTION 10 Compliance with Laws
SECTION 12 General
12.8 COUNTERPARTS: This Agreement may be executed in one or more
- 13 -<PAGE>
counterparts, each of which when so executed shall be deemed an
original, but all of which taken together shall constitute one and
the same complete and executed agreement.
12.9 EFFECTIVE AGREEMENT: If executed in counterparts, this Agreement
shall become effective when each Party to this Agreement shall
have received counterparts hereof signed by all of the other
Parties hereto.
- 14 -<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year
first above written.
The Energy Network, Inc. Oxford Technologies, Inc.
per: S/ James Laurito per: S/ Nicholas F. DeFelice
-------------------- ------------------------
Name: James Laurito Name: Nicholas F.
Title: Vice President DeFelice
Business Development Title: President
Address: Address:
60 Columbus Boulevard 221 South Street,
P. O. Box 1500 Building "H"
Hartford, CT 06144-1500 New Britain, CT, 06051
Fax Number: 860 727-3064 Fax Number: (860) 225-3755
Attention: Vice President Attention: President
Business
Development
Pratt & Whitney Canada Inc. Carrier Corporation
Per: S/ Reginald F. Steers Per: S/ Roger D. Morey
------------------------ --------------------
Name: Reginald F. Steers Name: Roger D. Morey
Title: Vice President Title: Vice President
Finance Business Development
Address: Address:
1000 Marie-Victorin P.O. Box 4800
Longueuil, Quebec 6304 Carrier Parkway
Canada, J4G 1A1 Syracuse, NY
Fax Number: (450) 442-7298 Fax Number: (315) 432-3898
Attention: General Attention: Vice President
Manager, Business
Industrial Engine Development
Division
- 15 -<PAGE>
Annex A
Proprietary Information Agreement
- 16 -<PAGE>
INDEPENDENT CONSULTING AGREEMENT
THIS AGREEMENT entered into this 23rd day of December, 1998, by and between
THE ENERGY NETWORK, INC., a Connecticut Corporation, with an office located
at 60 Columbus Boulevard, Hartford, CT (hereinafter referred to as "TEN")
and Oxford Technologies Inc. a Connecticut corporation, with an office
located at 221 South Street, New Britain, CT (hereinafter referred to as
"OXFORD").
1. AUTHORIZATION AND AGREEMENT TO SOLICIT
(a) TEN hereby authorizes OXFORD, subject to the terms and
conditions of this Agreement, to solicit expressions of interest and
requests for proposals from potential customers to outsource the
development, construction and operation of district energy and
cogeneration power projects to TEN in the territory described below,
and to refer such leads to TEN. The projects which are the subject of
this Agreement are those in which TEN expects to participate together
with Pratt & Whitney Canada Inc., Carrier Corporation and OXFORD
(collectively the "Alliance") pursuant to an Alliance Agreement (the
"Alliance Agreement") dated October 23, 1998 (hereinafter, the
"Projects"). This Agreement also shall relate to projects which TEN
and OXFORD may pursue independently of the Alliance, provided, however,
that TEN agrees in writing to pursue each particular such lead and that
such leads meet reasonable qualifications that TEN may from time to
time establish. OXFORD shall conduct the activities set forth in this
Agreement in those territories prescribed in the Alliance Agreement
(hereinafter, the "Territory").
(b) OXFORD agrees to devote its reasonable efforts to solicit orders
for Projects in the Territory and agrees not to represent, sell, or
offer for sale in the Territory any products, equipment or services
which are competitive to the Projects defined herein, except as
permitted in the Alliance Agreement.
- 1 -<PAGE>
(c) OXFORD shall use its expertise and know-how to identify and
prequalify potential projects, including, but not limited to, make
initial contacts, prepare and deliver sales presentations, and evaluate
and screen projects, all in accordance with the criteria for qualifying
leads and other requirements that the marketing committee of the
Alliance is to establish.
(d) OXFORD shall facilitate communications, meetings, discussions,
and follow-up documentation with prospective customers, and also shall
cooperate in the development of proposals and securing firm Project
agreements, all under the direction of TEN.
(e) OXFORD shall participate in bi-monthly conference calls as and
when scheduled by the marketing committee of the Alliance or such other
of its representatives as the Alliance members may designate, to
report all sales leads and assist in development of required
Sales/Marketing information, literature and lead qualification data.
(f) All leads and/or potential projects identified and reported by
OXFORD to the members of the marketing committee of the Alliance at the
bi-monthly conference calls (or at such other time and/or place as the
members of the marketing committee shall determine) shall be deemed
"Qualified Leads" for purposes of this Agreements provided i) such lead
on potential project conforms to Section 1.1 of the Alliance Agreement,
ii) the members of the marketing committee unanimously so agree, and
iii) such leads and potential projects meet the criteria to be
established by the Alliance marketing committee.
(g) All leads and potential projects which OXFORD currently has
identified, and any of such leads and potential projects which are
deemed to be Qualified Leads, are reflected on Exhibit A hereto.
- 2 -<PAGE>
2. LEGAL STATUS AND AUTHORITY OF OXFORD
TEN and OXFORD acknowledge that OXFORD is an independent contractor and
in no event shall OXFORD, its employees, agents or representatives be
considered agents or employees of TEN, except as otherwise set forth in the
Alliance Agreement.
OXFORD shall comply with all federal, state, county and local laws and
regulations regarding an independent contractor and corporate employer.
The parties therefore agree that the legal status and authority of OXFORD
pursuant to this Agreement shall be strictly construed and limited solely to
the obligations set forth in Section I hereof. OXFORD agrees that OXFORD
has the responsibility while conferring or dealing with third parties, to
reasonably describe its relationship with TEN under this Agreement and its
relationship to parties of the Alliance Agreement, in such a way that no
greater legal status or authority may be inferred by such third parties.
3. CONSULTING FEES
A Consulting Fee shall be paid to OXFORD within five (5) days of the
execution of a contract for a Project by a Qualified Lead (as defined above
in Section 1 (f) provided that the schedule for development of such Project
requires the execution of contracts for equipment within 45 days, otherwise
payment of such consulting fee to be deferred to a date not later than
forty-five (45) days prior to execution of such equipment contracts. The
Consulting Fee payable with respect to each Project shall be based upon
Capitalized Costs of the Project according to the following schedule:
Capitalized Costs Consulting Fee
----------------- --------------
first $20,000,000 3.0%
over $20,000,000 2.0%
- 3 -<PAGE>
The term "Capitalized Costs" is defined as the sum of the budgeted costs
plus contributed items stated at fair market value for each project
allocated as balance sheet tangible assets such as property, plant and
equipment, plant assets, or fixed assets, including but not limited to,
land, building structures, machinery, equipment, furniture, tools and the
following intangible costs: Architecture fees, engineering fees, legal fees
and any fees to be earned by TEN, if capitalized. The term "Capitalized
Costs" shall exclude all capitalized interest, internal labor and the
Consulting fee to be paid hereunder. In addition, OXFORD shall be paid a
Consulting Fee for any fees that may be earned by TEN in the initial year of
any arrangement pursuant to which TEN provides service, operation,
management and/or construction services with an OXFORD qualified lead, equal
to four percent (4%) of the revenue to be received by TEN, but only in those
instances where TEN does not own the Project.
In the event that TEN closes subsequent Project(s) with a previous
Qualified Lead, OXFORD shall be entitled to a Consulting Fee as set forth
above, provided OXFORD performs its responsibilities as set forth in this
Agreement. However, if a Project is closed with the same OXFORD Lead within
six (6) months from the date that the prior Project contract was executed
with said OXFORD Lead, Consulting Fees shall be calculated on the
Capitalized Costs on a cumulative basis.
4. EXPENSES
All expenses and other costs attendant with the obligations of OXFORD
hereunder shall be borne by OXFORD. By way of example and not limitation,
should OXFORD utilize third party assistance in soliciting orders for
projects, any resulting compensation to such a third party shall be the
responsibility of OXFORD.
All expenses and other costs attendant with the obligations of TEN
hereunder shall be borne by TEN. By way of example and not limitation,
- 4 -<PAGE>
should TEN utilize third party assistance in soliciting orders for projects,
any resulting compensation to such a third party shall be the responsibility
of TEN.
5. CONFIDENTIAL INFORMATION
TEN and OXFORD shall mutually treat as confidential and shall safeguard
all information, memoranda, reports and records pertaining to, or resulting
from, this Agreement or performance hereunder. Further, OXFORD agrees to be
fully bound by the terms and conditions of a Proprietary Information
Agreement dated April 22, 1998 executed by Oxford Industries of Connecticut,
Inc.
6. TRADEMARKS
OXFORD shall not use in any way, directly or indirectly, in whole or in
part, trade names or trademarks owned by TEN or other parties to the
Alliance Agreement, or trade names or trademarks confusingly similar thereto
in connection with OXFORD's business except in the manner and to the extent
that to which TEN or such parties may specifically consent in writing.
TEN shall not use in any way, directly or indirectly, in whole or in
part, trade names or trademarks owned by OXFORD or other parties to the
Alliance Agreement, or trade names or trademarks confusingly similar thereto
in connection with TEN s business except in the manner and to the extent
that to which OXFORD or such parties may specifically consent in writing.
7. OXFORD'S EMPLOYEES
All persons employed by OXFORD in connection with operations under this
Agreement shall be considered employees of OXFORD and shall in no way,
either directly or indirectly, be considered employees of TEN. Any taxes or
contributions levied by any governmental entity based upon the payrolls of
or employment by OXFORD shall be the exclusive liability of OXFORD and shall
- 5 -<PAGE>
in no way be chargeable to TEN.
8. WARRANTIES BY OXFORD AND TEN
OXFORD hereby agrees to indemnify and hold harmless TEN from any claim,
damage, loss, penalty or expense (including legal fees) resulting from the
failure of OXFORD to comply with any of the terms or conditions of this
Agreement. TEN hereby agrees to indemnify and hold harmless OXFORD from any
claim, damage, loss, penalty or expense (including legal fees) resulting
from the failure of TEN to comply with any of the terms or conditions of
this Agreement.
9. TERMINATION
(a) This Agreement shall have a term which is coterminous with the
term of the Alliance Agreement, unless terminated earlier by either
party for any reason by the giving of thirty (30) days prior written
notice to the other party, delivered by registered mail addressed to
such party at its last known address. Such notice will be deemed to be
given on the date of mailing. In the event OXFORD or TEN withdraws,
voluntarily or involuntarily, from the Alliance Agreement, then this
Agreement also shall terminate.
(b) In the event of termination, TEN shall have no further
responsibility to OXFORD except:
(1) To pay any Consulting Fees due and owing;
(2) To pay, when due and owing, a Consulting Fee on any
prospective Project which becomes a Qualified Lead within one
hundred twenty (120) days subsequent to termination of this
Agreement but which was, solicited by OXFORD prior to such
termination; and
(c) In the event of termination, OXFORD also shall promptly return
to TEN any and all product models, price books, customer lists, and
- 6 -<PAGE>
other sales aids furnished to it by, or developed jointly with, TEN and
all copies thereof, at the termination of this Agreement, OXFORD shall
submit a list of potential projects on which information has been
developed;
(d) OXFORD agrees to be bound by all of the termination provisions
of this Agreement and expressly waives any rights which it may have (i)
under any statute or other provision of law or regulation which rights
are not set forth in this Agreement, and further agrees to hold TEN
harmless from any damages or liabilities arising out of or based upon
any such statute or other provision of law or regulation; and, (ii)
under any statute in the Territory which requires TEN to pay OXFORD
upon termination, compensation, damages, penalties or the like based
upon OXFORD s representation of TEN in the Territory pursuant to this
Agreement or otherwise; and OXFORD further hereby expressly waives any
right to such payments, and further agrees to indemnify and hold
harmless TEN against any claim for, or based upon rights to, such
compensation, damages, penalties or the like.
- 7 -<PAGE>
10. MISCELLANEOUS
(a) This Agreement is not exclusive. TEN and OXFORD may enter into
other agreements with third parties to provide similar services.
(b) This Agreement and the rights and obligations hereunder shall be
and hereby are personal and non-assignable, therefore, any assignment
or transfer thereof by OXFORD or TEN shall be void, except with the
written consent of the other party.
(c) This Agreement shall be construed in accordance with and
governed by the laws of the State of Connecticut.
IN WITNESS WHEREOF, the parties have hereto executed this Agreement in
the month, day and year first written above.
THE ENERGY NETWORK, INC. OXFORD TECHNOLOGIES INC.
By: S/ James P. Laurito By: S/ Nicholas F. DeFelice
----------------------------- ----------------------------
James P. Laurito Nicholas F. DeFelice
Its President, Its President,
----------------------------- ----------------------------
duly authorized duly authorized
- 8 -<PAGE>
Thomas L. Rose
Vice President
National Utilities
FLEET (Logo)
Fleet Bank
Mail Stop: MA OF 0320
One Federal Street
Boston, MA 02110
November 28, 1998
The Energy Network, Inc.
P.O. Box 1500
Hartford, Connecticut 06114-1500
Attn: Mr. Andrew Johnson, Treasurer
Re: $10,000,000 364-Day Revolving Credit Line
Dear Andrew:
This letter is written in connection with that certain 364-Day
Revolving Credit Agreement between The Energy Network, Inc. (the "Borrower")
and Fleet National Bank (the "Lender") dated as of October 1, 1997 (as
amended the "Credit Agreement") and that certain 364-Day Revolving Credit
Note given by the Borrower to the order of Lender dated October 1, 1997 in
the original principal amount of up to $10,000,000 (as amended the "Note").
Capitalized terms used herein which are not otherwise specifically defined
herein shall have the same meaning as in the Credit Agreement.
The Lender and the Borrower have agreed to again extend the maturity
date of the loan evidenced by the Note to September 28, 1999. The Lender
and the Borrower, by its execution of this letter where indicated below,
hereby agree that (i) the definition of "Maturity Date", as defined in the
Credit Agreement and in the Note, is hereby amended such that "Maturity
Date" shall hereafter mean September 28, 1999 and (ii) TEN Gas Services,
Inc. shall hereafter be included as a "Guarantor" under the Credit
Agreement. By their execution of this letter where indicated below, each of
the undersigned Guarantors hereby consents to the modifications set forth
above. Except as specifically modified hereby, the terms of the Credit
Agreement, the Note and the remaining Loan Documents shall not be affected
by this letter agreement and each shall remain in full force and effect.
If you have any questions, please feel free to contact me.
Very truly yours,
FLEET NATIONAL BANK
By: S/ Thomas L. Rose
-------------------------------
Thomas L. Rose
Vice President
Acknowledged and agreed to this 8 day of December, 1998.
THE ENERGY NETWORK, INC.
By: S/ Andrew H. Johnson
-------------------------------
Name: Andrew H. Johnson<PAGE>
TENTH AMENDMENT TO
CONNECTICUT NATURAL GAS CORPORATION
EMPLOYEE SAVINGS PLAN
The Connecticut Natural Gas Corporation Employee Savings
Plan is hereby amended as follows:
1. The following new subparagraph (f) is added to Section
15.01:
"(f) Notwithstanding any other provision of the
Plan to the contrary, in the event that Connecticut
Natural Gas Corporation, CTG Resources, Inc., The
Energy Network, Inc., The Hartford Steam Company, or
any affiliate of any such corporations, shall acquire
any other trade or business (or portion thereof)
through asset or stock acquisition, merger, or similar
transaction, and if in connection with or pursuant to
the terms of any such transaction it is necessary or
appropriate for this Plan to be amended for any reason
(such as, for example, in order to provide prior
service credit for vesting purposes), then any such
amendment may be made by the President of Connecticut
Natural Gas Corporation. The Board of Directors hereby
delegates to the President the authority to make any
such amendment or amendments to the Plan for such
purpose, without further action by the Board. Any such
amendment may take the form of an amendment to one or
more provisions of the Plan; one or more schedules or
appendices to be attached to the Plan and form a part
of the Plan; a combination of the foregoing; or such
other form as the President determines to be
appropriate. The Board of Directors may terminate this
delegation of authority at any time."
2. Except as hereinabove modified and amended, the amended
and restated Plan (as amended) shall remain in full force and
effect.
IN WITNESS WHEREOF, the Company hereby executes this Tenth
Amendment this 24th day of November, 1998.
CONNECTICUT NATURAL GAS CORPORATION
Janice Rawlins By S/ Jean S. McCarthy
--------------------- ----------------------------------
Witness Its AVP Human Resources<PAGE>
TENTH AMENDMENT TO
CONNECTICUT NATURAL GAS CORPORATION
UNION EMPLOYEE SAVINGS PLAN
The Connecticut Natural Gas Corporation Union Employee
Savings Plan is hereby amended as follows:
1. The following new subparagraph (f) is added to Section
15.01:
"(f) Notwithstanding any other provision of the
Plan to the contrary, in the event that Connecticut
Natural Gas Corporation, CTG Resources, Inc., The
Energy Network, Inc., The Hartford Steam Company, or
any affiliate of any such corporations, shall acquire
any other trade or business (or portion thereof)
through asset or stock acquisition, merger, or similar
transaction, and if in connection with or pursuant to
the terms of any such transaction it is necessary or
appropriate for this Plan to be amended for any reason
(such as, for example, in order to provide prior
service credit for vesting purposes), then any such
amendment may be made by the President of Connecticut
Natural Gas Corporation. The Board of Directors hereby
delegates to the President the authority to make any
such amendment or amendments to the Plan for such
purpose, without further action by the Board. Any such
amendment may take the form of an amendment to one or
more provisions of the Plan; one or more schedules or
appendices to be attached to the Plan and form a part
of the Plan; a combination of the foregoing; or such
other form as the President determines to be
appropriate. The Board of Directors may terminate this
delegation of authority at any time."
2. Except as hereinabove modified and amended, the amended
and restated Plan (as amended) shall remain in full force and
effect.
IN WITNESS WHEREOF, the Company hereby executes this Tenth
Amendment this 24th day of November, 1998.
CONNECTICUT NATURAL GAS CORPORATION
Janice Rawlins By S/ Jean S. McCarthy
--------------------- --------------------------------
Witness Its AVP Human Resources<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> THIS SCHEDULE CONTAINS
SUMMARY FINANCIAL
INFORMATION EXTRACTED
FROM THE CONSOLIDATED
BALANCE SHEETS,
STATEMENTS OF INCOME,
STATEMENTS OF CASHFLOWS
AND STATEMENTS OF
CAPITALIZATION AND IS
QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO
SUCH FINANCIAL
STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 293,103
<OTHER-PROPERTY-AND-INVEST> 55,788
<TOTAL-CURRENT-ASSETS> 86,907
<TOTAL-DEFERRED-CHARGES> 40,630
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 476,428
<COMMON> 66,999
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 59,908
<TOTAL-COMMON-STOCKHOLDERS-EQ> 126,907
0
879
<LONG-TERM-DEBT-NET> 217,540
<SHORT-TERM-NOTES> 15,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 3,234
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 112,868
<TOT-CAPITALIZATION-AND-LIAB> 476,428
<GROSS-OPERATING-REVENUE> 81,679
<INCOME-TAX-EXPENSE> 4,778
<OTHER-OPERATING-EXPENSES> 67,509
<TOTAL-OPERATING-EXPENSES> 72,287
<OPERATING-INCOME-LOSS> 9,392
<OTHER-INCOME-NET> 558
<INCOME-BEFORE-INTEREST-EXPEN> 9,950
<TOTAL-INTEREST-EXPENSE> 4,258
<NET-INCOME> 5,692 <PAGE>
15
<EARNINGS-AVAILABLE-FOR-COMM> 5,677
<COMMON-STOCK-DIVIDENDS> 2,216
<TOTAL-INTEREST-ON-BONDS> 434
<CASH-FLOW-OPERATIONS> (6,681)
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.65
<PAGE>
</TABLE>
