<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ENERGYNORTH NATURAL GAS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW HAMPSHIRE 4920 02-0209312
(STATE OR OTHER (PRIMARY STANDARD (I.R.S EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
1260 ELM ST., P.O. BOX 329
MANCHESTER, NEW HAMPSHIRE 03105-0329
(603) 625-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ROBERT R. GIORDANO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ENERGYNORTH NATURAL GAS, INC.
1260 ELM STREET, P.O. BOX 329
MANCHESTER, NEW HAMPSHIRE 03105-0329
(603) 625-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
RICHARD A. SAMUELS, ESQUIRE JAMES L. NOUSS, JR., ESQUIRE
MCLANE, GRAF, RAULERSON & MIDDLETON BRYAN CAVE LLP
PROFESSIONAL ASSOCIATION ONE METROPOLITAN SQUARE
900 ELM STREET, P.O. BOX 326 211 N. BROADWAY, SUITE 3600
MANCHESTER, NH 03105-0326 ST. LOUIS, MO 63102-27500
(603) 625-6464 (314) 259-2000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
of the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
AMOUNT PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
% First Mortgage Bonds....... $22,000,000 $22,000,000 $6,666.67
</TABLE>
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REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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<PAGE>
ENERGYNORTH NATURAL GAS, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY
ITEMS OF PART I
OF FORM S-1
<TABLE>
<CAPTION>
FORM S-1 ITEM AND CAPTION LOCATION IN PROSPECTUS
------------------------- ----------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front Cover Front Cover Page; Prospectus Cover
Page of Prospectus.................. Page
2. Inside Front and Outside Back Cover Available Information; Table of
Pages of Prospectus................. Contents
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges.. Prospectus Summary; Risk Factors;
The Company; Selected Financial
Data
4. Use of Proceeds...................... Use of Proceeds
5. Determination of Offering Price...... Not Applicable
6. Dilution............................. Not Applicable
7. Selling Security Holders............. Not Applicable
8. Plan of Distribution................. Underwriting
9. Description of Securities to be Description of Bonds
Registered..........................
10. Interests of Named Experts and Legal Matters; Experts
Counsel.............................
11. Information with Respect to the Prospectus Summary; Selected
Registrant.......................... Financial Data; Management's
Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Certain
Relationships and Related
Transactions; Management;
Description of Bonds; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Not Applicable
Liabilities.........................
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 6, 1997
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
LOGO
$22,000,000
ENERGYNORTH NATURAL GAS, INC.
FIRST MORTGAGE BONDS DESIGNATED AS
% SERIES E BONDS DUE , 2027
-----------
The First Mortgage Bonds Designated as % Series E Bonds Due , 2027 (the
"Bonds") offered hereby are being issued by EnergyNorth Natural Gas, Inc. (the
"Company"). Interest on the Bonds is payable semiannually on and
beginning .
The Bonds will be issued in the form of one Global Security (a "Global
Security") registered in the name of the nominee of The Depository Trust
Company, as Depository and such nominee will be the sole holder of the Bonds.
An owner of an interest in the Bonds ("Beneficial Owner") will not be entitled
to the delivery of a definitive security except in limited circumstances. A
Beneficial Owner's interest in the Global Security will be indicated on, and
transfers will be effected only through, records maintained by the Depository
and its participants. See "DESCRIPTION OF BONDS."
The Bonds are redeemable at any time within 60 days after request on behalf
of a deceased holder, subject to an annual maximum principal amount limitation
of $25,000 per holder and $500,000 in the aggregate. At the option of the
Company, the Bonds will be redeemable, in whole or in part, on or after ,
2002, at 104% of the principal amount, declining by 1% of the principal amount
per year for each of the succeeding four years, plus accrued interest. There
will be no sinking fund established to redeem the Bonds. See "DESCRIPTION OF
BONDS."
There is currently no market for the Bonds and there is no assurance that one
will develop. The Company does not intend to list the Bonds for trading on any
national securities exchange.
-----------
SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Bond.................................. 100%
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Total..................................... $22,000,000
</TABLE>
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- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify Edward D. Jones & Co., L.P. (the
"Underwriter") against certain civil liabilities under the Securities Act
of 1933. See "UNDERWRITING."
(2) Before deduction of expenses payable by the Company estimated at $124,367.
-----------
The Bonds are offered by the Underwriter, subject to prior sale, when, as,
and if issued to and accepted by the Underwriter subject to approval of certain
legal matters by counsel for the Underwriter and certain other conditions. The
Underwriter reserves the right to withdraw, cancel, or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Global
Security will be made through the facilities of the Depository in New York, New
York, on or about , 1997 against payment therefor in immediately available
funds.
EDWARD D. JONES & CO., L.P.
The date of this Prospectus is , 1997
<PAGE>
[MAP OF ENERGYNORTH NATURAL GAS, INC.
SERVICE TERRITORY IS PLACED HERE]
The Company will provide to each Beneficial Owner of the Bonds upon the
written request of any such person a copy of annual reports on Form 10-K and
quarterly reports on Form 10-Q free of charge. Such requests should be
addressed to the Manager, Public and Investor Relations of the Company, P.O.
Box 329, Manchester, NH 03105-0329.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE BONDS,
INCLUDING OVERALLOTMENT, STABILIZING TRANSACTIONS, AND THE PURCHASE OF BONDS
TO COVER SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The information set forth below should be read in conjunction with and is
qualified in its entirety by the detailed information and financial statements
contained in this Prospectus.
THE OFFERING
Issuer.................... EnergyNorth Natural Gas, Inc.
Securities Offered........ $22,000,000 aggregate principal amount of First
Mortgage Bonds Designated as % Series E Bonds Due
, 2027.
Risk Factors.............. The Company's operations and the Bonds are subject
to certain risks. See "RISK FACTORS."
Maturity.................. , , 2027.
Interest Payment Dates.... .
Use of Proceeds........... The proceeds will be used to retire all existing
First Mortgage Bonds Designated as 8.67% Series A
General and Refunding Mortgage Bonds Due 2002 and
to repay the Company's short-term debt. See "USE OF
PROCEEDS."
Deceased Beneficial
Owner's Redemption
Privilege................
At the option of any deceased Beneficial Owner's
representative, interests in the Bonds are
redeemable at 100% of the principal amount, plus
accrued interest, at any time, subject to the
maximum principal amount of $25,000 per deceased
Beneficial Owner and $500,000 in the aggregate for
all deceased Beneficial Owners, during the initial
period ending , 1998 and for each twelve-month
period thereafter. See "DESCRIPTION OF BONDS--
Limited Right of Redemption Upon Death of a
Beneficial Owner."
Company's Redemption The Bonds are not subject to redemption at the
Privilege................ option of the Company prior to , 2002.
Thereafter, the Bonds will be redeemable, in whole
or in part, at the Company's option, at 104% of the
principal amount, declining by 1% of the principal
amount per year for each of the succeeding four
years, plus accrued interest. See "DESCRIPTION OF
BONDS-- Redemption at Option of the Company."
Trustee................... Bank of New Hampshire.
3
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT RATIOS AND PERCENTAGES)
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
JUNE 30, 1997 FISCAL YEARS ENDED SEPTEMBER 30,
------------- ----------------------------------
1996 1995 1994
(UNAUDITED) ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total operating revenues..... $92,004 $ 77,510 $ 69,817 $ 88,150
Operating income............. 8,217 8,200 6,540 8,096
Net income................... 5,437 5,427 3,745 4,837
Interest charges............. 3,540 3,508 4,049 3,675
Ratio of earnings to fixed
charges(1).................. 3.28x 3.27x 2.27x 2.83x
Ratio of earnings to fixed
charges pro forma(1)(2)..... x
Long-term debt (including
capital lease obligations
and excluding current
maturities) as percentage of
total capitalization........ 36.6% 39.6% 42.9% 44.4%
</TABLE>
- --------
(1) For the purpose of computing these ratios, earnings consist of net income
plus income taxes and fixed charges. Fixed charges consist of total
interest, amortization of debt discount, premium and expense, and the
estimated portion of interest implicit in rentals.
(2) Assuming that the Bonds had been outstanding throughout the period and that
the indebtedness to be retired from the proceeds of the sale of the Bonds
had not been outstanding.
CAPITALIZATION AT JUNE 30, 1997
(IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED(2)
------------- -------------
<S> <C> <C> <C> <C>
Long-term debt (including capital lease
obligations and excluding current
maturities)(1)................................. $26,789 36.6% $44,066 48.7%
Common shareholder's equity..................... 46,429 63.4 46,429 51.3
------- ----- ------- -----
Total capitalization.......................... $73,218 100.0% $90,495 100.0%
======= ===== ======= =====
</TABLE>
- --------
(1) Current maturities of long-term debt were $1,663.
(2) Adjusted for the sale of the Bonds at par. The Company targets an average
ratio of 50% long-term obligations to total capitalization and anticipates
retaining future earnings or receiving capital contributions from its
shareholders to achieve this ratio.
4
<PAGE>
RISK FACTORS
Prospective purchasers should carefully consider, together with the other
information contained and incorporated by reference in this Prospectus, the
following risk factors before purchasing the Bonds offered hereby. Prospective
purchasers should note, in particular, that this Prospectus contains forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended (the "Securities Act"), and Section 21E of the Securities Act
of 1934, as amended (the "Exchange Act"), and that actual results could differ
materially from those contemplated by such statements. Prospective purchasers
should also refer to the factors discussed under "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Factors That May
Affect Future Results." These considerations are not intended to represent a
complete list of the general or specific risks that may affect the Bonds or
the Company. It should be recognized that other risks may be significant,
presently or in the future, and the risks set forth below may affect the Bonds
or the Company to a greater extent than indicated.
FACTORS AFFECTING THE GAS UTILITY INDUSTRY
The natural gas utility industry is subject to numerous regulations and
uncertainties, many of which may affect the Company in varying degrees.
Industry issues which have affected or may affect the Company from time to
time include the following: fluctuations in demand attributable to weather;
new business and operational requirements for gas supply resulting from
changes in federal regulation of interstate pipelines; competition with other
sources of gas supply; competition with alternative sources of energy;
uncertainty in achieving an adequate return on invested capital due to
inflation; difficulty in obtaining rate increases from regulatory authorities
in adequate amounts and on a timely basis; attrition in earnings produced by
the combination of increasing expenses and the costs of new capital which may
exceed allowed rates of return; the availability of pipeline transportation
capacity necessary to secure supplies of gas; bypass of the Company's
intrastate gas transportation system; volatility in the price of natural gas;
increases in construction and operating costs; environmental regulations and
costs of environmental remediation; the possibility of state regulation
requiring the unbundling of various elements of gas distribution and service;
rates and margin for gas transportation service and customer choice of
transportation service without gas sales service; the possibility of change
from cost-based rate regulation; and uncertainty in the projected rate of
growth of customers' energy requirements.
ABSENCE OF PUBLIC MARKET FOR THE BONDS
There is no public trading market for the Bonds, and the Company does not
intend to apply for listing of the Bonds on any national securities exchange
or for quotation of the Bonds on any automated dealer quotation system. The
Company has been advised by the Underwriter that it presently intends to make
a market in the Bonds after the consummation of the offering contemplated
hereby, although the Underwriter is under no obligation to do so, and may
discontinue any market-making activities at any time without any notice. No
assurance can be given as to the liquidity of the trading market for the Bonds
or that an active public market for the Bonds will develop. If an active
public trading market for the Bonds does not develop, the market price and
liquidity of the Bonds may be adversely affected. If the Bonds are traded,
they may trade at a discount from their initial offering price, depending on
prevailing interest rates, the market for similar securities, performance of
the Company, and certain other factors.
EFFECT OF WEATHER
The Company's business is influenced by seasonal weather conditions. The
amount of gas sold and transported for central and space heating purposes and,
to a lesser extent, water heating is directly related to the ambient air
temperature. Consequently, more gas is sold and transported during the winter
months than during the summer months, resulting in seasonal differences in
revenues. Because the Company's rates are set based on normal temperatures,
warmer than normal temperatures will have an adverse impact on the Company's
revenues and earnings. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
5
<PAGE>
ENVIRONMENTAL MATTERS
The Company and its predecessors owned or operated several facilities for
the manufacture of gas from coal, a process used through the mid-1900's. The
costs of remediation of by-products produced by that process at two of those
former manufactured-gas facility sites are uncertain, and it is uncertain
whether investigation or remediation of by-product disposal related to other
of the manufactured-gas facilities owned or operated by the Company and its
predecessors will be required in the future and, if required, the cost of such
investigation or remediation. Moreover, although substantially all of such
costs have been allowed to be recovered through rates (over a period of years
but without recovery of carrying costs on the unamortized balance), and the
Company anticipates that such substantial recovery will continue to be
allowed, future proceedings could result in allowance of less than
substantially all such costs. See "BUSINESS--Legal Proceedings and
Environmental Matters."
THE COMPANY
EnergyNorth Natural Gas, Inc. is a regulated utility engaged in the
purchase, transportation, and sale of natural gas for residential, commercial,
and industrial use in New Hampshire. The Company distributes natural gas
through an underground pipeline distribution network to more than 75 percent
of the natural gas customers in New Hampshire. The Company's approximately
68,000 natural gas customers are located in 27 cities and towns with a
combined population of approximately one-half million residents. The Company
is headquartered in Manchester, New Hampshire and is a wholly-owned subsidiary
of EnergyNorth, Inc. ("ENI"), a public utility holding company, exempt from
registration under the Public Utility Holding Company Act of 1935, also
headquartered in Manchester, New Hampshire. The Company is one of two
principal operating subsidiaries of ENI. ENI's other principal subsidiary is
EnergyNorth Propane, Inc. ("ENPI"), a non-regulated business which sells and
delivers liquified petroleum gas ("propane" or "LP") to customers both within
and beyond the natural gas pipeline network. See "BUSINESS-General." The
mailing address of the Company's principal executive office is 1260 Elm
Street, P.O. Box 329, Manchester, New Hampshire 03105-0329, and its telephone
number is (603) 625-4000.
USE OF PROCEEDS
The proceeds to the Company from the sale of the Bonds, net of the estimated
underwriting discount and expenses, are estimated to be approximately
$124,367. The Company intends to use the net proceeds to retire all of its
outstanding First Mortgage Bonds Designated as 8.67% Series A General and
Refunding Mortgage Bonds Due 2002 (approximately $5,900,000) and to repay its
short-term borrowings (approximately $14,500,000), which short-term borrowings
have a weighted average interest rate as of June 30, 1997 of approximately
6.55% per annum. Any balance of net proceeds will be used for working capital
purposes. Pending such applications, the net proceeds may be temporarily
invested in short-term marketable securities.
6
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company. The
selected financial data as of and for the five fiscal years ended September
30, 1996 was derived from the audited financial statements of the Company. The
selected financial data as of and for the twelve months ended June 30, 1997
was derived from unaudited financial statements of the Company which, in the
opinion of management, contain all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation thereof. The results of
operations for the twelve months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the fiscal year ending
September 30, 1997. The financial data set forth below should be read in
conjunction with the Financial Statements and the Notes thereto and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS " included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
JUNE 30, 1997 FISCAL YEARS ENDED SEPTEMBER 30,
------------- -----------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total operating
revenues............... $ 92,004 $ 77,510 $ 69,817 $ 88,150 $ 78,495 $73,067
Net income.............. 5,437 5,427 3,745 4,837 4,960 3,392
Cash dividends.......... 3,651 3,635 3,368 3,199 3,072 2,854
Total assets............ 122,084 122,706 112,287 111,685 104,091 98,212
Capitalization:
Common stockholder's
equity............... 46,429 41,357 38,065 37,688 34,860 32,172
Long-term debt
(including capital
lease obligations)... 26,789 27,102 28,577 30,143 31,786 33,040
Total
capitalization..... 73,218 68,459 66,642 67,831 66,646 65,212
Short-term debt
(including current
portion of long-term
debt).................. 7,163 11,206 3,195 1,709 4,428 4,378
Ratio of earnings to
fixed charges.......... 3.28x 3.27x 2.27x 2.83x 2.88x 2.24x
</TABLE>
- --------
Reclassifications are made periodically to previously issued financial data
to conform to the current presentation.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's rates charged to customers are regulated by the New Hampshire
Public Utilities Commission ("NHPUC"). The NHPUC is required by New Hampshire
law to allow the Company to charge rates that are just and reasonable, such
that the Company is compensated for the cost of providing service and allowed
a reasonable rate of return on its investment. The Company regularly assesses
whether it is earning a reasonable return and files for rate increases when it
determines that it is not being permitted to earn a reasonable return.
The Company generates revenues primarily through the sale and transportation
of natural gas. The Company's gas sales are divided into two categories: firm,
whereby the Company must supply gas to customers on demand; and interruptible,
whereby the Company may, generally during cooler months, discontinue service
to high volume industrial customers. Sales of gas to interruptible customers
do not materially affect the Company's operating income because all margin on
such sales is returned to the Company's firm customers.
The Company's tariff of rates includes cost of gas adjustment ("CGA") rates
which provide for increases and decreases in the rates charged for gas to
reflect estimated changes in the cost of gas. Although changes in CGA rates
affect revenues, they do not affect total margin because the CGA is a tariff
mechanism designed to provide dollar-for-dollar recovery of gas costs. Amounts
recovered under CGA rates are reconciled semiannually against actual costs,
and future CGA rates are adjusted accordingly.
The Company's sales are responsive to colder weather because the majority of
its firm customers use natural gas for space heating purposes. The Company
measures weather through the use of degree days. A degree day is calculated by
subtracting the average temperature for the day from 65 degrees Fahrenheit.
The "normal" number of degree days during any period is calculated based upon
a rolling approximate thirty-year average number of degree days during such
period. The table below discloses degree day data as recorded at the U.S.
weather station in Concord, New Hampshire, comparing actual degree days to the
previous period and to normal. As a result of the size and topographical
variations of the Company's service territory, weather conditions within such
territory often vary. The Company considers Concord, New Hampshire weather
data to be representative of weather conditions within its service territory.
<TABLE>
<CAPTION>
DEGREE DAYS
-------------
PRIOR CHANGE VS. CHANGE VS.
ACTUAL PERIOD NORMAL PRIOR PERIOD NORMAL
------ ------ ------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Fiscal year ended September 30,
1994............................ 7,877 7,550 7,512 4.3% 4.9%
Fiscal year ended September 30,
1995............................ 6,834 7,877 7,525 (13.2)% (9.2)%
Fiscal year ended September 30,
1996............................ 7,482 6,834 7,549 9.5% (0.9)%
Twelve months ended June 30,
1997............................ 7,357 7,482 7,511 (1.7)% (2.1)%
</TABLE>
Shifts between transportation and sales gas will cause variations in natural
gas revenues since the transportation rate does not include the commodity cost
of gas, which is billed directly to the customer by its marketer. Prior to
August 1, 1997, the Company's rate structure provided approximately the same
margin from sales service and transportation service. Effective August 1,
1997, transportation rates were reduced by approximately 3%. The Company
cannot predict the impact, if any, that the results of this reduction in
transportation rates will have on customers' decisions to switch to
transportation service or the resulting impact decisions to switch would have
on operating income. The Company will seek an adjustment in overall rates if
it determines that reductions in transportation rates and increases in the
number of transportation customers impairs its ability to earn its allowed
return. At June 30, 1997, the Company had 37 transportation customers compared
to 25 customers the previous year.
RESULTS OF OPERATIONS--TWELVE MONTHS ENDED JUNE 30, 1997 COMPARED TO TWELVE
MONTHS ENDED SEPTEMBER 30, 1996
Earnings and Operating Revenues
Net income increased to $5,437,000 for the twelve months ended June 30, 1997
from $5,427,000 for fiscal year 1996. Total operating revenues were
$92,004,000 compared to $77,510,000 in the prior period, an 18.7%
8
<PAGE>
increase. Higher purchased gas cost of approximately $15,000,000 passed
through the CGA was the primary reason for the significant increase. Despite a
1.5% increase in the average number of customers, warmer weather resulted in
firm sendout, including firm transportation, that was essentially unchanged
from fiscal year 1996. Margin earned from utility natural gas operations
decreased $427,000, or 1.2%.
Operating Expenses
Decreases in wages and related operating expense reductions, as a result of
reductions in the workforce and overtime requirements, were the primary
reasons for the net decrease in operations and maintenance expense. Continued
capital additions to the distribution system and amortization of environmental
remediation costs account for the increase in depreciation and amortization
expense.
Taxes other than income taxes decreased 2.2% due to property tax abatements
and a reduction in the public utility tax assessment.
While interest on long-term debt decreased 3.4% compared to fiscal year
1996, other interest expense increased 16.6%. Higher average outstanding
short-term borrowings during the twelve months ended June 30, 1997 was the
primary reason for the increase.
RESULTS OF OPERATIONS--FISCAL 1996 COMPARED TO FISCAL 1995
Earnings
Net income for 1996 was a record $5,427,000, which represents a 45% increase
over the $3,745,000 net income for 1995. The 1996 increase in earnings was
primarily due to greater margins resulting mostly from growth in volumes
delivered. Volumes of firm gas delivered to utility customers increased 13.1%
to 11,400,000 Mcf (1,000 cubic feet). Weather in the Company's service area
was near normal in 1996, but 9.5% colder than the prior year (based upon a
comparison of degree days for such periods). In addition, 1995 earnings
included a $215,000 after-tax gain on the sale of railcars.
Operating Revenues
Operating revenues were $77,510,000 in 1996, compared to $69,817,000 in
1995. The increase resulted primarily from increased volumes delivered to firm
residential and commercial heating customers due to the colder weather and
1.7% customer growth in 1996. Revenues from gas transported for customers
under firm transportation service rates increased more than 40% to $979,000,
due to a 45% increase in volumes transported. This increase included a shift
of 162,000 Mcf from firm commercial and industrial sales to firm
transportation sales, representing a decrease of $516,000 in operating revenue
attributable to the commodity cost of gas.
Cost of Gas Sold
Cost of gas was $39,115,000 in 1996 and $35,602,000 in 1995. The increase
was primarily due to higher prices from suppliers (approximately $5,900,000)
and the increase in delivered volumes (approximately $4,700,000), partially
offset by timing differences related to the recovery of gas costs through the
CGA (approximately $7,200,000). The average unit cost of gas sold in 1996 was
$3.96 per Mcf, compared to $3.44 per Mcf in 1995. Increases or decreases in
purchased gas costs from suppliers have no significant impact on margin, as
they are recovered from customers through the CGA.
Operating Expenses
Operations and maintenance expense increased $217,000, or 1.2%, to
$18,624,000 in 1996. Reductions in the workforce, other cost saving
initiatives, and workers' compensation and health insurance refunds helped
offset most of the increases from liability insurance, uncollectible accounts
and other administrative expenses.
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Depreciation and amortization expense increased from $4,063,000 to
$4,693,000 in 1996, consistent with the Company's continued investment in the
expansion and upgrading of its distribution system and facilities and
amortization of environmental remediation costs. Net additions to property,
plant, and equipment were $7,496,000 and $6,407,000 in 1996 and 1995,
respectively.
Taxes other than income taxes increased $194,000 to $3,654,000 primarily due
to increases in property taxes, resulting from property tax rate increases and
additions to taxable property. A higher level of pretax income was the main
reason for the $1,479,000 increase in total federal and state income taxes in
1996. In addition, as a result of the resolution of certain federal income tax
issues, the Company reduced federal income taxes by $200,000 in 1995.
Total other income for 1995 includes a gain of $350,000 from the sale of
railcars formerly used to transport liquid propane.
Fiscal 1996 interest expense decreased 13.4% from 1995 due mainly to the
repayment of $1,664,000 of long-term debt and a decrease in average short-term
borrowings and average short-term interest rates.
RESULTS OF OPERATIONS--FISCAL 1995 COMPARED TO FISCAL 1994
Earnings
Net income declined to $3,745,000 in 1995 from 1994 net income of
$4,837,000. A key reason for the decrease in net income was the impact on
operations of significantly warmer weather during the 1995 heating season. In
1994, net income was impacted by record colder than normal temperatures.
Operating Revenues
Operating revenues were approximately $69,800,000 in 1995, a decrease of
20.9% from 1994. The total volume of gas sendout declined 7.5% as temperatures
in 1995 were 13.2% warmer than in 1994 and 9.2% warmer than normal. The
average number of utility customers increased 2.1% to more than 65,000 in
1995.
Cost of Gas Sold
The average unit cost of gas purchased and produced decreased to $3.44 per
Mcf in 1995 from $4.03 per Mcf in 1994.
Operating Expenses
Operations and maintenance expense decreased 4% in 1995, primarily because
of reductions in the workforce combined with reductions in workers'
compensation insurance and bad debt expense.
Capital expenditures for the Company's continuing expansion and system
improvement programs were the reason for the 4.1% increase in depreciation and
amortization in 1995.
A gain of $350,000 from the sale of railcars formerly used to transport
liquid propane is included in total other income for 1995.
Total interest expense was $4,049,000 in 1995, or 10.2% greater than 1994.
The Company's total average short-term borrowings and the weighted average
short-term interest rate were greater than in 1994.
Total federal and state income taxes decreased $535,000 in 1995. The lower
level of pretax income and the resolution of certain tax issues are the
principal reasons for the decrease. Partially offsetting the decrease was the
impact of the repeal of the franchise tax, which was a credit against state
income taxes. The Company recorded state income taxes of $359,000 in 1995. No
state income taxes were recorded in 1994, when the franchise tax was in
effect.
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CAPITAL RESOURCES AND LIQUIDITY
Because of the seasonal nature of the Company's operations, a substantial
portion of cash receipts are generated during the November-March heating
season, which results in the highest cash inflow during late winter and early
spring. However, cash requirements for capital expenditures, dividends, long-
term debt retirement, and working capital do not track this pattern of cash
receipts. The greatest demand for cash is in the fall and early winter to
support the completion of the annual construction program and to fund gas
inventories and other working capital requirements.
Cash provided by operations and financing activities was sufficient to fund
investing activities in 1996. Higher earnings due to increased margins from
greater sales volumes had a favorable impact on funds provided by operating
activities. Prior to November 1996, ENI, the Company's parent, raised
approximately $1,500,000 of common equity through its Dividend Reinvestment
and Stock Purchase Plan and contributed $1,500,000 to the Company's common
capital. Borrowings against lines of credit during 1996 ranged from zero to a
high of approximately $9,500,000. The Company's major uses of cash were
capital expenditures of $7,496,000, environmental remediation of $672,000, and
retirement of $1,664,000 of long-term debt. Deferred gas costs increased
$9,428,000, due to the timing of the recovery of increased gas costs through
the CGA. In addition, dividend payments to ENI totaled $3,635,000 in 1996.
At June 30, 1997, deferred gas cost was in a $2,476,000 overcollected
position resulting from prior summer period activity. The overcollected
amounts are being returned to customers during the current summer period
through the CGA.
Capital expenditures for 1997 are currently projected at approximately
$11,800,000, and annual sinking fund requirements and maturities of long-term
debt are scheduled to be $1,700,000 in 1997. Included in 1997 construction
expenditures is a major main extension project to serve the town of Milford,
New Hampshire. Additional cash requirements will be necessary for the payment
of dividends, environmental remediation, and working capital. Cash to fund
these requirements is expected to be provided principally by internally
generated funds, short-term bank borrowings under the Company's lines of
credit, and debt financing. At September 30, 1996, the Company had available
lines of credit aggregating $12,500,000 with $9,535,000 outstanding. At June
30, 1997 the available lines of credit were $14,700,000 with $5,500,000
outstanding. In addition, a credit line of $9,500,000 was available at
September 30, 1996 and June 30, 1997 under the Company's fuel inventory trust
financing plan. At June 30, 1997, the Company's inventory in trust was
$4,083,000 with an outstanding purchase obligation of $4,101,000.
On June 30, 1997, the Company's capitalization consisted of 58% common
equity and 42% debt, including short-term debt. After issuance of the Bonds
and use of the proceeds (See "USE OF PROCEEDS"), capitalization will consist
of approximately 51% common equity and 49% debt. Return on average common
equity was 12.14% for the twelve months ended June 30, 1997. In order to
contribute to both stability and the ability to market new securities when
appropriate, the Company attempts to maintain a balanced capital structure.
ENVIRONMENTAL MATTERS
The Company is involved in the investigation and remediation of certain
environmental matters. See "BUSINESS--Legal Proceedings and Environmental
Matters." The Company accrues charges in connection with environmental costs
when it is probable that a liability exists and the amount or range of amounts
can be reasonably estimated.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Private Securities Litigation Reform Act of 1995 encourages the use of
cautionary statements accompanying forward-looking statements. The preceding
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the other sections of this Prospectus to which it refers
include forward-
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looking statements concerning the impact of changes in the cost of gas and of
the CGA mechanism on total margin; projected capital expenditures and sources
of cash to fund expenditures; and estimated costs of environmental remediation
and anticipated regulatory approval of recovery mechanisms. The Company's
future results, generally and with respect to such forward-looking statements,
may be affected by many factors, among which are, but not limited to,
uncertainty as to the regulatory allowance of recovery of changes in the cost
of gas; uncertain demands for capital expenditures and the availability of
cash from various sources; uncertainty as to whether transportation rates will
be reduced in future regulatory proceedings with resulting decreases in
transportation margins; and uncertainty as to regulatory approval of the full
recovery of environmental costs, transition costs, and other regulatory
assets.
NEW ACCOUNTING STANDARDS AND PRONOUNCEMENTS
The Financial Accounting Standards Board has issued new accounting standards
that the Company will adopt in future periods. Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share," establishes
standards for computing and presenting earnings per share, effective fiscal
1998. SFAS No. 130, "Reporting Comprehensive Income," establishes standards
for reporting and the disclosure of comprehensive income and its components,
effective fiscal 1999. It is not expected that the adoption of SFAS Nos. 128
and 130 will have a material impact on the Company's financial reporting.
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," establishes standards for the way public business enterprises
report information about operating segments, including disclosures about
products and services, geographic areas, and major customers, effective fiscal
1998. The Company is currently evaluating the impact of SFAS No. 131.
The American Institute of Certified Public Accountants issued a Statement of
Position ("SOP") 96-1, "Environmental Remediation Liabilities." The SOP's
objective is to make the timing of the recognition of environmental
obligations more uniform by discussing the estimation process and providing
benchmarks to aid in determining when to recognize environmental liabilities.
The SOP is effective for the Company in fiscal 1998. The Company does not
expect that the adoption of the SOP will have a material impact on the
Company's financial position or results in operations.
THE "YEAR 2000" ISSUE
Many computer systems are currently based on storing two digits to identify
the year of a transaction (for example, "97" for "1997"), rather than a full
four digits, and are not programmed to consider the start of a new century.
Significant processing inaccuracies and even inoperability could result in the
year 2000 and thereafter. The Company's principal computer systems are
currently capable of processing the year 2000, or are in the process of being
upgraded or replaced by systems that are similarly capable. The Company does
not expect that the costs of addressing the "Year 2000" issue will have a
material impact on the Company's financial position or results in operations.
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BUSINESS
GENERAL
The Company, incorporated in the State of New Hampshire in 1945, is engaged
in the purchase, transportation and sale of natural gas for residential,
commercial, and industrial use in New Hampshire. The Company is a wholly-owned
subsidiary of ENI, a public utility holding company, also incorporated in the
State of New Hampshire. ENI is exempt from registration under the Public
Utility Holding Company Act of 1935. Both the Company and ENI are
headquartered at 1260 Elm Street, Manchester, New Hampshire. In 1988, the
Company, which had been named Gas Service, Inc., merged with two other natural
gas distribution subsidiaries of ENI, Manchester Gas Company and Concord
Natural Gas Corporation, and changed its name to EnergyNorth Natural Gas, Inc.
The service territory of the Company has a population of approximately
463,000 in 27 communities situated in southern and central New Hampshire,
which includes the communities of Nashua, Manchester, Concord, and Laconia.
The service area encompasses approximately 922 square miles. Located within 30
to 85 miles of Greater Boston, the Company's service territory offers a
favorable business climate with no general sales or personal income taxes, a
productive labor force, and a comfortable, safe, and clean environment for
residents and tourists.
The State of New Hampshire's job growth continues to be significantly above
average, ranking first among New England states with a 3.9% annual growth rate
in 1996. This compares to a 2.0% average growth rate nationally and a 1.8%
average rate for New England for the same period. According to The New England
Economic Project's May 1997 Economic Outlook for New Hampshire, new housing
permits are expected to increase 34% in 1997 over 1996. While the New
Hampshire unemployment rate for 1997 is forecasted at 3.5% compared to 4.2% in
1996, the labor force is forecasted to increase by 4.0% in 1997. Job growth
and low unemployment in the Company's service area tends to result in an
increase in volumes transported and sold and numbers of customers. In fiscal
1996, the Company experienced net customer growth of over 2.4% compared to
fiscal 1995.
The Company's marketing focus continues to stress low cost growth by
concentrating on adding new customers along the Company's more than 1,000
miles of gas mains and adding load from the existing customer base, while also
expanding its system of mains into areas in which there is a significant
demand for natural gas service. The Company has an approximate 28% share of
the home heating market (based on households) within its service territory,
creating a potential for increased sales where the natural gas pipeline is
located and alternative fuels are used. In New Hampshire, fuel oil has a
penetration of over 57% of the home heating market. Currently, the comparative
full-service price of natural gas for heating is comparable to fuel oil. From
a total energy perspective, natural gas is a strong competitor with a complete
range of gas appliances and uses, including ranges, water heaters, clothes
dryers, fireplaces and gas logs, outdoor lights, and natural gas heat pumps
for heating and cooling. While these multiple uses provide opportunities to be
the total energy provider to new customers, they also provide opportunities
for expansion within the existing customer base. Due to continued customer
conversions from other energy sources and expansion of its service territory,
the Company has an opportunity for growth in the retail sales market. During
the past five years, the Company has experienced an annual average customer
growth rate of about 2.0% compared to an approximate 1.5% national average for
local distribution companies. Additional growth in distribution operations may
also occur as industrial and commercial customers turn to natural gas for
electric generation because of a price advantage and as a means to ensure
compliance with the provisions of the Clean Air Act. As the electric industry
continues to move toward deregulation, this option may become more attractive.
The development of new gas-burning technologies for industry and the wider
acceptance of natural gas as a fuel for motor vehicles have provided
opportunities for increased gas usage in market sectors that are not sensitive
to the weather, although the use of natural gas powered vehicles in New
Hampshire is not extensive at present.
THE GAS DISTRIBUTION BUSINESS
The Company distributes natural gas as a regulated public utility pursuant
to franchise authority granted to it by the NHPUC. No operations are outside
of the State of New Hampshire. While the franchise area of the
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Company is primarily residential in character, sales volumes are almost evenly
split between residential and commercial/industrial customers. As of June 30,
1997, the Company served over 68,000 customers, of which approximately 88%
were residential and 12% were commercial and industrial. During fiscal 1996,
no customer purchased more than 4% of the Company's total annual sales and
transportation volume.
The Company offers firm and interruptible transportation service to its
commercial and industrial customers. Transportation service allows a customer
to purchase a natural gas supply directly from a third party marketer. The
marketer delivers the gas to one of the Company's interstate pipeline take
stations. The customer contracts with the Company to transport the gas from
the take station to its facility. To ensure a continual, uninterrupted supply,
the Company also provides an optional, separate standby service as a backup to
the gas supplies of transportation customers. As of September 30, 1996, the
Company provided transportation service to 25 customers, and as of June 30,
1997 to 37 customers.
The Company distributes gas to substantially all of its utility customers
through a system of underground pipelines connected with its three operations
centers in Manchester, Nashua, and Tilton, six take stations located in
Manchester, Londonderry, Windham, Concord, Hooksett, and Suncook and four
production plant facilities in Manchester, Nashua, Concord, and Tilton. The
pipelines are generally located in public ways and are subject to licenses
granted by municipalities. The Company serves over 75% of New Hampshire's
natural gas customers.
SUMMARY OF REVENUES
Revenues attributable to various categories of gas distribution and related
operations (unaudited) during the twelve months ended June 30, 1997 and during
the last three fiscal years are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS FISCAL YEARS ENDED SEPTEMBER 30,
ENDED --------------------------------
JUNE 30, 1997 1996 1995 1994
------------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Sales service............... $90,776 $ 76,007 $ 69,067 $ 88,150
Transportation service...... 1,228 1,503 749 --
Service and appliance
sales...................... 1,891 1,781 1,650 1,566
Rentals..................... 771 821 821 811
------- ---------- ---------- ----------
$94,666 $ 80,112 $ 72,287 $ 90,527
======= ========== ========== ==========
</TABLE>
During the winter period, November 1 through March 31, the Company's gas
revenues are substantially higher than during the summer months. The increase
in gas revenues during the winter, and the concomitant increase in gas supply
requirements, occurs because approximately 89% of the Company's customers use
natural gas for heating.
DEREGULATION
The implementation of Federal Energy Regulatory Commission ("FERC") Order
636 provided for the unbundling and deregulation of the interstate pipeline
system and led to the beginning of unbundling of the intrastate pipeline
system in New Hampshire. In late 1993, the NHPUC approved gas transportation
rates and separate standby and balancing services for commercial and
industrial customers.
Gas transportation services have allowed customers to utilize the Company's
distribution system for the transportation of gas purchased from third-party
gas marketers, creating competition from gas marketers for the sale of gas to
end users. At June 30, 1997, the Company had 37 transportation customers.
These customers are, for the most part, large commercial and industrial
customers. The volume transported for transportation customers in fiscal 1996
was 514,000 Mcf, approximately 4% of the Company's total gas sales. The
Company expects the number of transportation customers and volume of gas
transported to increase.
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The Company is the sole distributor and transporter of natural gas in its
franchise area. The Tennessee Gas Pipeline Company ("Tennessee Gas") is the
only interstate pipeline to serve the Company's franchise area. For that
reason, and because installation of private transmission mains would typically
be impractical, customers have not attempted to bypass the Company's
distribution system.
COMPETITION
Natural gas competes mainly with electricity and fuel oil. The principal
competitive factors between natural gas and alternative fuels are the price of
the fuel and the conversion costs from one fuel to another. Competition is
greatest among the Company's commercial and industrial customers who have the
capability to use alternative fuels. The Company provides flexible rates for
users with dual-fuel capabilities in order to better compete with the
alternative fuels.
Under current market conditions, natural gas has a significant price
advantage over electricity in New Hampshire. Natural gas heating costs are
currently less than one-third of electric heating costs. At the present time,
the price of natural gas is comparable to the price of full-service oil for
heating. The Company continues to add customers who might otherwise elect to
use oil, because energy decisions are also based on factors other than cost
such as service, cleanliness, and environmental impact. Demand for natural gas
is expected to continue to increase as national attention remains focused on
its environmental advantages, efficiency, and security of supply. Commercial
and industrial customers continue to find gas technologies and equipment
attractive as they deal with the requirements of the Clean Air Act Amendments
of 1990 and other federal environmental legislation.
GAS SUPPLY
General. The Company's gas supply goal is to maintain a balanced portfolio
of supply that will continue to minimize the overall cost of gas while
providing the necessary security to meet demand requirements.
Supply Contracts and Storage. The Company's gas supply is principally
natural gas transported by the interstate pipeline system. The Company has
contracted with Tennessee Gas to deliver 56,833 Dekatherms ("Dths", a unit of
heating value equivalent to one million British Thermal Units) per day on a
firm transportation basis and up to 8,000 Dths per day on an interruptible
basis. Natural gas supplies are purchased both on a long-term contract and
short-term spot market basis. During fiscal 1996, the Company purchased
approximately 6.2% of its annual natural gas requirements in the spot market.
At times during the year, typically during the summer, the Company will
purchase lower cost spot market natural gas supply. The Company's long-term
contracts, under which it has firm supply for approximately 32,529 Dths per
day, have remaining terms of two to nine years.
In fiscal 1996, approximately 68% of the Company's gas requirements came
from domestic pipeline sources, 21% from Canadian pipeline supplies, and
approximately 10% from supplemental pipeline supplies. LP and liquefied
natural gas ("LNG") purchases from both domestic and foreign sources made up
approximately 1% of the Company's total supply requirements. Supplemental
supplies of gas are produced from plants owned and operated by the Company.
All pipeline volumes are transported by Tennessee Gas under FERC tariffed
rate schedules. The supply from Canada is transported to Tennessee Gas's
system using the TransCanada and the Iroquois Gas transmission systems.
In addition to long-term supply sources, the Company stores gas during the
summer months under long-term contracts with the owners of storage facilities
located in Pennsylvania and New York. Gas from these storage facilities, up to
24,304 Dths per day on a firm basis, is delivered to the Company during the
winter months through the Tennessee Gas system. The Company owns other on-site
storage facilities capable of holding 125,438 Dths of LP and 13,057 Dths of
LNG.
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<PAGE>
The Company contracted for 1,710,000 Dths of supplemental gas vapor, 75,000
Dths of LNG, and an additional 1,000,000 gallons of LP for the winter of 1996-
1997.
The Company's record peak day sendout of gas, in February 1995, was 90,791
Mcf, or approximately 93,000 Dths. The Company expects to be able to secure
the gas supply required to meet existing customer and forecasted new customer
demands through long-term commitments and purchases in the spot market.
Cost of Purchased and Produced Gas. The average unit cost of gas purchased
and produced during fiscal 1996 was approximately $3.96 per Mcf compared to
$3.44 per Mcf for fiscal 1995. The 1996 average unit cost reflects higher
pipeline costs due to supplier rate case settlements and higher cost of gas
supply in the marketplace. During the twelve months ended June 30, 1997, the
average unit cost of gas purchased and produced was approximately $4.30 per
Mcf compared to $3.86 per Mcf for the same period last year. The CGA clause
authorized by the NHPUC permits recovery by the Company from its customers (or
requires refunds to its customers) of gas costs (including pipeline, LP, LNG,
and storage) that are higher (or lower) than the cost of gas included in base
rates. The CGA is determined twice annually, for summer and winter periods.
Margins earned on interruptible sales, 280-day sales, and capacity release
are passed on to firm customers through the CGA. In addition, costs associated
with a fuel inventory trust, including administration fees and carrying costs,
are recovered through the CGA.
The Company is subject to payment of transition costs associated with FERC
Order 636 restructuring. Tennessee Gas began billing these costs late in
fiscal 1993, and the Company has incurred approximately $5,900,000 in
transition costs through September 30, 1996 and approximately $7,600,000
through June 30, 1997, and is recovering these costs through the CGA. As of
June 30, 1997, the Company has recorded additional transition costs of
approximately $1,500,000 that will be billed over a period of 18 months.
Meanwhile, the Company's customers are benefiting from the restructuring,
realizing long-term savings in gas costs.
SUPERVISION AND REGULATION
The Company is subject to regulation by the NHPUC, which has authority over
accounting, rates and charges, the issuance of securities, and certain
operating matters. Changes in utility rates and charges cannot be made without
30 days notice to the NHPUC, which has the power to suspend, investigate, and
change any proposed increase in rates and charges.
The gas distribution business of the Company is subject to extensive safety
regulations and reporting requirements promulgated by the United States
Department of Transportation, but are not otherwise subject to direct
regulation by federal agencies except as to environmental matters. The Company
is also subject to zoning and other regulations by local authorities, and its
capital expenditures, earnings, and operations have not been materially
affected by environmental and local regulation.
LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS
The Company is a party in several proceedings of the sort that arise in the
ordinary course of its business. Such actions, for the most part, are covered
by insurance and, to the extent that they are not fully covered, the damages
sought are not material in amount. The Company is a party to various routine
NHPUC proceedings relating to operations, none of which is expected to have a
material impact on the Company's earnings or assets.
The Company and certain of its predecessors owned or operated several
facilities for the manufacture of gas from coal, a process used through the
mid 1900's that produced by-products that may be considered contaminated or
hazardous under current laws, and some of which may still be present at such
facilities. The Company accrues environmental investigation and clean-up costs
with respect to former manufacturing sites and other environmental matters
when it is probable that a liability exists and the amount or range of amounts
can be reasonably estimated.
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<PAGE>
In 1995, the Company completed the disposal of the contents of the gasholder
situated on one former gas manufacturing site in Concord, New Hampshire. Total
remediation costs amounted to approximately $3,500,000 and were recorded in
deferred charges. Recovery of these costs from customers began on July 1, 1995
and will extend over a seven-year period. The unamortized balance of
$2,489,000 at June 30, 1997 is excluded from rate base. The Company may not
earn a return or charge rates to customers based on amounts not included in
rate base.
The New Hampshire Department of Environmental Services ("NHDES") has
required remedial action for a portion of the Concord site at which wastes
were disposed from approximately 1852 through 1952. The estimated cost of this
remedial action ranges from $2,100,000 to $3,200,000, and the Company has
recorded $2,100,000 at June 30, 1997 in deferred charges. The Company has
petitioned the NHPUC for approval of the Company's proposed five-year recovery
from ratepayers, including carrying costs, for approximately $1,900,000 of
investigation, remediation, and recovery effort costs.
On September 12, 1995, the Company filed a complaint in the United States
District Court for the District of New Hampshire against UGI Utilities, Inc.,
as the successor to United Gas Improvement Company. The Company seeks
contribution for expenses incurred at the Concord site based upon the
operation of the manufactured gas plant by the United Gas Improvement Company,
a predecessor of UGI Utilities, Inc., during a period of time the manufactured
gas plant was in operation.
On December 8, 1995, the Company filed suit in the United States District
Court for the District of New Hampshire against Associated Electric and Gas
Insurance Services, Ltd., American Home Assurance Company, CIGNA Specialty
Insurance Company, International Insurance Company, Lloyd's, Underwriters at
London, Lexington Insurance Company, and National Union Fire Insurance
Company, later adding Columbia Casualty Company as a defendant, seeking a
declaratory judgment that they owe the Company a defense and/or
indemnification for environmental claims associated with the Concord facility.
The Company filed suit in the New Hampshire (Hillsborough County) Superior
Court on December 8, 1995 against the Continental Insurance Company and
Netherlands Insurance Company seeking a declaratory judgment that they owe the
Company a defense and/or indemnification for environmental claims associated
with the Concord facility. In March and June 1997, the Company reached
settlements with two defendants in those suits in an aggregate amount of
$137,500.
The Company and Public Service Company of New Hampshire ("PSNH"), an
electric utility company, conducted an environmental site characterization of
a second former manufactured gas plant in Laconia, New Hampshire. The Laconia
manufactured gas plant operated between approximately 1887 and 1952, and the
Company owned and operated the facility for approximately the last seven years
of its active life. PSNH also owned and operated the facility during its
active life. Without admitting liability, the Company and PSNH have entered
into an agreement under which the costs of the site characterization are
shared. The Company's share of the costs of the site characterization and a
report to the NHDES totaled $265,000 and has been recorded in deferred charges
as of June 30, 1997. The report describes conditions at the site, including
the presence of by-products of the manufactured gas process in site soils,
groundwater, and sediments in an adjacent water body. Based upon its review of
the report, NHDES has directed PSNH and the Company to prepare and submit a
remedial action plan. The Company expects to incur further costs but is
currently unable to predict the magnitude of any liability that may be imposed
on it for the cost of additional studies or the performance of a remedial
action in connection with the Laconia site. The Company commenced proceedings
in New Hampshire Superior Court and Federal District Court on February 2, 1997
against eighteen of its present and former insurers seeking recovery of
expenses that have been and will be incurred in connection with the
investigation and remediation of contamination from the Laconia plant.
The Company is pursuing and intends to pursue recovery from insurance
carriers and claims against any other responsible parties seeking to ensure
that they contribute appropriately to reimburse the Company for any costs
incurred with respect to environmental matters. The Company intends to seek
and expects to receive approval of rate recovery methods with respect to
environmental matters after it has determined the extent of contamination,
received recommendations with regard to remediation, and commenced remediation
efforts.
See "FINANCIAL STATEMENTS--Commitments and Contingencies, Note 8."
17
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PROPERTIES
The Company's utility gas distribution facilities constitute the majority of
its physical assets. As of September 30, 1996, the Company had approximately
1,020 miles of mains and 640 miles of service connections. The utility's mains
and service connections are adequate to meet current service requirements and
are maintained through a regular program of inspection and repair. Offices and
operations centers located in Nashua, Manchester, Concord, and Tilton are
adequate for the needs of the Company and are regularly maintained and in good
condition. Substantially all of the Company's properties are fully utilized.
Substantially all of the Company's utility properties are subject to the liens
of the indentures securing the Company's mortgage bonds. In some cases, motor
vehicles and nonutility assets are subject to purchase money security
interests held by banks.
EMPLOYEES
At June 30, 1997, the Company had 108 full-time employees, represented by
two contracts with Local 12012 of the United Steelworkers of America. The
contracts expire in 2001. Substantially all of the time of ENI's 96 full-time
employees (as of June 30, 1997), is allocated to the Company. None of ENI's
employees are represented by labor unions.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is one of two principal operating subsidiaries of ENI. The other
principal operating subsidiary of ENI is EnergyNorth Propane, Inc., a retailer
of propane which serves customers in central and southern New Hampshire.
EnergyNorth Propane, Inc. is also a 49% member in VGS Propane LLC, a Vermont
limited liability company which provides propane sales and service in Vermont.
ENI's common stock is registered under the Exchange Act and listed on the New
York Stock Exchange under the symbol "EI." Neither ENI nor any of its
subsidiaries (other than the Company) have guaranteed or pledged assets for
repayment of the Bonds.
In general, the senior management of ENI serves as the senior management of
all of its subsidiaries, including the Company, and ENI is the employer of the
senior management. ENI provides for the administrative support and services
and establishes policies, plans, and goals for the Company. The Company has
entered into a Cost Allocation Agreement with ENI and ENI's other subsidiaries
in order to provide for the equitable allocation of costs of goods and
services incurred by ENI or its subsidiaries for the benefit of one or more of
the subsidiaries or for ENI. Generally, cost allocations for ENI's
subsidiaries, including the Company, are based upon each subsidiary's fixed
assets, number of customers, and net income, relative to the other
subsidiaries. For fiscal 1997, the Company's allocation of costs under the
Cost Allocation Agreement is 88%. The Company is also a party to a Tax Sharing
Agreement with ENI and its other subsidiaries whereby the Company, ENI, and
ENI's other subsidiaries agree to be responsible for their allocable share of
federal income taxes (or be entitled to their allocable share of any refunds)
in the event that a consolidated tax return is filed. Tax allocations are
based upon calculations made in accordance with federal tax laws and
regulations.
19
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Directors of the Company each serve for a term of one year, or until their
successors have been duly elected and qualified. The term of office of each
executive officer terminates when his or her successor has been duly elected
and qualified. Set forth below is certain information with respect to the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME, AGE AND POSITIONS SERVED AS SERVED AS PRINCIPAL OCCUPATION OR
HELD WITH THE COMPANY DIRECTOR EXECUTIVE EMPLOYMENT DURING LAST
SINCE OFFICER SINCE FIVE YEARS
----------------------- --------- ------------- -----------------------
<S> <C> <C> <C>
Robert R. Giordano,
59(1).................. 1984 1983 President and Chief Executive Officer
President and Chief of the Company; President and Chief
Executive Officer; Executive Officer of ENI; Chairman
Director and Chief Executive Officer of ENPI.
N. George Mattaini,
71(1).................. 1982 1983 Chairman of the Company; Vice Chairman
Chairman of the Board of ENI.
of Directors
Edward T. Borer,
58(1)(2)............... 1982 -- Chairman (and, until 1996, Chief
Director Executive Officer; and, until 1995,
President) of Philadelphia
Corporation for Investment Services,
a registered securities broker/dealer
and investment advisor. Chairman of
ENI.
Michelle L. Chicoine,
41 ................... 1996 1990 Chief Financial Officer (since 1997),
Vice President, Vice President (since 1994), and
Treasurer, Chief Treasurer (since 1990) of the
Financial Officer; Company, ENI and ENPI.
Director
Albert J. Hanlon, 56.... 1991 1988 Senior Vice President of the Company
Senior Vice President; and of ENI.
Director
Frank L. Childs, 53 .... 1996 1995 Vice President of the Company and ENI
Vice President; (since 1995); formerly (1992-1994)
Director Executive Vice President and Chief
Administrative Officer of UNITIL
Corporation, a registered public
utility holding company; formerly
President (until 1994) and Chief
Operating Officer (until 1992) of
Fitchburg Gas and Electric Light
Company, a public utility.
Richard P. Demers, 60 .. -- 1988 Vice President of the Company and of
Vice President ENI; President of ENPI.
David A. Skrzysowski,
51..................... -- 1989 Vice President and Controller of the
Vice President and Company and of ENI; Vice President of
Controller ENPI.
</TABLE>
- --------
(1) Director of EnergyNorth, Inc., parent of the Company.
(2) Mr. Borer is a director of Philadelphia Corporation for Investment
Services.
COMPENSATION OF DIRECTORS
The directors of the Company are not compensated by the Company for services
provided to the Company as directors. However, the directors of the Company
are compensated by ENI, the parent of the Company, for services as directors
and/or officers of ENI. Eighty-eight percent of compensation paid to directors
of ENI is allocated to the Company.
20
<PAGE>
The Chairman of the board of directors of ENI receives an annual retainer of
$42,000, and the Vice Chairman receives an annual retainer of $24,000. All
other directors of ENI receive annual retainers of $10,500. Committee Chairmen
receive additional annual retainers of $2,500. Directors of ENI, other than
the Chairman and Vice Chairman, receive fees of $600 for each board meeting
attended and $500 for each committee meeting attended, with the exception of
multiple meetings of the board of directors held on the day of the annual
meeting of the board of directors. Directors of ENI also receive annual
incentive stock awards of 100 shares of ENI common stock if stated earnings
and total return objectives are met. Directors of ENI who are employees
receive no annual retainers or meeting fees.
Directors of ENI may elect to have portions of the retainers and fees
credited each year to a deferred compensation account pursuant to a plan that
provides for accrual of interest and distribution of the deferral accounts in
lump sum amounts or in equal installments over ten years, at the option of
each director, beginning on the date designated by the director.
21
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by ENI, the
Company's parent, for services rendered in all capacities during the fiscal
years ended September 30, 1996, 1995, and 1994 to the Company's Chief
Executive Officer and the four other executive officers of the Company whose
salary and cash incentive compensation award for the 1996 fiscal year exceeded
$100,000. Substantially all (approximately 92%) of such executive compensation
was charged to the Company, based on an allocation of services performed by
each executive officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ----------------
CASH INCENTIVE OTHER ANNUAL RESTRICTED STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) COMPENSATION COMPENSATION AWARDS(2) COMPENSATION(3)
- --------------------------- ---- --------- -------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert R. Giordano...... 1996 $200,334 $59,103 $2,492 $19,677 $7,961
President and CEO 1995 191,021 19,002 3,124 18,989 7,197
of the Company and 1994 181,369 13,808 2,459 13,805 7,131
ENI; Chairman and
CEO of ENPI
Albert J. Hanlon........ 1996 $114,917 $25,835 $1,346 $ 8,593 $4,555
Senior Vice President 1995 111,866 9,279 1,448 9,248 4,560
of the Company and ENI 1994 106,635 6,962 813 6,937 4,136
Richard P. Demers....... 1996 $ 95,333 $20,959 $ 0 $ 6,971 $4,397
Vice President of the 1995 91,927 7,721 827 7,718 4,250
Company and ENI; 1994 88,203 5,686 757 5,665 3,377
President of ENPI
Frank L. Childs(4)...... 1996 $ 93,750 $22,062 $ 0 $ 7,338 $1,946
Vice President of the 1995 68,981 5,613 0 5,610 645
Company and ENI 1994 0 0 0 0 0
Michelle L. Chicoine.... 1996 $ 85,584 $21,550 $1,053 $ 7,164 $4,095
Vice President, 1995 81,041 6,222 927 6,222 3,729
Treasurer and CFO 1994 76,816 4,647 968 4,619 2,369
of the Company,
ENI and ENPI
</TABLE>
- --------
(1) Includes amounts earned and deferred without election by the officer and
amounts deferred pursuant to Deferred Compensation Agreements and the
Company's 401(k) plan.
(2) The aggregate number of shares of restricted stock holdings of the above-
named officers, as of September 30, 1996, is 7,250 shares, having a value
of $138,656.
(3) All other compensation paid in 1996 includes: Employer contributions to
the Company's 401(k) plan for Mr. Giordano ($4,882); value of term life
insurance premiums paid for Mr. Giordano ($2,040), Mr. Hanlon ($1,609),
Mr. Demers ($1,334), Mr. Childs ($1,225) and Ms. Chicoine ($1,176);
portion of interest earned in a deferred compensation account by Mr.
Giordano in excess of 120% of federal long-term rate ($1,039).
(4) Mr. Childs joined the Company in January 1995.
22
<PAGE>
The following Pension Plan Table sets forth estimated annual benefits
payable under ENI's Retirement Plan and Supplemental Executive Retirement Plan
("SERP") at age 65 to persons in specified compensation and years of service
classifications, and combined annual benefits payable under the Retirement
Plan and SERP upon such retirement to persons in those compensation
classifications. Substantially all (approximately 92%) of the Retirement Plan
funding expenses and SERP payments are charged to the Company based on an
allocation of services performed by each executive officer. Combined annual
benefits shown in the table do not reflect offsets for benefits of Social
Security and for retirement benefits received from other employers.
PENSION PLAN TABLE
ESTIMATED ANNUAL BENEFITS UNDER RETIREMENT PLAN
UPON RETIREMENT WITH YEARS OF SERVICE INDICATED
<TABLE>
<CAPTION>
COMBINED ANNUAL BENEFITS
AVERAGE ANNUAL EARNINGS UNDER RETIREMENT PLAN
DURING HIGHEST FIVE YEARS 20 YEARS 30 YEARS 40 YEARS AND SERP UPON RETIREMENT
- ------------------------- -------- -------- -------- ------------------------
<S> <C> <C> <C> <C>
$125,000................... $ 45,000 $ 59,375 $ 65,625 $ 93,750
150,000................... 54,000 71,250 78,750 112,500
175,000................... 63,000 83,125 91,875 131,250
200,000................... 72,000 95,000 105,000 150,000
225,000................... 81,000 106,875 118,125 168,750
250,000................... 90,000 118,750 131,250 187,500
300,000................... 108,000 142,500 157,500 225,000
</TABLE>
Non-Contributory Retirement Plan
All full-time salaried employees, including officers and certain part-time
employees, are eligible to participate in ENI's Retirement Plan, provided an
employee has reached the age of 21 and has completed one year of service. The
SERP is a non-contributory plan intended to supplement benefits of the
Retirement Plan for certain named executive officers, effective January 1,
1985. Under both plans, normal retirement is at age 65 with a provision for
early retirement. Benefits under the Retirement Plan vest after five years of
service and under the SERP vest after ten years of service. Earnings under the
plans for the executive officers named in the Summary Compensation Table
consist of regular annual compensation, excluding bonuses or severance pay,
and is the same as the Annual Compensation and Long-Term Compensation shown in
the Summary Compensation Table. Mr. Giordano has 32 credited years of service
under the plans, Mr. Hanlon 25 years, Mr. Demers 9 years, Mr. Childs 2 years,
and Ms. Chicoine 7 years.
Funding of the Retirement Plan is based on actuarial computations and
results in a pool of assets held in trust that is unallocated with respect to
any particular individual. Benefits payable under the Retirement Plan are
calculated on the basis of straight life annuity amounts, accrued over a 25-
year period and are not subject to any deduction for Social Security Benefits
or other offset.
Benefits under the SERP are unfunded, accrue over a 15-year period and once
they are fully vested do not vary with years of service, except that SERP
participants who are included in the plan after September 30, 1995 will have
benefits reduced if they retire prior to normal retirement date under the
Retirement Plan. For an individual retiring at age 65, benefits are calculated
on the basis of 75% of the average of the five highest consecutive years'
earnings, less any amounts receivable for benefits as Social Security, the
Retirement Plan, and other qualified plans of ENI and other employers.
Employment Agreements
ENI, the Company's parent, has employment agreements with Messrs. Giordano
and Hanlon under which it has agreed to employ them for five and two-year
periods, respectively, and which may be extended annually for an additional
year. If ENI terminates the employment of either of these individuals other
than for his breach of
23
<PAGE>
the agreement or misconduct, it is required to continue salary payments
including average incentive compensation, deferred compensation, and amounts
the employee has elected to defer, through the term of the agreement. Such
termination payments will not be made following any termination of employment
that gives rise to payments under the management continuity agreements
described below.
Management Continuity Agreements
ENI, the Company's parent, has management continuity agreements (the
"Continuity Agreements") with Messrs. Giordano, Hanlon, Demers, Childs, and
Ms. Chicoine. The Continuity Agreements provide that in the event of
termination of employment or a reduction in compensation, position, or other
conditions of employment within a specified period following a Change in
Control of ENI, as defined in the Continuity Agreements, or termination by the
employee for Good Reason, as defined in the Continuity Agreements, following a
Change in Control, ENI shall pay to the employee a lump sum severance benefit
and certain other benefits. The severance benefit payable to Mr. Giordano is
five times his annual salary and incentive and deferred compensation, and to
Messrs. Hanlon and Childs and Ms. Chicoine 2.95 times each of their annual
salaries and incentive and deferred compensation. The severance benefit
payable to Mr. Demers is the greater of two times his annual salary or 2.75
times his five-year average taxable compensation. In each Continuity
Agreement, except for Mr. Giordano's, no severance benefits are paid to the
extent that such benefits, aggregated with other benefits paid to the
employee, constitute "excess parachute payments" within the meaning of Section
280G of the Internal Revenue Code of 1986.
PERFORMANCE GRAPH
The following graph compares the performance of ENI's common stock to the
S&P 500 Index and a natural gas industry peer group, consisting of 64
companies published by Media General Financial Services, Inc., for the last
five years. The graph assumes an investment of $100 at September 30, 1991 with
all dividends reinvested.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
9/91 9/92 9/93 9/94 9/95 9/96
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 Index $100 $111 $125 $130 $169 $203
Energy North, Inc. 100 114 150 126 133 161
Industry Peer Group 100 102 129 117 123 158
- --------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE ENI BOARD OF DIRECTORS
The compensation program for executive officers of the Company is
administered by the Compensation Committee of ENI's board of directors. The
Committee's philosophy is to link executive compensation to improvements in
corporate performance and enhanced profitability and shareholder value. The
compensation program objectives are to (1) provide a competitive, market-based
total compensation package that enables ENI to attract and retain key
executives; (2) integrate all compensation programs with ENI's annual and
long-term business objectives and focus executive efforts on the fulfillment
of those objectives; and (3) provide variable compensation opportunities that
are directly linked with the performance of ENI and that align executive
remuneration with the interests of shareholders and utility subsidiary
ratepayers.
Base Salary
The base salary component of executive compensation reflects the first
objective stated above of attracting and retaining qualified executives.
The salary range for each ENI executive officer ("officer") position,
including the Chief Executive Officer ("CEO"), and the actual base salary of
each officer is reviewed annually. The salary ranges are based upon
independent regional and industry salary surveys, including peer groups, for
comparable positions. These surveys are reviewed and analyzed by ENI's Human
Resources Department with the assistance of outside consultants from time to
time. Specific salary levels are established through an evaluation of each
officer's performance relating to duties and individual achievements. For
fiscal year 1996, the salary range and specific officer salary recommendations
were reviewed and approved by the ENI Compensation Committee.
In establishing 1996 base salary of ENI's CEO, the ENI Compensation
Committee reviewed the competitive market data and also reviewed performance
relating to ENI's earnings level and return on equity, cost containment
efforts, involvement in community and industry leadership activities, and
development of relations with customers. The Committee's evaluation of the
CEO's success in meeting these goals resulted in the determination of his base
salary. The Compensation Committee recommended a base salary, which was
approved by the board of directors.
Key Employee Incentive Plan
Each officer of ENI participates in ENI's Key Employee Performance and
Equity Incentive Plan. The Plan is intended to compensate key employees based
upon performance standards and objectives and to reward performance with share
ownership in ENI. ENI seeks to align the interests of key employees with the
interests of shareholders and utility rate payers. In 1996 the annual
performance criteria which determined eligibility for awards under the Plan
were (1) earnings levels compared to forecast, (2) total average shareholder
return over a rolling three-year period compared to a peer group of comparable
natural gas distribution companies, (3) operations and maintenance expenses
per customer benchmarks compared to inflation, and (4) evaluation of
individual performance. Success in meeting these goals determines the amount
of annual incentive compensation an officer will receive. Targeted awards for
the CEO of ENI under the program range up to 40% of the midpoint of the market
interval and up to 30% for other participating officers. Three-quarters of the
Incentive Plan award is paid in cash and one-quarter is paid in the form of
awards of ENI common stock that are subject to forfeiture and restrictions on
transferability for a period of three years.
The ENI Compensation Committee believes that the total compensation program
for executives of ENI is competitive with the compensation programs provided
by similarly-sized utilities. The Compensation Committee believes that any
amounts paid under the annual incentive plan are appropriately related to
corporate and individual performance, yielding awards that are directly linked
to annual financial and operational results of ENI.
Compensation Committee of the Board
of Directors of ENI: Sylvio Dupuis,
Chairman; Roger L. Avery; Richard B.
Couser
Security Ownership
All shares of the Company's common stock, its only outstanding class of
equity securities, are held by ENI.
25
<PAGE>
DESCRIPTION OF BONDS
GENERAL
The First Mortgage Bonds Designated as % Series E Bonds Due , 2027 (the
"Bonds") will be issued as a new series of Bonds under the General and
Refunding Mortgage Indenture dated as of June 30, 1987 among Gas Service, Inc.
("GSI") now named EnergyNorth Natural Gas, Inc. and Bank of New Hampshire,
N.A. (predecessor to Bank of New Hampshire) (the "Trustee") as supplemented
and modified by six Supplemental Indentures, including the Sixth Supplemental
Indenture dated as of , 1997 relating to the Bonds (the "Indenture"). The
following statements relating to the Bonds and certain provisions of the
Indenture are summaries, do not purport to be complete, and are subject to and
are qualified in their entirety by reference to the provisions of the
Indenture.
THE INDENTURE AND INFORMATION CONCERNING OTHER INDENTURES
The Indenture was entered into June 30, 1987 among GSI and the Trustee.
Contemporaneously with the execution of the Indenture, Manchester Gas Company
("MGC") and Concord Natural Gas Corporation ("CNGC"), both wholly-owned gas
distribution subsidiaries of ENI, entered into indentures with the Trustee
virtually identical to the Indenture (the "MGC Indenture" and the "CNGC
Indenture", respectively). Mortgage bonds designated Series A ("Series A
Bonds") were issued under the Indenture, the MGC Indenture, and the CNGC
Indenture. In 1988, MGC and CNGC merged with and into GSI, which changed its
name to EnergyNorth Natural Gas, Inc. All of the mortgage and security
interests created under each of the Indenture, the MGC Indenture, and CNGC
Indenture (the "Liens") were transferred to the Trustee to be held in trust
for the collective benefit of all of the bondholders under the Indenture, the
MGC Indenture, and the CNGC Indenture. The holders of the Series A Bonds (the
"Series A Bondholders") issued under the Indenture, the MGC Indenture, and the
CNGC Indenture contemporaneously entered into a Subordination and
Intercreditor Agreement and an Intercreditor Agreement stipulating that the
Series A Bondholders, as among themselves, had a lien of equal value and
priority on the property subject to the Liens.
The Company intends to redeem all of the outstanding Series A Bonds with the
proceeds of the sale of the Bonds and retire the MGC Indenture and the CNGC
Indenture. All series of bonds issued subsequent to the issuance of the Series
A Bonds have been issued solely under the Indenture.
When the Company entered into the Indenture in 1987, bonds issued under
First Mortgage Indentures of GSI and MGC (the "First Mortgage Indentures")
remained outstanding. As a result, the Indenture was entitled the "General and
Refunding Mortgage Indenture." In 1992, all remaining outstanding bonds under
the First Mortgage Indentures were redeemed, and the First Mortgage Indentures
were discharged and released. Consequently, there are no bonds outstanding
having priority over the bonds under the Indenture.
BOOK-ENTRY ONLY SYSTEM
The Bonds will be issued in an aggregate initial principal amount of
$22,000,000 and will be represented by one certificate (the "Global Security")
to be registered in the name of the nominee of The Depository Trust Company
("DTC") or any successor depository (the "Depository"). The Depository will
maintain the Bonds in denominations of $1,000 and integral multiples thereof
through book-entry facilities. In accordance with its normal procedures, the
Depository will record the interests of each Depository participating firm
("Participant") in the Bonds whether held for its own account or as a nominee
for another person.
So long as the nominee of the Depository is the registered owner of the
Bonds, such nominee will be considered the sole owner or holder of the Bonds
for all purposes under the Indenture and any applicable laws, except as noted
below. Except as otherwise provided below, a Beneficial Owner, as hereinafter
defined, of interests in the Bonds will not be entitled to receive a physical
certificate representing such ownership interest and will not be considered an
owner or holder of the Bonds under the Indenture. A Beneficial Owner is the
person who has the right to sell, transfer, or otherwise dispose of an
interest in the Bonds and the right to receive
26
<PAGE>
the proceeds therefrom, as well as interest, principal, and premium (if any)
payable in respect thereof. A Beneficial Owner's interest in the Bonds will be
recorded, in integral multiples of $1,000, on the records of the Participant
that maintains such Beneficial Owner's account for such purpose. In turn, the
Participant's interest in such Bonds will be recorded, in integral multiples
of $1,000, on the records of the Depository. Therefore, the Beneficial Owner
must rely on the foregoing arrangements to evidence its interest in the Bonds.
Beneficial ownership of the Bonds may be transferred only by compliance with
the procedures of the Beneficial Owner's Participant (e.g., brokerage firm)
and the Depository.
All rights of ownership must be exercised through the Depository and the
book-entry system, except that a Beneficial Owner is entitled to directly
exercise its rights under Section 316(b) of the Trust Indenture Act of 1939,
as amended, with respect to the payment of principal and interest on the
Bonds. Notices that are to be given to registered owners by the Company or the
Trustee will be given only to the Depository. It is expected that the
Depository will forward the notices to the Participants by its usual
procedures so that such Participants may forward such notices to the
Beneficial Owners. NEITHER THE COMPANY NOR THE TRUSTEE WILL HAVE ANY
RESPONSIBILITY OR OBLIGATION TO ASSURE THAT ANY NOTICES ARE FORWARDED BY THE
DEPOSITORY TO THE PARTICIPANTS OR BY ANY PARTICIPANT TO THE BENEFICIAL OWNERS.
The following information concerning DTC and its book-entry has been
obtained from sources the Company believes to be reliable, but it does not
take any responsibility for the accuracy thereof: DTC is a limited-purpose
trust company organized under New York Banking Law, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC holds securities that Participants
deposit with it and facilitates the settlement of securities transactions
among Participants in such securities transactions through electronic
computerized book-entry changes in accounts of Participants, thereby
eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers (including the
Underwriter), banks, trust companies, clearing corporations, and certain other
organizations, some of whom (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers, and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who
are not Participants may beneficially own securities held by DTC only through
Participants.
INTEREST AND PAYMENT
The Bonds will mature on , 2027. The Bonds will bear interest from the
date of issuance at the rate per annum stated on the cover page hereof payable
semi-annually on and of each year, (each an "Interest Payment Date")
commencing , to the persons in whose names the Bonds are registered at the
close of business on and , respectively, next preceding such Interest
Payment Date. If any payment date would otherwise be a day that is not a
business day, the payment will be postponed to the next day that is a business
day, and no interest on such payment shall accrue for the period from and
after such otherwise scheduled payment date for the purposes of the payment to
be made on such next succeeding business day.
So long as the nominee of the Depository is the registered owner of the
Bonds, payments of interest, principal, and premium (if any) on the Bonds will
be made to the Depository. The Depository will be responsible for crediting
the amount of such distributions to the accounts of the Participants entitled
thereto, in accordance with the Depository's normal procedures. Each
Participant will be responsible for disbursing such distributions to the
Beneficial Owners of the interests in Bonds that it represents. NEITHER THE
COMPANY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR LIABILITY FOR ANY
ASPECT OF THE RECORDS RELATING TO, NOTICES TO, OR PAYMENTS MADE ON ACCOUNT OF,
BENEFICIAL OWNERSHIP INTERESTS IN THE BONDS, FOR MAINTAINING, SUPERVISING OR
REVIEWING ANY RECORDS RELATING TO SUCH BENEFICIAL OWNERSHIP INTERESTS, OR FOR
THE SELECTION OF ANY BENEFICIAL OWNER TO RECEIVE PAYMENT IN THE EVENT OF A
PARTIAL REDEMPTION OF THE GLOBAL SECURITY OR FOR CONSENTS GIVEN OR OTHER
ACTION TAKEN ON BEHALF OF ANY BENEFICIAL OWNER.
27
<PAGE>
SECURITY AND PRIORITY
The Bonds are secured by a first mortgage on substantially all of the real
and personal property presently owned by or hereafter acquired by the Company,
including all real estate interests; all personal property; all gas
manufacturing facilities, distribution facilities and storage facilities; all
equipment used in the transmission or storage of gas; contract rights to
purchase natural gas and other products from various suppliers; and all rights
under any permit or license. Excluded from the security for the Bonds under
the terms of the Indenture are the following: all cash, bonds, stocks,
obligations, and other securities not deposited with the Trustee; all contract
rights other than to purchase natural gas or for material construction
contracts; all accounts receivable, notes and bills receivable, judgments, and
other evidences of indebtedness; all electricity, gas, water, appliances,
stock in trade, materials, fuel, supplies, and other products generated,
manufactured, produced, purchased, or acquired for the purpose of sale and/or
resale, transmission, distribution, storage, inventory, or use in the usual
course of business; all products of the land owned by the Company; all
vehicles, automotive equipment, and construction equipment; all office
equipment, furniture, and tools; all property which is characterized as
supplemental fuel inventory; and the Company's books and records. However,
upon an Event of Default (as defined below), the foregoing excluded property
(except the supplemental fuel inventory) may become subject to the lien of the
Indenture. In the event of a merger, consolidation, transfer, sale, or lease
of the Company or its properties, the lien of the Indenture survives against
the property of the Company in the possession of a successor company.
The Bonds will rank equally and ratably (except as to sinking fund and other
analogous funds established for the exclusive benefit of a particular series)
with all bonds issued under the Indenture (and the MGC Indenture and the CNGI
Indenture with respect to Series A Bond issued thereunder), regardless of
series, from time to time issued and outstanding under the Indenture.
TITLE INSURANCE
Title insurance will be issued to the Trustee for the benefit of the
bondholders insuring all real property conveyed to the Trustee as security
under the Indenture.
REDEMPTION AT OPTION OF THE COMPANY
The Bonds will be redeemable at any time on or after , 2002, as a whole
or in part, at the election of the Company, on not less than 30 nor more than
60 days' notice given as provided in the Indenture, at 104% of the principal
amount of the Bonds, declining by 1% of the principal amount per year for each
of the succeeding four years, together with accrued and unpaid interest to the
date of redemption, as further illustrated in the table set forth below,
provided that Bonds are redeemed on or after of the years indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE %
---- ----------
<S> <C>
2002........................................................... 104%
2003........................................................... 103%
2004........................................................... 102%
2005........................................................... 101%
2006 and thereafter............................................ 100%
</TABLE>
On and after the date fixed for redemption, interest will cease to accrue on
Bonds or portions thereof called for redemption, unless the Company shall
default in the payment of the redemption price.
If the Company elects to redeem less than all of the outstanding Bonds, the
Trustee shall prorate the principal amount of such bonds to be redeemed among
all holders of outstanding Bonds in proportion to the outstanding principal
amount of such bonds held by each holder. The aggregate principal amount of
each partial redemption of Bonds shall be allocated in units of $1,000, or
integral multiples thereof, among the holders of such bonds at the time
outstanding, in proportion as nearly as practicable, to the respective unpaid
principal amount of such bonds held thereby, with adjustment, to the extent
practicable, to equalize for any prior redemption not made in exactly such
proportion.
28
<PAGE>
LIMITED RIGHT OF REDEMPTION UPON DEATH OF A BENEFICIAL OWNER
Unless the Bonds have been declared due and payable prior to their maturity
by reason of an Event of Default, the representative of a deceased Beneficial
Owner has the right to request redemption of all or part of his or her
interest in the Bonds, expressed in integral multiples of $1,000 principal
amount, for payment prior to maturity. The Company will redeem the same
subject to the limitations that the Company will not be obligated to redeem
during the period beginning with the original issuance of the Bonds of this
series and ending , and during any twelve month period ending
thereafter, (i) at the request a deceased Beneficial Owner any interest in
the Bonds which exceeds an aggregate principal amount of $25,000 or (ii)
interests in the Bonds in an aggregate principal amount exceeding $500,000. A
Redemption Request, as hereinafter defined, may be presented to the Trustee at
any time and in any principal amount. If the Company, although not obligated
to do so, chooses to redeem interests of a deceased Beneficial Owner in the
Bonds in any such period in excess of the $25,000 limitation, such redemption,
to the extent that it exceeds the $25,000 limitation for any deceased
Beneficial Owner, shall not be included in the computation of the $500,000
aggregate limitation for such period or any succeeding period.
Subject to the $25,000 and $500,000 limitations, the Company will upon the
death of any Beneficial Owner redeem the interests of the Beneficial Owner in
the Bonds within 60 days following receipt by the Trustee of a Redemption
Request from such Beneficial Owner's personal representative, or surviving
joint tenant(s), tenant(s) by the entirety or tenant(s) in common, or other
persons entitled to effect such a Redemption Request. If Redemption Requests
exceed the aggregate principal amount of interests in Bonds required to be
redeemed during any twelve-month period, such excess Redemption Requests will
be applied to successive periods, regardless of the number of periods required
to redeem such interests.
A Redemption Request may be made by delivering a request to the Depository,
in the case of a Participant which is the Beneficial Owner of such interest,
or to the Participant through whom the Beneficial Owner owns such interest, in
form satisfactory to the Participant, together with evidence of death and
authority of the representative satisfactory to the Participant and Trustee. A
surviving joint tenant, tenant in common or a tenant by the entirety, or other
person seeking the redemption of an interest in Bonds by reason of the death
of another may make the request for redemption and shall submit such other
evidence of the right to such redemption as the Participant shall require. The
request shall specify the principal amount of interest in the Bonds to be
redeemed. A request for redemption in form satisfactory to the Participant and
accompanied by the documents relevant to the request as above provided,
together with a certification by the Participant that it holds the interest on
behalf of the deceased Beneficial Owner with respect to whom the request for
redemption is being made (a "Redemption Request"), shall be provided to the
Depository by a Participant and the Depository will forward the request to the
Trustee. Redemption Requests shall be in form satisfactory to the Trustee.
The price to be paid by the Company for an interest in the Bonds to be
redeemed pursuant to a request on behalf of a deceased Beneficial Owner is one
hundred percent (100%) of the principal amount thereof plus accrued but unpaid
interest to the date of payment. Subject to arrangements with the Depository,
payment for an interest in the Bonds which are to be redeemed shall be made to
the Depository upon presentation of Bonds to the Trustee for redemption in the
aggregate principal amount specified in the Redemption Requests submitted to
the Trustee by the Depository which are to be fulfilled in connection with
such payment. Any acquisition of Bonds by the Company other than by redemption
at the option of a representative on behalf of a deceased Beneficial Owner
shall not be included in the computation of either the $25,000 or $500,000
limitations for any period.
Interests in the Bonds held in tenancy by the entirety, joint tenancy, or by
tenants in common will be deemed to be held by a single Beneficial Owner, and
the death of a tenant in common, tenant by the entirety, or joint tenant will
be deemed the death of a Beneficial Owner. The death of a person who, during
such person's lifetime,
29
<PAGE>
was entitled to substantially all of the rights of a Beneficial Owner of an
interest in the Bonds will be deemed the death of the Beneficial Owner,
regardless of the recordation of such interest on the records of the
Participant, if such rights can be established to the satisfaction of the
Participant and the Trustee. Such interest shall be deemed to exist in typical
cases of nominee ownership, ownership under the Uniform Gifts to Minors Act or
the Uniform Transfer to Minors Act, community property or other joint
ownership arrangements between a husband and wife (including individual
retirement accounts or Keogh plans maintained solely by or for the decedent or
by or for the decedent and any spouse), and trust and certain other
arrangements where one person has substantially all of the rights of
Beneficial Owner during such person's lifetime.
In the case of a Redemption Request which is presented on behalf of a
deceased Beneficial Owner and which has not been fulfilled at the time the
Company gives notice of its election to redeem the Bonds, the Bonds which are
the subject of such Redemption Request shall not be eligible for redemption
pursuant to the Company's option to redeem but shall remain subject to
fulfillment pursuant to such Redemption Request.
Subject to the provisions of the immediately preceding paragraph, any
Redemption Request may be withdrawn upon delivery of a written request for
such withdrawal given to the Trustee by the Depository prior to , in the
case of the initial period, or prior to , in the case of the subsequent
twelve-month period, or prior to payment for redemption of the interest in the
Bonds by reason of the death of a Beneficial Owner.
Because of the limitations of the Company's requirement to redeem, no
Beneficial Owner can have any assurance that his or her interest in the Bonds
will be paid prior to maturity.
SINKING FUND
The Bonds are not subject to a sinking fund.
COVENANTS
The Company may issue additional bonds (in unlimited principal amounts)
under the Indenture only if, after giving effect to such issuance, its Net
Earnings Available for Interest (as defined in the Indenture) for a period of
12 consecutive months during the 24 months immediately preceding the month in
which bonds are issued is at least equal to 1.75 times the total annual
interest charges on all Outstanding Bonds (as defined in the Indenture) under
the Indenture (excluding any bonds for which provision has been made in
compliance with any requirement of the Indenture for their retirement) and all
other indebtedness for borrowed money then secured by a lien equal to or
superior to the lien of the Indenture on any part of the Company's property
which is subject to the Indenture (except any such indebtedness the evidences
of which shall then be held in any sinking fund or otherwise and any such
indebtedness where the necessary moneys for which the payment or redemption
have been deposited with a trustee or mortgagee) (the "Debt"). Further,
additional bonds may be issued only if, after giving effect to the proposed
bond issuance, Outstanding Bonds do not exceed 70% of Bondable Capacity (as
calculated in accordance with the provisions of the Indenture). On June 30,
1997, after giving effect to the issuance of the Bonds and the redemption of
the Series A Bonds, Net Earnings Available for Interest were times the
total annual interest charges for the Debt, and Outstanding Bonds were equal
to 52% of Bondable Capacity.
Before the Trustee may take any action under any provision of the Indenture,
the Trustee must receive, among other things, an officers' certificate and an
opinion of counsel stating that all conditions and covenants which must be
complied with pursuant to the terms of the Indenture before the Trustee may
take the requested action have been complied with.
Subject to the restrictions described above, the Indenture would not afford
any protection to bondholders solely in the event of the Company's involvement
in a highly-leveraged transaction.
30
<PAGE>
EVENTS OF DEFAULT; NOTICE AND WAIVER
The Indenture provides that the following shall constitute events of default
("Events of Default"):
(a) failure to pay the principal of any bonds secured by and outstanding
under the Indenture when due;
(b) failure to pay interest on any bond secured by and outstanding under
the Indenture for a period of 5 days after such interest shall have become
due;
(c) failure to pay any sinking fund payment for a period of 5 days after
such payment shall have become due under any supplement to the Indenture;
(d) certain events of bankruptcy, insolvency or reorganization;
(e) failure to perform or observe certain covenants, agreements, or
conditions on the part of the Company with respect to the payment of taxes,
the maintenance of certain liens on the trust estate, the maintenance of
certain insurance, and the sale of certain property;
(f) failure to perform or observe any of the other covenants, agreements,
or conditions on the part of the Company in the Indenture, and the
continuance of such failure for a period of 30 days after the earlier of
(i) knowledge by an officer of the Company, or (ii) written notice thereof
to the Company from the Trustee or from the holders of not less than 33
1/3% of the aggregate principal amount of the Bonds outstanding;
(g) default under any covenant or agreement of the Company contained in
any agreement between the Company and the original purchaser or the holders
of the bonds of a particular series so long as (i) such covenant or
agreement expressly states that a default thereunder constitutes a default
under the Indenture and (ii) a copy of such agreement or covenant is
provided to the Trustee;
(h) the rendering against the Company of a judgment or judgments for the
payment of monies in excess of $250,000 in the aggregate and the
continuance of such judgment unsatisfied and without stay for a period of
30 days; and
(i) with respect to Indebtedness for Money Borrowed (as defined in the
Indenture) in the aggregate amount in excess of $250,000 (excluding the
bonds) either (i) failure to pay any amount due or any interest or premium
thereon, when due, or (ii) default in the performance or observance of any
other obligation or condition with respect to such Indebtedness (as defined
in the Indenture) if the effect of such default either accelerates the
maturity of the Indebtedness or permits such Indebtedness to become due and
payable prior to its stated maturity.
Upon the occurrence of an Event of Default, the Trustee may, and upon the
request of the holders of 33 1/3% in aggregate principal amount of the
outstanding bonds shall, by written notice to the Company, declare the
principal and all accrued and unpaid interest on the bonds immediately due and
payable. The Trustee, upon request of the holders of a majority in aggregate
principal amount of the outstanding bonds, shall rescind any such declaration
if such default is cured.
The Indenture provides that within 45 days after the occurrence of an Event
of Default the Trustee will give the holders of the bonds notice of all
uncured Events of Default known to it; but in the case of a default in the
payment of principal or premium, if any, or interest on any of the bonds, or
in the payment of any sinking, improvement, purchase, amortization, or other
fund installment, the Trustee shall be protected for withholding such notice
if the Trustee in good faith determines that the withholding of such notice is
in the interest of such holders.
The holders of a majority in aggregate principal amount of the outstanding
bonds may on behalf of the holders of all the bonds waive certain past
defaults, except a default in the payment of the principal or premium or
interest on the bonds or in respect of a covenant or provision of the
Indenture that cannot be modified or amended without the consent of all of the
outstanding bondholders affected. Upon such waiver, such Event of Default
shall be deemed to be cured and no longer to exist for any purpose under the
Indenture.
31
<PAGE>
Bondholders have no right to enforce any remedy under the Indenture unless
the Trustee has first had a reasonable opportunity to do so following notice
of default to the Trustee and request by the holders of 25% in aggregate
principal amount of the bonds for action by the Trustee with offer of
indemnity satisfactory to the Trustee against cost, expenses and liabilities
that may be incurred thereby, but this provision does not impair the absolute
right of any bondholder to enforce payment of the principal of and interest on
his or her bond when due.
MODIFICATION OF INDENTURE
Modifications and amendments of the Indenture which materially affect the
rights of the holders of the bonds outstanding under the Indenture may be made
by the Company and the Trustee only with the consent of the holders of no less
than 66 2/3% in principal amount of the bonds of each series then outstanding,
provided that no such modification or amendment may: (1) permit the extension
of the time or times of payment of the principal of, or the interest or the
premium (if any) on, any bond, or a reduction in the rate of interest or the
amount of premium thereon, or otherwise affect the terms of payment of the
principal of, or the interest or the premium (if any) on, any bond; (2)
otherwise than as permitted by the Indenture, permit the creation of any lien
ranking prior or equal to the lien of the Indenture with respect to any of the
mortgaged properties; or (3) permit the reduction of the percentage of bonds
required for the making of any such modification or alteration.
RELEASE OF PROPERTY
Unless an Event of Default shall have occurred and be continuing, the
Company is entitled to possess, use and enjoy all the property and
appurtenances, franchise and rights conveyed by the Indenture. Subject to
various limitations and requirements, the Company may obtain a release of any
part of the mortgaged property upon receipt by the Trustee of cash or other
consideration, if any, received or to be received from the sale, surrender or
other disposition of the property to be released.
RELEASE AND DISCHARGE OF INDENTURE
The Company may require the discharge of the Indenture if: (1) the Company
pays or makes appropriate provision for the payment to the holders of the
outstanding bonds of the principal, premium if any, and any interest due and
to become due thereon; and (2) the Company delivers an opinion of counsel and
an officers' certificate in accordance with the Indenture to the Trustee.
SUCCESSOR CORPORATION
Under the Indenture, the Company may not consolidate with or merge into or
convey or lease all or substantially all of its assets to another corporation,
unless immediately after such transaction, no Event of Default will exist and
such corporation assumes all the obligations of the Company under the bonds
and the Indenture.
CONCERNING THE TRUSTEE
Bank of New Hampshire is the Trustee under the Indenture. Its address is 143
Main Street, Concord, New Hampshire. The Company has appointed Bank of New
Hampshire as the Registrar under the Indenture.
The Indenture provides that all indebtedness to the Trustee for compensation
thereunder shall be secured by a lien prior to that of the bonds upon the
trust estate.
32
<PAGE>
UNDERWRITING
The sole Underwriter, Edward D. Jones & Co., L.P., whose address is 12555
Manchester Road, St. Louis, Missouri 63131-3729, has agreed, subject to the
terms and conditions of the Underwriting Agreement, to purchase the Bonds from
the Company.
The Company has been advised that the Underwriter proposes to offer the
Bonds directly to the public at the public offering price set forth on the
cover page of this Prospectus. The Underwriter may organize a selling group of
other securities dealers, all of whom will be members of the National
Association of Securities Dealers, Inc. The Underwriter may allow concessions
to members of the selling group in such amounts as it may determine. After the
initial public offering, the public offering price and concessions to dealers
may be changed.
The Company has been advised that the Underwriter intends to make a market
in the Bonds. In order to facilitate the offering of the Bonds, the
Underwriter may engage in transactions that stabilize, maintain or otherwise
affect the price of the Bonds. Specifically, the Underwriter may over-allot in
connection with the offering, creating a short position in the Bonds for its
own account. In addition, to cover over-allotments or to stabilize the price
of the Bonds, the Underwriter may bid for, and purchase, the Bonds in the open
market. The Underwriter may reclaim selling concessions allowed to a dealer
for distributing the Bonds in the offering, if the Underwriter repurchases
previously distributed Bonds in transactions to cover short positions in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Bonds above independent market levels. The
Underwriter is not required to engage in these activities, and may end any of
these activities at any time.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the offering have been passed upon
for the Company by McLane, Graf, Raulerson & Middleton, Professional
Association, Manchester, New Hampshire. Richard A. Samuels, a shareholder and
director of McLane, Graf, Raulerson & Middleton, Professional Association, is
Assistant Secretary of the Company and Secretary of ENI, the Company's parent.
Certain matters will be passed upon for the Underwriter by Bryan Cave LLP,
St. Louis, Missouri.
EXPERTS
The audited financial statements and schedules of the Company included in
this Prospectus and elsewhere in the Registration Statement, of which this
Prospectus is a part, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of such firm as experts in
accounting and auditing in giving said reports.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
under Section 15(d) of the Exchange Act and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"SEC"). Such reports and other information can be inspected and copied at the
SEC's Public Reference Room; Judiciary Plaza; 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the following Regional Offices of the SEC:
7 World Trade Center, Suite 1300, New York, New York 10048; and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can be obtained from the Public Reference Section of
the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The SEC also maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC (http://www.sec.gov).
33
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Balance Sheets, June 30, 1997 (unaudited), September 30, 1996 and 1995.... F-3
Statements of Income, Twelve Months Ended June 30, 1997 (unaudited),
Fiscal Years Ended September 30, 1996, 1995 and 1994..................... F-4
Statements of Retained Earnings, Twelve Months Ended June 30, 1997
(unaudited), Fiscal Years Ended September 30, 1996, 1995 and 1994........ F-5
Statements of Cash Flows, Twelve Months Ended June 30, 1997 (unaudited),
Fiscal Years Ended September 30, 1996, 1995 and 1994..................... F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of EnergyNorth Natural Gas, Inc.:
We have audited the accompanying balance sheets of EnergyNorth Natural Gas,
Inc. (a New Hampshire corporation and a wholly owned subsidiary of
EnergyNorth, Inc.) as of September 30, 1996 and 1995, and the related
statements of income, retained earnings and cash flows for each of the three
years in the period ended September 30, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of EnergyNorth Natural Gas,
Inc. as of September 30, 1996 and 1995, and the results of its operations and
its cash flows for each of the years in the period ended September 30, 1996,
in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Boston, Massachusetts
November 1, 1996
F-2
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, -----------------
1997 1996 1995
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Utility plant, at cost...................... $143,711 $136,198 $129,864
Accumulated depreciation and amortization... 47,686 44,679 41,448
-------- -------- --------
Net utility plant........................... 96,025 91,519 88,416
-------- -------- --------
Current assets:
Cash and temporary cash investments......... 459 311 404
Accounts receivable (net of allowances of
$1,333, $1,176 and $907, respectively)..... 6,047 1,831 1,921
Unbilled revenues........................... 593 582 586
Deferred gas costs.......................... -- 3,783 --
Materials and supplies...................... 1,523 1,453 1,498
Supplemental gas supplies................... 5,335 8,825 7,899
Prepaid and deferred taxes.................. 1,412 1,562 1,673
Recoverable FERC 636 transition costs....... 1,514 1,733 1,733
Prepaid expenses and other.................. 413 1,098 1,156
-------- -------- --------
Total current assets...................... 17,296 21,178 16,870
-------- -------- --------
Deferred charges:
Regulatory asset--income taxes.............. 2,402 2,401 2,401
Recoverable environmental costs............. 6,268 6,840 3,741
Other deferred charges...................... 93 768 859
-------- -------- --------
Total deferred charges.................... 8,763 10,009 7,001
-------- -------- --------
Total assets.............................. $122,084 $122,706 $112,287
======== ======== ========
STOCKHOLDER'S EQUITY AND LIABILITIES
Capitalization:
Common stock--par value of $25 per share,
120,000 shares authorized, issued and
outstanding................................ $ 3,000 $ 3,000 $ 3,000
Amount in excess of par..................... 22,538 22,538 21,038
Retained earnings........................... 20,891 15,819 14,027
-------- -------- --------
Total common stockholder's equity......... 46,429 41,357 38,065
-------- -------- --------
Long-term debt.............................. 26,789 27,102 28,552
Capital lease obligations................... -- -- 25
-------- -------- --------
Total long-term obligations............... 26,789 27,102 28,577
-------- -------- --------
Total capitalization...................... 73,218 68,459 66,642
-------- -------- --------
Current liabilities:
Notes payable to banks...................... 5,500 9,535 1,500
Current portion of long-term debt........... 1,663 1,646 1,652
Current portion of capital lease
obligations................................ -- 25 43
Inventory purchase obligation............... 4,101 7,867 7,130
Accounts payable............................ 5,615 5,287 4,307
Accounts payable to affiliates.............. 763 589 1,285
Deferred gas costs.......................... 2,476 -- 5,645
Accrued interest............................ 1,055 831 857
Accrued taxes............................... 2,596 1,617 192
Accrued FERC 636 transition costs........... 1,514 1,733 1,733
Customer deposits, environmental and
other...................................... 1,933 3,963 1,260
-------- -------- --------
Total current liabilities................. 27,216 33,093 25,604
-------- -------- --------
Commitments and contingencies
Deferred credits:
Deferred income taxes....................... 16,272 15,619 14,339
Unamortized investment tax credits.......... 1,768 1,870 2,010
Regulatory liability........................ 1,284 1,374 1,497
Contributions in aid of construction and
other...................................... 2,326 2,291 2,195
-------- -------- --------
Total deferred credits.................... 21,650 21,154 20,041
-------- -------- --------
Total stockholder's equity and
liabilities.............................. $122,084 $122,706 $112,287
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
12 MONTHS ENDED SEPTEMBER 30,
JUNE 30, -----------------------
1997 1996 1995 1994
--------------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Operating revenues:
Utility gas service................... $91,029 $76,620 $68,988 $86,376
Other................................. 975 890 829 1,774
------- ------- ------- -------
Total operating revenues............ 92,004 77,510 69,817 88,150
------- ------- ------- -------
Operating expenses:
Cost of gas sold...................... 53,879 39,115 35,602 51,058
Operations and maintenance............ 18,140 18,624 18,407 19,180
Depreciation and amortization......... 4,864 4,693 4,063 3,897
Taxes other than income taxes......... 3,574 3,654 3,460 3,639
Federal and state income taxes........ 3,330 3,224 1,745 2,280
------- ------- ------- -------
Total operating expenses............ 83,787 69,310 63,277 80,054
------- ------- ------- -------
Operating income........................ 8,217 8,200 6,540 8,096
Other income............................ 760 735 1,254 416
------- ------- ------- -------
Income before interest expense.......... 8,977 8,935 7,794 8,512
Interest expense:
Interest on long-term debt............ 2,653 2,747 2,883 3,001
Other interest........................ 887 761 1,166 674
------- ------- ------- -------
Total interest expense.............. 3,540 3,508 4,049 3,675
------- ------- ------- -------
Net income.............................. $ 5,437 $ 5,427 $ 3,745 $ 4,837
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
STATEMENTS OF RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
12 MONTHS ENDED SEPTEMBER 30,
JUNE 30, -----------------------
1997 1996 1995 1994
--------------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance at beginning of period.... $19,105 $14,027 $13,650 $12,012
Add--net income................... 5,437 5,427 3,745 4,837
------- ------- ------- -------
24,542 19,454 17,395 16,849
Deduct--cash dividends on common
stock............................ 3,651 3,635 3,368 3,199
------- ------- ------- -------
Balance at end of year............ $20,891 $15,819 $14,027 $13,650
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
12 MONTHS ENDED SEPTEMBER 30,
JUNE 30, -------------------------
1997 1996 1995 1994
--------------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income........................ $ 5,437 $ 5,427 $ 3,745 $ 4,837
Noncash items:
Depreciation and amortization... 5,114 5,177 4,486 4,271
Deferred taxes and investment
tax credits, net............... 928 1,017 1,066 569
Changes in:
Accounts receivable, net........ (1,843) 90 303 (372)
Unbilled revenues............... 12 4 (42) (76)
Inventories..................... (820) (881) 47 704
Prepaid expenses and other...... (16) 58 (93) 224
Deferred gas costs.............. 4,587 (9,428) 909 5,499
Accounts payable................ 225 980 36 247
Accounts payable to affiliates,
net............................ (719) (696) 901 (269)
Accrued liabilities............. (630) (279) (104) (167)
Accrued/prepaid taxes........... 246 1,536 (419) 112
Payments for environmental costs
and other........................ (1,315) (821) (2,672) (1,511)
-------- ------- ------- -------
Net cash provided by operating
activities................... 11,206 2,184 8,163 14,068
-------- ------- ------- -------
Cash flows from investing
activities:
Additions to property............. (11,752) (7,496) (6,407) (6,298)
-------- ------- ------- -------
Cash flows from financing
activities:
Capital contributions from
parent........................... 1,500 1,500 -- 1,190
Issues of long-term debt.......... 211 208 149 80
Change in notes payable to banks.. 3,500 8,035 1,500 (3,050)
Increase in inventory purchase
obligation....................... 9,194 9,284 6,770 9,962
Change in customer deposits and
other............................ (271) 81 7 128
Cash dividends on common stock.... (3,651) (3,635) (3,368) (3,199)
Refunding requirements:
Repayment of long-term debt..... (1,660) (1,664) (1,687) (1,356)
Repayment of capital lease
obligations.................... (36) (43) (41) (41)
Repayment of inventory purchase
obligation..................... (8,059) (8,547) (6,974) (9,655)
-------- ------- ------- -------
Net cash provided by (used
for) financing activities.... 728 5,219 (3,644) (5,941)
-------- ------- ------- -------
Net decrease in cash and temporary
cash investments................... 182 (93) (1,888) 1,829
Cash and temporary cash investments,
beginning of year.................. 277 404 2,292 463
-------- ------- ------- -------
Cash and temporary cash investments,
end of year........................ $ 459 $ 311 $ 404 $ 2,292
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
NOTE 1. ACCOUNTING POLICIES
The significant accounting policies followed by EnergyNorth Natural Gas,
Inc. (the "Company") are set forth below.
Business Organization
The Company is a wholly owned subsidiary of EnergyNorth, Inc. Transactions
between the Company and other affiliated companies include payments for
management, accounting, data processing and other services. The Company is a
regulated gas distribution utility located in southern and central New
Hampshire and also provides service and sells appliances. The rates and
accounting practices followed by the Company are regulated by the New
Hampshire Public Utilities Commission ("NHPUC"). The Company's accounting
policies conform to generally accepted accounting principles applicable to
rate-regulated enterprises and reflect the effects of the ratemaking process
in accordance with Statement of Financial Accounting Standards ("SFAS") No.
71, "Accounting for Certain Types of Regulation."
Revenue Recognition
Utility revenues derived from the sale or transportation of natural gas are
based on rates authorized by the NHPUC. Customers' meters are read and bills
are rendered on a cycle basis throughout the month. The Company records
unbilled revenues related to gas delivered but not billed at the end of the
accounting period.
Cost of Gas Adjustment Clause
The Company's tariff includes a cost of gas adjustment ("CGA") clause that
permits billings to customers for changes in its cost of gas over a base
period cost. The tariff provides for a CGA calculation for a summer period and
a winter period. Any difference between the cost of gas incurred and amounts
billed to customers is deferred for ratemaking and accounting purposes to the
next corresponding period. Interest accrues on these amounts at the prime
rate, adjusted quarterly.
Inventories
Inventories are valued on the basis of the lower of average cost or market.
Depreciation
The Company provides for depreciation on the straight-line basis. The rates
applied are approved by the NHPUC. Such rates were equivalent to a composite
rate of 3.4% for the twelve months ended June 30, 1997 and for the fiscal
years ended September 30, 1996, 1995 and 1994. Under depreciation practices
required by the NHPUC, when gas utility assets under the composite method are
retired from service, the cost of the retired assets are removed from the
property accounts and charged, together with any cost of removal, to the
accumulated depreciation accounts. For all other assets, when assets are sold
or retired, the cost of the assets and their related accumulated depreciation
are removed from the respective accounts, net removal costs are recorded and
any gain or loss is included in income.
Deferred Charges
Total deferred charges consist primarily of regulatory assets and the cost
of issuing debt. The Company has established various regulatory assets in
cases where the NHPUC has permitted, or is expected to permit, recovery of
specific costs over a period of time. At September 30, 1996, regulatory assets
included $6,800,000 for
F-7
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
environmental investigation and disposal costs and $2,400,000 of unrecovered
deferred state income taxes (see Note 6). At June 30, 1997, regulatory assets
included $6,300,000 for environmental investigation and disposal costs and
$2,400,000 of unrecovered deferred state income taxes.
The unamortized cost of issuing debt at September 30, 1996 was $664,000 and
at June 30, 1997 was $619,000. Deferred financing costs are amortized over the
life of the related security. Other deferred charges are amortized over the
recovery period specified by the NHPUC.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," issued in March 1995 and effective
October 1, 1996, establishes accounting standards for the impairment of long-
lived assets. SFAS No. 121 requires that any assets, including regulatory
assets, which are no longer probable of recovery through future revenues, be
revalued based on estimated future cash flows. If the revaluation is less than
the book value of the asset, an impairment loss would be charged to earnings.
While circumstances may change, based on the current regulatory environment in
the Company's service area, the adoption of SFAS No. 121 has not had a
material impact on the Company's financial position or results of operations.
Investment Tax Credits
Investment tax credits are being amortized over the estimated useful life of
the property that gave rise to the credit.
Fair Value of Financial Instruments
Because of the short maturity of certain assets, which include cash,
temporary cash investments and accounts receivable, and certain liabilities,
which include accounts payable and notes payable to banks, these instruments
are stated at amounts that approximate fair value.
If long-term debt outstanding at September 30, 1996 were refinanced using
new issue debt rates of interest that on average are lower than the
outstanding rates, the present value of those obligations would increase from
the amounts outstanding on the September 30, 1996 balance sheet by 11.8%. In
the event of refinancing, there would be no gain or loss as, under established
regulatory procedure, any such difference would be reflected in rates and have
no effect on gross income.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect assets and liabilities, the disclosure of contingent assets and
liabilities, and revenues and expenses. Actual amounts could differ from those
estimates.
Reclassifications
Reclassifications are made periodically to previously issued financial
statements to conform to the current year's presentation.
F-8
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. CASH FLOWS
Supplemental disclosures of cash flow information are as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
12 MONTHS ENDED SEPTEMBER 30,
JUNE 30, --------------------
1997 1996 1995 1994
--------------- ------ ------ ------
<S> <C> <C> <C> <C>
Cash paid during the period for:
Interest (net of amount capitalized).... $3,709 $3,369 $4,132 $3,372
Income taxes............................ 2,391 508 898 1,595
</TABLE>
In preparing the accompanying statements of cash flows, all highly liquid
investments having maturities of three months or less when acquired were
considered to be cash equivalents and classified as cash and temporary
investments.
NOTE 3. INVENTORY FINANCING
The Company finances gas inventory purchases through the use of a single
purpose trust, which purchases gas with funds loaned to it by a bank. As the
Company requires gas to service customers, gas is repurchased from the trust
at original product cost plus financing costs and trust fees. The cost of gas
and related financing are recoverable through the CGA.
The bank credit agreement provides for a .375% commitment fee on the credit
line and interest at prime (8.25% at September 30, 1996 and 8.5% at June 30,
1997) with a fixed rate interest option at less than prime on the outstanding
balance. The trust agreement provides for a management fee of $8,000 annually.
The credit agreement between the trust and the bank provides for a total
commitment of up to $9,500,000 through February 1998.
As of September 30, 1996 and 1995, the gas inventories under the trust
agreement and controlled by the Company totaled $7,800,000 and $7,100,000,
respectively, and are included in inventories on the accompanying balance
sheets. At June 30, 1997, gas inventories under the trust agreement were
$4,100,000. Inventory purchase obligations under this financing agreement are
reflected as a current liability on the accompanying balance sheets.
NOTE 4. NOTES PAYABLE TO BANKS
As of June 30, 1997, the Company had available $14,700,000 under various
unsecured bank lines of credit that are renewed annually, $5,500,000 of which
was outstanding. The lines bear interest at prime, or less than prime on
certain of the lines for fixed periods of time, and are due on demand. The
terms of the credit agreements require annual commitment fees of .25% to .35%
of the lines.
F-9
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. LONG-TERM DEBT
At June 30, 1997 and September 30, 1996 and 1995, long-term debt consisted
of the following (in thousands):
<TABLE>
<CAPTION>
FINAL SEPTEMBER 30,
INTEREST PAYMENT JUNE 30, ---------------
RATE DUE 1997 1996 1995
--------------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
General and Refunding
Bonds:
8.67% 2002 $ 7,088 $ 7,088 $ 8,270
8.44% 2009 4,000 4,333 4,667
9.70% 2019 7,000 7,000 7,000
9.75% 2020 10,000 10,000 10,000
Vehicle notes............ Prime plus .50% 2001 364 327 267
------- ------- -------
Total................ 28,452 28,748 30,204
Less--current portion.... 1,663 1,646 1,652
------- ------- -------
Total long-term
debt................ $26,789 $27,102 $28,552
======= ======= =======
</TABLE>
Interest payments for the General and Refunding Bonds are due semiannually.
The General and Refunding Bonds are collateralized by first mortgage liens on
substantially all real property and operating plant facilities.
The aggregate amounts of principal due for all long-term debt for each of
the five years subsequent to September 30, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
1997................................................................ $1,646
1998................................................................ 1,612
1999................................................................ 1,582
2000................................................................ 1,551
2001................................................................ 1,516
</TABLE>
NOTE 6. INCOME TAXES
The Company files a consolidated federal income tax return with its parent
company. For financial reporting and rate purposes, the Company provides taxes
on a separate return basis.
At September 30, 1996 and 1995, the SFAS No. 109 regulatory liability
amounted to $1,000,000 and $1,100,000, respectively, for the tax benefit of
unamortized investment tax credits, and $339,000 and $384,000, respectively,
for the excess reserves for deferred taxes as a result of pre-July 1, 1987
deferred income taxes that were recorded in excess of the current federal
statutory income tax rate.
A deferred state income tax liability and a corresponding regulatory asset
of approximately $2,400,000, representing revenues the Company expects to
recover from utility gas service customers, were established at September 30,
1994 as a result of recording deferred state income taxes on the cumulative
temporary differences due to a change in New Hampshire tax law. Effective June
2, 1994, the 1% franchise tax assessed on sales of natural gas was repealed.
Prior to the change in tax law, the franchise tax was permitted as a credit
against the New Hampshire Business Profits Tax ("NHBPT"). Because franchise
tax payments exceeded the NHBPT, the Company never incurred a NHBPT liability;
therefore, no deferred state income taxes related to temporary differences
were recorded.
F-10
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of cumulative differences that gave rise to the deferred tax
liabilities and deferred tax assets for the years ended September 30, 1996 and
1995 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Contributions in aid of construction...................... $ 696 $ 666
Unamortized investment tax credits........................ 636 683
Allowance for doubtful accounts........................... 454 351
Deferred gas costs........................................ -- 1,373
Other..................................................... 821 655
------- -------
Total deferred tax assets............................... 2,607 3,728
------- -------
Deferred tax liabilities:
Property-related.......................................... 14,742 13,860
Deferred gas costs........................................ 1,773 --
Environmental costs....................................... 1,499 1,445
Other..................................................... 1,372 1,245
------- -------
Total deferred tax liabilities.......................... 19,386 16,550
------- -------
Net deferred tax liability.................................. $16,779 $12,822
======= =======
</TABLE>
Deferred income taxes were classified in the accompanying balance sheets as
of September 30, 1996 and 1995 as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Current..................................................... $ 1,160 $(1,517)
Long-term................................................... 15,619 14,339
------- -------
Total................................................... $16,779 $12,822
======= =======
</TABLE>
The components of federal and state income taxes reflected in the
accompanying statements of income for the years ended September 30, 1996, 1995
and 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Federal:
Current............................................ $ (323) $ 961 $1,944
Deferred........................................... 3,119 566 481
Investment tax credits............................. (140) (141) (145)
------ ------ ------
Total federal.................................... 2,656 1,386 2,280
------ ------ ------
State:
Current............................................ (129) 227 --
Deferred........................................... 697 132 --
------ ------ ------
Total state...................................... 568 359 --
------ ------ ------
Total provision for income taxes..................... $3,224 $1,745 $2,280
====== ====== ======
</TABLE>
F-11
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The total federal and state income tax provision, as a percentage of income
before federal and state income taxes, was 37.3%, 31.8% and 32% for the years
ended September 30, 1996, 1995 and 1994, respectively. The following table
reconciles the income tax provision calculated using the federal statutory tax
rate of 34% to the book provision for federal income taxes (in thousands).
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Tax calculated at statutory rate................... $2,941 $1,867 $2,420
Increase (reduction) in effective tax resulting
from:
Amortization of investment tax credit............ (140) (141) (145)
Adjustment due to change in tax rates............ (28) (28) (28)
State taxes, net of federal tax benefit.......... 375 241 --
Other, net....................................... 76 (194) 33
------ ------ ------
Total provision for income taxes................... $3,224 $1,745 $2,280
====== ====== ======
NOTE 7. EMPLOYEE BENEFIT PLANS
Pension Plans
The Company has a noncontributory defined benefit plan covering
substantially all employees. Benefits are based on years of credited service
and average earnings during the five highest consecutive years of earnings
prior to the normal retirement date. The Company is also charged for pension
expense for the management pension plan of the parent company.
The Company's funding policy is to annually contribute to the plans an
amount that is not less than the minimum amount required by the Employee
Retirement Income Security Act of 1974 and not more than the maximum
deductible for income tax purposes.
Net periodic pension cost included the following components (in thousands):
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost for benefits earned................... $ 249 $ 236 $ 231
Interest cost on projected benefit obligations..... 472 458 440
Actual return on plan assets....................... (542) (953) 314
Net amortization and deferral...................... (90) 369 (860)
Parent company allocation.......................... 344 389 387
------ ------ ------
Net periodic pension cost.......................... $ 433 $ 499 $ 512
====== ====== ======
The following table sets forth the funded status of the plans at September
30, 1996, 1995 and 1994 (in thousands):
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Vested benefit obligation.......................... $5,983 $5,239 $5,120
====== ====== ======
Accumulated benefit obligation..................... $6,228 $5,455 $5,322
====== ====== ======
Projected benefit obligation....................... $6,971 $6,429 $6,246
Plan assets at fair value.......................... 7,300 6,839 5,896
------ ------ ------
Funded status...................................... 329 410 (350)
Unrecognized transition asset...................... (384) (444) (504)
Unrecognized prior service cost.................... 351 407 463
Unrecognized net loss.............................. 447 185 782
------ ------ ------
Prepaid pension.................................... $ 743 $ 558 $ 391
====== ====== ======
</TABLE>
F-12
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Assumptions used to determine the projected benefit obligation were as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate.............................................. 7.5% 7.5% 7.5%
Rate of increase in future compensation levels............. 4.0% 4.0% 4.5%
Expected long-term rate of return on assets................ 9.0% 9.0% 9.0%
</TABLE>
Plan assets are invested in common stocks and bonds.
The Company has an employee 401(k) savings and investment plan covering
substantially all employees. The Company made contributions of $61,000,
$57,000 and $56,000 for the years ended September 30, 1996, 1995 and 1994,
respectively.
Other Postemployment Benefits
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits to qualified retired employees.
In accordance with SFAS No. 106, the Company began recording the cost of
postretirement benefits on an accrual basis in 1994. The expense recorded in
fiscal 1996, 1995 and 1994 for providing postretirement benefits, including
amortization of the accumulated projected benefit obligation over a 20-year
period, was $222,000, $278,000 and $451,000, respectively.
The Company has funded these benefit costs by making cash contributions, at
the same level of expense recorded, to a voluntary employee benefit
association ("VEBA") trust.
The following table sets forth the funded status of the plan at September
30, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Accumulated postretirement benefit obligation as of July
31:
Retirees............................................... $ 1,225 $1,005
Fully eligible active plan participants................ 372 530
Other active participants.............................. 685 656
------- ------
2,282 2,191
Plan assets at fair market value......................... (738) (557)
Unrecognized transition obligation....................... (2,381) (2,521)
Unrecognized net gain.................................... 891 956
------- ------
Accrued postretirement benefit cost at July 31........... 54 69
Contributions for the two-month period ending September
30...................................................... 55 70
------- ------
Accrued postretirement benefit cost at September 30...... $ (1) $ (1)
======= ======
</TABLE>
The components of the net periodic postretirement benefit cost at September
30, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Service cost--benefits attributed to services
during the year......................................... $ 48 $ 44
Interest cost on accumulated postretirement
benefit obligation...................................... 161 162
Actual asset return...................................... (48) (73)
Net amortization and deferral............................ 61 145
---- ----
Net periodic postretirement benefit cost................. $222 $278
==== ====
</TABLE>
F-13
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
An 11% average annual rate of increase in the per capita costs of covered
health care benefits was assumed for fiscal 1996, reduced in steps of 1% to a
level of 5% at 2002 and thereafter. This decrease results from changes in
estimates of future health care inflation, assumed changes in health care
utilization and related effects. Increasing the assumed health care cost trend
rates by one percentage point in each year would have resulted in a $198,000
increase in the accumulated postretirement benefit obligation as of July 31,
1996 and an increase in the aggregate of the service cost and interest cost
components of net periodic postretirement benefit cost for fiscal 1996 of
$15,000. A discount rate of 7.5% was used to determine the accumulated
postretirement benefit obligation. The expected long-term rate of return on
plan assets is 9%. Plan assets are invested in common stocks and bonds.
NOTE 8. COMMITMENTS AND CONTINGENCIES
Contracts
The Company has various contractual agreements covering the transportation
of natural gas, underground storage facilities and the purchase of natural
gas, which are recoverable under the Company's CGA. These contracts expire at
various times from 1997 to 2011.
Litigation
The Company has been named in certain lawsuits arising from normal
operations. In the opinion of management, the outcome of these lawsuits will
not have a material adverse effect on the financial position or results of
operations of the Company.
Environmental Issues
The Company and certain of its predecessors owned or operated several
facilities for the manufacture of gas from coal, a process used through the
mid-1900's that produced by-products that may be considered contaminated or
hazardous under current law, and some of which may still be present at such
facilities. The Company accrues environmental investigation and clean-up costs
with respect to former manufacturing sites and other environmental matters
when it is probable that a liability exists and the amount or range of amounts
can be reasonably estimated.
One former manufactured gas facility in Concord, New Hampshire has been
investigated and partially remediated. Disposal of the contents of the
gasholder situated at this former gas manufacturing facility has been
completed. Total remediation costs amounted to approximately $3,500,000 and
were recorded in deferred charges. Recovery of costs from customers began on
July 1, 1995 and will extend over a seven-year period. The unamortized balance
of $2,500,000 at June 30, 1997 is excluded from rate base.
The New Hampshire Department of Environmental Services ("NHDES") has
required remedial action for a portion of the Concord site at which wastes
were disposed of from approximately 1852 through 1952. The estimated cost of
this remedial action ranges from $2,100,000 to $3,200,000, and the Company has
recorded $2,100,000 at June 30, 1997 in deferred charges. The Company has
petitioned the NHPUC for approval of the Company's proposed five-year recovery
from ratepayers, including carrying costs, for approximately $1,900,000 of
investigation, remediation and recovery effort costs.
The Company is pursuing recovery from its insurance carriers as well as from
insurance carriers of its predecessors with respect to the Concord site. In
addition, the Company is pursuing recovery against an entity that the Company
alleges owned or operated the manufactured gas plant during the late 1800's
and early 1900's.
F-14
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company and Public Service Company of New Hampshire ("PSNH"), an
electric utility company, conducted an environmental site characterization of
a second former manufactured gas plant in Laconia, New Hampshire. The Laconia
manufactured gas plant operated between approximately 1887 and 1952, and the
Company owned and operated the facility for approximately the last seven years
of its active life. PSNH also owned and operated the facility during its
active life. Without admitting liability, the Company and PSNH have entered
into an agreement under which costs of the site characterization are shared.
The Company's share of the costs of the site characterization and a report to
the NHDES, totaled $265,000 and has been recorded in deferred charges as of
June 30, 1997. The Company expects to incur further expenses but is currently
unable to predict the magnitude of any liability that may be imposed on it for
the cost of additional studies or the performance of a remedial action in
connection with the Laconia site. The Company is pursuing recovery from its
insurance carriers for costs incurred with respect to the Laconia site.
The Company is pursuing and intends to pursue recovery from insurance
carriers and claims against any other responsible parties seeking to ensure
that they contribute appropriately to reimburse the Company for any costs
incurred with respect to environmental matters. The Company intends to seek
and expects to receive approval of rate recovery methods with respect to
environmental matters after it has determined the extent of contamination,
received recommendations with regard to remediation, and commenced remediation
efforts.
Transition Costs
Federal Energy Regulatory Commission Order 636 allows interstate pipeline
companies to recover transition costs created as they buy out of long-term
fixed-price gas contracts. Since the Company's supplier began direct billing
these costs on September 1, 1993 as a component of demand charges, $7,600,000
has been billed through June 30, 1997. The Company has recorded additional
transition costs of approximately $1,500,000 that will be billed over a period
of 18 months. The Company is recovering transition costs through the cost of
gas adjustment.
F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNEC-
TION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COM-
PANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SO-
LICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE ANY OF THE DATES
AS OF WHICH INFORMATION IS FURNISHED HEREIN OR THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 5
The Company.............................................................. 6
Use of Proceeds.......................................................... 6
Selected Financial Data.................................................. 7
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 8
Business................................................................. 13
Certain Relationships and Related Transactions........................... 19
Management............................................................... 20
Description of Bonds..................................................... 26
Underwriting............................................................. 33
Legal Matters............................................................ 33
Experts.................................................................. 33
Available Information.................................................... 33
Index to Financial Statements............................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$22,000,000
ENERGYNORTH
NATURAL GAS, INC.
FIRST MORTGAGE BONDS
DESIGNATED AS
% SERIES E BONDS
DUE , 2027
LOGO
----------------
PROSPECTUS
----------------
EDWARD D. JONES & CO., L.P.
DATED , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
Filing fee--Securities and Exchange Commission.................... $ 6,667
Blue Sky filing fees and expenses (including estimated legal
fees)............................................................ $ 7,500
NASD filing fee................................................... $ 2,700
Legal fees and expenses (estimated)............................... $ 50,000
Accounting fees (estimated)....................................... $ 25,000
Printing and engraving (estimated)................................ $25,000
Trustee fees...................................................... $ 2,500
Miscellaneous..................................................... $ 5,000
--------
Total........................................................... $124,367
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
New Hampshire Revised Statutes Annotated ("RSA") 293-A, Sections 8.51 and
8.56, empower a corporation, subject to certain limitations, to indemnify its
directors and officers against expenses (including attorney's fees, judgments,
fines and amounts paid in settlement) actually and reasonably incurred by them
in connection with any civil or criminal suit or proceeding (other than a
derivative action) to which they are parties or threatened to be made parties
by reason of being directors or officers, if they acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of
the corporation (and with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful). The power to
indemnify in connection with an action or suit by or in the right of the
corporation (a derivative action) is more limited. Indemnification against
expenses actually and reasonably incurred is required if a director or officer
is wholly successful in defense of an action, suit or proceeding of the type
where indemnity is permitted by the statute. Unless ordered by a court,
indemnification under the statute, other than mandatory indemnification
against expenses, may be made only if a determination that indemnification is
proper has been made by a prescribed vote of the board of directors, special
legal counsel in certain cases, by the shareholders or by the prescribed vote
of a committee duly designated by the board of directors, in certain cases.
Indemnification provided for by RSA 293-A:8.50-8.58 is not exclusive and a
corporation is empowered to maintain insurance on behalf of its directors and
officers against any liability asserted against them in that capacity, whether
or not the corporation would have the power under that section to indemnify
them.
The by-laws of the Company provide that it shall indemnify any director or
officer pursuant to the provisions of RSA 293-A:8.50-8.58. The Company
maintains insurance on behalf of its directors and officers against liability
asserted them in that capacity.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a complete list of Exhibits filed as part of this
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
1 Underwriting Agreement between EnergyNorth Natural Gas, Inc. and
Edward D. Jones & Co., L.P. (to be filed by amendment).
3.1 Articles of Incorporation of EnergyNorth Natural Gas, Inc.
3.2 Bylaws of EnergyNorth Natural Gas, Inc.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
4.1 Gas Service, Inc. General and Refunding Mortgage Indenture, dated
as of June 30, 1987, as amended, and supplemented by a First
Supplemental Indenture, dated as of October 1, 1988, and by a
Second Supplemental Indenture, dated as of August 31, 1989, is
incorporated by reference to Exhibit 4.1 of EnergyNorth, Inc.'s
Form 10-K (File No. 0-11035) for the fiscal year ended September
30, 1989.
4.2 Third Supplemental Indenture, dated as of September 1, 1990, to
Gas Service, Inc. General and Refunding Mortgage Indenture, dated
as of June 30,1987, is incorporated by reference to Exhibit 4.2
of EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1990.
4.3 Fourth Supplemental Indenture, dated as of January 10, 1992, to
Gas Service, Inc. General and Refunding Mortgage Indenture, dated
as of June 30, 1987, is incorporated by reference to Exhibit 4.3
of EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1992.
4.4 Fifth Supplemental Indenture, dated as of February 1, 1995, to Gas
Service, Inc. General and Refunding Mortgage Indenture, dated as
of June 30, 1987 is incorporated by reference to Exhibit 4.4 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the fiscal
year ended September 30, 1996.
4.5 Sixth Supplemental Indenture, dated as of , 1997, to Gas
Service, Inc. General and Refunding Mortgage Indenture, dated as
of June 30, 1987.
4.6 Copies of Bond Indentures and a note and credit agreement defining
the rights of holders of long-term debt of certain subsidiaries
of EnergyNorth, Inc., under which the amounts of bonds or the
note issued do not exceed 10% of the consolidated assets of
EnergyNorth, Inc. will be furnished to the Securities and
Exchange Commission upon request.
5 Opinion of McLane, Graf, Raulerson & Middleton, Professional
Association as to the legality of the Bonds being registered.
10.1 Gas transportation agreement (FT-A), dated as of September 1,
1993, between Tennessee Gas Pipeline Company and EnergyNorth
Natural Gas, Inc. is incorporated by reference to Exhibit 10.1 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the fiscal
year ended September 30, 1993.
10.2 Gas transportation agreement (contract No. 632), dated as of
September 1, 1993, between Tennessee Gas Pipeline Company and
EnergyNorth Natural Gas, Inc. is incorporated by reference to
Exhibit 10.2 to EnergyNorth, Inc.'s Form 10-K (File No. 0-11035)
for the fiscal year ended September 30, 1995.
10.3 Supplemental Executive Retirement Plan of EnergyNorth, Inc., as
amended, is incorporated by reference to Exhibit 10.3 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the fiscal
year ended September 30, 1996.
10.4 Deferred Compensation Agreement, dated as of November 30, 1993,
between Robert R. Giordano and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.3 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30, 1993.
10.5 Deferred Compensation Agreement, dated as of November 30, 1993,
between Albert J. Hanlon and EnergyNorth, Inc. is incorporated by
reference to Exhibit 10.5 to EnergyNorth, Inc.'s Form 10-K (File
No. 0-11035) for the fiscal year ended September 30, 1993.
10.6 Amendment to Deferred Compensation Agreement, dated as of October
1, 1996, between Robert R. Giordano and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.6 to EnergyNorth, Inc.'s
10-K (File No. 0-11035) for the fiscal year ended September 30,
1996.
10.7 Amendment to Deferred Compensation Agreement, dated as of October
1, 1996, between Albert J. Hanlon and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.6 EnergyNorth, Inc.'s 10-
K (File No. 0-11035) for the fiscal year ended September 30,
1996.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
10.8 Deferred Compensation Agreement, dated as of November 30, 1993,
between Richard P. Demers and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.6 to EnergyNorth, Inc.'s 10-K (File
No. 0-11035) for the fiscal year ended September 30, 1996.
10.9 Deferred Compensation Agreement, dated as of November 30, 1995,
between Frank L. Childs and EnergyNorth, Inc. is incorporated by
reference to Exhibit 10.6 to EnergyNorth, Inc.'s 10-K (File No.
0-11035) for the fiscal year ended September 30, 1996.
10.10 Deferred Compensation Agreement, dated as of November 30, 1993,
between Michelle L. Chicoine and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.6 to EnergyNorth, Inc.'s
10-K (File No. 0-11035) for the fiscal year ended September 30,
1996.
10.11 EnergyNorth, Inc. 1992 Directors' Deferred Compensation Plan, as
amended, is incorporated by reference to Exhibit 10.11 to
EnergyNorth, Inc.'s 10-K (File No. 0-11035) for the fiscal year
ended September 30, 1996.
10.12 Employment Agreement, dated as of December 1, 1995, between Robert
R. Giordano and EnergyNorth, Inc. is incorporated by reference to
Exhibit 10.9 to EnergyNorth, Inc.'s Form 10-K (File No. 0-11035)
for the fiscal year ended September 30, 1995.
10.13 Employment Agreement, dated as of December 1, 1995, between Albert
J. Hanlon and EnergyNorth, Inc. is incorporated by reference to
Exhibit 10.11 to EnergyNorth, Inc.'s Form
10-K (File No. 0-11035) for the fiscal year ended September
30,1995.
10.14 Management Continuity Agreement, dated as of December 7, 1995,
between Robert R. Giordano and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.12 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30, 1995.
10.15 Management Continuity Agreement, dated as of December 7, 1995,
between Albert J. Hanlon and EnergyNorth, Inc. is incorporated by
reference to Exhibit 10.14 to EnergyNorth, Inc.'s Form
10-K (File No. 0-11035) for the fiscal year ended September 30,
1995.
10.16 Management Continuity Agreement, dated as of December 2, 1996,
between Michelle L. Chicoine and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.18 to EnergyNorth, Inc.'s
Form 10-K (File No. 0-11035) for the fiscal year ended September
30, 1996.
10.17 Management Continuity Agreement, dated as of December 2, 1996,
between Frank L. Childs and EnergyNorth, Inc. is incorporated by
reference to Exhibit 10.19 to EnergyNorth, Inc.'s Form
10-K (File No. 0-11035) for the fiscal year ended September 30,
1996.
10.18 Management Continuity Agreement, dated as of December 7, 1995,
between Richard P. Demers and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.20 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30, 1996.
10.19 EnergyNorth, Inc. Key Employee Performance and Equity Incentive
Plan, as amended, is incorporated by reference to Exhibit 10.15
to EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1995.
10.20 EnergyNorth, Inc. Director Incentive Plan is incorporated by
reference to Exhibit 10 to EnergyNorth, Inc.'s Form 10-Q (File
No. 0-11035) for the quarter ended March 31, 1997.
10.21 Tax Sharing Agreement, dated as of October 1, 1988.
10.22 Cost Allocation Agreement, dated as of October 1, 1996.
12 Statement re: Computation of Ratios.
23.1 Consent of McLane, Graf, Raulerson & Middleton, Professional
Association is contained in Exhibit 5 and incorporated herein by
reference.
23.2 Consent of Arthur Andersen LLP.
25 Statement of Eligibility of Bank of New Hampshire as Trustee is
contained in a separately bound Form T-1 filed with Securities
and Exchange Commission.
27 Financial Data Schedule.
</TABLE>
II-3
<PAGE>
(b)The following financial statement schedule of EnergyNorth Natural Gas,
Inc. is submitted herewith:
Schedule II--Valuation and Qualifying Accounts for the Three Years Ended
September 30, 1996 and Twelve Months Ended June 30, 1997 (unaudited)
All schedules other than those above have been omitted because they are not
required or are inapplicable.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
the registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MANCHESTER, STATE OF NEW
HAMPSHIRE, ON AUGUST 5, 1997.
EnergyNorth Natural Gas, Inc.
/s/ Robert R. Giordano
By:__________________________________
Robert R. Giordano
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert R. Giordano and Michelle L. Chicoine, his
or her true and lawful attorney-in-fact and agent with full power of
substitution and re-substitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their, his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Robert R. Giordano Director, President August 5, 1997
- ------------------------------------- and Chief Executive
ROBERT R. GIORDANO Officer
/s/ N. George Mattaini Chairman of the August 5, 1997
- ------------------------------------- Board of Directors
N. GEORGE MATTAINI
/s/ Edward T. Borer Director August 5, 1997
- -------------------------------------
EDWARD T. BORER
/s/ Michelle L. Chicoine Director, Chief August 5, 1997
- ------------------------------------- Financial Officer,
MICHELLE L. CHICOINE Vice President,
Treasurer
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Albert J. Hanlon Director, Senior August 5, 1997
- ------------------------------------- Vice President
ALBERT J. HANLON
/s/ Frank L. Childs Director, Vice August 5, 1997
- ------------------------------------- President
FRANK L. CHILDS
/s/ David A. Skrzysowski Vice President and August 5, 1997
- ------------------------------------- Controller (Chief
DAVID A. SKRZYSOWSKI Accounting Officer)
II-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors of EnergyNorth Natural Gas, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
financial statements of EnergyNorth Natural Gas, Inc. included in this
Registration Statement and have issued our report thereon dated November 1,
1996. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed under Item 16(b) of
the Registration Statement is presented for purposes of complying with the
Securities and Exchange Commission rules and is not part of the basic
financial statements. This schedule for the three years ended September 30,
1996 has been subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Boston, Massachusetts
November 1, 1996
S-1
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
Reserves which are deducted in the balance sheets from assets to which they
apply:
<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(1) DEDUCTIONS PERIOD
----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Twelve months ended
June 30, 1997 Allowance for
(unaudited)............ doubtful accounts $1,205 $1,080 $133 $1,085 $1,333
Fiscal year ended
September 30, 1996..... Allowance for
doubtful accounts 907 1,130 138 999 1,176
Fiscal year ended
September 30, 1995..... Allowance for
doubtful accounts 992 990 167 1,242 907
Fiscal year ended
September 30, 1994..... Allowance for
doubtful accounts 850 1,280 145 1,283 992
</TABLE>
- --------
(1) Represents recoveries on accounts previously written off.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
1 Underwriting Agreement between EnergyNorth Natural Gas, Inc.
and Edward D. Jones & Co., L.P. (to be filed by amendment)
3.1 Articles of Incorporation of EnergyNorth Natural Gas, Inc.
3.2 Bylaws of EnergyNorth Natural Gas, Inc.
4.1 Gas Service, Inc. General and Refunding Mortgage Indenture,
dated as of June 30, 1987, as amended, and supplemented by a
First Supplemental Indenture, dated as of October 1, 1988, and
by a Second Supplemental Indenture, dated as of August 31,
1989, is incorporated by reference to Exhibit 4.1 of
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1989
4.2 Third Supplemental Indenture, dated as of September 1, 1990, to
Gas Service, Inc. General and Refunding Mortgage Indenture,
dated as of June 30,1987, is incorporated by reference to
Exhibit 4.2 of EnergyNorth, Inc.'s Form 10-K (File No. 0-
11035) for the fiscal year ended September 30, 1990
4.3 Fourth Supplemental Indenture, dated as of January 10, 1992, to
Gas Service, Inc. General and Refunding Mortgage Indenture,
dated as of June 30, 1987, is incorporated by reference to
Exhibit 4.3 of EnergyNorth, Inc.'s Form 10-K (File No. 0-
11035) for the fiscal year ended September 30, 1992
4.4 Fifth Supplemental Indenture, dated as of February 1, 1995, to
Gas Service, Inc. General and Refunding Mortgage Indenture,
dated as of June 30, 1987 is incorporated by reference to
Exhibit 4.4 to EnergyNorth, Inc.'s Form 10-K (File No. 0-
11035) for the fiscal year ended September 30, 1996
4.5 Sixth Supplemental Indenture, dated as of , 1997, to Gas
Service, Inc. General and Refunding Mortgage Indenture, dated
as of June 30, 1987
4.6 Copies of Bond Indentures and a note and credit agreement
defining the rights of holders of long-term debt of certain
subsidiaries of EnergyNorth, Inc., under which the amounts of
bonds or the note issued do not exceed 10% of the consolidated
assets of EnergyNorth, Inc. will be furnished to the
Securities and Exchange Commission upon request
5 Opinion of McLane, Graf, Raulerson & Middleton, Professional
Association as to the legality of the Bonds being registered
10.1 Gas transportation agreement (FT-A), dated as of September 1,
1993, between Tennessee Gas Pipeline Company and EnergyNorth
Natural Gas, Inc. is incorporated by reference to Exhibit 10.1
to EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1993
10.2 Gas transportation agreement (contract No. 632), dated as of
September 1, 1993, between Tennessee Gas Pipeline Company and
EnergyNorth Natural Gas, Inc. is incorporated by reference to
Exhibit 10.2 of EnergyNorth, Inc.'s Form 10-K (File No. 0-
11035) for the fiscal year ended September 30, 1995
10.3 Supplemental Executive Retirement Plan of EnergyNorth, Inc., as
amended, is incorporated by reference to Exhibit 10.3 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1996
10.4 Deferred Compensation Agreement, dated as of November 30, 1993,
between Robert R. Giordano and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.3 to EnergyNorth,
Inc.'s Form 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1993
10.5 Deferred Compensation Agreement, dated as of November 30, 1993,
between Albert J. Hanlon and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.5 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30,
1993
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
10.6 Amendment to Deferred Compensation Agreement, dated as of
October 1, 1996, between Robert R. Giordano and EnergyNorth,
Inc. is incorporated by reference to Exhibit 10.6 to
EnergyNorth, Inc.'s 10-K (File No. 0-11035) for the fiscal
year ended September 30, 1996
10.7 Amendment to Deferred Compensation Agreement, dated as of
October 1, 1996, between Albert J. Hanlon and EnergyNorth,
Inc. is incorporated by reference to Exhibit 10.6 EnergyNorth,
Inc.'s 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1996
10.8 Deferred Compensation Agreement, dated as of November 30, 1993,
between Richard P. Demers and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.6 to EnergyNorth,
Inc.'s 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1996
10.9 Deferred Compensation Agreement, dated as of November 30, 1995,
between Frank L. Childs and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.6 to EnergyNorth, Inc.'s 10-K (File
No. 0-11035) for the fiscal year ended September 30, 1996
10.10 Deferred Compensation Agreement, dated as of November 30, 1993,
between Michelle L. Chicoine and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.6 to EnergyNorth,
Inc.'s 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1996
10.11 EnergyNorth, Inc. 1992 Directors' Deferred Compensation Plan,
as amended, is incorporated by reference to Exhibit 10.11 to
EnergyNorth, Inc.'s 10-K (File No. 0-11035) for the fiscal
year ended September 30, 1996
10.12 Employment Agreement, dated as of December 1, 1995, between
Robert R. Giordano and EnergyNorth, Inc. is incorporated by
reference to Exhibit 10.9 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30,
1995
10.13 Employment Agreement, dated as of December 1, 1995, between
Albert J. Hanlon and EnergyNorth, Inc. is incorporated by
reference to Exhibit 10.11 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30,1995
10.14 Management Continuity Agreement, dated as of December 7, 1995,
between Robert R. Giordano and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.12 to EnergyNorth,
Inc.'s Form 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1995
10.15 Management Continuity Agreement, dated as of December 7, 1995,
between Albert J. Hanlon and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.14 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30,
1995
10.16 Management Continuity Agreement, dated as of December 2, 1996,
between Michelle L. Chicoine and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.18 to EnergyNorth,
Inc.'s Form 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1996
10.17 Management Continuity Agreement, dated as of December 2, 1996,
between Frank L. Childs and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.19 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30,
1996
10.18 Management Continuity Agreement, dated as of December 7, 1995,
between Richard P. Demers and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.20 to EnergyNorth,
Inc.'s Form 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1996
10.19 EnergyNorth, Inc. Key Employee Performance and Equity Incentive
Plan, as amended, is incorporated by reference to Exhibit
10.15 to EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for
the fiscal year ended September 30, 1995
10.20 EnergyNorth, Inc. Director Incentive Plan is incorporated by
reference to Exhibit 10 to EnergyNorth, Inc.'s Form 10-Q (File
No. 0-11035) for the quarter ended March 31, 1997
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
10.21 Tax Sharing Agreement, dated as of October 1, 1988
10.22 Cost Allocation Agreement, dated as of October 1, 1996
12 Statement re: Computation of Ratios
23.1 Consent of McLane, Graf, Raulerson & Middleton, Professional
Association is contained in Exhibit 5 and incorporated herein
by reference
23.2 Consent of Arthur Andersen, LLP
25 Statement of Eligibility of Bank of New Hampshire as Trustee is
contained in a separately bound Form T-1 filed with Securities
and Exchange Commission
27 Financial Data Schedule
</TABLE>
<PAGE>
Exhibit 3.1
RESTATED ARTICLES OF INCORPORATION
OF
ENERGYNORTH NATURAL GAS, INC.
ARTICLE I
---------
The name of the corporation shall be --
ENERGYNORTH NATURAL GAS, INC.
ARTICLE II
----------
The period of the Corporation's duration is perpetual.
ARTICLE III
-----------
The principal purpose for which the Corporation is organized is the
distribution of gas and related by-products within and without the State of New
Hampshire.
The Corporation is empowered to transact any and all lawful business
for which a corporation may be incorporated under RSA 293-A.
ARTICLE IV
----------
The amount of the authorized capital stock of this Corporation shall
be $4,750,000, divided into two classes as follows: 17,500 shares of Preferred
Stock with a par value of $100 per share and 120,000 shares of Common Stock with
a par value of $25 per share.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of each class of stock are
as follows:
DIVISION I
PROVISIONS RELATING TO PREFERRED STOCK
PART A. GENERAL PROVISIONS
SECTION 1. Issuance in Series. (a) The Preferred Stock may be
--------- ------------------
issued from time to time as shares of one or more series by a resolution or
resolutions adopted by the holders of the Corporation's Common Stock. The
initial series is designated "Series A Preferred Stock" and the number of shares
comprising such series and the particular terms and provisions with respect to
such series are set forth in subdivision B of this Division I. With respect to
each other series of Preferred Stock, the resolution or resolutions providing
for the issue of shares of each such series shall fix:
<PAGE>
- 2 -
(1) the number of shares comprising such series;
(2) the distinctive designation of such series;
(3) the annual dividend rate for such series;
(4) the redemption price or prices for such series, which may consist of a
redemption price or scale of redemption prices applicable only to
redemption for a sinking fund (the term "sinking fund" as used in this
Article IV shall mean and include any sinking fund, purchase fund or
any other provision for the periodic retirement of shares) and a
different redemption price or scale of redemption prices applicable to
any redemption made at the option of the Corporation;
(5) the provisions, if any, respecting a sinking fund for shares of such
series;
(6) the voting rights, if any, of the holders of the shares of such
series, which may be general or limited;
(7) the terms, if any, upon which shares of such series shall be
convertible into, or exchangeable for shares of any other class or
classes, including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment thereof, if any;
and
(8) generally, the other powers, preferences and rights, and any
qualifications, limitations or restrictions thereof, of such series,
provided, however, that no such powers, preferences, rights,
qualifications, limitations or restrictions shall be in conflict with
these Articles of Agreement or any amendment thereto providing for the
issue of any other series of Preferred Stock of which there are shares
outstanding.
(b) All shares of Preferred Stock shall be of equal rank with each other,
regardless of series, and shall be identical with each other in all respects
except as provided pursuant to paragraph (a) of this Section 1; and the shares
of Preferred stock of any one series shall be identical with each other in all
respects, except, if dividends thereon are cumulative, as to the dates from and
after which dividends thereon shall be cumulative. As used herein, the term "of
equal rank" means neither enjoying nor being subject to any priority with
respect either to payment of dividends or to the distribution of assets upon the
liquidation, dissolution or winding up of the Corporation, and has no reference
to the rate or amount of such dividends of distributions or to other terms of
the shares.
<PAGE>
- 3 -
(c) The shares of Preferred Stock may be issued for such consideration,
not less than $100 per share, as shall be fixed from time to time by the Board
of Directors.
SECTION 2. Dividend Rights. The holders of Preferred Stock of each series
--------- ---------------
shall be entitled to receive, out of any funds legally available for the
purpose, when and as declared by the Board of Directors, cumulative cash
dividends thereon at the rate set forth in subdivision B of this Division I in
the case of the Series A Preferred Stock and in the case of each other such
series, cash dividends at such rate per annum, which may or may not be
cumulative, all as shall be fixed at the time of the creation of such series,
and no more. Dividends on the Preferred Stock of all series shall be payable
quarterly on the first day of the months of January, April, July and October in
each year. Accumulations of dividends shall not bear interest. Whenever there
shall be paid on the Preferred Stock of any series the full amount or any part
of the dividends payable thereon, there shall also be paid at the same time upon
the shares of each other series of Preferred Stock then outstanding entitled to
receive cumulative dividends the full amount or the same proportionate part, as
the case may be, of the dividends payable thereon.
SECTION 3. Restrictions on Junior Stock Dividends and Distributions. So
--------- --------------------------------------------------------
long as any of the Preferred Stock shall remain outstanding, no dividend (other
than a dividend payable in shares of Junior Stock) shall be paid or declared,
nor any distribution made on Junior Stock and no Junior Stock shall be redeemed,
purchased, retired or otherwise acquired either directly or indirectly unless
(a) all dividends on all Preferred Stock of each series then outstanding
for the current quarterly dividend period and, if dividends on any such series
are cumulative, for all past dividend periods, shall have been paid or declared
and a sum sufficient for the payment thereof set apart;
(b) all sinking fund payments in respect of Preferred Stock of all series
then outstanding required to have been made by the Corporation shall have been
duly made; and
(c) any additional conditions with respect to the payment or making of any
such dividends, distributions, purchases, retirements or other acquisitions
contained in the provisions of these Articles of Agreement, as from time to time
amended, relating to any series of Preferred Stock then outstanding shall have
been satisfied.
SECTION 4. Preference upon Liquidation, Dissolution or Winding Up. In the
--------- ------------------------------------------------------
event of any partial or complete liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, before any
distribution shall be made to the holders of any shares of Junior Stock, the
Preferred
<PAGE>
- 4 -
Stock of each series shall be entitled to receive for each share thereof, out of
any legally available assets of the Corporation:
(a) if such liquidation, dissolution or winding up shall be voluntary, a
sum in cash equal to the redemption price that would have been payable had the
Corporation, instead, at its option redeemed the same on the date when the first
distribution is made upon the Preferred Stock in connection with such voluntary
liquidation, dissolution or winding up; or
(b) if such liquidation, dissolution or winding up shall be involuntary, a
sum in cash equal to $100 per share;
plus, in each case, an amount equal to all unpaid cumulative dividends thereon,
whether or not declared or earned, accrued to the date when payment of such
preferential amounts shall be made available to the holders of the Preferred
Stock; and the Preferred Stock shall be entitled to no further participation in
such distribution;
If, upon any such liquidation, dissolution or winding up of the affairs of
the Corporation, the assets of the Corporation available for distribution as
aforesaid among the holders of the Preferred Stock shall be insufficient to
permit the payment of them of the full preferential amounts aforesaid, then the
entire assets of the Corporation so as to be distributed shall be distributed
ratably among the holders of the Preferred Stock in proportion to the full
preferential amounts to which they are respectively entitled.
A consolidation or merger of the Corporation, or a sale or transfer of all
or substantially all of its assets as an entirety shall not be regarded as a
"liquidation, dissolution or winding up of the affairs of the Corporation"
within the meaning of this Section 4.
SECTION 5. Redemption. (a) Subject to any restrictions contained in
--------- ----------
these Articles of Agreement, as amended, or in resolutions of the holders of the
Corporation's Common Stock or its Board of Directors, relating to any series of
Preferred Stock then Outstanding, the Corporation may, at its option, expressed
by resolution of its Board of Directors, at any time redeem the whole or any
part of the Preferred Stock or of any series thereof at the time outstanding, by
the payment in cash for each share of stock to be redeemed of the then
applicable redemption price or prices, as set forth in Section 1 of subdivision
B of this Division I as in the case of the Series A Preferred Stock, and as
shall be fixed at the time of the creation thereof in the case of each other
such series, plus, in any such case, a sum of money equivalent to all accrued
and unpaid cumulative dividends, whether or not declared or earned, thereon to
the date fixed for redemption and, in the case
<PAGE>
- 5 -
of noncumulative dividends, equivalent to all dividends declared and unpaid.
Notice of any proposed redemption of shares of Preferred Stock shall be
given by the Corporation by mailing a copy of such notice at least 30 days prior
to the date fixed for such redemption to the holders of record of the shares of
Preferred Stock to be redeemed, at their respective addresses appearing on the
books of the Corporation. Said notice shall specify the shares called for
redemption, the redemption price and the place at which and the date on which
the shares called for redemption will, upon presentation and surrender of the
certificates of stock evidencing such shares, be redeemed and the redemption
price therefor paid.
If less than all of the shares of any series of Preferred Stock then
outstanding are to be redeemed, the shares to be redeemed shall be selected, by
such method, either by lot or pro rata, as shall from time to time be determined
by resolution of the Board of Directors, subject to any limitation contained in
resolutions of the Board of Directors or in these Articles of Agreement, as
amended, providing for any series of Preferred Stock.
From and after the date fixed in any such notice as the date of redemption,
unless default shall be made by the Corporation in providing moneys at the time
and place specified for the payment of the redemption price pursuant to said
notice, all cumulative dividends on the Preferred Stock thereby called for
redemption shall cease to accrue and all rights of the holders thereof as
stockholders of the Corporation except the right to receive the redemption
price, but without interest, shall cease and determine; provided, however, the
Corporation may, in the event of any such redemption, and prior to the
redemption date specified in the notice thereof, deposit in trust, for the
account of the holders of the Preferred Stock to be redeemed, with a bank or
trust company having an office located in Nashua, New Hampshire or New York, New
York, and having a capital surplus and undivided profits aggregating not less
than $9,000,000, all funds necessary for such redemption, and thereupon all
shares of the Preferred Stock with respect to which such deposit shall have been
made shall forthwith upon the making of such deposit no longer be deemed to be
outstanding, and all rights of the holders thereof with respect to such shares
of Preferred Stock shall thereupon cease and terminate, except the right of such
holders to receive from the funds so deposited the amount payable upon the
redemption thereof, but without interest, or, if any right of conversion
conferred upon such shares shall not, by the terms thereof, previously have
expired, to exercise the right of conversion thereof on or before the redemption
date specified in such notice, unless such right of conversion by the terms
thereof expires at any earlier time, and then only on or before such earlier
time for the expiration of such right of conversion. Any funds so set aside or
deposited which, because of the exercise of any right of conversion of shares
called
<PAGE>
- 6 -
for redemption, shall not be required for such redemption, shall be released or
repaid forthwith to the Corporation. Any funds so set aside or deposited, which
shall be unclaimed at the end of 5 years from such redemption date, shall be
released or repaid to the Corporation upon its request expressed in a resolution
of its Board of Directors, and any depositary thereof shall thereby be relieved
of all responsibility in respect thereof, after which release or repayment the
holders of shares so called for redemption shall look only to the Corporation
for payment of the redemption price, but without interest. Any interest on
funds so deposited which may be allowed by any bank or trust company with which
such deposit was made shall belong to the Corporation.
(b) If and so long as any quarterly cumulative dividend on any series of
Preferred Stock shall be in arrears, the Corporation shall not redeem, purchase
or otherwise acquire, by way of sinking fund payments or otherwise, any
Preferred Stock unless all outstanding shares of Preferred Stock entitled to
receive cumulative dividends are simultaneously redeemed.
(c) Whenever there shall be deposited or set aside the whole or any part
of the funds required to be deposited or set aside by the Corporation as a
sinking fund for any series of Preferred Stock there shall be also deposited or
set aside at the same time the full amount or the same proportionate part, as
the case may be, of the funds, if any, then due to be deposited or set aside as
sinking fund for each other series of Preferred Stock then outstanding.
(d) Prior to or simultaneously with any purchase, retirement or redemption
of any share or shares of any series of Preferred Stock (other than purchases,
retirements or redemptions made pursuant to any sinking fund) the Corporation
shall set aside sufficient moneys to effect the redemption, in the manner and at
the price hereinabove in paragraph (a) of this Section 5 provided, of a like
proportion of shares of each other series of Preferred Stock then outstanding.
(e) All shares of Preferred Stock which shall have been redeemed,
converted, purchased or otherwise acquired by the Corporation shall be retired
and cancelled and shall have the status of authorized but unissued shares of
Preferred Stock, subject to any limitation contained in resolutions of the
holders of the Corporation's Common Stock or its Board of Directors or in these
Articles of Agreement, as amended, providing for any series of Preferred Stock
then outstanding.
SECTION 6. Voting Rights of the Preferred Stock. Except as otherwise
--------- ------------------------------------
expressly provided in these Articles of Agreement, as amended, or as may be
required by law, the holders of the Preferred Stock shall have no voting rights
for the election of directors or in respect to any other matter.
<PAGE>
- 7 -
(a) Voting Rights with Respect to Election of Directors:
---------------------------------------------------
(1) If at any time the Corporation shall be in arrears in the payment
of six quarterly dividends, in whole or in part, whether or not
consecutive, on any series of Preferred Stock entitled to receive
cumulative dividends, or if at any time the Corporation shall be
in default in setting aside the required funds for the sinking
fund provided for any series of the Preferred Stock or in
redeeming the required shares of Preferred Stock of any series
through such sinking fund, the occurrence of any such contingency
shall mark the beginning of a period (hereinafter referred to as
a Default Period) which shall extend until such time as all
accrued and unpaid dividends for all previous quarterly dividend
periods and for the then current quarterly dividend period on all
shares of Preferred Stock of all series then outstanding entitled
to receive cumulative dividends shall have been paid or declared
and funds for the payment thereof set apart and until all such
sinking fund defaults have been cured in full;
(2) Upon the beginning and continuing for the duration of any Default
Period, the holders of the Preferred Stock voting separately and
as a class shall be solely entitled, at each meeting of
Stockholders at which directors are elected, to elect the
smallest number of directors necessary to constitute one-third of
the full Board of Directors (such members of the Board of
Directors of the Corporation elected by the holders of the
Preferred Stock being hereinafter called "Preferred Directors").
During any such Default Period the remaining members of the Board
of Directors shall be elected by the holders of the other class
or classes of stock of the Corporation then outstanding and
entitled to vote for the election of directors. At each election
of Directors by a class vote pursuant to the provisions of this
Section, the class first electing the directors which it is
entitled to elect shall name the directors who are to be
succeeded by the directors then elected by such class, whereupon
the terms of office of the directors so named shall terminate.
The term of office of the directors not so named shall terminate
upon the election by any other class of the directors which it is
entitled to elect;
<PAGE>
- 8 -
(3) If the next annual meeting of stockholders of the Corporation
will not be held within 90 days after the beginning of a Default
Period, then within 30 days after the beginning of a Default
Period, upon the notice and in accordance with the procedure
provided in the By-Laws, the Clerk of the Corporation shall call
a special meeting of the stockholders of the Corporation to be
held within 90 days after the beginning of such Default Period,
at which meeting such holders shall vote for the election of
Directors in accordance with the provisions of foregoing
subparagraph (2) of this paragraph (a). If the annual meeting of
stockholders will be held within 90 days after the beginning of a
Default Period, the Preferred Directors shall be elected at such
annual meeting of stockholders by the holders of the Preferred
Stock voting as a class in the manner hereinabove provided. After
the first election of Preferred Directors as herein provided, and
so long as the Default Period continues, the Preferred Directors
shall be elected annually by the holders of the Preferred Stock
voting as a class at the annual meeting of stockholders;
(4) The holder or holders of at least 25% in number of shares of
Preferred Stock then outstanding, present in person or by proxy,
shall constitute a quorum for the election of the Preferred
Directors unless a greater proportion shall then be required by
law. The absence at any meeting of the stockholders of the
Corporation of a quorum of the holders of shares of other classes
of capital stock of the Corporation shall not affect the exercise
by the holders of the Preferred Stock of the voting rights herein
provided for the election of directors;
(5) So long as any Default Period continues, no Preferred Directors
may be removed from office without the vote or consent of the
holders of a majority of the Outstanding Preferred Stock, and any
vacancy on the Board of Directors caused by the death,
resignation or removal of any Preferred Director shall be filled
by vote of the remaining Preferred Directors, unless the holders
of a majority of the Preferred Stock then outstanding by written
notice filed with the Corporation otherwise direct, or, if there
is no remaining Preferred Director, such vacancies shall be
filled by the holders of the Preferred Stock, voting as a class,
at a special meeting of such holders called in the manner
provided in the By-Laws;
<PAGE>
- 9 -
(6) Upon the termination of a Default Period, the terms of the
Preferred Directors shall thereupon expire and the right of the
holders of the Preferred Stock, as a class, to elect directors
shall cease, subject to the revesting of such right in the event
of the beginning of another Default Period.
(b) Certain Other Voting Rights. So long as any shares of Preferred Stock
---------------------------
of any series shall be outstanding, and in addition to any other approvals or
consents required by these Articles of Agreement, as amended, or by law, without
the consent of the holders of at least two-thirds of the shares of Preferred
Stock at the time outstanding, given either by their affirmative vote at a
special meeting of the holders of the Preferred Stock called for that purpose,
or, if permitted by law, in writing without a meeting:
(7) The Corporation will not issue any shares of Prior Stock or
Parity Stock or any securities convertible into shares of Prior
Stock or Parity Stock;
(8) The Corporation will not issue any shares of Preferred Stock (in
addition to the 7,500 shares of Series A Preferred Stock,
initially to be issued), or any securities convertible into such
Preferred Stock, unless in each case
(i) Available Net Earnings of the Corporation for any period of
12 consecutive calendar months within the 15 calendar
months immediately preceding the date of the issuance of
such Preferred Stock shall have been at least 150% of Pro-
Forma Fixed Charges of the Corporation. As used herein the
term "Available Net Earnings of the Corporation" for any
period shall mean the Net Income of the Corporation for
such period, plus, to the extent deducted in computing such
Net Income, the sum of: (x) Federal and State income taxes,
(y) interest on indebtedness of the Corporation for
borrowed money and (z) one third of rentals paid by the
Corporation as lessee under all leases of real or personal
property having an original term of (or renewable at the
option of the lessor or the lessee for terms aggregating)
more than 3 years; and the term "Pro-Forma Fixed Charges of
the Corporation" shall mean, as of the date of the proposed
issuance of any shares of Preferred Stock and after giving
effect thereto and to the application of the proceeds
thereof, the sum of (xx) the aggregate annual interest
charges
<PAGE>
- 10 -
on all indebtedness of the Corporation for borrowed money
then to be outstanding, plus (yy) one third of the
aggregate annual rentals payable under all leases of the
type described in the foregoing clause (z) then to be in
effect and (zz) the aggregate annual dividend requirements
on all shares of Preferred Stock then to be outstanding;
(ii) after giving effect to such proposed issue, Junior Stock
Equity shall be not less than 200% of the aggregate amount
payable upon all then outstanding shares of Preferred Stock
upon the involuntary liquidation, dissolution or winding up
of the affairs of the Corporation;
(iii) any provision made for the periodic retirement of shares of
any series of such additional Preferred Stock through the
operation of any sinking fund shall not become operative
earlier than April 1, 1978 and shall not result in the
retirement of such additional series of Preferred Stock at
a rate in excess of the proportionate rate at which the
shares of Series A Preferred Stock then outstanding are to
be retired by reason of the sinking fund provided therefor
in paragraph (d) of Section 1 of this subdivision B;
(iv) the Corporation shall then or theretofore have paid or
declared and set apart for payment all accrued and unpaid
dividends upon all then outstanding shares of capital stock
of the Corporation of every series or class, other than
Junior Stock; and
(v) the Corporation shall then or theretofore have deposited or
applied all moneys which the Corporation shall then or
theretofore have been required to deposit or apply with
respect to the mandatory redemption or retirement of any
then outstanding shares of its capital stock of any series
or class other than Junior Stock;
(9) The Corporation shall not sell, lease, convey, or otherwise
dispose of all or substantially all of its properties or assets
or voluntarily part with the control thereof or voluntarily
liquidate,
<PAGE>
- 11 -
dissolve or wind up its business or be a party to any merger or
consolidation;
(10) The Corporation will not amend, alter or repeal, directly or
indirectly, any of the provisions of these Articles of Agreement,
as amended (other than an amendment, alteration or repeal of any
of the provisions of this paragraph (b)), or of the By-Laws of
the Corporation, which will affect adversely the rights,
preferences or powers of the Preferred Stock or the holders
thereof; and the Corporation will not amend, alter, or repeal,
directly or indirectly, any of the provisions of this paragraph
(b); provided, however, that an increase in the total number of
shares of Preferred Stock (other than Series A Preferred Stock)
which the Corporation shall have authority to issue shall not
require the vote or approval of the holders of the Preferred
Stock.
SECTION 7. No Preemptive Rights. No holder of any Preferred Stock of any
--------- --------------------
series shall be entitled as such, as a matter of right (other than pursuant to
conversion rights, if any, fixed by the holders of the Corporation's Common
Stock in the resolution or resolutions providing for the issue of any series of
Preferred Stock) to subscribe for, purchase or receive any shares of stock of
the Corporation of any class or any obligation convertible into, or warrant or
other instrument entitling the holder to purchase or receive, any stock of the
Corporation of any class, which the Corporation may issue or sell, whether out
of the shares of stock (or securities or other instruments) now authorized or
hereafter authorized or out of shares of stock (or securities or other
instruments) now authorized or hereafter authorized or out of shares of stock
(or securities or other instruments) of the Corporation reacquired by it after
issuance.
PART B. PROVISIONS RELATING TO THE SERIES A PREFERRED STOCK
SECTION 1. Designation, Dividend Rate, Optional Redemption Price and
--------- ---------------------------------------------------------
Sinking Fund. (a) Creation and Designation: A series of the Preferred Stock
- ------------ ------------------------
consisting of 7,500 shares and designated as Series A Preferred Stock is hereby
created.
(b) Dividends: The Series A Preferred Stock shall be entitled to receive
---------
out of any assets of the Corporation lawfully available for dividends, if, when
and as declared by the Board of Directors of the Corporation, preferential
cumulative dividends at the rate of $9.25 per share per annum and no more,
payable quarterly on the first day of January, April, July, and October in each
year. Such dividends on each share of Series A Preferred Stock shall accrue and
be Cumulative from the date of issue thereof.
<PAGE>
- 12 -
(c) Optional Redemption: The redemption prices per share (herein called
-------------------
"optional redemption price") for shares of Series A Preferred Stock redeemed at
the option of the Corporation pursuant to the provisions of Section 5 of
subdivision A of this Division I shall be as follows: $109.25 per share if
redeemed on or before April 1, 1982; $105 per share if redeemed thereafter and
on or before April 1, 1987; $103 per share if redeemed thereafter and on or
before April 1, 1992; and $100 per share if redeemed thereafter; plus in each
case an amount in cash equivalent to all dividends accrued or in arrears thereon
(whether or not earned or declared) to and including the date of redemption;
provided, however, that the Corporation shall not be entitled to redeem shares
of the Series A Preferred Stock, pursuant to the provisions of this paragraph
(c), prior to April 1, 1987, by the application, directly or indirectly, of
funds obtained through the issuance or creation of any indebtedness of the
Corporation for money borrowed or the issuance by the Corporation of any
Preferred Stock or Parity Stock or Prior Stock, having, in the case of any such
indebtedness, an interest cost to the Corporation or, in the case of any such
stock, a dividend rate (determined, in either case, in accordance with sound
financial practice) of less than 9-1/4% per annum.
(d) Sinking Fund: So long as any shares of Series A, Preferred Stock
------------
remain outstanding on or before April 1, 1978, and on April 1 of each year
thereafter, the Corporation shall set aside a sum equal to the lesser of (i)
$37,000 or (ii) the number of shares of Series A Preferred Stock then
outstanding multiplied by $100, as and for a sinking fund for the Series A
Preferred Stock. Funds so set aside for the sinking fund shall be applied by or
at the direction of the Corporation on April 1 of each year, beginning with the
year 1978, to the redemption of shares of Series A Preferred Stock at a price
equal to $100 per share plus accrued and unpaid dividends, whether or not earned
or declared, on each share so redeemed to and including the date fixed for such
redemption, and in the manner, upon the notice and with the effect specified in
Section 5 of subdivision A of this Division I. Accrued and unpaid dividends on
shares of Series A Preferred Stock to be redeemed through the sinking fund shall
not be charged to funds deposited in the sinking fund but shall be paid out of
the other funds of the Corporation.
The obligation of the Corporation to set apart such sum or sums shall be
cumulative so that, if the full amount required to be set apart as aforesaid in
each such year for the sinking fund shall not be so set apart, the deficiency
shall be made good thereafter as soon as funds shall become lawfully available
therefor.
(e) Special Redemption Right: Concurrently with the redemption of shares
------------------------
of the Series A Preferred Stock on April 1 of each of the years 1978 through
1983, both years inclusive, the Corporation may redeem, at the price, upon the
notice and in the manner specified in foregoing paragraph (d) of this Section,
an
<PAGE>
- 13 -
additional number of shares of Series A Preferred Stock not exceeding the number
of shares then being redeemed pursuant to the sinking fund provided for in
foregoing paragraph (d) of this Section. The right of the Corporation to redeem
shares of Series A Preferred Stock pursuant to this Paragraph (e) shall not be
cumulative and the failure of the Corporation to redeem on any April 1 the full
number of shares to which it is entitled pursuant to this paragraph (e) shall
not increase the number of shares which it may redeem on any subsequent April l.
(f) Pro-Rata Redemption: All shares of Series A Preferred Stock to be
-------------------
redeemed at the option of the Corporation or pursuant to the sinking fund there
for shall be selected pro rata, and there shall be so redeemed from each record
holder, to the nearest whole share, that proportion of the shares then held by
each record holder which the total number of shares so redeemed bears to the
total number of shares of Series A Preferred Stock then outstanding.
(g) All shares of Series A Preferred Stock redeemed, retired, purchased or
otherwise acquired by the Corporation shall be cancelled and shall not be
reissued as shares of Series A Preferred Stock.
SECTION 2. Additional Voting Rights of Series A Preferred Stock. So long
--------- ----------------------------------------------------
as any shares of Series A Preferred Stock shall be outstanding, and in addition
to any other approvals or consents required by law or by these Articles of
Agreement or otherwise, without the consent of the holders of at least two-
thirds of the shares of Series A Preferred Stock at the time outstanding as of a
record date fixed by the Board of Directors, given either by their affirmative
vote at a special meeting called for that purpose, or if permitted by law, in
writing without a meeting:
(a) The Corporation will not increase the number of shares of Series A
Preferred Stock which the Corporation shall have authority to issue, or issue
any securities convertible into shares of Series A Preferred Stock;
(b) The Corporation shall not make any Restricted Stock Distributions
unless, after giving effect thereto, the aggregate of all such Restricted Stock
Distributions made, paid or declared during the period from January 1, 1976 to
and including the date of the making, payment or declaration of the Restricted
Stock Distribution in question, does not exceed the sum of (x) $800,000, plus
(or, in the case of a deficit, minus) (y) Net Income of the Corporation accrued
during such period (computing such Net Income on a cumulative basis for such
entire period); and unless at the time of the making, payment or declaration of
the proposed Restricted Stock Distribution, the conditions set forth in Section
3 of subdivision A of this Division I have been currently satisfied;
<PAGE>
- 14 -
(c) The Corporation will not amend, alter or repeal, directly or
indirectly, any of the provisions of these Articles of Agreement, as amended
(other than an amendment, alteration or repeal of any of the provisions of this
Part B), or of the By-Laws of the Corporation, which will affect adversely the
rights, preferences or powers of the Series A Preferred Stock or the holders
thereof; and the Corporation will not amend, alter or repeal, directly or
indirectly, any of the provisions of this Part B.
PART C. PROVISIONS RELATING TO THE SERIES B PREFERRED STOCK
SECTION 1. Designation, Dividend Rate, Optional Redemption Price and Sinking
--------- -----------------------------------------------------------------
Fund. (a) Creation and Designation: A series of the Preferred Stock
- ---- ------------------------
consisting of 10,000 shares and designated as Series B Preferred Stock is hereby
created.
(b) Dividends: The Series B Preferred Stock shall be entitled to receive
---------
out of any assets of the Corporation lawfully available for dividends, if, when
and as declared by the Board of Directors of the Corporation, preferential
cumulative dividends at the rate of $15.50 per share per annum and no more,
payable quarterly on the first day of January, April, July, and October in each
year. Such dividends on each share of Series B Preferred Stock shall accrue and
be cumulative from the date of issue thereof.
(c) Optional Redemption: The redemption price per share (herein called
-------------------
"optional redemption price") for shares of Series B Preferred Stock redeemed at
the option of the Corporation pursuant to the provisions of Section 5 of
subdivision A of this Division I shall be as follows:
<TABLE>
<CAPTION>
Price Per
Share If Redeemed During 12 Month Period Ending:
- --------- ------------------------------------------
<C> <S>
$115.5000 May 1, 1982
114.6842 May 1, 1983
113.8864 May 1, 1984
113.0526 May 1, 1985
112.2368 May 1, 1986
111.4210 May 1, 1987
110.6053 May 1, 1988
109.7895 May 1, 1989
108.9737 May 1, 1990
108.1579 May 1, 1991
107.3421 May 1, 1992
106.5263 May 1, 1993
105.7105 May 1, 1994
104.8947 May 1, 1995
104.0079 May 1, 1996
103.2632 May 1, 1997
</TABLE>
<PAGE>
- 15 -
<TABLE>
<C> <S>
102.4474 May 1, 1998
101.6316 May 1, 1999
100.8158 May 1, 2000
100.0000 May 1, 2001
</TABLE>
plus in each case an amount in cash equivalent to all dividends accrued or in
arrears thereon (whether or not earned or declared) to and including the date of
redemption; provided, however, that prior to May 1, 1991, the Corporation shall
not redeem shares of the Series B Preferred Stock pursuant to the provisions of
this paragraph (c) in contravention of the provisions of the following paragraph
(f) of this Section l.
(d) Sinking Fund: So long as any shares of Series B Preferred Stock
------------
remain outstanding, on or before May 1, 1982, and on May 1 of each year
thereafter, the Corporation shall set aside a sum equal to the lesser of (i)
$50,000 or (ii) the number of shares of Series B Preferred Stock then
outstanding multiplied by $100, as and for a sinking fund for the Series B
Preferred Stock. Funds so set aside for the sinking fund shall be applied by or
at the direction of the Corporation on May 1 of each year, beginning with the
year 1982, to the redemption of shares of Series B Preferred Stock at a price
equal to $100 per share plus accrued and unpaid dividends, whether or not earned
or declared, on each share so redeemed to and including the date fixed for such
redemption, and in the manner, upon the notice and with the effect specified in
Section 5 of subdivision A of this Division I. Accrued and unpaid dividends on
shares of Series B Preferred Stock to be redeemed through the sinking fund shall
not be charged to funds deposited in the sinking fund but shall be paid out of
the other funds of the Corporation.
The obligation of the Corporation to set apart such sum or sums shall
be cumulative so that, if the full amount required to be set apart as aforesaid
in each such year for the sinking fund shall not be so set apart, the deficiency
shall be made good thereafter as soon as funds shall become lawfully available
therefore.
(e) Special Redemption Right: Concurrently with the redemption of
------------------------
shares of the Series B Preferred Stock on May 1 of each of the years 1982
through 2000, both years inclusive, the Corporation may, except as otherwise
provided in the following paragraph (f) of this Section 1, redeem, at the price,
upon the notice and in the manner specified in the foregoing paragraph (d) of
this Section 1, an additional number of shares of Series B Preferred Stock not
exceeding the number of shares then being redeemed pursuant to the sinking fund
provided for in foregoing paragraph (d) of this Section, provided that the
aggregate number of shares of the Series B Preferred Stock so voluntarily
redeemed shall not exceed 2,500. The right of the Corporation to redeem shares
of Series B Preferred Stock pursuant to this paragraph (e)
<PAGE>
- 16 -
shall not be cumulative and the failure of the Corporation to redeem on any May
1 the full number of shares to which it is entitled pursuant to this paragraph
(e) shall not increase the number of shares which it may redeem on any
subsequent May 1.
(f) Limitations on Redemptions Prior to May 1, 1991: Except with
-----------------------------------------------
respect to redemptions pursuant to the sinking fund provided for in the
foregoing paragraph (d) of this Section 1, no redemption shall be made prior to
May 1, 1991 as a part of a refunding or anticipated refunding operation
involving, directly or indirectly, funds borrowed by the Company or any
affiliate of the Company or funds received by the Company or any affiliate of
the Company as proceeds from the sale of preferred stock (including, within the
meaning of that term, Preferred Stock, Parity Stock or Prior Stock) having (i)
an effective interest cost (in the case of borrowings) or dividend rate (in the
case of preferred stock) of less than 15.50% per annum, or (ii) as of the date
of proposed redemption, a Weighted Average Life to Maturity less than the
remaining Weighted Average Life to Maturity of the Series B Stock. The
"Weighted Average Life to Maturity" of any indebtedness for borrowed money or of
any preferred stock means as at the time of the determination thereof the number
of years obtained by dividing the then Remaining Dollar-Years of such
indebtedness or preferred stock by the then outstanding principal amount of such
indebtedness or by the par value plus paid-in capital received for the then
outstanding preferred stock, as the case may be. The term "Remaining Dollar-
Years" of any indebtedness for borrowed money or any preferred stock means the
amount obtained by (i) multiplying the amount of each then remaining sinking
fund, serial maturity or other required repayment or redemption, including
repayment at final maturity or final mandatory redemption, by the number of
years (calculated to the nearest one-twelfth) which will elapse between the date
of determination and the date of that required repayment or redemption, and (ii)
totaling all the products obtained in (i).
(g) Pro-Rata Redemption: All shares of Series B Preferred Stock to be
-------------------
redeemed at the option of the Corporation or pursuant to the sinking fund
therefor shall be selected pro rata, and there shall be so redeemed from each
record holder, to the nearest whole share, that proportion of the shares then
held by each record holder which the total number of shares so redeemed bears to
the total number of shares of Series B Preferred Stock then outstanding.
(h) Cancellation of Series B preferred Stock Acquired by the
--------------------------------------------------------
Corporation: All shares of Series B Preferred Stock redeemed, retired,
- -----------
purchased or otherwise acquired by the Corporation shall be cancelled and shall
not be reissued as shares of Series B Preferred Stock.
<PAGE>
- 17 -
SECTION 2. Limited Voting Rights of Series B preferred Stock
--------- -------------------------------------------------
Except as provided in these Articles of Agreement, as amended,
including paragraph (a) of Section 6 of subdivision A of this Division I
providing limited contingent voting rights with respect to the election of
certain directors and this Section 2, or as may be required by law, the holders
of Series B Preferred Stock shall have no voting rights for the election of
directors or in respect of any other matter.
So long as any shares of Series B Preferred Stock shall be outstanding,
and in addition to any other approvals or consents required by law or by these
Articles of Agreement or otherwise, without the consent of the holders of at
least two-thirds of the shares of Series B Preferred Stock at the time
outstanding as of a record date fixed by the Board of Directors, given either by
their affirmative vote at a special meeting called for that purpose, or, if
permitted by law, in writing without a meeting:
(a) The Corporation will not increase the number of shares of Series B
preferred Stock which the Corporation shall have authority to issue, or issue
any securities convertible into shares of Series B Preferred Stock;
(b) The Corporation shall not make any Restricted Stock Distributions
unless, after giving effect thereto, the aggregate of all such Restricted Stock
Distributions made, paid or declared during the period from January 1, 1976 to
and including the date of the making, payment or declaration of the Restricted
Stock Distribution in question, does not exceed the sum of (x) $800,000, plus
(or, in the case of a deficit, minus) (y) Net Income of the Corporation accrued
during such period (computing such Net Income on a cumulative basis for such
entire period); and unless at the time of the making, payment or declaration of
the proposed Restricted Stock Distribution, the conditions set forth in Section
3 of subdivision A of this Division I have been currently satisfied;
(c) The Corporation will not amend, alter or repeal, directly or
indirectly, any of the provisions of these Articles of Agreement, as amended
(other than an amendment, alteration or repeal of any of the provisions of this
Part C, or of the By-Laws of the Corporation, which will affect adversely the
rights, preferences or powers of the Series B Preferred Stock or the holders
thereof; and the Corporation will not amend, alter or repeal, directly or
indirectly, any of the provisions of this Part C.
<PAGE>
- 18 -
SECTION 3. Other Provisions Applicable to the Series B
---------- -------------------------------------------
Preferred Stock.
- ---------------
Other powers, preferences and rights, and the qualifications,
limitations and restrictions thereof, of the Series B Preferred Stock shall be
as provided in these Articles of Agreement, as amended.
PART D. DEFINITIONS
SECTION l. As used in this Division I, the following terms shall have
---------
the following meanings:
(a) The term "Common Stock" of any corporation shall mean stock of any
class or classes (however designated) the holders of which are ordinarily, in
the absence of contingencies, entitled to vote for the election of a majority of
the directors (or persons performing similar functions) of such corporation,
even though the right so to vote has been suspended by the happening of such a
contingency;
(b) The term "Junior Stock" shall mean and include the Common Stock,
and shares of stock of any other class of the Corporation ranking junior to the
Preferred Stock with respect to both the payment of dividends and the
distribution of assets upon the liquidation, dissolution or winding up of the
Corporation;
(c) The term "Junior Stock Equity" shall mean the sum of the par or
stated value of all outstanding Junior Stock plus (or minus in the case of a
deficit) all earned and capital surplus (other than any capital surplus
allocable to the Preferred Stock and other than surplus resulting from a
revaluation, after January 1, 1977, of assets), determined in accordance with
generally accepted accounting principles consistently applied;
(d) The term "Net Income" of the Corporation for any period means the
net income (or net loss) for such period (taken as a cumulative whole) of the
Corporation available for dividends after all proper charges and reserves,
determined in accordance with generally accepted accounting principles, provided
that in any event
(1) there shall be excluded net gains and net losses (which shall
be determined by deducting from the gross proceeds of the sale
or other disposition (A) all expenses allocable thereto and
(B) any income and excess profits tax allocable to any gain)
in such period on the sale or other disposition, not in the
ordinary course of business, of capital assets or investments
or on the acquisition or retirement or sale or other
<PAGE>
- 19 -
disposition of shares of stock or other securities of the
Corporation;
(2) there shall be deducted depreciation (including obsolescence)
and amortization determined in accordance with generally
accepted accounting principles, in amounts approved by the
independent public accountants of the Corporation at the time
of certifying the annual financial statements of the
corporation;
(3) there shall be excluded the proceeds from any life insurance
policies;
(e) The terms "Prior Stock" and "Parity Stock" shall mean shares of
stock of any class of the Corporation (other than the Preferred Stock) ranking
prior to or on a parity with, as the case may be, the Preferred Stock with
respect either to the payment of dividends or the distribution of assets upon
the liquidation, dissolution or winding up of the Corporation, and shall have no
reference to the rate or amount of such dividends or distributions or to other
terms of the shares;
(f) The term "Restricted Stock Distribution" shall mean the
declaration or payment of any dividend on, or the making of any other
distribution on or in respect of, any share or shares of Junior Stock (other
than a dividend or distribution solely in shares of Junior Stock) or the
purchase, redemption or retirement of any share or shares of Junior Stock
(except in exchange for or out of the net proceeds of the substantially
concurrent sale of other shares of Junior Stock) or any warrants or other rights
to acquire shares of Junior Stock. For the purposes of this definition the
amount of any Restricted Stock Distribution declared, paid or distributed in
property of the Corporation shall be deemed to be the book value of such
property at the time of the making of the Restricted Stock Distribution in
question.
SECTION 2. Computations and Financial Statements. For the purposes
--------- -------------------------------------
of this Division I unless otherwise expressly provided, all computations shall
be made and all financial statements shall be prepared in accordance with
generally accepted accounting principles approved by independent public
accountants who may be the independent public accountants regularly employed by
the Corporation to examine its books and accounts.
DIVISION II
PROVISIONS RELATING TO THE COMMON STOCK
A. Dividend Rights. Subject to the restrictions and limitations
---------------
contained in these Articles of Agreement, as amended, relating to the Preferred
Stock, the holders of the Common Stock
<PAGE>
- 20 -
shall be entitled to receive, when and as declared by the Board of Directors,
out of any funds legally available for the purpose, such dividends as may be
declared from time to time by the Board of Directors.
B. Voting Rights. Subject to the restrictions and limitations
-------------
contained in these Articles of Agreement, as amended, relating to the Preferred
Stock, each holder of Common Stock of the Corporation shall be entitled to one
vote for each share of Common Stock standing in his name upon the books of the
Corporation.
DIVISION III
INCONSISTENT OR CONFLICTING BY-LAWS
A. To the extent any of the provisions of this Article IV are
inconsistent with, or in conflict with, any of the provisions of the By-Laws of
the Corporation, then the provisions of this Article IV shall control.
ARTICLE V
---------
The first meeting of the incorporators shall be held at the office of
Louis E. Wyman, 45 Market Street, Manchester, New Hampshire, on the 23rd day of
July, 1945, at 11:00 o'clock in the forenoon and we hereby waive all future
notice of the same.
October 1, 1988
<PAGE>
Exhibit 3.2
BY-LAWS
OF
ENERGYNORTH NATURAL GAS, INC.
ARTICLE I
Offices
-------
The principal office of the corporation in the State of New Hampshire shall
be located in the City of Manchester, County of Hillsborough. The corporation
may have such other offices, either within or without the State of New
Hampshire, as the board of directors may designate or as the business of the
corporation may require from time to time.
ARTICLE II
Shareholders
------------
Section 2.1 Annual Meeting. The annual meeting of the shareholders shall
--------------
be held on the first Wednesday in the month of February in each year, beginning
with the year 1986, at the hour of 10:00 a.m., or at such other time on such
other day as shall be fixed by the board of directors, for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday in the State of New Hampshire, such meeting shall be held on the next
succeeding business day. If the election of directors shall not be held on the
day designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the board of directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as conveniently may
be.
Section 2.2 Special Meetings. Special meetings of the shareholders, for
----------------
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the president or by the board of directors, and shall be called by the
president at the request of the holders of not less than one-tenth (1/10) of all
outstanding shares of the corporation entitled to vote at the meeting.
Section 2.3 Place of Meeting. The board of directors may designate any
----------------
place, either within or without the State of New Hampshire, as the place of
meeting for any annual meeting or for any special meeting called by the board of
directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may
<PAGE>
designate any place, either within or without the State of New Hampshire, as the
place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
office of the corporation in the State of New Hampshire.
Section 2.4 Notice of Meeting. Written notice stating the place, day and
-----------------
hour of the meeting, and in case of a special meeting the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) nor more than fifty (50) days before the
date of the meeting, either personally or by mail, by or at the direction of the
president, or the secretary, or the officer or other persons calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
Section 2.5 Closing of Transfer Books or Fixing of Record Date. For the
--------------------------------------------------
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the board of directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, fifty (50) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least ten (10) days immediately preceding such meeting. In
lieu of closing the stock transfer books, the board of directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than fifty (50) days and, in case of a
meeting of shareholders, not less than ten (10) days prior to the date on which
the particular action requiring such determination of shareholders is to be
taken. If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice of or to vote at a
meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the date on which the notice of the meeting is mailed or the date on
which the resolution of the board of directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
Section 2.6 Voting Record. The officer or agent having charge of the stock
-------------
transfer books for shares of the corporation shall make a complete record of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares
<PAGE>
- 3 -
held by each. Such record shall be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any shareholder during
the whole time of the meeting for the purposes thereof.
Section 2.7 Quorum. A majority of the outstanding shares of the
------
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the shares are represented at a meeting, a majority of the shares so represented
may adjourn the meeting from time to time without further notice. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 2.8 Proxies. At all meetings of shareholders, a shareholder may
-------
vote in person or by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of
the corporation before or at the time of the meeting. No proxy shall be valid
after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy.
Section 2.9 Voting of Shares. Unless cumulative voting is authorized in
----------------
the articles of incorporation, each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
Section 2.10 Voting of Shares by Certain Holders. Shares standing in the
-----------------------------------
name of another corporation may be voted by such officer, agent or proxy as the
By-Laws of such corporation may prescribe or, in the absence of such provision,
as the board of directors of such other corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under control of a receiver may be voted by such receiver
without the transfer thereof into his name if authority so to do be contained in
an appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the
<PAGE>
- 4 -
name of the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
Neither treasury shares of its own stock held by the corporation, nor
shares held by another corporation if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the
corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
Section 2.11 Informal Action by Shareholders. Any action required or
-------------------------------
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.
ARTICLE III
Board of Directors
------------------
Section 3.1 General Powers. The business and affairs of the corporation
--------------
shall be managed by its board of directors.
Section 3.2 Number Tenure and Qualifications. The number of directors of
--------------------------------
the corporation shall be five (5). Each director shall hold office until the
next annual meeting of shareholders and until his successor shall have been
elected and qualified. Directors need not be residents of the State of New
Hampshire or shareholders of the corporation.
Section 3.3 Regular Meetings. A regular meeting of the board of directors
----------------
shall be held without other notice than this By-Law immediately after, and at
the same place as, the annual meeting of shareholders. The board of directors
may provide, by resolution, the time and place, either within or without the
State of New Hampshire, for the holding of additional regular meetings without
other notice than such resolution.
Section 3.4 Special Meetings. Special meetings of the board of directors
----------------
may be called by or at the request of the president or any two directors. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or without the State of New Hampshire, as the
place for holding any special meeting of the board of directors called by them.
Section 3.5 Notice. Notice of any special meeting shall be given at least
------
two (2) days previously thereto by written notice delivered personally or mailed
to each director at his business address, or by telegram. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
so
<PAGE>
- 5 -
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegram company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. 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 or waiver of notice of such meeting.
Section 3.6 Special Telephone Meeting. A special telephone meeting of the
-------------------------
board of directors may be called by or at the request of the chairman, the
president, or any two directors, by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence at
the meeting. Notice of a special telephone meeting shall be given by telephone
to or telegram delivered to a responsible person at the director's residence or
business address not less than 12 hours prior to the telephone meeting.
Section 3.7 Quorum. A majority of the number of directors fixed in the
------
manner prescribed by Section 2 of this Article III shall constitute a quorum for
the transaction of business at any meeting of the board of directors, but if
less than such majority is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice.
Section 3.8 Manner of Acting. The act of the majority of the directors
----------------
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 3.9 Action Without a Meeting. Any action required or permitted to
------------------------
be taken by the board of directors at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the directors.
Section 3.10 Vacancies. Any vacancy occurring in the board of directors
---------
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the board of directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election by the board of directors for a term of
office continuing only until the next election of directors by the shareholders.
Section 3.11 Compensation. By resolution of the board of directors, each
------------
director may be paid his expenses, if any, of attendance at each meeting of the
board of directors, and may be
<PAGE>
- 6 -
paid a stated salary as director or a fixed sum for attendance at each meeting
of the board of directors or both. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
Section 3.12 Presumption of Assent. A director of the corporation who is
---------------------
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE IV
Officers
--------
Section 4.1 Number. The officers of the corporation shall be a chairman of
------
the board, vice chairman, president, one or more vice-presidents (the number
thereof to be determined by the board of directors), a secretary, and a
treasurer, each of whom shall be elected by the board of directors. Such other
officers and assistant officers as may be deemed necessary may be elected or
appointed by the board of directors. Any two or more offices may be held by the
same person, except the offices of president and secretary.
Section 4.2 Election and Term of Office. The officers of the corporation
---------------------------
to be elected by the board of directors shall be elected annually by the board
of directors at the first meeting of the board of directors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign or shall have been removed in the manner hereinafter provided.
Section 4.3 Removal. Any officer or agent may be removed by the board of
-------
directors whenever, in its judgment, the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
Section 4.4 Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or otherwise, may be
<PAGE>
- 7 -
filled by the board of directors for the unexpired portion of the term.
Section 4.5 Chairman of the Board. The chairman of the board shall preside
---------------------
at all meetings of the board of directors and shareholders and shall have such
other duties as the board of directors may prescribe.
Section 4.6 Vice Chairman of the Board. The vice chairman of the board
--------------------------
shall perform such duties as may be assigned to him by the board of directors or
the chairman of the board. In the absence of the chairman, the vice chairman
shall perform the duties of chairman.
Section 4.7 President. The president, subject to the control of the board
---------
of directors, the chairman and vice chairman, shall in general supervise and
control all of the business and affairs of the corporation. He shall, in the
absence of the chairman and vice chairman, preside at meetings of the
shareholders and board of directors. He may sign, with the secretary or any
other proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these By-
Laws to some other officer or agent of the corporation, or shall be required by
law to be otherwise signed or executed; and in general shall perform all duties
incident to the office of president and such other duties as may be prescribed
by the board of directors from time to time.
Section 4.8 The Vice-Presidents In the absence of the president or in the
-------------------
event of his death, inability or refusal to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of the president,
and when so acting shall have all the powers of and be subject to all the
restrictions upon the president. Any vice-president may sign, with the
secretary or an assistant secretary, certificates for shares of the corporation;
and shall perform such other duties as from time to time may be assigned to him
by the president or by the board of directors.
Section 4.9 The Secretary. The secretary shall: (a) be the resident agent
-------------
of the corporation; (b) keep the minutes of the proceedings of the shareholders
and of the board of directors in one or more books provided for that purpose;
(c) see that all notices are duly given in accordance with the provisions of
these By-Laws or as required by law; (d) be custodian of the corporate records
and of the seal of the corporation and see that the seal of the corporation is
affixed to all documents the execution of which
<PAGE>
- 8 -
on behalf of the corporation under its seal is duly authorized; (e) keep a
register of the post office address of each shareholder which shall be furnished
to the secretary by such shareholder; (f) sign with the president, or a vice-
president, certificates for shares of the corporation, the issuance of which
shall have been authorized by resolution of the board of directors; (g) have
general charge of the stock transfer books of the corporation; and (h) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the president or by the
board of directors.
Section 4.10 The Treasurer. The treasurer shall: (a) have charge and
-------------
custody of and be responsible for all funds and securities of the corporation;
(b) receive and give receipts for monies due and payable to the corporation from
any source whatsoever, and deposit all such monies in the name of the
corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article V of these By-Laws; (c)
sign with the president, or a vice-president, certificates for shares of the
corporation, the issuance of which shall have been authorized by resolution of
the board of directors; and (d) in general perform all of the duties incident to
the office of treasurer and such other duties as from time to time may be
assigned to him by the president or by the board of directors. If required by
the board of directors, the treasurer shall give a bond for the faithful
discharge of his duties in such sum and with such surety or sureties as the
board of directors shall determine.
Section 4.11 Assistant Secretaries and Assistant Treasurers. The assistant
----------------------------------------------
secretaries or assistant treasurers, when authorized by the board of directors,
may sign with the president or a vice-president certificates for shares of the
corporation the issuance of which shall have been authorized by a resolution of
the board of directors. The assistant treasurers shall respectively, if
required by the board of directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the board of directors shall
determine. The assistant secretaries and assistant treasurers, in general,
shall perform such duties as shall be assigned to them by the secretary or the
treasurer, respectively, or by the President or the board of directors.
Section 4.12 Salaries. The salaries of the officers shall be fixed from
--------
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
<PAGE>
- 9 -
ARTICLE V
Contracts, Loans, Checks and Deposits
-------------------------------------
Section 5.1 Contracts. The board of directors may authorize any officer or
---------
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
Section 5.2 Loans. No loans shall be contracted on behalf of the
-----
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
Section 5.3 Checks, Drafts, etc. All checks, drafts or other orders for
-------------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents, of the corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
Section 5.4 Deposits. All funds of the corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the board of directors may
select.
ARTICLE VI
Certificates for Shares and Their Transfer
------------------------------------------
Section 6.1 Certificates for Shares. Certificates representing shares of
-----------------------
the corporation shall be in such form as shall be determined by the board of
directors. Such certificates shall be signed by the chairman or vice chairman
of the board of directors, or the president or a vice-president, and by the
secretary or an assistant secretary, or the treasurer or an assistant treasurer
and sealed with the corporate seal or a facsimile thereof. The signatures of
such officers upon a certificate may be facsimiles if the certificate is
manually signed on behalf of a transfer agent or a registrar, other than the
corporation itself or one of its employees. Each certificate for shares shall
be consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for transfer shall
be cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except
that in case of a lost, destroyed
<PAGE>
- 10 -
or mutilated certificate a new one may be issued therefor upon such terms and
indemnity to the corporation as the board of directors may prescribe.
Section 6.2 Transfer of Shares. Transfer of shares of the corporation
------------------
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the corporation,
and on surrender for cancellation of the certificate for such shares. The
person in whose name shares stand on the books of the corporation shall be
deemed by the corporation to be the owner thereof for all purposes.
ARTICLE VII
Dividends
---------
The board of directors may, from time to time declare and the corporation
may pay dividends on its outstanding shares in the manner, and upon the terms
and conditions provided by law and its articles of incorporation.
ARTICLE VIII
Corporate Seal
--------------
The board of directors shall provide a corporate seal which shall consist
of a flat-faced circular die with the words and figures "EnergyNorth Natural
Gas, Inc.- Incorporated 1945-New Hampshire" inscribed thereon.
ARTICLE IX
Waiver of Notice
----------------
Whenever any notice is required to be given to any shareholder or director
of the corporation under the provisions of these By-Laws or under the provisions
of the articles of incorporation or under the provisions of the New Hampshire
Business Corporation Act, a waiver thereof in writing signed by the person or
persons entitled to such notice, whether before or after the time stated herein,
shall be deemed equivalent to the giving of such notice.
<PAGE>
- 11 -
ARTICLE X
Amendments
----------
These By-Laws may be altered, amended or repealed and new By-Laws may be
adopted by the board of directors, subject to repeal or change by action of the
shareholders.
ARTICLE XI
Executive Committee
-------------------
Section 11.1 Appointment. The board of directors, by resolution adopted by
-----------
a majority of the full board, may designate two or more of its members to
constitute an executive committee. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the board of
directors, or any member thereof, of any responsibility imposed by law. The
board of directors, by resolution adopted by a majority of the full board, may
terminate the executive committee at any time.
Section 11.2 Authority. The executive committee, when the board of
---------
directors is not in session, shall have and may exercise all of the authority of
the board of directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee and except also
that the executive committee shall not have the authority of the board of
directors in reference to amending the articles of incorporation, adopting a
plan of merger or consolidation, recommending to the shareholders the sale,
lease or other disposition of all or substantially all of the property and
assets of the corporation otherwise than in the usual and regular course of its
business, recommending to the shareholders a voluntary dissolution of the
corporation or a revocation thereof, or amending these By-Laws of the
corporation.
Section 11.3 Tenure and Qualifications. Each member of the executive
-------------------------
committee shall hold office until the next regular annual meeting of the board
of directors following his designation and until his successor is designated as
a member of the executive committee and is elected and qualified.
Section 11.4 Meetings. Regular meetings of the executive committee may be
--------
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee
may be called by any member thereof upon not less than one (1) day's notice
stating the place, date and hour of the meeting, which notice may be written or
oral, and if mailed, shall be deemed to be delivered when deposited in the
United States mail addressed to the member of the executive committee at his
business address. Any member of the executive
<PAGE>
- 12 -
committee may waive notice of any meeting and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of
the executive committee need not state the business proposed to be transacted at
the meeting.
Section 11.5 Special Telephone Meetings A special telephone meeting of the
--------------------------
executive committee may be called by any member thereof by means of a conference
telephone or similar communication equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence at the meeting. Notice of a special telephone meeting shall
be given by telephone or a telegram delivered to a responsible person at the
member's residence or business address not less than 12 hours prior to the
telephone meeting.
Section 11.6 Quorum. A majority of the members of the executive committee
------
shall constitute a quorum for the transaction of business at any meeting thereof
and action of the executive committee must be authorized by the affirmative vote
of a majority of the members present at a meeting at which a quorum is present.
Section 11.7 Action Without a Meeting. Any action required or permitted to
------------------------
be taken by the executive committee at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the members of the executive committee.
Section 11.8 Vacancies. Any vacancy in the executive committee may be
---------
filled by a resolution adopted by a majority of the full board of directors.
Section 11.9 Resignations and Removal. Any member of the executive
------------------------
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the corporation and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 11.10 Procedure. The executive committee shall elect a presiding
---------
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these By-Laws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information at
the meeting thereof held next after the proceedings shall have been taken.
<PAGE>
- 13 -
ARTICLE XII
Indemnification of Directors and Officers
-----------------------------------------
The corporation shall indemnify each of its directors or officers or former
directors or officers, or any person who may have served at its request as a
director or officer of another corporation, partnership, joint venture, trust,
or other enterprise to the fullest extent permitted by law.
<TABLE>
<CAPTION>
<S> <C>
ADOPTED: January 25, 1984
AMENDED: October 23, 1985
AMENDED: August 6, 1986
AMENDED: February 4, 1987
AMENDED: February 1, 1988
AMENDED: July 31, 1989
</TABLE>
<PAGE>
Exhibit 4.5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ENERGYNORTH NATURAL GAS, INC.
(Formerly Gas Service, Inc.)
TO
BANK OF NEW HAMPSHIRE
Trustee
-------------------
SIXTH SUPPLEMENTAL INDENTURE
Dated as of
, 1997
--------------
-------------------
Supplemental
To
General and Refunding Mortgage Indenture
Dated as of June 30, 1987
-------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SIXTH SUPPLEMENTAL INDENTURE
THIS SIXTH SUPPLEMENTAL INDENTURE dated and entered into as of
__________, 1997, by and between ENERGYNORTH NATURAL GAS, INC., a corporation
duly organized and existing under and by virtue of the laws of the State of New
Hampshire, having its principal office and place of business in Manchester,
County of Hillsborough, in the State of New Hampshire (hereinafter called the
"Company") and BANK OF NEW HAMPSHIRE, a New Hampshire trust company, as
successor trustee to Bank of New Hampshire, N.A., having its principal corporate
trust office and place of business in Concord, New Hampshire, and a current
mailing address of 143 North Main Street, Concord, New Hampshire 03301, as
Trustee (hereinafter referred to as the "Trustee") under the General and
Refunding Mortgage Indenture dated as of June 30, 1987 (the "Original
Indenture") from Gas Service, Inc. (now named EnergyNorth Natural Gas, Inc.), as
heretofore amended and supplemented by a First Supplemental Indenture dated as
of October 1, 1988, a Second Supplemental Indenture dated as of August 31, 1989,
a Third Supplemental Indenture dated as of September 1, 1990, a Fourth
Supplemental Indenture dated as of January 10, 1992, and a Fifth Supplemental
Indenture dated as of February 1, 1995 (said General and Refunding Mortgage
Indenture together with the First Supplemental Indenture, the Second
Supplemental Indenture, the Third Supplemental Indenture, the Fourth
Supplemental Indenture, the Fifth Supplemental Indenture, and this Sixth
Supplemental Indenture, being sometimes hereinafter referred to as the
"Indenture"); and
WHEREAS, the Company by resolution of its Board of Directors duly
adopted has determined forthwith to issue an additional series of bonds to be
secured by the Indenture to be known and designated as "First Mortgage Bonds
_____% Series E Due 2027" (said bonds being referred to as the "Series E Bonds"
or "bonds of Series E"); and
WHEREAS, on or subsequent to the date of the Fourth Supplemental
Indenture, the Company has constructed or acquired certain additional properties
which are subject in any event to the lien and effect of the Indenture, but
nevertheless, in accordance with the provisions of Section 17.01(a) of the
Indenture, the Company desires to execute and deliver this Sixth Supplemental
Indenture for the purpose of specifically conveying to the Trustee upon the
trusts and for the purpose of the Indenture all of such additional properties
constructed or acquired and now owned by the Company, except property of the
character of that expressly excepted and excluded from the lien of the
Indenture; and
WHEREAS, the Company desires in accordance with the provisions of
Section 5.01(e) of the Indenture to execute this Sixth Supplemental Indenture
for the purpose of creating the Series E Bonds and providing for the terms
thereof as contemplated in Section 2.03 of the Indenture, all as set forth in
this Sixth Supplemental Indenture; and
WHEREAS, the Company has, by proper resolution of its Board of
Directors, duly voted to execute, acknowledge and file with the Trustee and to
request the Trustee to execute this Sixth Supplemental Indenture; and
<PAGE>
WHEREAS, each of the Series E Bonds is to be substantially in the
following form, to-wit:
2
<PAGE>
(FORM OF SERIES E BOND)
No. RD- $
---------------
ENERGYNORTH NATURAL GAS, INC.
First Mortgage Bond
% Series E Due 2027
-----
ENERGYNORTH NATURAL GAS, INC., a corporation of the State of New
Hampshire (hereinafter called the "Company"), for value received, hereby
promises to pay to ______________________________, or registered assigns, the
principal sum of __________________________________________________
($__________) at the principal corporate trust office of Bank of New Hampshire
(hereinafter called the "Trustee", which term shall include its successors in
the trusts hereinafter referred to) in the City of Concord (or at the principal
corporate trust office of its then successor Trustee) or, at the option of the
registered owner hereof, at the office of any other paying agent appointed by
the Company, on __________ and to pay interest thereon from the date hereof at
the rate per annum specified in the title of this Bond, semi-annually on
__________ and __________ in each year commencing __________ and to pay interest
on any overdue installment of principal, premium, if any, and interest at the
rate of ____% per annum (to the extent legally enforceable) (in each case
computed on the basis of a 360-day year of twelve 30-day months) at the
principal corporate trust office of the Trustee or, at the option of the
registered owner hereof, at the office of any such paying agent, until the
principal hereof shall have been paid in full; such interest payable on any
__________ or __________ shall (subject to certain exceptions provided in the
Indenture referred to below) be paid to the person in whose name this Bond or
the bond in exchange or substitution for which this Bond shall have been issued,
shall have been registered at the close of business on the __________ or
__________, as the case may be, next preceding such __________ of __________.
At the option of the person in whose name this Bond shall have been registered,
principal, premium, if any, and interest may be paid by wire transfer in
immediately available funds or by check payable to the order of and mailed to
the address of the person entitled thereto as the name and address of such
person shall appear on the bond register maintained pursuant to the Indenture.
Both principal and premium, if any, and interest shall be paid in any coin or
currency of the United States of America which, at the time of payment, is legal
tender for payment of public and private debts.
The Company hereby agrees that the interest rate per annum on this
Bond specified in the title of this Bond and the interest rate of ____% per
annum on any overdue installment of principal, premium, if any, and interest
shall be the applicable interest rates, notwithstanding the rate of interest
prescribed by statute from time to time.
This Bond is one of a duly authorized issue of First Mortgage Bonds of
the Company, the aggregate principal amount of which is not limited except as
such may be limited
3
<PAGE>
by law, to be issued in series with distinctive designations, the series of
which this Bond is one, designated as Series E, being limited to an aggregate
principal amount of twenty-two million dollars ($22,000,000), all bonds of all
series, including the bonds of Series E, to be issued under and secured by a
certain General and Refunding Mortgage Indenture dated as of June 30, 1987 by
and between the Company and Bank of New Hampshire, N.A., Trustee (said General
and Refunding Indenture, as heretofore or hereafter amended and supplemented,
being hereinafter referred to as the "Indenture"), to which Indenture reference
is hereby made for a description of the mortgaged and pledged property, the
nature and extent of the security and benefit thereof, the terms and conditions
under which the bonds may be issued and secured, the rights and remedies under
the Indenture of the bondholders, and the rights and obligations under the
Indenture of the Company and the Trustee. An executed counterpart of the
Indenture is on file at the principal corporate trust office of the Trustee.
As stated therein, the Indenture may in certain respects be modified
without the consent of the bondholders and may, with the consent of holders of
not less than sixty-six and two-thirds percent (66-2/3%) in principal amount of
the bonds of all series then issued and outstanding, be modified in certain
other respects in each case upon the conditions and in the manner provided in
the Indenture, but, among other restrictions, no such modification shall affect
or impair the obligation of the Company in respect of the principal of and
premium, if any, and interest on this Bond.
In the event of certain defaults, the principal of this Bond may be
declared or may become due and payable prior to maturity in the manner and with
the effect provided in the Indenture. As stated in the Indenture, a majority in
aggregate principal amount of the bonds of all series at any time outstanding
may waive a past default and its consequences, except a default in the payment
of the principal of or premium, if any, or interest on any bond, or a default in
respect of a covenant or provision of the Indenture which cannot be modified
without the consent of the holder of each outstanding bond affected.
No reference herein to the Indenture and no provisions of this Bond or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Bond as herein set forth; provided that no recourse under or
upon any obligation, covenant or agreement contained in the Indenture, or in
this Bond, or under any judgment obtained against the Company, or by the
enforcement of any assessment or penalty, or by an legal or equitable
proceedings by virtue of any constitution or statute or rule of law or
otherwise, shall be had against any incorporator, stockholder, officer, or
director, past, present or future, as such of the Company, or of any predecessor
or successor company, either directly of through the Company or such predecessor
or successor company, or otherwise, for the payment for or to the Company
or any receiver thereof, or for or to the holder of this Bond, of any sum that
may be due and unpaid by the Company upon and any and all personal liability of
every name and nature, whether at common law or in equity or by statute or by
constitution or otherwise, or any such incorporator, stockholder, officer or
director, as such, for the payment for or to the Company or any receiver
thereof, or for or to the holder of this Bond of any sum that may remain due and
4
<PAGE>
unpaid upon this Bond is hereby expressly waived and released as a condition of
and as part of the consideration to the execution of the Indenture and the issue
of this Bond; provided, however, that nothing herein or in the Indenture
contained shall be taken to prevent recourse to and the enforcement of the
liability, if any, of any stockholder or subscriber to capital stock upon or in
respect of shares of capital stock not fully paid or the liability of any
stockholder or subscriber to capital stock under any agreement entered into by
such stockholder or subscriber to capital stock.
Upon compliance with the conditions prescribed in the Indenture and
upon surrender of this Bond, accompanied by a written instrument of assignment
in form satisfactory to the Trustee and duly executed by the registered owner in
person or by duly authorized attorney, at the principal corporate trust office
of the Trustee in the City of Concord, or at such other agency of the Company as
shall be maintained for such proposes, this Bond is transferable on the bond
register and thereupon a new bond or bonds of the same series and for a like
aggregate principal amount of authorized denominations will be issued in the
name of the transferee.
The Company, the Trustee, any authenticating agent, any paying agent,
and any registrar may deem and treat the registered holder hereof as the
absolute owner of this Bond (whether or not this Bond shall be overdue and
notwithstanding any notice of ownership or writing hereon made by anyone other
than the Company or any registrar), for the purpose of receiving payment hereof
or on account hereof or interest or any premium hereon (subject to certain
provisions provided in the Indenture) and for all other purposes, and neither
the Company, the Trustee, any authenticating agent, any paying agent, nor any
registrar shall be affected by any notice to the contrary.
The bonds of Series E consist of fully registered bonds without
coupons in the denominations of one thousand dollars ($1,000), and multiples
thereof. This Bond, singly or with other bonds of the same series and
registered in the same name, may be exchanged for one or more bonds of the same
series and for a like aggregate principal amount in authorized denominations.
All bonds to be so exchanged shall be surrendered at the principal corporate
trust office of the Trustee in the City of Concord, or at such other agency of
the Company as shall be maintained for such purpose, and, if required by the
Trustee, accompanied by written instruments of assignment in form satisfactory
to the Trustee and duly executed by the registered owner in person or by duly
authorized attorney.
At the option of the Company and upon the notice and otherwise in the
manner and with the effect as provided in the Indenture, and particularly in the
Sixth Supplemental Indenture dated as of __________, 1997 (the "Sixth
Supplemental Indenture"), any or all of the bonds of Series E may be redeemed by
the Company at any time on or after ________, 2002, upon payment of 104% of the
principal amount of the bonds of Series E to be redeemed, declining by 1% of the
principal amount per year for each of the succeeding four years, and accrued
interest thereon to the date of such redemption.
5
<PAGE>
Notice of redemption shall be given by mail, first class postage
prepaid, to the holders of the bonds to be redeemed at least thirty (30) days
but no more than sixty (60) days prior to the date fixed for redemption, at
their last addresses as they shall appear on the register, or otherwise as
provided in the Indenture.
In case of the call for payment of less than the whole principal
amount of this Bond, upon payment of the redemption price to the registered
owner hereof and surrender of this Bond, there shall be issued to such
registered owner another bond of Series E in principal amount equal to the
unredeemed balance hereof.
This Bond shall be governed by and construed in accordance with the
law of the State of New Hampshire.
This Bond shall not be valid or obligatory for any purpose or entitled
to any security or benefit under the Indenture until the certificate of
authentication hereon shall have been signed by the Trustee or any
authenticating agent on its behalf.
IN WITNESS WHEREOF, EnergyNorth Natural Gas, Inc. has caused this Bond
to be executed in its name by its President or one of its Vice Presidents by his
or her signature or a facsimile thereof, and its corporate seal or a facsimile
thereof to be affixed hereto or imprinted hereon and attested by the signature
or facsimile signature of its Secretary or an Assistant Secretary.
Dated: ENERGYNORTH NATURAL GAS, INC.
By:
------------------------------------
President
[Corporate Seal]
6
<PAGE>
ATTEST:
- --------------------------------
Secretary
7
<PAGE>
(FORM OF CERTIFICATE OF AUTHENTICATION)
This is one of the First Mortgage bonds ___% Series E Due 2027
referred to in the within-mentioned Sixth Supplemental Indenture dated as of
__________, 1997.
BANK OF NEW HAMPSHIRE,
AS TRUSTEE
By:
----------------------------------------
Authorized Officer
- ----------------------------------------------------
(FORM OF ASSIGNMENT)
For value received, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
(Please Insert Social Security Or Other
Identifying Number of Assignee)
the within bond of EnergyNorth Natural Gas, Inc. and all rights thereunder,
hereby irrevocable constituting and appointing ____________________ attorney to
transfer said bond on the register of the Company, with full power of
substitution in the premises.
Dated:
NOTICE: The signature(s) to this assignment must correspond with the name(s)
as written upon the face of the within bond in every particular, without
alteration or enlargement or any change whatever.
- ----------------------------------------------------
NOW THEREFORE, THIS SIXTH SUPPLEMENTAL INDENTURE WITNESSETH that, in
consideration of the premises, and of the acceptance and purchase of the Series
E Bonds by the registered owner thereof, and of the mutual covenants herein
contained, and of the sum of $10 duly paid to the Company by the Trustee and of
other good and valuable consideration, the receipt whereof is hereby
acknowledged, and for the purpose of securing the due and punctual payment of
the principal of, and premium, if any, and interest on the bonds which have been
or shall be at any time issued and outstanding under the Indenture, and for the
purpose of securing the faithful performance and observance of all covenants and
conditions set
8
<PAGE>
forth in the Indenture and/or in any supplemental indenture, the Company has
executed and delivered this Sixth Supplemental Indenture, has given, granted,
bargained, sold, warranted, pledged, assigned, transferred, mortgaged, created a
security interest in, conveyed and confirmed, and by these presents does give,
grant, bargain, sell, warrant, pledge, assign, transfer, mortgage, create a
security interest in, convey and confirm (with mortgage covenants) unto Bank of
New Hampshire, Trustee, as herein provided, and its successor or successors in
the trust hereby created, and to its or their assigns, forever, all and
singular, the plants, rights, permits, franchises, easements and property, real,
personal, and mixed that has been acquired by the Company subsequent to January
10, 1992, together with the rents, issues, and profits thereof (including,
without limiting the generality of the foregoing, all real property specifically
described in Schedule A hereto); except such of said properties, rights or
interests therein as may have been or may be released by the Trustee, or sold
and disposed of, in whole or in part, as permitted by the provisions of the
Indenture;
SUBJECT, HOWEVER, to Permitted Liens (as that term is defined in Article I
of the Indenture);
AND SUBJECT FURTHER, to all defects and limitations of title and to all
other liens, charges, encumbrances, reservations, exceptions, exclusions,
restrictions, conditions, limitations, covenants, and interests existing at the
time of the acquisition of said properties, rights, or interests, including,
without limitation, the General and Refunding Mortgage Indenture dated as of
June 30, 1987, as amended and supplemented, between Manchester Gas Company and
Bank of New Hampshire, N.A. (the "Manchester Gas General and Refunding
Indenture") and the General and Refunding Mortgage Indenture dated as of June
30, 1987, as amended and supplemented, between Concord Natural Gas Corporation
and Bank of New Hampshire, N.A. (the "Concord Gas Indenture"), and any
substitutions, replacements, additions, betterments, extensions, and
enlargements thereof, none of which substantially interfere with the free use
and enjoyment by the Company of the property and rights hereinbefore described
for the general purposes and uses of the Company's gas business;
BUT SPECIFICALLY RESERVING, EXCEPTING AND EXCLUDING from this Sixth
Supplemental Indenture and from the grant, conveyance, mortgage, transfer and
assignment herein contained, all property, interests, and rights of the kind and
to the extent specified in subclauses (a) through (l), inclusive, including the
proviso thereto, of the granting clauses, on pages 9, 10, and 11 of the Original
Indenture.
TO HAVE AND TO HOLD all said plants, rights, permits, franchises,
easements, and property hereby conveyed, assigned, pledged, or mortgaged or
intended so to be, unto the Trustee, its successor or successors in trust, and
to its and their assigns forever;
BUT IN TRUST, NEVERTHELESS, for the additional and equal pro rata benefit,
security, and protection of the holders from time to time of all bonds
outstanding hereunder, without priority of one bond over any other (except as
provided in Section 8.04 of the Indenture and except as any special sinking,
purchase, amortization, improvement, or other fund
9
<PAGE>
established in accordance with the provisions of the Indenture may afford
additional or special security for the bonds of any particular series and except
independent security as provided in Section 2.03 of the Indenture), and upon the
trusts and subject to the conditions set forth in the Indenture;
PROVIDED, HOWEVER, that the maximum amount of bonds secured hereby is
$66,000,000 which amount includes $5,000,000 principal amount of bonds of Series
A, $7,000,000 principal amount of bonds of Series B, $10,000,000 principal
amount of bonds of Series C, $5,000,000 principal amount of the bonds of Series
D, $22,000,000 principal amount of Series E and premium, if any, interest and
default penalties, if any, on such bonds of Series A, Series B, Series C, Series
D, and Series E together with any advances made by the Trustee to protect its
interest in the trust estate. The maximum amount of bonds secured hereby shall
be increased upon the issuance of any additional series of bonds as provided in
a supplemental indenture hereto establishing such series of bonds. Pursuant to
the provisions of the First Supplemental Indenture dated as of October 1, 1988,
the Company has heretofore conveyed the mortgaged and pledged property to the
Trustee under the Concord Gas Indenture and to the Trustee under the Manchester
Gas General and Refunding Indenture as additional security for the bonds issued
under said indentures.
PROVIDED, HOWEVER, and these presents are upon the condition, that if the
Company shall pay or cause to be paid or make appropriate provisions for the
payment unto the holders of the outstanding bonds of the principal, premium, if
any, and interest to become due thereon at the times and in the manner
stipulated therein and in this Indenture, and shall pay or cause to be paid all
other sums payable under this Indenture by the Company, then this Supplemental
Indenture and the estate and rights hereby granted shall, pursuant to the
provisions of Article XIII of the Original Indenture, cease, determined and be
void, but otherwise shall be and remain in full force and effect.
AND IT IS HEREBY COVENANTED, DECLARED AND AGREED, upon the trust and for
the purposes aforesaid and in order, pursuant to the terms of the Indenture, to
provide for the issuance under the Indenture of Series E Bonds and to fix the
terms and conditions of the Series E Bonds and in order to modify and amend the
Indenture in the particulars and to the extent hereinafter in this Sixth
Supplemental Indenture specifically provided, the Company hereby covenants and
agrees with the Trustee as follows:
ARTICLE I
SERIES E BONDS
(S)1.1. Title and Terms of Series E Bonds. There shall be a series of
bonds designated "First Mortgage Bonds ____% Series E Due 2027" (said bonds
being referred to as the "Series E Bonds" or "bonds of Series E"). The Series E
Bonds shall be limited in aggregate principal amount to twenty-two million
dollars ($22,000,000), shall be issuable only as fully registered
10
<PAGE>
bonds without coupons, and shall be issued substantially in the form
hereinbefore set forth. The Series E Bonds shall mature on __________, 2027 and
may be issued in denominations of one thousand dollars ($1,000) and any multiple
thereof.
The Series E Bonds shall bear interest (computed on the basis of a
360-day year of twelve 30-day months), until payment of the principal thereof
has been made or duly provided for, at the rate per annum specified in the title
of the Series E Bonds, payable semi-annually on __________ and __________ in
each year, commencing on ____________, 1998 and (to the extent legally
enforceable) to pay interest at the rate of ____% per annum on any overdue
installment of principal, premium, if any, and interest.
Each bond of Series E shall be dated the date of its authentication
and interest shall be payable on the principal represented thereby from the date
thereof.
Interest on any Series E Bond shall be paid to the person in whose
name such bond (or, notwithstanding the cancellation thereof, the bond in
exchange or substitution for which such bond shall have been issued) is
registered at the close of business on the applicable record date; provided,
however, that if the Company shall default in the payment of the interest due on
any interest payment date on the principal represented by any Series E Bond,
such defaulted interest shall be paid to the person in whose name such bond (or
any bond issued upon registration of transfer or exchange thereof) is registered
on a subsequent record date established by notice given by mail by or on behalf
of the Company to the holders of Series E Bonds not less than ten (10) days
preceding such subsequent record date. The term "record date" shall mean, with
respect to any semiannual interest payment date for the Series E Bonds, the
close of business on the __________ day of __________ or the __________ day of
_______, as the case may be, next preceding such interest payment date, or with
respect to any payment of defaulted interest, the close of business on any
subsequent record date established as provided above which shall be at least
five (5) business days prior to the payment date for such defaulted interest.
At the option of the registered owner, principal, premium, if any, and
interest on the Series E Bonds may be paid by wire transfer in immediately
available funds or by certified check payable to the order of and mailed to the
address of the person entitled thereto as the name and address of such person
shall appear on the bond register maintained pursuant to Section 2.08 of the
Indenture. The principal of, premium, if any, and interest on the Series E
Bonds shall be payable in any coin or currency of the United States of America
which, at the time of payment, is legal tender for the payment of public and
private debts, at the principal corporate trust office of the Trustee in the
City of Concord, or at the principal corporate trust office of its successor as
Trustee, or, at the option of the holder, at the principal office of any other
paying agent appointed by the Company for the purpose.
(S)1.2. Original Issue of Series E Bonds. Provided that no event of
default has occurred and is continuing, at any time after the execution and
delivery of this Sixth Supplemental Indenture, upon the application of the
Company, the Trustee shall authenticate and
11
<PAGE>
deliver to or upon the order of the Company the entire twenty-two million
dollars ($22,000,000) in aggregate principal amount of bonds of Series E upon
receipt by the Trustee of:
(a) An Officers' Certificate, Engineer's Certificate,
Accountant's Certificate and Opinion of Counsel complying with the
requirements of Section 4.01 of the Indenture with respect to such Property
Additions as is sufficient to constitute a Net Bondable Capacity equal to
or exceeding $22,000,000;
(b) The instruments required by Section 5.01 of the
Indenture; and
(c) The Series E Bonds duly executed by the Company.
(S)1.3. Optional Redemption of Series E Bonds. Notwithstanding any
provisions in Article VIII or Article IX of the Indenture, the bonds of Series E
shall be subject to redemption only in the manner and with the effect provided
in this Article I. The Company shall have the option, at any time, on or after
__________, 2002, of redeeming the outstanding Series E Bonds, either in whole
or in part (but if in part then in units of $100,000 or any integral multiple of
$10,000 in excess thereof), by payment of 104% of the principal amount of the
Series E Bonds to be prepaid, declining by 1% of the principal amount per year
for each of the succeeding four years, and accrued interest thereon to the date
of such prepayment. Any redemption of a Series E Bond pursuant to Section 10.10
of the Indenture shall be at a redemption price determined in the manner set
forth in this (S)1.3. The entire remaining principal amount of the bonds of
Series E shall become due and payable on __________, 2027.
Notwithstanding any provision to the contrary under any Section of the
Indenture, in the case of the redemption of only a portion of the outstanding
Series E Bonds, the Trustee shall prorate the principal amount of such bonds to
be redeemed among all holders of outstanding Series E Bonds in proportion to the
outstanding principal amount of such bonds held by each holder. The aggregate
principal amount of each partial redemption of Series E Bonds shall be allocated
in units of $1,000, or integral multiples thereof, among the holders of such
bonds at the time outstanding, in proportion, as nearly as practicable, to the
respective unpaid principal amounts of such bonds held thereby, with adjustment,
to the extent practicable, to equalize for any prior redemption not made in
exactly such proportion.
(S)1.4. Limited Right of Redemption Upon Death of a Beneficial Owner.
Unless the Series E Bonds have been declared due and payable prior to their
maturity by reason of an event of default, the representative of a deceased
owner of an interest in the Series E Bonds ("Beneficial Owner") has the right to
request redemption of all or part of his or her interest in the Bonds, expressed
in integral multiples of $1,000 principal amount, for payment prior to maturity.
The Company will redeem the same subject to the limitations that the Company
will not be obligated to redeem during the period beginning with the original
issuance of the Series E Bonds of this series and ending ____________________,
and during any twelve month period ending ____________________ thereafter, (i)
at the request a deceased Beneficial Owner any interest in the Series E Bonds
which exceeds an aggregate principal amount of
12
<PAGE>
$25,000 or (ii) interests in the Series E Bonds in an aggregate principal amount
exceeding $500,000. A Redemption Request, as hereinafter defined, may be
presented to the Trustee at any time and in any principal amount. If the
Company, although not obligated to do so, chooses to redeem interests of a
deceased Beneficial Owner in the Series E Bonds in any such period in excess of
the $25,000 limitation, such redemption, to the extent that it exceeds the
$25,000 limitation for any deceased Beneficial Owner, shall not be included in
the computation of the $500,000 aggregate limitation for such period or any
succeeding period.
Subject to the $25,000 and $500,000 limitations, the Company will upon
the death of any Beneficial Owner redeem the interests of the Beneficial Owner
in the Series E Bonds within 60 days following receipt by the Trustee of a
Redemption Request from such Beneficial Owner's personal representative, or
surviving joint tenant(s), tenant(s) by the entirety or tenant(s) in common, or
other persons entitled to effect such a Redemption Request. If Redemption
Requests exceed the aggregate principal amount of interests in Series E Bonds
required to be redeemed during any twelve-month period, such excess Redemption
Requests will be applied to successive periods, regardless of the number of
periods required to redeem such interests.
A Redemption Request may be made by delivering a request to the
Depository Trust Company or any successor depository ("Depository"), in the case
of a participating firm (a "Participant") which is the Beneficial Owner of such
interest, or to the Participant through whom the Beneficial Owner owns such
interest, in form satisfactory to the Participant, together with evidence of
death and authority of the representative satisfactory to the Participant and
Trustee. A surviving joint tenant, tenant in common or a tenant by the entirety
or other person seeking the redemption of an interest in Series E Bonds by
reason of the death of another may make the request for redemption and shall
submit such other evidence of the right to such redemption as the Participant
shall require. The request shall specify the principal amount of interest in the
Series E Bonds to be redeemed. A request for redemption in form satisfactory to
the Participant and accompanied by the documents relevant to the request as
above provided, together with a certification by the Participant that it holds
the interest on behalf of the deceased Beneficial Owner with respect to whom the
request for redemption is being made (a "Redemption Request"), shall be provided
to the Depository by a Participant and the Depository will forward the request
to the Trustee. Redemption Requests shall be in form satisfactory to the
Trustee.
The price to be paid by the Company for an interest in the Series E
Bonds to be redeemed pursuant to a request on behalf of a deceased Beneficial
Owner is one hundred percent (100%) of the principal amount thereof plus accrued
but unpaid interest to the date of payment. Subject to arrangements with the
Depository, payment for an interest in the Bonds which are to be redeemed shall
be made to the Depository upon presentation of Bonds to the Trustee for
redemption in the aggregate principal amount specified in the Redemption
Requests submitted
13
<PAGE>
to the Trustee by the Depository which are to be fulfilled in connection with
such payment. Any acquisition of Series E Bonds by the Company other than by
redemption at the option of a representative on behalf of a deceased Beneficial
Owner shall not be included in the computation of either the $25,000 or $500,000
limitations for any period.
Interests in the Series E Bonds held in tenancy by the entirety, joint
tenancy, or by tenants in common will be deemed to be held by a single
Beneficial Owner, and the death of a tenant in common, tenant by the entirety,
or joint tenant will be deemed the death of a Beneficial Owner. The death of a
person who, during such person's lifetime, was entitled to substantially all of
the rights of a Beneficial Owner of an interest in the Series E Bonds will be
deemed the death of the Beneficial Owner, regardless of the recordation of such
interest on the records of the Participant, if such rights can be established to
the satisfaction of the Participant and the Trustee. Such interest shall be
deemed to exist in typical cases of nominee ownership, ownership under the
Uniform Gifts to Minors Act or the Uniform Transfer to Minors Act, community
property or other joint ownership arrangements between a husband and wife
(including individual retirement accounts or Keogh plans maintained solely by or
for the decedent or by or for the decedent and any spouse), and trust and
certain other arrangements where one person has substantially all of the rights
of Beneficial Owner during such person's lifetime.
In the case of a Redemption Request which is presented on behalf of a
deceased Beneficial Owner and which has not been fulfilled at the time the
Company gives notice of its election to redeem the Series E Bonds, the Series E
Bonds which are the subject of such Redemption Request shall not be eligible for
redemption pursuant to the Company's option to redeem but shall remain subject
to fulfillment pursuant to such Redemption Request.
Subject to the provisions of the immediately preceding paragraph, any
Redemption Request may be withdrawn upon delivery of a written request for such
withdrawal given to the Trustee by the Depository prior to ____________________,
in the case of the initial period, or prior to ____________________, in the case
of the subsequent twelve-month period, or prior to payment for redemption of the
interest in the Series E Bonds by reason of the death of a Beneficial Owner.
Because of the limitations of the Company's requirement to redeem, no
Beneficial Owner can have any assurance that his or her interest in the Series E
Bonds will be paid prior to maturity.
(S)1.5. Home Office Payment. The Company may enter into a written
agreement with any holder of Series E Bonds providing that payment of such bonds
at stated maturity or when called for redemption in part be made directly by
mail, wire transfer or in any other manner to the holder thereof without
presentation or surrender thereof if there shall be delivered to the Trustee an
agreement (which may be a composite with other such agreements) between the
Company and such holder (or other person acting as agent for such holder or for
whom such holder is a nominee) that payment shall be so made and that in the
event the holder thereof shall
14
<PAGE>
sell or transfer any such bonds it will, prior to the delivery of such bonds,
make a proper notation of the amount of principal which has been paid thereon to
the date of transfer. The Trustee shall not be liable or responsible to any such
holder or transferee or to the Company or to any other person for any act or
omission to act on the part of the Company or any such holder in connection with
any such agreement. The Company will indemnify and save the Trustee harmless
against any liability resulting from any such act or omission and against any
liability resulting from any action taken by the Trustee in accordance with the
provisions of any such agreement.
(S)1.6. Notice of Redemption of Series E Bonds. Prior to any
redemption of bonds of Series E, the Trustee, in the name and on behalf of the
Company, shall mail, by first class postage prepaid, or prepaid overnight
courier, a notice of redemption to each registered holder of a bond to be
redeemed (in whole or in part) at the last address of such holder appearing on
the bond register. Such notice shall be mailed not less than thirty (30) days
but no more than sixty (60) days prior to the day fixed for redemption and shall
conform to the requirements of Section 8.02 of the Indenture. Such notice
shall, in any case, specify (i) the date of such redemption, (ii) the principal
amount of such holder's Series E Bonds to be redeemed on such date, and (iii)
accrued interest payable in connection with such redemption.
(S)1.7. Waiver of Presentment and Surrender; Replacement of Bonds.
(a) With respect to Series E Bonds and in accordance with the
provisions of Section 8.07 of the Indenture, there shall be no requirement that
such bonds be presented or surrendered to the Trustee at the time of any payment
on such bonds including at stated maturity; and
(b) Notwithstanding the provisions of Section 2.12 of the
Indenture, the requirements of said Section shall not apply to the extent that
other provision is made in any agreement between the Company and the original
purchasers or any holder of a Series E Bond, so long as a copy of such agreement
is provided to the Trustee.
ARTICLE II
MISCELLANEOUS
(S)2.1. The provisions of this Sixth Supplemental Indenture shall be
effective from and after the execution hereof; and the Indenture, as previously
and as hereby modified and amended, shall remain in full force and effect.
(S)2.2. Each reference in the Indenture to any article, section,
term, or provision of the Indenture shall mean and be deemed to refer to such
article, section, term, or provision of the Indenture, as amended, except where
the context otherwise indicates.
15
<PAGE>
(S)2.3. In the event of any inconsistency between the provisions of
this Sixth Supplemental Indenture and the provisions of the Original Indenture,
the First Supplemental Indenture, the Second Supplemental Indenture, the Third
Supplemental Indenture, the Fourth Supplemental Indenture, or the Fifth
Supplemental Indenture, this Sixth Supplemental Indenture shall control.
(S)2.4. All terms contained in this Sixth Supplemental Indenture
which are defined in the Original Indenture, as amended and supplemented by the
First Supplemental Indenture, the Second Supplemental Indenture, the Third
Supplemental Indenture, the Fourth Supplemental Indenture, and the Fifth
Supplemental Indenture shall, except as otherwise specifically provided herein
or as the context clearly otherwise indicates, have the meanings given to such
terms in the Original Indenture, as so amended and supplemented. The use and
construction herein of terms is in accordance with the use and construction
thereof in the Original Indenture, as amended and supplemented by the First
Supplemental Indenture, the Second Supplemental Indenture, the Third
Supplemental Indenture, the Fourth Supplemental Indenture, and the Fifth
Supplemental Indenture.
(S)2.5. This Sixth Supplemental Indenture shall become void when the
Indenture shall be void.
(S)2.6. The covenants, stipulations, promises, and agreements
contained in this Sixth Supplemental Indenture, made by or on behalf of the
Company or the Trustee, respectively, shall inure to the benefit of and bind
their respective successors and assigns.
(S)2.7. This Sixth Supplemental Indenture is, among other things, a
security agreement and is signed as such by the Company and by the Trustee as
secured party.
(S)2.8. This Sixth Supplemental Indenture may be simultaneously
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
(S)2.9. The cover of this Sixth Supplemental Indenture and all
article and descriptive headings are inserted for convenience only, and shall
not affect any construction or interpretation hereof.
(S)2.10. This Sixth Supplemental Indenture shall be governed by, and
construed and enforced in accordance with, the laws of the State of New
Hampshire.
ARTICLE III
AMENDMENT TO INDENTURE
16
<PAGE>
(S)3.1. Article X of the Original Indenture shall be amended by
substituting "$250,000" for "$100,000" in Sections 10.05(a)(2) and 10.05(a)(3),
so as to increase the value of mortgaged property sold or exchanged by the
Company requiring independent engineer and accountant certificates.
ARTICLE IV
CONFIRMATION
(S)4.1. As supplemented and modified by this Sixth Supplemental
Indenture, this Indenture is in all respects ratified and confirmed, and this
Indenture and the First, Second, Third, Fourth, Fifth, and Sixth Supplemental
Indentures shall be read, taken and construed as one and the same instrument.
IN WITNESS WHEREOF, ENERGYNORTH NATURAL GAS, INC. has caused this
instrument to be executed in its corporate name by its President or one of its
Vice-Presidents and by its Treasurer or one of its Assistant Treasurers and its
corporate seal to be hereunto affixed and to be attested by its Secretary or
Assistant Secretary, and BANK OF NEW HAMPSHIRE, to evidence its acceptance of
the trust hereby created, has caused this instrument to be executed in its
corporate name by its Trust Officer and its corporate seal to be hereunto
affixed and to be attested by its Secretary, all as of the day and year first
above written.
ENERGYNORTH NATURAL GAS, INC.
By:
----------------------------------------
Its:
---------------------------------------
[CORPORATE SEAL]
and:
---------------------------------------
Its:
---------------------------------------
ATTEST:
- --------------------------------
Its:
----------------------------
17
<PAGE>
Signed, sealed and delivered
by EnergyNorth Natural Gas, Inc.
in the presence of:
- --------------------------------
- --------------------------------
18
<PAGE>
BANK OF NEW HAMPSHIRE
By:
----------------------------------------
Its:
---------------------------------------
[Corporate Seal]
ATTEST:
- --------------------------------
Its:
----------------------------
Signed, sealed and delivered
by Bank of New Hampshire
in the presence of:
- --------------------------------
- --------------------------------
19
<PAGE>
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH, SS.
On this ____ day of __________, 1997 before me personally appeared
____________________ and ____________________, to me personally known, who being
by me duly sworn, did say that they are ____________________ and
________________ ____________________, respectively, of ENERGYNORTH NATURAL GAS,
INC., that the seal affixed to the foregoing instrument is the corporate seal of
said corporation, and that said instrument was signed by them and sealed on
behalf of said corporation, and that said instrument was signed by them and
sealed on behalf of said corporation by authority of its Board of Directors; and
the said ____________________ and ____________________ acknowledged said
instrument to be the free act and deed of said corporation.
-------------------------------------------
Notary Public
[NOTARIAL SEAL]
My Commission expires:
-----------------
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH, SS.
On this ____ day of __________, 1997 before me personally appeared
____________________ and ____________________, to me personally known, who being
by me duly sworn, did say that they are ____________________ and
________________ ____________________, respectively, of BANK OF NEW HAMPSHIRE,
that the seal affixed to the foregoing instrument is the corporate seal of said
corporation, and that said instrument was signed by them and sealed on behalf of
said corporation, and that said instrument was signed by them and sealed on
behalf of said corporation by authority of its Board of Directors; and the said
____________________ and ____________________ acknowledged said instrument to be
the free act and deed of said corporation.
-------------------------------------------
Notary Public
[NOTARIAL SEAL]
My Commission expires:
------------------
20
<PAGE>
Exhibit 5
RICHARD A. SAMUELS
Direct Dial: (603) 628-1470
Internet: [email protected] August 5, 1997
EnergyNorth Natural Gas, Inc.
1260 Elm Street, Box 329
Manchester, NH 03105-0329
Ladies and Gentlemen:
You have requested our opinion as to certain matters concerning First
Mortgage Bonds Designated as ____% Series E Bonds Due __________, 2027 of
EnergyNorth Natural Gas, Inc. (the "Bonds") with respect to which you are
filing a Registration Statement on Form S-1 with the Securities and
Exchange Commission (the "Registration Statement"). The Bonds are to be
issued under the General and Refunding Mortgage Indenture dated as of June
30, 1997 between EnergyNorth Natural Gas, Inc. and Bank of New Hampshire as
Trustee (the "Indenture") in an underwritten public offering pursuant to a
vote of EnergyNorth Natural Gas, Inc.'s Board of Directors, as soon as
practicable after the effective date of the Registration Statement.
We have examined such corporate documents and made such
investigations of matters of fact and law as we deemed necessary to the
rendition of this opinion. We have assumed that there will be no material
changes in the documents examined and the matters investigated. Based upon
such examination and investigation, and upon those assumptions, we are of
the opinion that the Bonds, when issued in accordance with the vote of the
Directors and authenticated and delivered by the Trustee in accordance with
the Indenture, will be duly authorized, legally issued, fully paid and
nonassessable and will be binding obligations of EnergyNorth Natural Gas,
Inc.
We consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the prospectus included therein.
MCLANE, GRAF, RAULERSON & MIDDLETON,
PROFESSIONAL ASSOCIATION
By: /s/ Richard A. Samuels
------------------------------
Richard A. Samuels
<PAGE>
Exhibit 10.21
TAX SHARING AGREEMENT
---------------------
THIS AGREEMENT made as of October 1, 1988 by and between ENERGYNORTH, INC.,
a New Hampshire corporation (EnergyNorth); ENERGYNORTH NATURAL GAS, INC., a New
Hampshire Corporation (ENGI); CONCORD GAS SERVICE, (a subsidiary of ENGI), a
New Hampshire corporation (Concord Service); ENERGYNORTH PROPANE, INC., a New
Hampshire corporation (Propane); and ENERGYNORTH REALTY, INC., a New Hampshire
corporation (Realty).
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
WHEREAS, the term "AFFILIATES" as used herein shall be deemed to refer to
ENGI, Concord Service, Propane, Realty together with any other corporation which
becomes a subsidiary of EnergyNorth, the term 'CONSOLIDATED AFFILIATES" shall be
deemed to refer to the AFFILIATES together with EnergyNorth, and the
CONSOLIDATED AFFILIATES as a collective tax paying unit is sometimes referred to
as the "GROUP"; and
WHEREAS, EnergyNorth owns at least 80 percent of the issued and outstanding
shares of each class of voting common stock of ENGI, Realty and Propane; and
Concord Service is a wholly-owned subsidiary of ENGI: each of the CONSOLIDATED
AFFILIATES is a member of an affiliated group within the meaning of Section 1504
of the Internal Revenue Code of 1986, as amended (the "Code"), of which
EnergyNorth is the common parent corporation; and EnergyNorth proposes to
include each of the
<PAGE>
2
AFFILIATES in filing a consolidated Federal income tax return for the fiscal
year ending September 30, 1989, and thereafter.
NOW, THEREFORE, EnergyNorth and the AFFILIATES agree as follows:
1. Consolidated Return Election. If at any time and from time to time
----------------------------
EnergyNorth so elects, each of the AFFILIATES will join in the filing of a
consolidated Federal income tax return for the fiscal year ending September 30,
1989 and for any subsequent period for which the Group is required or permitted
to file such a return. EnergyNorth agrees to file such consents, elections and
other documents and to take such other action as may be necessary or appropriate
to carry out the purposes of the Section 1. Any period for which any of the
AFFILIATES is included in a consolidated Federal income tax return filed by
EnergyNorth is referred to in this Agreement as a "Consolidated Return Year".
2. Affiliates' Liability to EnergyNorth for Consolidated Return Year.
------------------------------------------------------------------
Within 90 days after the filing of each consolidated return by EnergyNorth, each
of the AFFILIATES included therein shall pay to EnergyNorth the amount, if any,
of the Federal income tax for which the AFFILIATE would have been liable for
that year, computed in accordance with Treasury Regulations, Section 1.1552-1(a)
(2) (ii) as though that AFFILIATE had filed a separate return for such year,
giving effect to any net operating loss carryovers, capital loss carryovers,
investment tax credit carryovers, foreign tax credit carryovers, capital loss
carryovers or other similar items, incurred by that AFFILIATE for any period
ending on or before the date of this Agreement.
<PAGE>
3
The foregoing allocation of Federal Income tax liability is being made in
accordance with Treasury Regulations, Sections 1.1552-1(a) (2) and 1.1502-33(d)
(2) (ii), and no amount shall be allocated to any CONSOLIDATED AFFILIATE in
excess of the amount permitted under Treasury Regulations, Section 1.1502-33(d)
(2) (ii). Accordingly, after taking into account the allocable portion of the
Group's Federal income tax liability, no amount shall be allocated to any
CONSOLIDATED AFFILIATE in excess of the amount permitted in accordance with
Treasury Regulations, Section 1.1502-33(d) (2) (ii) (b).
3. Affiliate's Liability to EnergyNorth for Estimated Tax Payments.
---------------------------------------------------------------
Within 90 days following the payment by EnergyNorth of any estimated taxes on
behalf of any affiliate the affiliate will pay to EnergyNorth the amount of any
such estimated tax payment. The computation of such payment shall be consistent
with the formula set out in Section 2, above, and the liability of each
affiliate to EnergyNorth for consolidated return payments will be adjusted to
reflect all estimated payments made by or on behalf of any member of the
CONSOLIDATED AFFILIATES.
4. EnergyNorth's Liability to Each Affiliate for Consolidated Return
-----------------------------------------------------------------
Year. If for any Consolidated Return Year, any AFFILIATE included in the
- ----
consolidated return filed by EnergyNorth for such year has available a net
operating loss, capital loss, foreign tax credit, investment tax credit or
similar item (computed by taking into account carryovers of such items from
periods ending on or before the date of this agreement) that reduces the
consolidated tax liability of the Group below the amount that would have been
payable if that AFFILIATE did not have such item available, EnergyNorth shall
pay the
<PAGE>
4
amount of the reduction attributable to such AFFILIATE within 90 days after the
filing of the consolidated return for such year.
The amount of such reduction shall be equal to a portion of the excess of
(i) the total of the separate return tax liabilities of each of the CONSOLIDATED
AFFILIATES computed in accordance with Section 2 of this Agreement, over (ii)
the Federal income tax liability of the Group for the year. The portion of such
reduction attributable to an AFFILIATE shall be computed by multiplying the
total reduction by a fraction, the numerator of which is the value of the tax
benefits contributed by the AFFILIATE to the Group and the denominator of which
is the value of the total value of such benefits contributed by all CONSOLIDATED
AFFILIATES during the year.
For purposes of the foregoing paragraph a deduction or credit generated by
a CONSOLIDATED AFFILIATE which is in excess of the amount required to eliminate
its separate tax return liability but which is utilized in the computation of
the Federal income tax liability of the Group shall be deemed to be a tax
benefit contributed by the CONSOLIDATED AFFILIATE to the Group. The value of a
deduction which constitutes such a benefit shall be determined by applying the
then current corporate income tax rate to the amount of deduction. The value of
a credit that constitutes such a benefit shall be the tax saving. The value of
capital losses used to offset capital gains shall be computed at the then
current tax rate applicable to capital gains for corporations.
5. Affiliates' Liability for Separate Return Years. If any of the
------------------------------------------------
AFFILIATES leaves the Group and files separate Federal income tax returns, it
shall pay to EnergyNorth within 120 days of the end of each of the first five
taxable years for which it files such
<PAGE>
5
returns, the excess, if any, of (a) the Federal income tax that such AFFILIATE
would have paid for such year (on separate return basis giving effect to its net
operating loss carryovers) if it never had been a member of the Group, over (b)
the amount of Federal income tax such AFFILIATE has actually paid or will
actually pay for such years.
6. Tax Adjustments. In the event of any adjustments to the tax returns
------------------
of any of the CONSOLIDATED AFFILIATES as filed (by reason of an amended return,
a claim for refund or an audit by the Internal Revenue Service), the liability,
if any, of each of the AFFILIATES under Sections 2, 3, 4 and 5 shall be
redetermined to give effect to any such adjustment as if it had been made as
part of the original computation of tax liability, and payments between
EnergyNorth and the appropriate AFFILIATES shall be made within 120 days after
any such payments are made or refunds are received, or, in the case of contested
proceedings, within 120 days after a final determination of the contested
proceedings. Interest and penalties, if any, attributable to such an adjustment
shall be paid by each AFFILIATE to EnergyNorth in proportion to the increase in
such AFFILIATE'S separate return tax liability computed under Section 2 of this
Agreement that it is required to be paid to EnergyNorth.
7. Subsidiaries of Affiliates. If at any time, any of the AFFILIATES
---------------------------
acquires or creates one or more subsidiary corporations that are includable
corporations of the Group, they shall be subject to this agreement and all
references to the AFFILIATES herein shall be interpreted to include such
subsidiaries as a group.
8. Successors. This Agreement shall be binding on and inure to the
-----------
benefit of any successor, by merger, acquisition of assets or otherwise, to any
of the parties hereto
<PAGE>
(including but not limited to any successor of EnergyNorth or any of the
AFFILIATES succeeding to the tax attributes of such corporation under Section
381 of the Code) to the same extent as of such successor had been an original
party to this Agreement.
IN WITNESS WHEREOF, the duly authorized representatives of the parties
hereto have set their hands this 4th day of August 1989.
ENERGYNORTH, INC.
By: /s/ N. George Mattaini
Title: President and CEO
ENERGYNORTH NATURAL GAS, INC.
By: /s/ Michael J. Mancini, Jr.
Title: Senior Vice President
CONCORD GAS SERVICE CORPORATION
By: /s/ Michael J. Mancini, Jr.
Title: Senior Vice President
ENERGYNORTH PROPANE, INC.
By: /s/ Richard P. Demers
Title: President
ENERGYNORTH REALTY, INC.
By: /s/ Michael J. Mancini
Title: Senior Vice President
<PAGE>
Exhibit 10.22
COST ALLOCATION AGREEMENT
-------------------------
AGREEMENT made effective as of October 1, 1996 by and between ENERGYNORTH,
INC., a New Hampshire corporation (EnergyNorth); ENERGYNORTH NATURAL GAS, INC.,
a New Hampshire corporation (ENGI); ENERGYNORTH PROPANE, INC., a New Hampshire
corporation (Propane); ENERGYNORTH REALTY, INC., a New Hampshire corporation
(Realty); ENI RESOURCES, INC., a New Hampshire corporation (Resources); and
BROKEN BRIDGE CORPORATION, a New Hampshire corporation (BBC). (ENGI, Propane,
Realty, Resources and BBC are collectively referred to as the Subsidiaries.)
WHEREAS, EnergyNorth is the owner of one hundred percent (100%) of the
issued and outstanding shares of common stock of each of the Subsidiaries; and,
WHEREAS, EnergyNorth is fully equipped and staffed to furnish centralized
services to the Subsidiaries related to the problems and operations of the
Subsidiaries; and,
WHEREAS, EnergyNorth's operations are for the exclusive benefit of any or
all of the Subsidiaries; and,
WHEREAS, the purchase of goods or services by the Subsidiaries on a
centralized basis will enable the Subsidiaries to realize substantial economic
and other benefits through the efficient use of personnel and equipment,
coordination of analysis and planning and access to specialized personnel and
equipment,
NOW THEREFORE, in consideration of the mutual agreements set forth below,
the parties to this Agreement hereby agree (i) that EnergyNorth will render to
or
1
<PAGE>
procure for all or any of them as each of them requires, and each of the
Subsidiaries will purchase at EnergyNorth's cost, the administrative,
supervisory and various other goods and services hereinafter described; and (ii)
that all operating costs of EnergyNorth and the costs of such goods and services
rendered or procured by any of the Subsidiaries wholly or partially for the
benefit of EnergyNorth or one or more of the other Subsidiaries, will be
apportioned among the Subsidiaries as specified below.
I. GOODS AND SERVICES PROVIDED BY ENERGYNORTH
------------------------------------------
EnergyNorth agrees to furnish or procure the following services and such
other goods or services as the parties to this Agreement may from time to time
request. This Agreement shall not be construed to require EnergyNorth to hire
personnel which, in its judgment, are unnecessary, nor to require any party to
this Agreement to utilize goods or services it does not require. Any subsidiary
which does not use the goods and services of EnergyNorth shall not be assessed
costs therefor as provided by this Agreement. (By way of example only, Propane
does not require rate services and therefore will not allocated any expenses
associated therewith.) EnergyNorth shall not be obligated to perform any
services without reasonable notice.
A. Accounting and Auditing
-----------------------
EnergyNorth will advise and assist in accounting and auditing matters
and the formulation of accounting practices and methods of procedure,
including but not limited to the maintenance of general books and the
preparation and furnishing of annual and interim financial and related
reports as well as the coordination of the annual examination by
independent accountants.
2
<PAGE>
B. Forecasts
---------
EnergyNorth will advise and assist in the preparation of the forecast
and forecast review and control.
C. Corporate Records
-----------------
EnergyNorth will advise and assist in the preparation of corporate
records including, as necessary, the preparation of stockholders' and
directors' votes and resolutions, the filing with governmental authorities
of all documents necessary for the continuance of the corporate existence
of the Subsidiaries and the maintenance of minutes of the meetings of their
stockholders and directors.
D. Regulatory Matters
------------------
EnergyNorth will advise and assist in all regulatory matters.
E. Human Resources
---------------
EnergyNorth will advise and assist with employee relations matters
including but limited to employee recruitment, placement, training,
compensation, safety, labor relations, employee benefits and health and
welfare.
F. Public Relations
----------------
EnergyNorth will advise and assist in matters relating to the
dissemination of information to customers, employees, investors and other
interested groups and to the public at large including the preparation, as
necessary, of booklets, press releases and other materials.
3
<PAGE>
G. Insurance
---------
EnergyNorth will advise and assist in general insurance matters
including the procurement and administration of insurance policies.
H. Tax Matters
-----------
EnergyNorth will advise and assist in connection with the preparation
and filing of tax returns and in connection with other tax compliance
matters.
I. Financial Services
------------------
EnergyNorth will advise and assist in financial matters including but
not limited to cash management, loan procurement, bank relations, issuance
of securities and financing of capital requirements.
J. Engineering
-----------
EnergyNorth will advise and assist with engineering plans for
replacement and/or enlargement of existing facilities to meet the demands
for service and daily plant operations.
K. Gas Purchases and Transportation Contracts
------------------------------------------
EnergyNorth will advise and assist in negotiations for all gas and
transportation services required to meet customer demands.
L. Construction
------------
EnergyNorth will advise and assist in construction matters including
but not limited to the standardization, selection and implementation of
equipment,
4
<PAGE>
materials and corrosion controls; the selection of contractors and training
programs; and providing advice and assistance for compliance with all
governmental regulations.
M. Operations
----------
EnergyNorth will advise and assist with the standardization and
implementation of practices where appropriate, including but not limited to
employee training and safety procedures and customer service. EnergyNorth
will also advise and assist in matters relating to distribution and
production, including the best utilization of gas supplies.
N. Rates
-----
EnergyNorth will advise and assist in all rate and other regulatory
matters before the New Hampshire Public Utilities Commission, the Federal
Energy Regulatory Commission or other entities with regulatory jurisdiction
over any of the Subsidiaries.
O. Purchasing
----------
EnergyNorth will advise and assist with the standardization, purchase
and storage of all materials and supplies, and will purchase such materials
and supplies as appropriate to effectuate this Agreement.
P. Data Processing
---------------
EnergyNorth will advise and assist in the selection and use of data
processing equipment, systems development and design, training, conversion
and planning.
5
<PAGE>
Q. Marketing
---------
EnergyNorth will advise and assist in the policy development and
direction of marketing, including but not limited to training; specialized
residential, commercial and industrial services; and assistance in pricing
services.
R. Executive and Administrative
----------------------------
EnergyNorth will advise and assist with management and administration
of all relevant aspects of the business.
S. Miscellaneous
-------------
EnergyNorth will advise and assist with any other administrative or
supervisory services not described above and will procure such other goods
and services as may be required for the proper management and operation of
the Subsidiaries.
II. COMPENSATION
------------
The parties hereto agree that all activities undertaken, and all costs and
expenses incurred by EnergyNorth, are undertaken and incurred for the exclusive
benefit of the Subsidiaries or any combination of the Subsidiaries. The parties
further agree that certain costs and expenses incurred by one of the
Subsidiaries may exclusively or partially benefit one or more of the other
Subsidiaries. In order to fully compensate EnergyNorth for all of its costs and
expenses, and in order to compensate
6
<PAGE>
the Subsidiaries for costs and expenses incurred by them that exclusively or
partially benefit one or more of the other Subsidiaries, the parties agree as
follows:
A. Non-allocable costs and expenses
--------------------------------
All costs and expenses of any kind incurred by EnergyNorth, and all
significant costs (other than de minimis costs and expenses) incurred by
one of the Subsidiaries that benefits another one of the Subsidiaries (to
the extent that such costs and expenses can be identified as having been
incurred for the exclusive benefit of such Subsidiaries) will be charged
directly to the benefiting subsidiary if that subsidiary benefits
exclusively from such cost or expense. Costs and expenses that exclusively
benefit a subsidiary and which shall be allocated directly to the
benefiting subsidiary shall include personnel expense that is identified
through time sheets, lease and other office expense associated with the
personnel whose time is allocated according to time sheets, and all
salaries, wages, benefits and overhead expenses associated with such
personnel.
B. Allocable costs and expenses
----------------------------
Except where the parties to this Agreement determine that such an
allocation would be inequitable, all costs and expenses of any kind
incurred by EnergyNorth, and all costs and expenses (other than de minimis
costs and expenses) incurred by any of the Subsidiaries that benefit one
of the other Subsidiaries, to the extent that such costs and expenses
cannot be attributed exclusively to any one of the Subsidiaries pursuant to
paragraph II.A. above, will be allocated and charged to the Subsidiaries
according to the following formula:
7
<PAGE>
1. A subsidiary's allocation shall be the average of the following
three ratios. Each of the three ratios shall be rounded to the
nearest tenth of one percent:
a. Gross investment in fixed assets of the subsidiary to the
total of all Subsidiaries; provided however, that for
Propane "gross investment in fixed assets" shall be
construed to include the gross value of the property
transferred to it as of June 30, 1987; and,
b. Total number of customers of the subsidiary, calculated as
of September 30 of the prior fiscal year to the total for
all of the Subsidiaries; and,
c. Net income of the subsidiary to the total for all the
Subsidiaries times two.
2. The final allocation percentage for each subsidiary will be
rounded to the nearest whole percent.
3. Each subsidiary's allocation percentage, as described above,
shall be updated annually, effective October 1, based on ratios
calculated by using the preceding fiscal year's actual gross
investment in fixed assets, actual total number of customers as
of September 30, and actual net income.
C. Calculation and recording of costs and expenses
-----------------------------------------------
Without limiting those costs and expenses to be allocated according to
the formula described in paragraph II.B.1 above, and by way of example
only, the following costs and expenses, to the extent they do not
exclusively benefit a specific subsidiary or Subsidiaries, will be
allocated pursuant to the three-part formula:
1. Insurance premiums or other fees or costs
2. Legal and professional fees and costs
3. Computer and data processing costs
8
<PAGE>
4. All other administrative or operating costs
D. Notwithstanding the above, any of the Subsidiaries that does not
benefit from a cost or expense incurred by EnergyNorth shall not be
assessed a charge therefor. (By way of example only, EnergyNorth does not
incur New Hampshire Public Utilities Commission regulatory commission costs
and expenses on behalf of Propane, and therefore Propane will not be
allocated any expenses associated therewith.)
III. ADDITION OF NEW PARTIES
-----------------------
The parties agree that the cost allocation methodology set forth in this
Agreement shall apply to each of them and to any subsidiary of EnergyNorth that
may be formed in the future.
IV. EFFECTIVE DATE AND TERMINATION
------------------------------
A. This Agreement shall be effective as of October 1, 1996, subject to
any required regulatory approvals.
B. This Agreement may be terminated, upon not less than sixty (60) days
written notice, by any party; provided, however, that this Agreement shall be
terminated automatically if it shall become invalid or illegal under any state
law or under any rule, regulation or order of any other state body having
jurisdiction and shall be modified to the extent that performance under this
Agreement may conflict with any rule, regulation or order of any governmental
body having jurisdiction.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereof have caused this Agreement to be
executed effective as of the date and year first above written.
ENERGYNORTH, INC.
By: /s/ Michelle L. Chicoine
----------------------------------
Title: Chief Financial Officer
-----------------------
ENERGYNORTH NATURAL GAS, INC.
By: /s/ Michelle L. Chicoine
----------------------------------
Title: Chief Financial Officer
-----------------------
ENERGYNORTH PROPANE, INC.
By: /s/ Michelle L. Chicoine
----------------------------------
Title: Chief Financial Officer
-----------------------
ENERGYNORTH REALTY, INC.
By: /s/ Michelle L. Chicoine
----------------------------------
Title: Chief Financial Officer
-----------------------
ENI RESOURCES, INC.
By: /s/ Michelle L. Chicoine
----------------------------------
Title: Chief Financial Officer
-----------------------
BROKEN BRIDGE CORPORATION
By: /s/ Michelle L. Chicoine
----------------------------------
Title: Chief Financial Officer
-----------------------
10
<PAGE>
STATE OF NEW HAMPSHIRE
COUNTY OF MERRIMACK
On this 11th day of April, 1997, Michelle L. Chicoine, known to me or
satisfactorily proven to be such person, appeared before me and swore under oath
that the attached Cost Allocation Agreement is a true and complete copy of the
original.
/s/ Heidi C. Bettez
-------------------------------
Heidi C. Bettez, Notary Public
My Commission Expires 9/12/2001
11
<PAGE>
Exhibit 12
ENERGYNORTH NATURAL GAS, INC.
FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
EXHIBIT 12 STATEMENT RE: COMPUTATION OF RATIOS
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
(unaudited)
Twelve Months
Ended June 30, 1997 Fiscal Years Ended September 30,
------------------------- -----------------------------------------------------------------
Pro Forma Historical 1996 1995 1994 1993 1992
------------------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Net income $5,437,000 $5,437,000 $5,427,000 $3,745,000 $4,837,000 $4,960,000 $3,392,000
Add back:
Provision for income taxes 3,330,000 3,330,000 3,224,000 1,745,000 2,280,000 1,997,000 1,542,000
Fixed charges 4,322,000 3,840,000 3,803,000 4,333,000 3,888,000 3,710,000 3,993,000
------------------------- -----------------------------------------------------------------
Adjusted earnings $13,089,000 $12,607,000 $12,454,000 $9,823,000 $11,005,000 $10,667,000 $8,927,000
========================= =================================================================
Fixed charges
Total interest expense 3,540,000 3,508,000 4,049,000 3,675,000 3,490,000 3,770,000
Interest element of rentals 300,000 300,000 295,000 284,000 213,000 220,000 223,000
------------------------- -----------------------------------------------------------------
Total fixed charges $ $3,840,000 $3,803,000 $4,333,000 $3,888,000 $3,710,000 $3,993,000
========================= =================================================================
Ratio of earnings to fixed charges
(Adjusted earnings divided by
fixed charges) x 3.28x 3.27x 2.27x 2.83x 2.88x 2.24x
========================= =================================================================
</TABLE>
NOTE:
In computing the ratio of earnings to fixed charges, earnings are based on net
income from continuing operations plus income taxes and fixed charges. Fixed
charges consist of total interest, amortization of debt discount and expense,
and the estimated portion of interest implicit in rentals. The pro forma ratio
of earnings to fixed charges assumes that the Bonds had been outstanding
throughout the period and that the indebtedness to be retired from the proceeds
of sale of the Bonds had not been outstanding.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports, and to all references to our Firm, included in this Registration
Statement.
/s/ Arthur Andersen LLP
--------------------------
ARTHUR ANDERSEN LLP
Boston, Massachusetts
August 4, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ENERGYNORTH NATURAL GAS, INC. BALANCE SHEETS AS OF JUNE 30, 1997 AND SEPTEMBER
30, 1996 AND STATEMENTS OF INCOME AND STATEMENTS OF CASH FLOWS FOR THE TWELVE
MONTHS ENDED JUNE 30, 1997 AND THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS YEAR
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1996<F1>
<PERIOD-END> JUN-30-1997 SEP-30-1996
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 96,025 91,519
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 17,296 21,178
<TOTAL-DEFERRED-CHARGES> 8,763 10,009
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 122,084 122,706
<COMMON> 3,000 3,000
<CAPITAL-SURPLUS-PAID-IN> 22,538 22,538
<RETAINED-EARNINGS> 20,891 15,819
<TOTAL-COMMON-STOCKHOLDERS-EQ> 46,429 41,357
0 0
0 0
<LONG-TERM-DEBT-NET> 26,789 27,102
<SHORT-TERM-NOTES> 5,500 9,535
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,663 1,646
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 25
<OTHER-ITEMS-CAPITAL-AND-LIAB> 41,703 43,041
<TOT-CAPITALIZATION-AND-LIAB> 122,084 122,706
<GROSS-OPERATING-REVENUE> 92,004 77,510
<INCOME-TAX-EXPENSE> 3,330 3,224
<OTHER-OPERATING-EXPENSES> 80,457 66,086
<TOTAL-OPERATING-EXPENSES> 83,787 69,310
<OPERATING-INCOME-LOSS> 8,217 8,200
<OTHER-INCOME-NET> 760 735
<INCOME-BEFORE-INTEREST-EXPEN> 8,977 8,935
<TOTAL-INTEREST-EXPENSE> 3,540 3,508
<NET-INCOME> 5,437 5,427
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 5,437 5,427
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 2,590 2,721<F2>
<CASH-FLOW-OPERATIONS> 11,206 2,184
<EPS-PRIMARY> 0.00 0
<EPS-DILUTED> 0 0
<FN>
<F1> Net of accumulated depreciation of $47,686 for the twelve months ended
June 30, 1997 and $44,679 for fiscal 1996.
<F2> $2,590 represents the forecasted annual interest on bonds for the fiscal
year ending September 30, 1997. Actual Interest on bonds for the twelve
months ended June 30, 1997 was $2,623.
</FN>
</TABLE>
