SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act
of 1934
Commission File Number 000-25305
ENERGYNORTH NATURAL GAS, INC.
(Exact name of registrant in its charter)
_____________
New Hampshire 02-0209312
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1260 Elm Street, P.O. Box 329, Manchester, NH 03105-0329
(603) 625-4000
(Address, zip code and telephone number of principal executive offices)
Securities to be registered pursuant to Section 12(b) of the Act: NONE
Securities to be registered pursuant to Section 12(g) of the Act:
FIRST MORTGAGE BONDS DESIGNATED AS
7.40% SERIES E BONDS DUE SEPTEMBER 30, 2027
(Title of Class)
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
FORM 10
Table of Contents
Page
TABLE OF CONTENTS
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 3
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS 3
<PAGE>
ITEM 13.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information responsive to this Item is incorporated by reference
to Item 1 of the Registrant's Quarterly Report on Form 10-Q (File
No. 000-25305) for the Quarter ended December 31, 1998 as filed
with the Securities and Exchange Commission on or about January
29, 1999.
ITEM 15.
FINANCIAL STATEMENTS AND INDEX TO EXHIBITS
(a) List of documents filed as part of this Report
(1) Financial Statements
The following financial statements are incorporated by
reference to Item 1 of the Registrant's Quarterly Report
on Form 10-Q (File No. 000-25305) for the Quarter ended
December 31, 1998 as filed with the Securities and
Exchange Commission on or about January 29, 1999:
Condensed Statements of Income for the three and twelve month periods
ended December 31, 1998 and December 31, 1997
Condensed Balance Sheets at December 31, 1998, December 31, 1997 and
September 30, 1998
Condensed Statements of Cash Flows for the three month periods
ended December 31, 1998 and December 31, 1997
Notes to Condensed Financial Statements
(2) Exhibits Required by Item 601 of Regulation S-K
See Exhibit Index on pages 5 and 6.
(b) Exhibits - See Exhibit Index on pages 5 and 6.
<PAGE>
SIGNATURES
In accordance with the requirements of Section 12 of the
Securities Exchange Act of 1934, the registrant has duly caused
this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ENERGYNORTH NATURAL GAS, INC.
(Registrant)
Date: February 19, 1999 By: /S/ MICHELLE L. CHICOINE
Michelle L. Chicoine
President
<PAGE>
EXHIBIT INDEX
The exhibits listed below are filed herewith, or are incorporated herein by
reference to other filings.
Exhibit Number Description
3.1 Articles of Incorporation of EnergyNorth Natural Gas,
Inc. are incorporated by reference to Exhibit 3.1 to
EnergyNorth Natural Gas, Inc.'s Registration Statement on
Form S-1, No. 333-32949, dated August 6, 1997.
3.2 By-Laws of EnergyNorth Natural Gas, Inc., as amended, are
incorporated by reference to Exhibit 3.2 to EnergyNorth
Natural Gas, Inc.'s Amendment No. 2 to Registration
Statement on Form S-1, No. 333-32949, dated September 17, 1997.
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 to 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 to 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. 1-11441) for the fiscal year ended
September 30, 1996.
4.5 Sixth Supplemental Indenture, dated as of September 15,
1997, to Gas Service, Inc. General and Refunding Mortgage
Indenture, dated as of June 30, 1987, is incorporated by
reference to Exhibit 4.5 to EnergyNorth Natural Gas,
Inc.'s Amendment No. 1 to Registration Statement on Form
S-1, No. 333-32949, dated September 10, 1997.
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 Tax Sharing Agreement, dated as of October 1, 1988, is
incorporated by reference to Exhibit 10.21 to EnergyNorth
Natural Gas, Inc.'s Registration Statement on Form S-1,
No. 333-32949, dated August 6, 1997.
10.4 Cost Allocation Agreement, dated as of October 1, 1996,
is incorporated by reference to 10.22 to EnergyNorth
Natural Gas, Inc.'s Amendment No. 2 to Registration
Statement on Form S-1, No. 333-32949, dated September 17,
1997.
<PAGE>
13.1 Registrant's Annual Report on Form 10-K for the Fiscal
Year ended September 30, 1998 as filed with the
Securities and Exchange Commission on or about December
22, 1998.*
13.2 Part II, Item 2 "Changes in Securities and Use of
Proceeds" of the Registrant's Quarterly Report on Form
10-Q for the Quarter ended December 31, 1997 as filed with
the Securities and Exchange Commission on or about
January 23, 1998. **
13.3 Item 1 of the Registrant's Quarterly Report on Form 10-Q
for the Quarter ended December 31, 1998 (Registration No.
333-32949) as filed with the Securities and Exchange
Commission on or about January 29, 1999.
99.1 Pages 6 through 8 of EnergyNorth, Inc.'s Proxy Statement
for its Annual Meeting to be held February 3, 1999. **
99.2 Pages 26-32 of the Registrant's Amendment No. 2 to Form
S-1 Registration Statement (Reg. No. 333-32949) filed with
the Securities and Exchange Commission on or about
September 17, 1997. **
99.3 Part II, Item 14 "Indemnification of Directors and
Officers" on page II-1 of the Registrant's Amendment
No. 2 to Form S-1 Registration Statement (Reg. No. 333-32949)
filed with the Securities and Exchange Commission on or
about September 17, 1997. **
* filed on January 28, 1999.
** filed by Amendment due to technical error in January 28, 1999 electronic
filing.
Part II, Item 2 "Changes in Securities and Use of Proceeds" of
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997 as filed with the Securities and Exchange
Commission on or about January 23, 1998.
Item 2. Changes in Securities and Use of Proceeds
(a) No equity securities of the Company were sold by it during
the period covered by this report. All 120,000 shares of
the Company's outstanding common stock are held by
EnergyNorth, Inc.
(b) Use of Proceeds.
(1) The Company's Registration Statement on Form S-1,
Registration No. 333-32949, was effective September 18,
1997.
(2) The offering commenced on September 18, 1997.
(3) n/a
(4) (i) All registered securities were sold on September 23, 1997.
(ii) The managing underwriter was Edward D. Jones & Co., L.P.
(iii) First Mortgage Bonds designated as 7.40% Series E bonds Due
September 30, 2027 were registered.
(iv) $22,000,000 of Series E Bonds were registered, all of which
were sold at that offering price.
(v) Expenses incurred in connection with the issuance and
distribution of the securities from the effective date of the
Registration Statement through December 31, 1997 were:
Underwriting discount $ 880,000
Other expenses 184,610
----------
Total $1,064,610
(vi) Amount of net offering proceeds from the effective date
of the Registration Statement through December 31, 1997,
representing 100% of the net proceeds, were used for:
Construction of plant, building and facilities $ -
Purchase of real estate -
Acquisition of other business -
Working capital 5,458,919
Temporary investments -
Redemption of bonds 6,436,081
Repayment of short-term debt 9,225,000
-----------
Total $21,120,000
None of such amounts were paid to directors, officers,
10% holders, or affiliates.
(vii) n/a
[TYPE] 10-Q
[DESCRIPTION] 12/31/98 QUARTERLY REPORT
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1998
Commission File Number 000-25305
ENERGYNORTH NATURAL GAS, INC.
(Exact name of registrant as specified in its charter)
New Hampshire 02-0209312
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1260 Elm Street, P.O. Box 329, Manchester, NH 03105
(Address and zip code of principal executive offices)
603-625-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
EnergyNorth Natural Gas, Inc. had 120,000 shares of $25.00 par
value common stock outstanding on January 29, 1999, the filing
date of this report.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ENERGYNORTH NATURAL GAS, INC.
Condensed Balance Sheets
Assets
(Unaudited, except for September 30, 1998 data)
(In thousands)
December 31, September 30,
1998 1997 1998
------------------ -------------
<S> <C> <C> <C>
Property:
Utility plant, at cost $161,394 $149,872 $158,564
Accumulated depreciation and amortization 52,759 48,956 51,309
------------------ -------------
Net utility plant 108,635 100,916 107,255
------------------ -------------
Current assets:
Cash and temporary cash investments 1,941 126 1,756
Accounts receivable (net of allowances of $1,248, $1,280 5,375 9,813 1,828
and $1,088, respectively)
Unbilled revenues 3,522 3,473 516
Deferred gas costs 29 1,433 -
Materials and supplies 1,510 1,510 1,411
Supplemental gas supplies 8,824 7,528 9,479
Prepaid and deferred taxes 2,282 1,409 1,766
Recoverable FERC 636 transition costs - 1,009 252
Prepaid expenses and other 732 826 2,028
------------------ -------------
Total current assets 24,215 27,127 19,036
------------------ -------------
Deferred charges and other assets:
Regulatory asset - income taxes 2,401 2,401 2,401
Recoverable environmental costs 6,596 5,044 6,113
Other deferred charges and assets 2,107 1,902 1,970
------------------ -------------
Total deferred charges and other assets 11,104 9,347 10,484
------------------ -------------
Total assets $143,954 $137,390 $136,775
================== =============
</TABLE>
See accompanying notes to condensed finanical statements.
<PAGE>
<TABLE>
<CAPTION>
ENERGYNORTH NATURAL GAS, INC.
Condensed Balance Sheets
Stockholder's Equity and Liabilities
(Unaudited, except for September 30, 1998 data)
(In thousands, except share information)
December 31, September 30,
1998 1997 1998
------------------ -------------
<S> <C> <C> <C>
Capitalization:
Common stockholder's equity:
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 22,538
Retained earnings 21,323 21,046 19,265
------------------ -------------
Total common stockholder's equity 46,861 46,584 44,803
Long-term debt 42,411 42,879 42,432
------------------ -------------
Total capitalization 89,272 89,463 87,235
------------------ -------------
Current liabilities:
Notes payable to banks 7,942 2,050 1,891
Current portion of long-term debt 436 478 450
Inventory purchase obligation 9,928 8,861 8,712
Accounts payable 5,622 6,386 4,670
Accounts payable to affiliates 1,364 986 2,145
Deferred gas costs - - 3,841
Accrued interest 1,156 1,200 257
Accrued and deferred taxes 2,104 2,477 524
Accrued FERC 636 transition costs - 1,009 252
Accrued environmental remediation costs 2,822 1,546 2,345
Customer deposits and other 255 350 1,313
------------------ ------------
Total current liabilities 31,629 25,343 26,400
------------------ ------------
Commitments and contingencies
Deferred credits:
Deferred income taxes 17,838 17,275 17,930
Unamortized investment tax credits 1,610 1,703 1,610
Regulatory liability - income taxes 1,129 1,226 1,141
Contributions in aid of construction and other 2,476 2,380 2,459
------------------ ------------
Total deferred credits 23,053 22,584 23,140
------------------ ------------
Total stockholder's equity and liabilities $143,954 $137,390 $136,775
================== ============
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
Condensed Statements of Income
For the periods ended December 31
(Unaudited)
(In thousands)
Three Months Twelve Months
1998 1997 1998 1997
------------------ ------------------
Operating revenues $22,019 $27,135 $80,180 $94,753
Operating expenses:
Cost of gas sold 8,905 13,154 42,444 55,363
Operations and maintenance 4,891 4,884 18,452 18,640
Depreciation and amortization 1,527 1,354 5,554 5,097
Taxes other than income taxes 969 1,005 3,702 2,698
Federal and state income taxes 1,743 2,226 2,329 3,722
------------------ ------------------
Total operating expenses 18,035 22,623 72,481 85,520
------------------ ------------------
Operating income 3,984 4,512 7,699 9,233
Other income 295 423 983 999
Interest expense:
Interest on long-term debt 902 914 3,616 2,905
Other interest 385 195 987 924
------------------ ------------------
Total interest expense 1,287 1,109 4,603 3,829
------------------ ------------------
Net income $ 2,992 $ 3,826 $ 4,079 $ 6,403
================== ==================
See accompanying notes to condensed financial statements.
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
Condensed Statements of Cash Flows
For the three months ended December 31
(Unaudited)
(In thousands)
1998 1997
------- -------
Cash flows from operating activities:
Net income $ 2,992 $ 3,826
Noncash items:
Depreciation and amortization 1,635 1,470
Deferred taxes and investment tax credits, net (104) (185)
Changes in:
Accounts receivable, net (3,547) (6,816)
Unbilled revenues (3,006) (2,871)
Inventories 556 1,541
Prepaid expenses and other 1,296 262
Deferred gas costs (3,870) (2,733)
Accounts payable 952 1,053
Accounts payable to affiliates, net (781) (1,447)
Accrued liabilities (254) 823
Accrued/prepaid taxes 1,063 2,167
Payments for environmental costs and other (419) 1,336
------- -------
Net cash used for operating activities (3,487) (1,574)
------- -------
Cash flows from investing activities:
Additions to property (2,739) (3,186)
Cash flows from financing activities:
Cash dividends on common stock (934) (935)
Repayment of long-term debt (35) (40)
Change in notes payable to banks 6,051 2,050
Change in inventory purchase obligation 1,216 2,271
Change in other financing activities 113 (1,213)
------- -------
Net cash provided by financing activities 6,411 2,133
------- -------
Net increase (decrease) in cash and temporary cash investments 185 (2,627)
Cash and temporary cash investments, beginning of period 1,756 2,753
------- -------
Cash and temporary cash investments, end of period $ 1,941 $ 126
======= =======
See accompanying notes to condensed financial statements.
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
Notes to Condensed Financial Statements
December 31, 1998
(Unaudited)
EnergyNorth Natural Gas, Inc. (Company) is a wholly owned
subsidiary of EnergyNorth, Inc., operating in southern and
central New Hampshire. Its principal business is the purchase,
transportation and sale of natural gas for residential,
commercial and industrial use in New Hampshire. The Company's
rates charged to customers are regulated by the State of New
Hampshire Public Utilities Commission (Commission). The
Commission 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.
Note 1. Basis of Presentation
The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the U. S. Securities and Exchange Commission.
Certain footnote disclosures and other information, normally
included in financial statements prepared in accordance with
generally accepted accounting principles, have been condensed or
omitted from these interim financial statements, pursuant to such
rules and regulations, although the Company believes that the
disclosures are adequate to make the information not misleading.
In the opinion of the Company, the accompanying unaudited
condensed financial statements contain all adjustments, which
include only normal recurring adjustments, necessary to present
fairly the financial position as of December 31, 1998 and 1997
and the results of operations for the three and twelve months
then ended and statements of cash flows for the three months
ended December 31, 1998 and 1997. All accounting policies and
practices have been applied in a manner consistent with prior
periods. These interim financial statements should be read in
conjunction with the financial statements and notes thereto
contained in the Company's Form 10-K for the year ended
September 30, 1998.
The business of the Company 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 is sold and transported during the summer months.
Therefore, the results of operations for the interim periods
presented are not indicative of the results to be expected for
all or any part of the balance of the current fiscal year.
Reclassifications are made periodically to previously issued
financial statements to conform to the current year's
presentation.
<PAGE>
Note 2. Cash Flows
Supplemental disclosures of cash flow information for the three
months ended December 31, are as follows (in thousands):
1998 1997
- ----------------------------------------------------------------
Cash paid (received) during the period for:
Interest (net of amount capitalized) $ 228 $ (47)
Income taxes 1,316 (186)
In preparing the accompanying condensed 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 cash investments.
Note 3. Commitments and Contingencies
For a discussion of commitments and contingencies, please refer
to Footnote 9 in the Company's Form 10-K for the year ended
September 30, 1998.
<PAGE>
Results of Operations
Net income for the three months ended December 31, 1998 was
$3 million compared to $3.8 in 1997. For the twelve months ended
December 31, 1998, net income was $4.1 million compared to $6.4
in the prior period. Included in the results of the prior twelve
month period was a one-time, after-tax credit of $649,000, which
was a result of a property tax settlement.
Temperatures for the three-month and twelve-month periods ended
December 31, 1998 were significantly warmer than normal and the
prior comparable periods. 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. Because 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.
Actual Actual Change vs. Change vs.
12-31-98 12-31-97 Normal Previous Period Normal
-------- -------- ------ --------------- ----------
3 months 2,293 2,556 2,598 (10.3)% (11.7)%
12 months 6,267 7,378 7,494 (15.1)% (16.4)%
Quarterly Comparison
Total operating revenues decreased more than $5.1 million, or
19%, for the quarter ended December 31, 1998. Although the
average number of customers increased 2.4% for the quarter, the
weather was more than 10% warmer, and firm sendout, including
transportation, decreased 7% compared to the prior quarter.
Although less sendout was the primary reason for the decrease in
revenue, lower purchased gas costs of $2 million passed through
the cost of gas adjustment (CGA) to firm customers also contributed
to the revenue decrease. Changes in the CGA rates affect operating
revenues; however, they do not affect total margin because the CGA
is a tariff mechanism designed to provide dollar-for-dollar recovery
of gas costs. Margin decreased 6.2% for the quarter, reflecting
warmer weather conditions.
Operation and maintenance expense was virtually unchanged from
the prior comparable period as increases in wage rates were
mostly offset by lower operating expense resulting from the
warmer weather. Depreciation and amortization expense increased
for the period as a result of capital additions and amortization
of environmental remediation costs. Total interest expense
increased 16% due mostly to the increased level of short-term
debt outstanding during the current period and interest accruing
on overcollected deferred gas cost balances.
<PAGE>
Twelve-Month Comparison
Although the average number of customers increased 2.2%, 15.1%
warmer temperatures resulted in firm sendout, including
transportation, that was 5% less than the prior period. Total
operating revenues decreased to $80.2 million from $94.8 million
in the prior period. Included in the current period revenues
were lower gas costs of $6.4 million that were passed through the
CGA. In addition, revenues decreased as customers switched from
sales gas service to transportation gas service. Total margin
decreased 4.2% from the corresponding prior period.
While maintenance costs and wage rates have increased, reductions
in the work force and overtime requirements were the primary
reasons that operations and maintenance expenses were less than
the prior comparable period. Higher depreciation and
amortization charges were a direct result of plant additions and
amortization of environmental remediation costs. Taxes other
than income taxes for the prior period included a favorable
property tax settlement.
Total interest expense increased more than 20% during the twelve-
month period due to the $22 million of 7.4% First Mortgage Bonds
issued in September 1997.
Capital Resources and Liquidity
The Company's major capital requirements result from normal
replacements, efforts to improve the efficiency of the
existing plant and serving additional customers. For the three
months ended December 31, 1998, capital expenditures totaled
approximately $2.7 million.
Cash flow patterns reflect the seasonality of the Company's
business. The greatest demand for cash is in the fall and early
winter as construction projects are brought to completion and
during the winter as accounts receivable balances grow.
The undercollected deferred gas costs balance at December 31, 1998
is due mostly to the timing of the recovery of purchased gas costs.
Capital expenditures, environmental remediation and working
capital requirements were financed by internally generated funds
and supplemented by short-term bank borrowings. At December 31,
1998, the Company had unsecured bank lines of credit of $15
million, $7.9 million of which was outstanding.
Construction expenditures for fiscal 1999 are expected to total
approximately $11.6 million. Construction expenditures, payment
of dividends, long-term debt repayments, environmental
remediation and working capital requirements will continue to be
funded through cash generated by operations supplemented by
available lines of credit.
<PAGE>
Environmental Matters
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-1900s 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. There
has been no significant change in the information disclosed in
the Company's September 30, 1998 Form 10-K.
Year 2000 Readiness
The Company has evaluated its principal computer systems and
noninformation technology systems including, but not limited to,
telecommunication systems, automated meter reading systems,
SCADA, regulator stations, plant remote control systems and
security systems to determine readiness for the year 2000. These
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. All necessary program modifications and system
upgrades and testing are expected to be completed by the year
2000. Costs incurred to date and costs expected to be incurred
to complete the year 2000 readiness are not significant and will
not have a material impact on the Company's financial position or
results of operations. The Company is currently assessing year
2000 issues with third parties with whom it has a material
relationship. Except for the Company's major pipeline supplier,
who has provided assurance of compliance, the Company has not
determined the level of third-party risk. Preparation of a
contingency plan to address failure of various systems is in
process and is expected to be finalized prior to September 30, 1999.
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 includes or
refers to forward-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; impact of unbundling regulatory proceedings;
year 2000 readiness 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 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; uncertainty as to
environmental costs and as to regulatory approval of the full
recovery of environmental costs and other regulatory assets;
weather; results of regulatory proceedings on unbundling; impact
of new pipeline supplies; and success of the Company's year 2000
readiness efforts and those of its vendors and customers.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
A description of pending legal proceedings is contained in the
Company's annual report on Form 10-K for the fiscal year ended
September 30, 1998.
No further material legal proceedings or material developments
occurred in the quarter ended December 31, 1998.
Items 2-5 are not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 - Financial Data Schedule
(Submitted only in electronic format to the
Securities and Exchange Commission)
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the
quarter ended December 31, 1998.
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
EnergyNorth Natural Gas, Inc.
(Registrant)
Date: January 29, 1999 /s/ DAVID A. SKRZYSOWSKI
David A. Skrzysowski, duly authorized
Vice President & Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
EnergyNorth Natural Gas, Inc. condensed balance sheet as of December 31, 1998
and condensed statement of income and statement of cash flows for the three
months ended December 31, 1998 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 108,635<F1>
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 24,215
<TOTAL-DEFERRED-CHARGES> 11,104
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 143,954
<COMMON> 3,000
<CAPITAL-SURPLUS-PAID-IN> 22,538
<RETAINED-EARNINGS> 21,323
<TOTAL-COMMON-STOCKHOLDERS-EQ> 46,861
0
0
<LONG-TERM-DEBT-NET> 42,411
<SHORT-TERM-NOTES> 7,942
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 436
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 46,304
<TOT-CAPITALIZATION-AND-LIAB> 143,954
<GROSS-OPERATING-REVENUE> 22,019
<INCOME-TAX-EXPENSE> 1,743
<OTHER-OPERATING-EXPENSES> 16,292
<TOTAL-OPERATING-EXPENSES> 18,035
<OPERATING-INCOME-LOSS> 3,984
<OTHER-INCOME-NET> 295
<INCOME-BEFORE-INTEREST-EXPEN> 4,279
<TOTAL-INTEREST-EXPENSE> 1,287
<NET-INCOME> 2,992
0
<EARNINGS-AVAILABLE-FOR-COMM> 2,992
<COMMON-STOCK-DIVIDENDS> 934
<TOTAL-INTEREST-ON-BONDS> 3,569<F2>
<CASH-FLOW-OPERATIONS> (3,487)
<EPS-PRIMARY> $0.00
<EPS-DILUTED> 0
<FN>
<F1>Net of accumulated depreciation of $52,759
<F2>$3,569 represents the forecasted annual interest on bonds for the fiscal year
ending September 30, 1999. Actual interest on bbonds for the three months
ended December 31, 1998 was $902.
</FN>
</TABLE>
Pages 6 through 8 of EnergyNorth, Inc.'s Proxy Statement for its
Annual Meeting to be held February 3, 1999.
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid
by the Company for services rendered in all capacities during the
fiscal years ended September 30, 1998, 1997 and 1996 to the Chief
Executive Officer and the four other executive officers of the
Company whose salary and cash incentive & bonus award for the
1998 fiscal year exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
--------------------------------- ---------------------------
Restricted
Cash Incentive Stock All Other
Name and Principal Position Year Salary(1) & Bonus Awards Other Awards (2) Compensation(3)
- --------------------------- ---- --------- -------------- ------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert R. Giordano 1998 $229,902 $56,832 $2,656 $55,136(4) $16,170
President and CEO 1997 210,797 61,217 2,234 20,403 12,132
1996 200,334 59,103 2,492 19,677 7,961
Michelle L. Chicoine 1998 $126,667 $34,342(4) $1,593 $ 8,078 $ 7,303
Executive Vice President 1997 111,595 26,832 1,350 8,932 6,013
1996 85,584 21,550 1,053 7,164 4,095
Frank L. Childs 1998 $115,883 $44,342(4) $ 0 $ 8,078 $ 7,260
Senior Vice President, 1997 107,417 25,695 0 8,563 3,571
Treasurer and CFO 1996 93,750 22,062 0 7,338 1,946
Kenneth M. Margossian(5) 1998 $115,853 $29,085(4) $ 0 $ 8,023 $ 1,499
Senior Vice President
Richard P. Demers 1998 $103,000 $19,244 $ 0 $ 6,413 $ 5,526
Vice President 1997 99,750 21,054 0 7,016 4,565
1996 95,333 20,959 0 6,971 4,397
(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, 1998,
is 7,694 shares, having a value of $212,070. Dividends are paid
on such shares.
(3) All other compensation paid in 1998 includes: Employer
contributions to the Company's 401(k) plan for Mr. Giordano
($5,169), Ms. Chicoine ($5,024), Mr. Childs ($5,127), and Mr.
Demers ($3,641); value of term life insurance premiums paid for
Mr. Giordano ($2,400), Ms. Chicoine ($2,279), Mr. Childs
($2,133), Mr. Margossian ($1,499) and Mr. Demers ($1,885);
portion of interest earned in a deferred compensation account by
Mr. Giordano in excess of 120% of federal long-term rate ($8,601).
(4) Includes an award of 1,350 shares of restricted stock
which are subject to forfeiture and nontransferability until
July 16, 2000 for Mr. Giordano ($36,197) and cash bonus award
for Ms. Chicoine ($10,000), Mr. Childs ($20,000) and Mr.
Margossian ($5,000) for 1998 acquisition activities.
(5) Mr. Margossian joined the Company on September 29, 1997.
</TABLE>
6
<PAGE>
The following Pension Plan Table sets forth estimated combined
annual benefits payable under the Company's Retirement Plan and
Supplemental Executive Retirement Plan ("SERP") at age 65 to
persons in specified compensation and years of service
classifications. The 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
- -----------------------------------------------------------------------
Average Annual Earnings 15 Years of 25 Years of 35 Years of
During Highest Five Years Service Service Service
------------------------- ----------- ----------- -----------
$125,000 $ 93,750 $ 93,750 $ 93,750
150,000 112,500 112,500 112,500
175,000 131,250 131,250 131,250
200,000 150,000 150,000 150,000
250,000 187,500 187,500 187,500
300,000 225,000 225,000 225,000
350,000 262,500 262,500 262,500
400,000 300,000 300,000 300,000
Noncontributory Retirement Plan
All full-time salaried employees, including officers and certain
part-time employees, are eligible to participate in the Company's
Retirement Plan, provided an employee has reached the age of 21
and has completed one year of service. The SERP is a
noncontributory 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 are the same, except for bonuses and
"Other", as the Annual Compensation and Long-Term Compensation
shown in the Summary Compensation Table. Mr. Giordano has 33
credited years of service under the plans, Ms. Chicoine 8 years,
Mr. Childs 3 years, and Mr. Demers 10 years. Mr. Margossian has
one credited year of service under the Retirement Plan.
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 of
Social Security, the Retirement Plan, and other qualified plans
of the Company and other employers.
7
<PAGE>
Employment Agreements
The Company has employment agreements with Mr. Giordano and Ms.
Chicoine under which the Company has agreed to employ Mr.
Giordano through March 31, 2003 and Ms. Chicoine for a two-year
period, which may be extended annually for an additional year. If
the Company terminates the employment of either of these
individuals other than for breach of 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
The Company has management continuity agreements (the "Continuity
Agreements") with Mr. Giordano, Ms. Chicoine, Messrs. Childs,
Margossian, and Demers. 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 the
Company, 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, the Company shall pay
to the employee a lump sum severance benefit and certain other
benefits. The severance benefit payable to Mr. Giordano is three
times his annual salary and incentive and deferred compensation,
a prorated incentive payment for the year in which termination
occurs, the present value of the additional amount he would have
received under the Retirement Plan and the SERP if he had
continued to be employed for three years from termination, and
continuation of benefits or a payment equal to the present value
of those benefits. In addition, the Company is required to make
an additional payment to Mr. Giordano sufficient on an after-tax
basis to satisfy any tax liability incurred under the "parachute"
tax rules of the Internal Revenue Code. The severance benefit
payable to Ms. Chicoine and Messrs. Childs and Margossian is 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.
8
Pages 26-32 of the Registrant's Amendment No. 2 to Form S-1
Registration Statement (Reg. No. 333-32949) filed with the
Securities and Exchange Commission on or about September 17,
1997.
<PAGE>
DESCRIPTION OF BONDS
GENERAL
The First Mortgage Bonds Designated as % Series E Bonds Due
September 30, 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 September
15, 1997 relating to the Bonds (the "Indenture"). The following
statements relating to the Bonds and certain provisions of the
Indenture are summaries of the material terms of the Bonds and
the Indenture, 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. Conveyance of notices and other
communications by the Depository to the Participants and by the
Participants to Beneficial Owners and the voting rights of
Participants and Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
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 Securities Exchange Act of
1934 (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 September 30, 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 March 31 and
September 30 of each year (each an "Interest Payment Date")
commencing March 31, 1998, to the persons in whose names the
Bonds are registered at the close of business on each March 15
and September 15, 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 September
30, 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 September 30 of the years indicated:
REDEMPTION
YEAR PRICE %
---------- -------
2002 104%
2003 103%
2004 102%
2005 101%
2006 and thereafter 100%
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 on September 30,
1998 and during any twelve-month period ending on September 30
thereafter, (i) at the request of a representative on behalf of 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 a 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 September 1, 1998, in the case of the initial
period beginning with the original issuance of the Bonds and
ending on September 30, 1998, or prior to September 1, in the
case of any subsequent twelve-month period ending on September
30.
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,
except 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>
Holders of bonds 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 holder of bonds 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
Part II, Item 14 "Indemnification of Directors and Officers" on
page II-1 of the Registrant's Amendment No. 2 to Form S-1
Registration Statement (Reg. No. 333-32949) filed with the
Securities and Exchange Commission on or about September 17,
1997.
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.
