SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee required)
For the fiscal year ended June 30, 1999 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
(No fee required)
For the transition period from to
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Commission File Number 0-29812
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Berkshire Energy Resources
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(Exact Name of Registrant as Specified in Its Charter)
Massachusetts 04-3408946
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
115 Cheshire Road, Pittsfield, MA 01201-1803
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(Address of Principal Executive Offices) (Zip Code)
(413) 442-1511
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Securities registered pursuant to Section 12(g) of the Act:
Common Shares No-Par Value
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(Title of Class)
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 [ ]
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of Common Shares no-par value of the Registrant
held by non-affiliates as of July 31, 1999 was $51,311,930. Total shares of
common stock of the Registrant outstanding as of July 31, 1999 were
2,519,170.
Documents Incorporated by Reference:
1. Berkshire Energy Resources' Annual Report to Shareholders for the
fiscal year ended June 30, 1999(Items 5, 6, 7, and 8 of Part II).
2. Berkshire Energy Resources' definitive Proxy Statement, to be filed on
October 1, 1999, pursuant to Regulation 14A under the Securities and
Exchange Act of 1934 (Items 10, 11, 12 and 13 of Part III).
Table of Contents
Item Page
PART I Number Number
------ ------ ------
Business 1 3
Properties 2 11
Legal Proceedings 3 11
Submission of Matters to a Vote of
Security Holders 4 12
Additional Items - 13
(Executive Officers of the Registrant)
PART II
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Market For Registrant's Common Equity and
Related Stockholder Matters 5 14
Selected Financial Data 6 14
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 14
Financial Statements and Supplementary Data 8 14
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 9 14
PART III
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Trustees and Executive Officers of the Registrant 10 15
Executive Compensation 11 15
Security Ownership of Certain Beneficial
Owners and Management 12 15
Certain Relationships and Related Transactions 13 15
PART IV
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Exhibits, Independent Auditors' Report on
Supplemental Schedules, Financial Statement
Schedules, and Reports on Form 8-K 14 16
Item 1. Business
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General
The Berkshire Gas Company adopted a holding company corporate
structure effective December 31, 1998 to capitalize on competitive
opportunities associated with the deregulation of the natural gas industry.
Berkshire Energy Resources(the "Company") has been organized as a
Massachusetts Business Trust and initially has as its subsidiaries: The
Berkshire Gas Company ("Berkshire Gas"), Berkshire Propane, Inc. ("Berkshire
Propane"), and Berkshire Energy Marketing, Inc. ("Berkshire Energy
Marketing"). The adoption of a holding company structure effectively
reorganized and segregated the Company's regulated business activities from
its nonregulated markets.
Berkshire Gas is a subsidiary engaged in the distribution, sale and
transportation of natural gas for residential, commercial and industrial
use. Berkshire Gas also has an appliance rental division that sells and
leases gas burning equipment.
Berkshire Propane is the retail propane subsidiary that provides propane
distribution and service to more than 100 communities in western
Massachusetts, eastern New York and southern Vermont. Berkshire Propane is
not subject to the regulatory authority of the Massachusetts Department of
Telecommunications and Energy (DTE), formerly the Massachusetts Department
of Public Utilities. Propane is delivered to customers by trucks from
storage facilities located in the service territory. Approximately 30% of
Berkshire's annual liquid propane requirements are purchased at a fixed
price. The remaining requirements are purchased in the spot market.
Berkshire Energy Marketing, was established to capitalize on new
opportunities associated with the deregulation of the utility industry. The
Berkshire Energy Marketing subsidiary offers competitively priced natural
gas to meet a wide variety of customer needs. To gain additional supply and
price leverage, Berkshire Energy Marketing has entered into a strategic
alliance with Connectiv/CNE Energy Services, LLC, a regional energy marketer
with significant supply acquisition capabilities. Berkshire Energy Marketing
is extending its reach into new markets, providing a variety of energy
options.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995
This Annual Report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Actual
results could differ materially from those contemplated by such statements.
Such statements reflect management's current views, are based on many
assumptions and are subject to risks and uncertainties.
Certain important factors which could cause such results to differ
include risks associated with the Company's maintaining contracts with
specific customers, government regulation, the increasingly competitive
nature of the markets in which the Company is engaged, and dependence on key
personnel. These factors are not intended to represent a complete list of
the general or specific risks that may affect the Company.
Territory Served
Berkshire Gas' utility service territory includes 19 communities in
the western portion of the Commonwealth of Massachusetts, including the
cities of Pittsfield and North Adams, the towns of Adams, Amherst, Great
Barrington, Greenfield and Williamstown, and twelve smaller municipalities.
The population of the area served is estimated at 190,000 and is primarily
residential in character, but the territory also includes industrial,
agricultural, educational, cultural and resort facilities. Berkshire
Propane markets propane throughout the western portion of Massachusetts,
eastern New York and southern Vermont. The Berkshire Gas Company currently
serves over 34,000 natural gas customers and Berkshire Propane, Inc., over
6,000 propane customers.
Customers
Utility Operations
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The largest group of Berkshire Gas' natural gas customers is the
residential class. During the fiscal years ended June 30, 1999, 1998 and
1997, residential consumers accounted for approximately 57%, 55% and 55%;
commercial and industrial consumers accounted for 35%, 41% and 40%; and
transportation consumers accounted for approximately 8%, 4% and 5% of
natural gas operating revenues, respectively. Transportation consumers
account for approximately 15%, 8%, and 9% of natural gas operating margin
for fiscal years 1999, 1998 and 1997, respectively. Net income could be
impacted by the loss of one or more significant transportation consumers,
who are all under contracts.
The number of natural gas customers increased 1% in 1999 over 1998,
from 34,166 to 34,494. Total Mcf sold and transported increased from
7,356,946 Mcf in 1998 to 7,880,066 Mcf in 1999 primarily due to increased
sales volumes due to 9.9% colder weather from January through March. Total
natural gas customers by classification at June 30 in each of the previous
five years were:
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
Residential 30,172 29,911 29,682 29,707 29,565
Commercial & Industrial 4,322 4,255 4,205 4,056 4,031
Propane Operations
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Berkshire Propane, Inc., sells liquid propane gas to residential and
commercial customers in Massachusetts, New York and Vermont. At June 30,
1999, Berkshire Propane had 6,073 customers as compared to 5,489 in 1998.
As part of the Company's growth strategy, Berkshire Propane acquired a local
propane dealer in October 1998, in order to increase market share.
Competition
Natural Gas Operations
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Implementation of the Federal Energy Regulatory Commission's (FERC)
Order 636 has increased the potential for competition in gas procurement,
supply and sale. FERC's actions have sought to encourage competition and
natural gas market efficiency through deregulation and "unbundling of
services" at the interstate pipeline level. This unbundling has changed the
historical relationships, whereby producers sold to pipelines, pipelines
sold to local distribution companies (LDCs) such as Berkshire Gas and LDCs
sold to end-users. Now LDCs or end-users may utilize pipeline services
primarily for the transportation of gas purchased from third parties.
While historically Berkshire Gas has been subject to competition from
electricity, oil, propane, coal and other fuels for space heating, water
heating, cooking, air conditioning and industrial applications, regulatory
changes have created the competition among existing and new suppliers or
marketers of natural gas. Berkshire Gas takes a very positive view of the
changes occurring within the natural gas industry. The advent of customer
choice should enhance the value of the Berkshire Gas's products and
services. Berkshire Gas is taking an active role in the transformation of
the industry at the state level, through participation in collaborative
proceedings involving a wide range of market stakeholders and regulators.
This process resulted in the establishment of "unbundled" rates for all
customer classes that will enable all customers to select their own supplier
of natural gas with Berkshire Gas providing transportation service.
Rates and Regulations
The Berkshire Gas Company is subject to the regulatory authority of
the DTE with respect to various matters, including rates, financing, certain
gas supply contracts, demand-side management programs and planning and
safety matters.
The principal rate classifications are residential, commercial and
industrial. Berkshire Gas also offers firm and quasi-firm transportation
rates for large end-users as well as interruptible sales and transportation
service. The rate structure is based on the cost of providing service to
each customer class.
In compliance with requirements set forth by the DTE, The Berkshire
Gas Company filed revenue-neutral, unbundled rates that became effective
November 1, 1998. The unbundled rates were submitted in accordance with a
request for a Joint Motion for Approval of the Settlement Agreement (the
Settlement) reached by participants in the Massachusetts Gas Collaborative
(the Collaborative). Presently, residential rates are designed separately
for heating and non-heating purposes. Additionally, like most other utility
companies in Massachusetts, The Berkshire Gas Company offers subsidized
rates to residential customers who qualify for certain government
entitlements. These customers receive a 20% discount from the standard
residential rates. The commercial and industrial rates are based on load
factor; that is, the cost is based on how much gas is consumed and when it
is consumed. There are seven classifications of load factor rates. All but
the Extra Large Annual Use, High Load rate are volumetric rates. Berkshire
Gas also offers four Quasi-Firm demand-based transportation rates that are
grandfathered and are only available to customers who were taking service
under those rates on or before November 1, 1998.
The current firm rate structure is based on seasonal rates, whereby
base rates are higher in the winter (November through April) and lower in
the summer (May through October). In addition to the base rates, Berkshire
Gas offers Default Service to any customer who is not receiving gas service
from a supplier as set forth in The Berkshire Gas Company's Terms and
Conditions. The rate for Default Service is established by The Berkshire
Gas Company's Seasonal Cost of Gas Adjustment Clause (CGAC) rate schedule,
which is adjusted on a semi-annual basis in order for Berkshire Gas to
recover the cost of gas supplies. As part of its new unbundled rates, the
Company modified its existing CGAC to allow for the following regulatory
changes: (a) the addition of provisions that allow for the recovery of the
gas portion of bad-debt expenses; and (b) new formulas for the recovery of
gas costs.
In addition, Berkshire Gas has a Local Distribution Adjustment Clause
(LDAC) which allows for the recovery of Demand Side Management (DSM) costs,
environmental response costs, FERC Order 636 transition costs, and certain
costs incurred as a result of participation in the Massachusetts Gas
Collaborative. Additionally, this clause enables Berkshire Gas to return to
firm ratepayers a portion of non-firm distribution margins allocated to firm
distribution services. The charge is set on an annual basis and is applied
to all firm sales and transportation customers.
The Berkshire Gas Company also provides several non-firm and special
rates to meet the varying needs of large customers. These rates include
Interruptible Sales and/or Transportation Service whereby a customer is
capable of either ceasing operations or switching to an alternate fuel.
Additionally, a Load Management Rate is available for non-residential
customers who agree to reduce demand to a predetermined minimum level on
peak days.
The DTE issued an order on capacity assignment, cost responsibility,
and related issues on February 1, 1999. The DTE ruled that mandatory
assignment of capacity on a "slice-of-the-system" would maintain reliability
and avoid improper transfer of cost responsibility. The DTE also found that,
until it determines that a sufficiently competitive market for upstream
capacity exists, the LDCs will maintain their obligation to serve.
Currently, the industry Collaborative is taking action on Model Terms and
Conditions to introduce the comprehensive unbundling of LDC services to
expanded customer classes as soon as November 1, 1999.
The Berkshire Gas Company is also subject to standards prescribed by
the Secretary of Transportation under the Natural Gas Pipeline Safety Act of
1968 with respect to the design, installation, testing, construction and
maintenance of pipeline facilities. The enforcement of these standards has
been delegated to the DTE, which has taken an active role in such
enforcement, including the application of civil penalties and the
requirement of remedial programs.
The regulation of prices, terms and conditions of interstate pipeline
transportation and sales of natural gas is subject to the jurisdiction of
FERC. The Berkshire Gas Company is not under the direct jurisdiction of
FERC, but monitors, and periodically participates in, proceedings before
FERC which involve the pipeline suppliers/transporters, the Berkshire Gas
Company's operations, and other matters pertinent to Berkshire Gas's
business. (See also "Competition".) The Berkshire Gas Company has recently
been an active participant in the FERC proceedings regarding the regulation
of short-term natural gas transportation services (Docket No. RM98-10-00)
"Notice of Proposed Rulemaking" (the NOPR), and the regulation of interstate
natural gas transportation services (Docket No. RM98-12-00) "Notice of
Inquiry" (the NOI). Through the NOPR and the NOI, the FERC is undertaking a
comprehensive review of the regulatory policies and procedures including
such issues as rate design, price caps, and negotiated terms and conditions,
that are currently in place for the natural gas industry. The FERC is still
reviewing comments from participants and at this point has not made a final
ruling on these dockets.
Environmental Matters
Federal, state and local laws and regulations establishing standards
and requirements for the protection of the environment have increased in
number and scope in recent years. The Company cannot predict the future
impact of such standards and requirements, which are subject to change and
can be retroactively applied.
During fiscal 1990, the DTE issued a generic ruling on cost recovery
for environmental cleanup with respect to former gas manufacturing sites.
Under the ruling, The Berkshire Gas LDAC will recover annual cleanup costs,
excluding carrying costs, over a seven-year period through the Company.
This ruling also provides for the sharing of any proceeds received from
insurance carriers equally between Berkshire Gas and its ratepayers, and
establishes maximum amounts that can be recovered from customers in any one
year.
During the year ended June 30, 1999, Berkshire Gas continued the
analysis and field review of two parcels of real estate formerly used for
gas manufacturing operations, which had been found to contain coal tar
deposits and other substances associated with by-products of the gas
manufacturing process. The review and assessment process began in 1985 with
respect to site #1, which is owned by Berkshire Gas, and in 1989 with
respect to site #2, which it formerly owned by Berkshire Gas.
With the review and approval of the Massachusetts Department of
Environmental Protection (MDEP), work at site #1 has resulted in proposed
remedial activities which are currently being permitted through local and
state agencies and will be pursued in the near future. Site monitoring
activities will continue for the foreseeable future.
It is difficult to predict the potential financial impact of the sites
until first, the nature and risk is fully characterized, and second, the
remedial strategies and related technologies are determined. The general
philosophy is one of source removal and/or reduction
coupled with risk minimization.
Beginning in fiscal year 2000, Berkshire Gas will likely begin
remediation of site #1. It is estimated that through 2014 the level of
expenditures for the sites will range from $3.3 to $12.7 million. Berkshire
Gas has recorded the most likely cost of $3.3 million in accordance with
SFAS No. 5. Ultimate expenditures cannot be determined until a remedial
action plan for site #2 is developed. Berkshire Gas's unamortized costs at
June 30, 1999, were $718 thousand and should be recovered using the formula
discussed above.
Seasonality
The Company's business has a distinct seasonal quality because a large
percentage of its sendout serves residential and commercial heating loads.
Gas and propane operating revenues reflect the seasonal nature of the
business. Such revenues are affected by temperature variations between the
heating and non-heating seasons and by seasonal pricing differentials
embodied in The Berkshire Gas Company's effective schedule of rates and
charges for gas services. (See also "Rates and Regulations".)
Employee Relations
The Company and its subsidiaries have 164 employees, approximately 53%
of whom are represented by the United Steelworkers of America, AFL-CIO-CLC,
under a contract which remains in effect until March 31, 2000. Relations
with employees are generally satisfactory.
Gas Supply
The Berkshire Gas Company's portfolio consists of five firm natural
gas contracts. As of November 1, 1999, Berkshire Gas will exercise its
option to terminate one of its contracts. The terms of the remaining gas
supply contracts range from approximately three to four years.
Under the terms of a fuel purchase agreement executed with U.S.
Generating Company (formerly Altresco, Inc.), Berkshire Gas is entitled to
receive gas peaking service during the Winter Period of November 1 through
March 31 of each year and back-up gas supplies in the event of proration or
curtailment of firm gas supplies (including propane).
In addition, Berkshire Gas executed two contracts with Distrigas of
Massachusetts Corporation (DOMAC). The first entitles Berkshire Gas to
receive up to 2,924 Mcf per day of vaporized Liquefied Natural Gas (LNG) for
365 days. The second contract entitles Berkshire Gas to receive up to 1,949
Mcf per day of LNG for 151 days. This contract provides Berkshire Gas with
the option to take the LNG in liquid or vapor form, thus providing the
necessary flexibility to serve its proposed permanent storage and
vaporization facility (see discussion below). The term of this contract is
for a five-year period ending October 31, 2003.
The Berkshire Gas Company has five Liquefied Petroleum Gas (LPG)
plants and one temporary portable LNG vaporizing unit that are utilized on
peak days to supplement the pipeline natural gas supply. Berkshire Gas
expects to replace this temporary facility with a permanent storage and
vaporization facility. The new facility should be operational by the 1999-
2000 heating season. By supplementing its natural gas supply with LPG and
LNG, Berkshire Gas is able to meet its customers' requirements during peak
periods. The Berkshire Gas Company's pipeline deliveries combined with LPG
facilities' storage and vaporization capacity yield a maximum daily sendout
of approximately 54,900 Mcf. Actual maximum daily sendout due to degree day
severity during the 1998-99 heating season was 45,335 Mcf. The composition
of gas supply for customer requirements during the fiscal year ended June
30, 1999, was: 99.81% natural gas and 0.19% LNG and LPG.
Berkshire Gas estimates that its supply of natural gas and
supplemental sources under contract are adequate to meet the anticipated
needs of their customers for the foreseeable future.
On April 16, 1997, the FERC approved an unopposed settlement offer of
Tennessee Gas Pipeline Company. The settlement established a cost sharing
mechanism between Tennessee and its customers. As a result of the order,
Tennessee implemented a reduced Gas Supply Realignment (GSR) surcharge
retroactively for the two-year period of January 1, 1997, through December
31, 1998. A refund from Tennessee, representing excess GSR surcharges from
January through March 1997, was returned to Berkshire's customers through
its CGAC during the fiscal year. The GSR surcharges did not significantly
affect The Berkshire Gas Company's competitiveness and were absorbed by
Berkshire's firm sales customers. On April 29, 1998, the FERC approved a
Settlement Agreement for future Gas Research Institute (GRI) funding. The
Agreement assures continued funding of GRI which will be phased down to a
voluntary program by the year end 2004. The GRI surcharges do not
significantly affect The Berkshire Gas Company's competitiveness. Finally,
Berkshire Gas is currently in confidential discussions with Tennessee Gas
Pipeline Company regarding the renegotiation of its long-haul and short-haul
contracts. It is anticipated the new contracts will be in effect as of
November 1, 1999 and will provide Berkshire Gas with a more operationally
flexible and competitive portfolio.
Item 2. Properties
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The Company's utility subsidiary, The Berkshire Gas Company, has
approximately 694 miles of distribution mains, the major portion of which
are constructed of coated steel, plastic or cast iron. Berkshire Gas owns
and operates five auxiliary liquefied petroleum gas plants for supplementing
its supply of natural gas. (See "Gas Supply".) Berkshire Gas Company has
five sales meter stations receiving gas from the interstate pipeline.
All the principal properties of the Company are owned in fee, subject
to the lien of the mortgage securing The Berkshire Gas Company's First
Mortgage Bond, and are also subject to covenants, restrictions, easements,
leases, rights-of-way and other similar minor encumbrances or defects common
to properties of comparable size and character; none of which in the opinion
of the Company's management materially interferes with Berkshire Gas's use
of its properties in order to conduct its business. Berkshire Gas's gas
mains are primarily located under public highways and streets. Where they
are under private property, Berkshire Gas has obtained easements or rights-
of-way from the record holders of title. These easements and rights are
deemed by Berkshire Gas to be adequate for the purposes for which they are
being used.
Item 3. Legal Proceedings
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With reference to the matters discussed in Item 1 "Environmental
Matters", Berkshire Gas notified its present and former insurance carriers
that it has incurred and will incur further costs associated with the
previously-referenced coal tar deposits, for which it will seek coverage
under applicable insurance policies. No litigation has yet commenced and it
is not possible to determine the extent to which recovery of costs will
ultimately be obtained from such insurance carriers.
The Company is also involved with other legal proceedings incidental
to its business. At the present time the Company cannot predict the
outcomes of these proceedings as described herein.
On December 18, 1998, The Berkshire Gas Company was sued in the
Supreme Court of the State of New York, County of Kings, by the executrix of
the estate of a customer of Berkshire Gas's retail propane division relating
to an explosion at the home of such customer in Canaan, New York on July 28,
1997 and the death of the customer. Handi Mate, Inc., a New York
corporation that engages in the inspection of properties, was also named as
a defendant in the lawsuit.
The complaint alleges six counts against Berkshire Gas and seeks
damages of twenty million dollars ($20,000,000) per count, plus punitive
damages. Berkshire Gas intends to vigorously defend each of these claims
and expects to challenge certain claims that, upon initial review, appear
redundant to other claims.
Berkshire Gas has notified its insurance carrier of the filing of such
lawsuit and the carrier has assumed the defense of such claims. Berkshire
Gas has comprehensive liability insurance that provides up to thirty-five
million dollars ($35,000,000) of coverage per occurrence.
Berkshire Gas believes that the outcome will not have a material
adverse impact on its overall financial position or results of operations.
Item 4. Submission of Matters To A Vote Of Security Holders
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None.
Additional Items
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Executive Officers of the Registrant
The table set forth below shows the names, titles and ages
of all executive officers of the Registrant as of June 30, 1999. There is
no family relationship among officers of the Registrant. There is no
arrangement between any of the officers and any other person(s) pursuant to
which such officer has or is to be elected as an officer.
Served in This
Name Title Capacity Since Age
- ---- ----- -------------- ---
S.S. Robinson President and Chief 10-28-87 59
Executive Officer
M.J. Marrone Vice President, Treasurer 10-28-87 57
and Chief Financial Officer
R.M. Allessio Vice President, Utility 11-07-97 49
Operations of The Berkshire
Gas Company
The executive officers are elected annually.
Listed below is a brief account of the business of each of the above
executive officers during the past five years.
Name Capacity in Which Served During Past Five Years
- ---- -----------------------------------------------
S.S. Robinson President and Chief Executive Officer
M.J. Marrone Vice President, Treasurer and Chief Financial Officer
R.M. Allessio Vice President, Utility Operations of The Berkshire Gas
Company; Vice President of Marketing and Distribution of
The Berkshire Gas Company; Director of Marketing and
Distribution of The Berkshire Gas Company; Director of
Engineering and Distribution of The Berkshire Gas Company
Part II
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Item 5. Market For Registrant's Common Equity and Related Stockholder
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Matters
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The number of registered common shareholders of record of the
Registrant as of the close of business on July 31, 1999, was 1,967. The
other information required is contained in Berkshire Energy Resources's
Annual Report to Shareholders for the fiscal year ended June 30, 1999,
("Registrant's Annual Report") on page 31, under the heading "Consolidated
Quarterly Financial Information". This information is hereby incorporated
by reference in this report.
Item 6. Selected Financial Data
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The information required is contained in Registrant's Annual Report on pages
12 - 13, under the heading "10-Year Comparative Summary of Operations and
Statistics". This information is hereby incorporated by reference in this
report.
Item 7. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operations
---------------------
The information required is contained in Registrant's Annual Report on
pages 14 - 16, under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations". This information is hereby
incorporated by reference in this report.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The information required is contained in Registrant's Annual Report on
pages 17 - 31, in the financial statements of Berkshire Energy Resources for
the years ended June 30, 1999, 1998 and 1997, together with the related
notes to financial statements, under the heading "Independent Auditors'
Report", and under the heading "Consolidated Quarterly Financial
Information". This information is hereby incorporated by reference in this
report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -------------------------------------------------------------------------
Financial Disclosure
--------------------
None.
Part III
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Items 10, 11, 12 and 13
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The information required regarding the Executive Officers of the
Registrant is included in Part I under "Additional Items". Certain other
information called for by Items 10, 11, 12 and 13 has been omitted from this
report pursuant to General Instruction G(3), and is incorporated herein by
reference from the definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later than
120 days after the close of the Company's last fiscal year.
PART IV
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Item 14. Exhibits, Independent Auditors' Report on Supplemental Schedules,
- ----------------------------------------------------------------------------
Financial Statement Schedules and Reports on Form 8-K
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(a) 1. Financial Statements
--------------------
The following financial statements and related notes are contained
in the Registrant's Annual Report for the fiscal year ended
June 30, 1999, and are incorporated herein by reference.
Report of Independent Auditors.
Consolidated Statements of Income for the years ended June 30, 1999,
1998 and 1997.
Consolidated Balance Sheets, June 30, 1999, 1998 and 1997.
Consolidated Statements of Shareholders' Equity for the years ended
June 30, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended June 30,
1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
Selected Consolidated Quarterly Financial Data (unaudited) for the
years ended June 30, 1999, 1998 and 1997.
2. Independent Auditors' Report on Supplemental Schedules
------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
Deloitte &
Touche LLP
- ----------------------------------------------------------------------------
City Place Telephone:(860)280-3000
185 Asylum Street Facsimile:(860)280-3051
Hartford, Connecticut 06103-3402
To the Shareholders of
Berkshire Energy Resources:
We have audited the consolidated financial statements of Berkshire Energy
Resources (as successor to The Berkshire Gas Company) as of June 30, 1999,
1998 and 1997 and for each of the three fiscal years in the period ended
June 30, 1999 and have issued our report thereon dated August 12, 1999;such
financial statements and report are included in Berkshire Energy Resources's
Annual Report to Shareholders and are incorporated herein by reference.
Our audits also included the financial statement schedules of Berkshire
Energy Resources, listed in Item 14. These financial statement schedules are
the responsibility of Berkshire Energy Resources's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
/s/ Deloitte & Touche LLP
August 12, 1999
3. Financial Statement Schedules
-----------------------------
The information called for by this item appears under the caption
"Financial Statement Schedules and Exhibits Filed with Annual Report
on Form 10-K" (page 1 hereof). Such information is incorporated by
reference herein.
4. Exhibits
--------
The information called for by this item appears under the caption
"Financial Statement Schedules and Exhibits Filed with Annual Report
on Form 10-K" (page 1 hereof). Such information is incorporated by
reference herein.
(b) Reports on Form 8-K
-------------------
A report on Form 8-K, was filed on December 18, 1998 to report the
filing of a lawsuit against The Berkshire Gas Company. The
information called for by this item appears under the caption "Legal
Proceedings".
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 25, 1999 By: /s/
------------------
Scott S. Robinson,
President & CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons in the
capacities on the dates indicated.
Signatures Capacity Date
- ---------- -------- ----
/s/------------------ Trustee August 25, 1999
Franklin M. Hundley
Chairman of the Board
/s/------------------ Principal Executive August 25, 1999
Scott S. Robinson Officer; Trustee
President and Chief
Executive Officer
/s/------------------------- Principal Financial August 25, 1999
Michael J. Marrone & Accounting Officer
Vice President, Treasurer
and Chief Financial Officer
/s/--------------- Trustee August 25, 1999
George R. Baldwin
/s/------------- Trustee August 25, 1999
John W. Bond
/s/------------ Trustee August 25, 1999
Paul L. Gioia
/s/--------- Trustee August 25, 1999
James R. Keys
/s/------------ Trustee August 25, 1999
Robert B. Trask
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
and
EXHIBITS
Filed With
ANNUAL REPORT ON FORM 10-K
EXHIBIT INDEX
Certain of the following exhibits are filed herewith or will be filed
herewith by amendment. Certain other of the following exhibits have
heretofore been filed with the Commission and pursuant to Rule 411 are
incorporated herein by reference.
Exhibit
Number Description
2 Agreement and Plan of Merger dated February 19, 1998 by and among
The Berkshire Gas Company, the Company, and Berkshire Gas Mergeco
Gas Company, Inc., filed as Appendix A to the Company's
Registration Statement on form S-4, Registration Statement
No. 333-46799, and incorporated herein by reference.
3(i) Articles of Merger of The Berkshire Gas Company and Berkshire Gas
Mergeco Gas Company, and the Company, dated December 28, 1998, and
incorporated herein by reference.
3(ii) By-Laws of Berkshire Energy Resources. Filed as Appendix C to the
Company's Registration Statement on Form S-4, Registration
Statement No. 333-46799, and incorporated herein by reference.
4(a) First Mortgage Indenture and Deed of Trust, dated as of
July 1, 1954, between Pittsfield Coal Gas Company (now The
Berkshire Gas Company) and Chemical Corn Exchange Bank (now
Chemical Bank), Trustee. Filed as Exhibit 4(c) to Berkshire Gas's
Registration Statement on Form S-1, Registration Statement
No. 2-19808, and incorporated herein by reference.
4(b) First Supplemental Indenture, dated as of June 1, 1956, between
Berkshire Gas and Chemical Corn Exchange Bank (now Chemical Bank),
Trustee. Filed as Exhibit 4(d) to Berkshire Gas's Registration
Statement on Form S-1, Registration Statement No. 2-19808, and
incorporated herein by reference.
4(c) Second Supplemental Indenture, dated as of October 1, 1957,
between Berkshire Gas and Chemical Corn Exchange Bank (now
Chemical Bank), Trustee. Filed as Exhibit 4(e) to Berkshire Gas's
Registration Statement on Form S-2, Registration Statement
No. 2-19808, and incorporated herein by reference.
4(d) Third Supplemental Indenture, dated as of October 1, 1958, between
Berkshire Gas and Chemical Corn Exchange Bank (now Chemical Bank),
Trustee. Filed as Exhibit 4(f) to Berkshire Gas's Registration
Statement on Form S-1, Registration Statement No. 2-19808, and
incorporated herein by reference.
4(e) Fourth Supplemental Indenture, dated as of August 1, 1960, between
Berkshire Gas and Chemical Bank New York Trust Company (now
Chemical Bank), Trustee. Filed as Exhibit 4(e) to Berkshire Gas's
Registration Statement on Form S-2, File No. 33-1492, file
herewith.
4(f) Fifth Supplemental Indenture, dated as of June 1, 1962, between
the Company and Chemical Bank New York Trust Company (now Chemical
Bank), Trustee. Filed as Exhibit 4(f) to Berkshire Gas's
Registration Statement on Form S-2, File No. 33-1492, and
incorporated herein by reference.
4(g) Sixth Supplemental Indenture, dated as of February 1, 1965,
between Berkshire Gas and Chemical Bank New York Trust Company
(now Chemical Bank), Trustee. Filed as Exhibit 4(g) to Berkshire
Gas's Registration Statement on Form S-2, File No. 33-1492, and
incorporated herein by reference.
4(h) Seventh Supplemental Indenture, dated as of October 1, 1965,
between Berkshire Gas and Chemical Bank New York Trust Company
(now Chemical Bank), Trustee. Filed as Exhibit 4(h) to Berkshire
Gas's Registration Statement on Form S-2, File No. 33-1492, and
incorporated herein by reference.
4(i) Eighth Supplemental Indenture, dated as of September 1, 1967,
between Berkshire Gas and Chemical Bank New York Trust Company
(now Chemical Bank), Trustee. Filed as Exhibit 4(i) to Berkshire
Gas's Registration Statement on Form S-2, File No. 33-1492, and
incorporated herein by reference.
4(j) Ninth Supplemental Indenture, dated as of April 1, 1969, between
Berkshire Gas and Chemical Bank, Trustee. Filed as Exhibit 4(j)
to Berkshire Gas's Registration Statement on Form S-2, File
No. 3-1492, and incorporated herein by reference.
4(k) Tenth Supplemental Indenture, dated as of March 1, 1972, between
Berkshire Gas and Chemical Bank, Trustee. Filed as Exhibit 4(k)
to Berkshire Gas's Registration Statement on Form S-2, File
No. 33-1492, and incorporated herein by reference.
4(l) Eleventh Supplemental Indenture, dated as of April 15, 1975,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(l) Berkshire Gas's Registration Statement on Form S-2,
File No. 33-1492, and incorporated herein by reference.
4(m) Twelfth Supplemental Indenture, dated as of November 27, 1978,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(m) to Berkshire Gas's Registration Statement on Form
S- 2, File No. 33-1492, and incorporated herein by reference.
4(n) Thirteenth Supplemental Indenture, dated as of October 15, 1981,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(n) to Berkshire Gas's Registration Statement on Form
S-2, File No. 33-1492, and incorporated herein by reference.
4(o) Fourteenth Supplemental Indenture, dated as of August 19, 1983,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(o) to Berkshire Gas's Registration Statement on Form
S-2, File No. 33-1492, and incorporated herein by reference.
4(p) Fifteenth Supplemental Indenture, dated as of August 19, 1985,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(p) to Berkshire Gas's Registration Statement on Form
S-2, Registration No. 33-1492, and incorporated herein by
reference.
4(q) Sixteenth Supplemental Indenture, dated as of January 1, 1988,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(q) to Berkshire Gas's Registration Statement on Form
S-3, Registration No. 33-27785, and incorporated herein by
reference.
4(r) Seventeenth Supplemental Indenture, dated as of February 1, 1989,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(r) to Berkshire Gas's Registration Statement on Form
S-3, Registration Statement No. 33-27785, and incorporated herein
by reference.
4(s) Eighteenth Supplemental Indenture, dated as of September 1, 1991,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(x) to Berkshire Gas's Registration Statement on Form
S-3, Registration Statement No. 33-64302, and incorporated herein
by reference.
4(t) Nineteenth Supplemental Indenture, dated as of September 1, 1992,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(z) to Berkshire Gas's Registration Statement on Form
S-3, Registration Statement No. 33-64302, and incorporated herein
by reference.
4(u) Debenture Indenture, dated as of November 1, 1986, between
Berkshire Gas and Centerre Trust Company of St. Louis (now
Boatmen's Trust Company), as Trustee. Filed as Exhibit 4(q) to
Berkshire Gas's Registration Statement on Form S-2, Registration
Statement No. 33-9509, and incorporated herein by reference.
4(v) Senior Note Agreement, dated as of July 1, 1990, between Berkshire
Gas and Allstate Life Insurance Company. Filed as Exhibit 4(w) to
Berkshire Gas's Registration Statement on Form S-3, Registration
Statement No. 33-64302, and incorporated herein by reference.
4(w) Charter of Berkshire Gas. Filed as Exhibit 3(a) to Berkshire
Gas's Form 8, amending Berkshire Gas's Form 10-Q for the fiscal
quarter ended September 30, 1984, File No. 0-1857-3, and
incorporated herein by reference.
4(x) Amendment to Berkshire Gas's Charter, dated October 30, 1985.
Filed as Exhibit 3(b) to Berkshire Gas's Registration Statement on
Form S-2, Registration Statement No. 33-1492, and incorporated
herein by reference.
4(y) Amendment to Berkshire Gas's Charter, dated July 14, 1986. Filed
as Exhibit 3(a) to Berkshire Gas's Form 10-K for the fiscal year
ended June 30, 1986, File No. 0-1857-3, and incorporated herein by
reference.
4(z) Amendment to Berkshire Gas's Charter, dated October 28, 1986.
Filed as Exhibit 4(v) to Berkshire Gas's Registration Statement on
Form S-3, Registration Statement No. 33-27785, and incorporated
herein by reference.
4(aa) Amendment to Berkshire Gas's Charter, dated June 15, 1992. Filed
as Exhibit 4(y) to Berkshire Gas's Registration Statement on Form
S-3, Registration Statement No. 33-64302, and incorporated herein
by reference.
4(bb) Amendment to Berkshire Gas's Charter, dated July 29, 1994. Filed
as Exhibit 4(bb) on Berkshire Gas's Registration Statement on Form
S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
4(cc) Amendment to Berkshire Gas's Charter, dated September 10, 1996.
Filed as part of Exhibit 3(i) to Berkshire Gas's form 10-Q for the
fiscal quarter ended December 13, 1996. File No. 0-1857-3, and
incorporated herein by reference.
4(dd) Senior Note Agreement, dated November 1, 1996, between Berkshire
Gas and First Colony Life Insurance Company. Filed as Exhibit 4
to Berkshire Gas's form 10-Q for the fiscal quarter ended
December 31, 1996. File No. 0-1857-3, and incorporated herein by
reference.
4(ee) Declaration of Trust of Berkshire Energy Resources dated
February 17, 1998. Filed as Appendix B to the Company's
Registration Statement on Form S-4, Registration Statement
No. 333-46799, and incorporated herein by reference.
4(ff) Amendment to Medium-Term Loan Agreement, dated April 1, 1999.
Filed as Exhibit 4(ff) to Berkshire Energy Resources's Form 10-K
for the fiscal year ended June 30, 1999, File No. 0-29812,
filed herewith.
10(a) Employment Contract between Berkshire Gas and Scott S. Robinson.
Filed as Exhibit 10(f) to Berkshire Gas's Form 10-K for the fiscal
year ended June 30, 1985, File No. 01857-3, and incorporated
herein by reference.
10(b) Contract for the operation and maintenance of a cogeneration
pipeline between Berkshire Gas and Altresco Financial, Inc., dated
December 11, 1992. Filed as Exhibit 10(n) to Berkshire Gas's
Form 10-K for the fiscal year ended June 30, 1993,
File No. 0-18573, and incorporated herein by reference.
10(c) Year-to-year contract for the purchase of propane gas between
Berkshire Gas and Enron Gas Liquids, dated June 1, 1993. Filed as
Exhibit 10(c) on Berkshire Gas's Registration Statement on
Form S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(d) Contract for the transportation of natural gas under IT rate
schedule between Berkshire Gas and Tennessee Gas Pipeline Company,
contract number 103250-8, dated September 1, 1993. Filed as
Exhibit 10(d) on the Company Registration Statement on Form S-2,
Registration Statement No. 33-83828, and is incorporated herein by
reference.
10(e) Contract for the transportation of natural gas under FT-A rate
schedule between Berkshire Gas and Tennessee Gas Pipeline Company,
contract number 2030, dated September 1, 1993. Filed as
Exhibit 10(e) on Berkshire Gas's Registration Statement on
Form S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(f) Contract for the transportation of natural gas under FT-A rate
schedule between Berkshire Gas and Tennessee Gas Pipeline Company,
contract number 2064, dated September 1, 1993. Filed as Exhibit
10(f) on Berkshire Gas's Registration Statement on Form S-2,
Registration Statement No. 33-83828, and is incorporated herein by
reference.
10(g) Contract for the transportation of natural gas under FT-A rate
schedule between Berkshire Gas and Tennessee Gas Pipeline Company,
contract number 779, dated September 1, 1993. Filed as
Exhibit 10(g) on Berkshire Gas's Registration Statement on
Form S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(h) Contract for the transportation of natural gas under CGT-NE rate
schedule between Berkshire Gas and Tennessee Gas Pipeline Company,
contract number 2063, dated September 1, 1993. Filed as
Exhibit 10(h) on Berkshire Gas's Registration Statement on Form
S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(i) Contract for the purchase of natural gas between Berkshire Gas and
Tenngasco Corporation, dated September 14, 1993. Filed as
Exhibit 10(i) on Berkshire Gas's Registration Statement on Form
S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(j) Contract for the purchase of natural gas between Berkshire Gas and
Natural Gas Clearinghouse, dated as of November 1, 1993. Filed
as Exhibit 10(j) on Berkshire Gas's Registration Statement on Form
S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(k) Gas Storage Agreement between Berkshire Gas and Tennessee Gas
Pipeline Company, dated as of September 1, 1993. Filed as
Exhibit 10(k) on Berkshire Gas's Registration Statement on Form
S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(l) Company Corporate Incentive Compensation Plan ("ICP"). Filed as
Exhibit 10(l) on Berkshire Gas's Registration Statement on Form
S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(m) Severance Agreement, dated September 28, 1993, by and between
Berkshire Gas and Robert M. Allessio. Filed as Exhibit 10(n) on
Berkshire Gas's Registration Statement on Form S-2, Registration
Statement No. 33-83828, and is incorporated herein by reference.
10(n) Severance Agreement, dated October 15, 1993, by and between
Berkshire Gas and Michael J. Marrone. Filed as Exhibit 10(o) on
Berkshire Gas's Registration Statement on Form S-2, Registration
Statement No. 33-83828, and is incorporated herein by reference.
10(o) Severance Agreement, dated October 15, 1993, by and between
Berkshire Gas and Cheryl M. Clark. Filed as Exhibit 10(q) on
Berkshire Gas's Registration Statement on Form S-2, Registration
Statement No. 33-83828, and is incorporated herein by reference.
10(p) Employment Agreement, dated June 30, 1999, by and between the
Company and Scott S. Robinson. Filed as Exhibit 10(p) to
Berkshire Energy Resources's Form 10-K for the fiscal year ended
June 30, 1999, File No. 0-29812, filed herewith.
10(q) Severance Agreement, dated June 9, 1999, by and between Berkshire
Gas and Cheryl M. Clark. Filed as Exhibit 10(q) to Berkshire
Energy Resources's Form 10-K for the fiscal year ended
June 30, 1999, File No. 0-29812, filed herewith.
10(r) Severance Agreement, dated June 9, 1999, by and between Berkshire
Gas and Michael J. Marrone. Filed as Exhibit 10(r) to Berkshire
Energy Resources's Form 10-K for the fiscal year ended
June 30, 1999, File No. 0-29812, filed herewith.
10(s) Severance Agreement, dated June 9, 1999, by and between Berkshire
Gas and Robert M. Allessio. Filed as Exhibit 10(s) to Berkshire
Energy Resources's Form 10-K for the fiscal year ended
June 30, 1999, File No. 0-29812, filed herewith.
10(t) Company Corporate Incentive Compensation Plan ("ICP")as secured
and amended. Filed as Exhibit 10(t) to Berkshire Energy
Resources's Form 10-K for the fiscal year ended June 30, 1999,
File No. 0-29812, filed herewith.
13(a) Annual Report to Shareholders
Filed Herewith:
A copy of the Company's Annual Report to Shareholders for fiscal
year ended June 30, 1999.
27(a) Financial Data Schedule
Filed Herewith:
Financial Data Schedule for the fiscal year ended June 30, 1999.
Exhibit 3(i)
ARTICLES OF MERGER
of
THE BERKSHIRE GAS COMPANY
(A Massachusetts Utility Corporation)
and
BERKSHIRE GAS MERGECO GAS COMPANY, INC.
(A Massachusetts Utility Corporation)
and
BERKSHIRE ENERGY RESOURCES
(A Massachusetts Business Trust - - a party to the Agreement and Plan
of Merger described herein and that will survive the transaction
contemplated in such agreement)
Pursuant to the provisions of Section 102A of Chapter 164 of the
Massachusetts General Laws, the undersigned corporations adopt the following
Articles of Merger for the purpose of merging Berkshire Gas Mergeco Gas
Company, Inc. ("Mergeco") with and into The Berkshire Gas Company ("Berkshire
Gas"), which shall be the Surviving Corporation:
1. Attached hereto and incorporated herein by reference is the
Agreement and Plan of Merger dated as of February 19, 1998, of the
undersigned corporations. The Surviving Corporation will furnish a copy of
said agreement to any of its stockholders, or to any person who was a
stockholder of a Constituent Corporation, upon written request and without
charge. The Effective Time as defined therein is 11:59 P.M., Boston time on
December 31, 1998.
2. The undersigned president or vice president and clerk or
secretary or assistant clerk or secretary of each undersigned corporation
hereby state under the penalties of perjury that the attached Agreement and
Plan of Merger has been duly executed on behalf of such corporation and has
been approved by the stockholders of such corporation and by the Department
of Telecommunications and Energy of The Commonwealth of Massachusetts in the
manner required by Section 96 of Chapter 164 of the Massachusetts General
Laws.
3. The post office address of the initial principal office of the
Surviving Corporation is 115 Cheshire Road, Pittsfield, Massachusetts 01201.
4. The name, residence and post office address of each of the
initial directors and the chairman, president, treasurer and clerk of the
Surviving Corporation are as follows:
POST OFFICE
NAME TITLE RESIDENCE ADDRESS
George R. Baldwin Director c/o 115 Cheshire Road
Pittsfield, MA 01201
John W. Bond Director c/o 115 Cheshire Road
Pittsfield, MA 01201
Paul L. Gioia Director c/o 115 Cheshire Road
Pittsfield, MA 01201
Franklin M. Hundley Chairman and c/o 115 Cheshire Road
Director Pittsfield, MA 01201
James R. Keys Director c/o 115 Cheshire Road
Pittsfield, MA 01201
Robert B. Trask Director c/o 115 Cheshire Road
Pittsfield, MA 01201
Scott S. Robinson Director, 115 Cheshire Road
President and Pittsfield, MA 01201
Chief Executive
Officer
Michael J. Marrone Vice President, 115 Cheshire Road
Treasurer and Pittsfield, MA 01201
Chief Financial
Officer
Cheryl M. Clark Clerk 115 Cheshire Road
Pittsfield, MA 02101
5. The fiscal year of the Surviving Corporation initially adopted
shall end on the last day of the month of June in each year.
6. The date and time initially fixed in the Bylaws for the annual
meeting of the stockholders of the Surviving Corporation is 10:00 a.m. on the
second Wednesday in November of each year.
IN WITNESS WHEREOF, Berkshire Gas, Mergeco and Berkshire Energy
Resources, pursuant to approval and authorization duly given by resolutions
adopted by their respective Boards of Directors or Board of Trustees, have
each caused these Articles of Merger to be executed by its president or one
of its vice presidents and its clerk or one of its assistant clerks.
Dated: December 28, 1999 THE BERKSHIRE GAS COMPANY
By: /s/ Scott S. Robinson
---------------------
Name: Scott S. Robinson
Title: President and Chief
Executive Officer
By: /s/ Cheryl M. Clark
-------------------
Name: Cheryl M. Clark
Title: Clerk
BERKSHIRE GAS MERGECO GAS COMPANY, INC.
By: /s/ Scott S. Robinson
---------------------
Name: Scott S. Robinson
Title: President and Chief
Executive Officer
By: /s/ Cheryl M. Clark
-------------------
Name: Cheryl M. Clark
Title: Clerk
BERKSHIRE ENERGY RESOURCES
By: /s/ Scott S. Robinson
---------------------
Name: Scott S. Robinson
Title: President and Chief
Executive Officer
By: /s/ Cheryl M. Clark
-------------------
Name: Cheryl M. Clark
Title: Secretary
Exhibit 4(ff)
SECOND AMENDMENT TO LOAN AGREEMENT
This SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment"), dated as
of the 1st day of April, 1999, made by and between Fleet National Bank, a
national banking association (as successor-in-interest to Fleet Bank of
Massachusetts, a Massachusetts banking corporation), having a regular place
of business at One Monarch Place, Springfield, Massachusetts (the "Bank");
and The Berkshire Gas Company, a Massachusetts public utility corporation
having a usual place of business at 115 Cheshire Road, Pittsfield,
Massachusetts (the "Borrower"), to the Loan Agreement between the Borrower
and the Bank dated as of December 14, 1993, as modified by that certain
Loan Modification Agreement between the Borrower and the Bank dated April
11, 1994 (as amended or modified, the "Loan Agreement"). All capitalized
terms used herein without definition shall have the meanings ascribed to
such terms in the Loan Agreement. As wed herein, the term "Loan Documents"
shall have the meaning set forth in the Loan Agreement, as amended hereby.
RECITALS
A. Pursuant to the Loan Agreement, the Bank has agreed to lend the
Borrower Six Million Dollars ($6,000,000) (the "Term Loan") with a maturity
date of April 1, 1999.
B. The Borrower has requested that the Bank renew the Term Loan
and extend the maturity date to April 1, 2004.
C. The Bank has agreed to such request upon the terms and
conditions set forth herein, and to accomplish the foregoing purpose, the
Borrower and the Bank are mutually desirous of amending the Loan Agreement
as set forth herein.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby expressly acknowledged, the Borrower and the Bank hereby agree as
follows:
ARTICLE I
AMENDMENTS TO LOAN AGREEMENT
The Loan Agreement is hereby amended as follows:
1.1 Amendment of Loan Modification Agreement. The Loan Modification
hereby amended by deleting the Preliminary Statement and Section 2 in their
entirety.
1.2 Amendment of Definition of Loan Documents. Section 1.2 of the
Loan hereby deleted in its entirety and replaced with the following
"1.2 Loan Documents Defined. As used herein, the term "Loan
Documents" shall mean, collectively, (i) this Loan Agreement, as
amended, (ii) that certain $6,000,000 Commercial Promissory Note
dated December 14, 1993 by the Borrower in favor of the Bank, as
modified and amended (the "Note") (iii) that certain $7,000,000
Demand Revolving Business Credit Note made by the Borrower on
February 17, 1995 in favor of the Bank, as amended, (iv) that certain
First Mortgage Indenture and Deed of Trust (the "Trust Indenture"),
dated July 1, 1954 between the Borrower (formerly known as Pittsfield
Coal Gas Company) and Chemical Bank (formerly known as Chemical Bank
and Trust Company) as Trustee, as amended, (v) that certain Note
Agreement (the "Note Agreement") of the Borrower dated as of
November 1, 1996 (regarding $16,000,000 7.80% Senior Notes due
November 15, 2021), (vi) that certain ISDA Master Agreement dated as
of February 16, 1999 between the Bank and the Borrower (the "Swap
Agreement"), (vii) that certain Letter Agreement dated
February 16, 1999 between the Bank and the Borrower confirming the
terms and conditions of the Swap Agreement, and (viii) any and all
other agreements and documents related to or executed or delivered in
connection with the foregoing agreements listed in (i) through (v) or
in connection with any existing or future indebtedness of the
Borrower to the Bank.
1.2A Amendment of Section 2.5. Section 2.5 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
"2.5 Use of Proceeds. The proceeds of the Loans shall be used
for working capital and other general corporate purposes."
1.3 Amendment of Financial Statement Requirements.
(a) Section 3.1.1(i) of the Loan Agreement is hereby amended by
replacing the word "reviewed" with the word "audited".
(b) Section 3.1.1 (ii) of the Loan Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"(ii) As soon as available, and in any event within forty five
(45) days after the end of each of the first three quarters of each
fiscal year, internally prepared or accountant prepared consolidated
financial statements of the Borrower and Berkshire Energy Resources,
a Massachusetts business trust ("BER"), and its subsidiaries,
including balance sheets, statements of earnings and changes in cash
flow; provided, however, that if, and only for so long as, the
Borrower accounts for at least seventy five percent (75%) of the
revenues and capital of BER, the Borrower shall not be obligated to
provide such quarterly statements of the Borrower."
(c) Section 3.1.1(ii) of the Loan Agreement is hereby amended by
replacing the first sentence thereof with the following:
"With reasonable promptness, additional financial reports,
statements and information regarding the financial condition,
business and operations of the Borrower and BER as the Bank
reasonably may request from time to time."
(b) Section 3.1 of the Loan Agreement is hereby amended by adding
the following new Sections 3.1.2 and 3.1.3:
"3.1.2 In connection with the delivery of any of the foregoing
financial statements of the Borrower to the Bank, the Borrower hereby
covenants to cause a certified public accountant reasonably
acceptable to the Bank ("Accountants") to deliver a letter to the
Bank, upon which the Bank may rely, stating that such financial
statements have been prepared based on the same books and records of
the Borrower as the books and records of the Borrower used to prepare
any consolidated financial statements of BER {whether internally
prepared or auditor prepared) which include the Borrower's
financials.
3.1.3 The Borrower hereby covenants that upon reasonable
request of the Bank at any time and from time to time it shall cause
its Accountants to provide a letter to the Bank, upon which the Bank
may rely, stating (i) that such Accountants have reviewed the Trust
Indenture and the Note Agreement, each as then currently in effect,
and (ii) whether or not the Borrower is then in compliance with the
terms and provisions of the Trust Indenture and the Note Agreement."
1.4 Amendment of Section 7.4. Section 7.4(a) of the Loan Agreement
is hereby deleted in its entirety and replaced with the following:
"(a) If to the Bank, to it at:
Fleet National Bank
One Monarch Place
Springfield, MA 01102"
1.5 Pledge of Loan Documents. The following new Section 7.11 shall
be inserted immediately following Section 7.10:
"7.11 Pledge of Loan Documents. The Bank may at any time
pledge all or any portion of its rights under the Loan Documents
including, without limitation, any portion of the Note, to any of the
twelve (12) Federal Reserve Banks organized under Section 4 of the
Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or
enforcement thereof shall release the Bank from its obligations under
any of the loan documents."
ARTICLE II
AMENDMENTS TO COMMERCIAL PROMISSORY NOTE
The Note is hereby amended as follows:
2.1 The first and second sentences of the second paragraph are
hereby deleted in their entirety.
2.2 The third, fourth, fifth and sixth paragraphs are hereby
deleted entirely and replaced with the following:
"The term "Base LIBOR Rate" shall mean the rate per annum
obtained by dividing (i) the Fixed LIBOR Rate for each Interest
Period, by (ii) a percentage equal to one hundred percent (100%)
minus the reserve percentage applicable during such Interest Period
under regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or if more than one such percentage is
applicable, minus the daily average of such percentages for those
days in such Interest Period during which any such percentage shall
be so applicable) for determining the maximum reserve requirements
(including, without limitation, any marginal reserve requirement) for
the Bank (or of any subsequent holder of this Note which is subject
to such reserve requirements) in respect of liabilities or assets
consisting of or including Eurocurrency liabilities having a term
equal to the Interest Period.
The term "Boston Banking Day" means a day on which banks are
not required or authorized by law to close in Boston, Massachusetts.
The term "Business Day" shall mean: any Boston Banking Day and,
if the applicable Business Day relates to the selection or
determination of any interest rate computed with reference to the
LIBOR Rate, any London Banking Day. If any day on which a payment is
due is not a Business Day, then the payment shall be due on the next
day following which is a Business Day, unless, with respect to
advances at the LIBOR Rate, the effect would be to make the payment
due in the next calendar month, in which event such payment shall be
due on the next preceding day which is a Business Day.
The term "Interest Period" shall mean the applicable period for
each LIBOR Loan beginning on the day selected, or deemed selected, by
the Borrower at least two (2) Business Days prior to the end of the
current Interest Period or, if no Interest Period has been selected,
at least two (2) Business Days prior to the beginning of a new
Interest Period, and ending (a) thirty (30) days thereafter at any
time that the Swap Agreement is then in effect or (b) thirty (30),
sixty (60), ninety (90) or one hundred twenty (120) days thereafter
as selected by the Borrower at any time that the Swap Agreement is
not then in effect.
The term "LIBOR Principal Amount" shall mean that portion of
the outstanding principal balance of the Loan with respect to which
the Borrower has made the LIBOR Election as described herein.
The term "Fixed LIBOR Rate" shall mean, with respect to each
Interest Period, the rate of interest, expressed as an annual rate,
equal to the simple average, rounded up to the nearest 1/16 of 1%, of
the rates shown on the display referred to as the "LIBOR page" (or
any display substituted therefor) of the Reuters U.S. Domestic Money
Service transmitted through the Reuters monitor system as being the
respective rates at which deposits in Dollars would be offered by the
principal London offices of each of the banks named thereon to major
banks in the London interbank market at approximately 11:00 a.m.
(London time) on the day which is two (2) London Banking Days before
the first day of such Interest Period for a period substantially
coextensive with such Interest Period.
The term "London Banking Day" means any day on which dealings
in deposits in Dollars are transacted in the London interbank market.
The term "Prime Rate" shall mean the per annum rate of interest
so designated from time to time by the Bank at its principal office
as its prime or commercial base lending rate. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best
rate being charged to any customer.
The outstanding principal balance shall bear interest at the
Base LIBOR Rate plus (a) eight-tenths percent (0.8%) at any time the
Swap Agreement is then in effect or (6) one and one eighth (1.125%)
percent at any time that the Swap Agreement is not then in effect (as
applicable, the "LIBOR Rate").
During any period of time when the Swap Agreement is not then
in effect, at least two (2) Business Days prior to each last day of
any Interest Period by 10:00 a.m. of a Boston Banking Day the
Borrower shall select the Interest Period from the alternatives
available as elsewhere provided for herein, by giving irrevocable
written notice, or by cable, tested telex, telecopier (with
authorized signature) or telephone, but if not written, such notice
shall be immediately confirmed by written notice, to Bank specifying
the Interest Period. If no such selection is made, then a thirty (30)
day Interest Period shall be deemed selected."
Payments of interest for each LIBOR Loan shall be made on the
last day of the Interest Period for each such LIBOR Loan. In any
event, payment of principal, together with all accrued and unpaid
interest thereon shall be due and payable in full on April 1, 2004."
2.3 The eighth and ninth paragraphs are hereby deleted in their
entirety and replaced with the following:
"The Borrower shall have the right from time to time, upon at
least two (2) Business Days prior written notice to the Bank, to
prepay any outstanding LIBOR Loan, in whole (but not in part), and,
except for prepayments resulting from revolving activity performed by
the Bank under the Bank's Target Balance Service, the Borrower shall
pay to the Bank a yield maintenance fee in an amount computed as
follows: the latest published rate preceding the date of prepayment
for United States Treasury Notes or Bills (Bills on a discounted
basis shall be converted to a bond equivalent) with a maturity date
closest to the tenor of the Interest Period chosen for the LIBOR
Loan, as to which the prepayment is made shall be subtracted from the
London Interbank Offered Rate component of the LIBOR Interest Rate in
effect at the time of prepayment. If the result is zero or a negative
number, there shall be no yield maintenance fee. If the result is a
positive number, then the resulting percentage shall be multiplied by
the amount of the principal balance being prepaid. The resulting
amount shall be divided by 360 and multiplied by the number of days
remaining in the Interest Period of the applicable LIBOR Loan. Said
amount shall be reduced to present value calculated by using the
number of days remaining in the Interest Period of the applicable
prepaid LIBOR Loan and using the above-referenced United States
Treasury Note or Bill rate and the number of days remaining in the
Interest Period of the applicable prepaid LIBOR Loan. The resulting
amount shall be the yield maintenance fee due to the Bank upon
prepayment of the LIBOR Loan.
The Borrower agrees to indemnify the Bank and to hold the Bank
harmless from and against any loss, cost or expense (including loss
of anticipated profits) that the Bank may sustain or incur as
consequence of (i) default by the Borrower m payment of the principal
amount of or any interest on any LIBOR Loans as and when due and
payable, including any such loss or expense arising from interest or
fees payable by the Bank to lenders of funds obtained by it in order
to maintain its LIBOR Loans, (ii) failure of the Borrower to make a
borrowing after the Borrower has given (or is deemed to have given) a
notice electing a LIBOR Loan, (iii) the making of any payment of a
LIBOR Loan on a day that is not the last day of the applicable
Interest Period with respect thereto, including interest or fees
payable by the Bank to lenders of funds obtained by it in order to
maintain any such LIBOR Loans and (iv) default by the Borrower under
the Swap Agreement."
2.4 The seventh full paragraph on page 4 shall be amended by
replacing the words "six (6) month LIBOR Rate" in subsection (b) thereof
with the words "interest rate".
2.5 The following new paragraphs are hereby added immediately
following the sixth full paragraph on page 6 of the Note:
"The Bank shall have the unrestricted right, at any tune and
from time to time, and without the consent of or notice to the
Borrower, to grant to one or more banks or other financial
institutions (each, a "Participant") participating interests in the
Bank's obligation to lend hereunder and any or all of the Loans held
by the Bank hereunder. In the event of any such grant by the Bank of
a participating interest to a Participant, whether or not upon notice
to the Borrower, the Bank shall remain responsible for the
performance of its obligations hereunder and the Borrower shall
continue to deal directly and solely with the Bank in connection with
the Bank's rights and obligations hereunder. The Bank may furnish any
information concerning the Borrower in its possession from time to
time to prospective Participants, provided that the Bank shall
require any such prospective Participant to agree in writing to
maintain the confidentiality of such information.
Upon receipt of an affidavit of an officer of the Bank as to
the loss, theft, destruction or mutilation of the Note or any other
security document which is not of public record, and, in the case of
any such loss, theft, destruction or mutilation, upon cancellation of
such Note or other security document, the Borrower will issue, in
lieu thereof, a replacement note or other security document in the
same principal amount thereof and otherwise of like tenor."
ARTICLE III
REPRESENTATIONS AND WARRANTIES; COLLATERAL
The Borrower hereby represents and warrants to the Bank that:
3.1 Compliance with the Loan Agreement and other Loan Documents. As
of the execution of this Amendment, the Borrower is in compliance with all
of the terms and provisions set forth in the Loan Agreement and in the
other Loan Documents to be observed or performed by the Borrower, except
where the failure of Borrower to comply has been waived in writing by the
Bank.
3.2. Representations in Loan Agreement and other Loan Documents. The
representations and warranties of the Borrower set forth in the Loan
Agreement and the other Loan Documents are true and correct in all material
respects as of the date of this Amendment except to the extent that such
representations and warranties relate solely to or are specifically
expressed as of a particular date or period which is past or expired.
3.3. No Event of Default. No default or Event of Default exists under
the Loan Agreement or any of the other Loan Documents.
ARTICLE IV
ACKNOWLEDGEMENT OF OBLIGATIONS
4.1 Acknowledgement of Obligations. Borrower hereby ratifies and
affirms all of the terms and provisions of the Loan Documents, as amended
hereby, and acknowledges and agrees that all of its obligations under any
of the Loan Documents to which the Bank is a party are owed to the Bank
without any offset, deduction, defense or counterclaim of any nature.
ARTICLE V
MODIFICATION OF AND CONSENT UNDER LOAN DOCUMENTS;
EFFECTIVENESS OF AMENDMENT
5.1. Loan Documents. The Loan Agreement and each of the other Loan
Documents are hereby amended to provide that any reference to the
"Agreement" in the Loan Agreement or any of the other Loan Documents
executed and or delivered in conjunction therewith (excluding the Trust
Indenture and the Note Agreement), or any reference to any of the other
Loan Documents in the Loan Agreement or any other Loan Document executed
and or delivered in conjunction therewith (excluding the Trust Indenture
and the Note Agreement), shall mean the Loan Agreement or such Loan
Document as amended by this Amendment, and as it is further amended,
restated, supplemented or modified from time to time.
5.2 Conditions Precedent. This Amendment shall become effective and
be deemed effective as of the date hereof upon the satisfaction by the
Borrower or waiver by the Bank of the following conditions precedent:
(a) Receipt by the Bank of this Amendment, duly executed by the
Borrower;
(b) Receipt by the Bank of the First Amendment to Demand Revolving
Business Credit Note between the Bank and the Borrower, duly executed by
the Borrower;
(c) Receipt by the Bank of Swap Agreement, duly executed by the
Borrower;
(d) Receipt by the Bank of the Consent of the Massachusetts
Department of Public Utilities to the terms of this Amendment;
(e) Payment to the Bank of its fee in the amount of Twenty Five
Thousand Dollars ($25,000); and
(f) Receipt by the Bank of such other documents, instruments and
agreements as the Bank and its counsel may reasonably request.
ARTICLE VI
GENERAL
6.1. Full Force and Effect. As expressly amended hereby, the Loan
Agreement shall continue in full force and effect in accordance with the
provisions thereof. As used in the Loan Agreement, "hereinafter", "hereto",
"hereof" or words of similar import, shall, unless the context otherwise
requires, mean the Loan Agreement as amended by this Amendment.
6.2 Applicable Law. This Amendment shall be governed by and
construed in accordance with the internal laws and judicial decisions of
The Commonwealth of Massachusetts (without giving effect to principles of
conflicts or choice of laws of Massachusetts or of any other jurisdiction).
6.3 Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which
when taken together shall constitute but one and the same instrument.
6.4 Expenses. The Borrower shall reimburse the Bank for all
reasonable legal fees and expenses incurred by the Bank in connection with
the preparation, negotiation, execution and delivery of this Amendment and
all other agreements and documents or contemplated hereby.
6.5. Headings. The headings in this Amendment are for the purpose
of reference only and shall not affect the construction of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered on the date first above written.
BORROWER:
THE BERKSHIRE GAS COMPANY
ATTEST:
/s/Cheryl M. Clark By: s/s Michael J. Marrone
-----------------------
Clerk Name:
Title:: Vice President,
Treasurer & C.F.O.
(CORPORATE SEAL)
LENDER:
FLEET NATIONAL BANK
By: s/s Sheryl L. McQuade
-----------------------
Sheryl L. McQuade,
Vice President
Exhibit 10(p)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made this 30th day of June, 1999, effective as of
June 30, 1999, by and between THE BERKSHIRE GAS COMPANY, a Massachusetts
Corporation having a principal place of business in Pittsfield,
Massachusetts ("BGC" or the "Company"), and Scott S. Robinson, of Lenox,
Massachusetts ("Employee").
W I T N E S S E T H:
WHEREAS, BGC is engaged in the business of distributing and selling
natural gas and related energy businesses; and
WHEREAS, Employee has been employed by BGC for more than twenty-nine
(29) years in various executive positions, has performed valuable services
to BGC in such positions, and is currently President of BGC; and
WHEREAS, Employee is willing to continue in the employ of BGC;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained the parties agree as follows:
1. BGC Obligations
---------------
(a) BGC agrees to retain the Employee, during the period
described in paragraph 3 hereof, to perform services of substantially the
same nature as Employee currently performs on the terms and subject to the
conditions hereinafter set forth, including similar management duties for
any subsidiary or affiliated company, or services as may be assigned to him
by the Board of Directors of BGC, as long as such services are reasonably
comparable to those which might be reasonably expected to be performed by
an employee with the experience and skills of the Employee. In addition,
BGC shall not require the Employee to be based at any office or location
other than one within a fifty (50) mile radius of the headquarters of BGC
in Pittsfield, Massachusetts.
(b) BGC shall pay to Employee salary at a rate no less than the
rate in effect at the time of execution of this Agreement, or at a higher
rate which may be increased from time to time by the Board of Directors for
such office as the Employee then holds. BGC shall pay, or reimburse, or
cause to be paid or reimbursed, to Employee, all reasonable travel and
other expenses incurred by Employee in performing his obligations under
this Agreement. So long as this Agreement is in effect, BGC shall not pay
Employee any director's or trustee's fees for service as a director of BGC
or any parent or affiliated company of BGC, including, without limitation,
Berkshire Energy Resources ("Resources").
(c) Nothing in this Agreement shall restrict or limit the provision
of any payments or benefits to Employee pursuant to any plans
or agreements, now or hereafter existing, including but not
limited to the following:
(i) any incentive or bonus plans,
(ii) any employee or executive benefit plan,
(iii) any Deferred Compensation Agreement between BGC and
Employee,
(iv) any pension, stock ownership, stock option or other
similar plan, or
(v) any supplemental executive retirement plan.
(d) Further, in case of Employee's disability, BGC shall make
disability payments to Employee as described in paragraph 4 below. BGC's
dismissal of Employee without Good Cause (as defined in paragraph 5 below)
shall not alter its obligations under this Agreement.
2. Employee's Obligations
----------------------
(a) During the period of his employment hereunder, except for
illness, vacation periods, and reasonable leaves of absence, Employee shall
devote all his business time, attention, skill and efforts to the faithful
performance of his duties, as currently performed, or assigned from time to
time by the Board of Directors of BGC; provided, however, that any newly
assigned duties shall not be inconsistent with the duties Employee
presently performs. Further, Employee will serve as a Director of BGC and a
Trustee of Resources, if nominated and elected to such respective positions
in accordance with applicable law and the respective by-laws of BGC and
Resources and agrees to accept such other office and/or committee
assignments to which he may be appointed.
(b) Employee agrees that, during the term of this Agreement and
during the five year period following BGC's termination of or failure to
extend this Agreement for other than Good Cause, he shall not directly or
indirectly manage, operate, join, or become associated with a person or
entity that is in competition with BGC, Resources or any subsidiary or
affiliate, in BGC's service territory. Owning stock and/or securities in
any other corporation or entity shall not be deemed a violation of this
Agreement and Employee may serve, or continue to serve, on the boards of
directors of, and hold any other office or positions in, companies or
organizations, when, in the judgment of the Board of Directors, that
service will not conflict with the interests of BGC or Resources or any of
their subsidiaries or affiliates or divisions, or materially affect the
performance of Employee's duties pursuant to this Agreement. Employee shall
not, directly or indirectly, at any time during the term of his employment
hereunder or thereafter, and without regard to when or for what reason such
employment shall terminate, use or permit the use of any trade secrets,
customer lists, proprietary computer programs used or developed by the
Company or Resources or other proprietary information of or relating to BGC
or Resources, or any subsidiary or affiliate and shall not divulge such
trade secrets, customer lists, computer programs or other information to
any person, firm or corporation whatsoever. All payments and benefits to
Employee under this Agreement shall be subject to Employee's compliance
with the provisions of this Paragraph 2, and if Employee fails to comply
herewith, his rights to any future payments or other benefits hereunder
shall terminate, and BGC's obligations to make such payments and provide
such benefits shall cease; provided however, a default by Employee under
this Agreement shall have no effect on Employee's right to receive payments
under any agreement or plan of the sort listed in paragraph l(c) above.
3. Term of Employment
------------------
(a) The term of Employee's employment under this Agreement shall be
deemed to have commenced as of June 30, 1999 and shall continue until
December 31, 2001 (the "Term").
(b) In no event shall this Agreement be extended beyond December
31, 2001, except that the parties may agree in writing to continue
Employee's employment beyond such date and nothing herein shall be deemed
to require the retirement of Employee at any particular age.
4. Disability/Termination
----------------------
(a) If Employee is unable to perform his duties for a period of one
hundred eighty (180) days due to a physical, mental or other medical
disability and the Board of Directors of BGC finds, on the basis of medical
evidence satisfactory to the Board by two-thirds vote, that the Employee is
suffering such a disability so as to be prevented from reasonably
performing his duties under this Agreement, BGC may terminate Employee's
employment, provided that in the event of such termination BGC shall
continue to pay Employee his then current annual salary and continue to
make available all benefits provided hereunder (including any applicable
benefits provided for in Section 1(c) above) for the remainder of the Term.
At the expiration of such Term, Employee shall be eligible to retire with
the benefit of all then existing retirement and pension programs of BGC.
(b) In the event that BGC's termination of Employee's employment is
made at any time with Good Cause as defined in paragraph 5 below, or is
effected by resignation of the Employee, the parties' obligations under
this paragraph 4 shall cease, except for and subject to the provision of
paragraph l(c) above that this Agreement and its termination have no effect
on other plans or agreements between the parties.
(c) In the event of the Employee's death during any payment period
specified in subparagraph (a) of this paragraph 4 above, and Employee dies
before such payment is made, any and all such payments shall be made to
Employee's designated beneficiary.
(d) In the event a Change in Control (as defined in paragraph 6
below) occurs during the term of this Agreement and Employee's employment
is terminated without Good Cause or by the voluntary resignation of
Employee within 90 days of such Change in Control, then BGC (or any
successor entity after the Change in Control) shall provide Employee a
severance benefit as follows: 1) BGC shall pay Employee three times (3x)
his total annual cash compensation, which total annual cash compensation
shall be determined by summing (a) the Employee's then current annual
salary at the time of the Change in Control and (b) his cash bonus for the
most recent year preceding such Change in Control; 2) the Employee shall
have the right to exercise all stock options held by him immediately upon
the date of his termination; and 3) BGC shall continue to offer Employee
all medical, dental and disability benefits at the same cost to the
Employee as in effect prior to the Change in Control through December 31,
2001. Further, in the event of a termination without Good Cause relating
to any such Change in Control, Employee shall retain any and all retirement
or pension benefits, including benefits under any supplemental executive
retirement plan, to which he would be entitled in the event he was employed
for the full Term hereof.
(e) In the event that it is determined that any payment or
distribution of any type to or for the benefit of the Employee made by the
Company, by any of its affiliates (including Resources), by any person who
acquires ownership or effective control or ownership of a substantial
portion of the Company's (or Resources) assets (within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "Code")) or by any affiliate of such person,
whether paid or payable or distributed or distributable pursuant to the
terms of a severance agreement or otherwise, including the severance
benefit provided for in Section 4(d) hereof, (the "Total Payments"), would
be subject to the excise tax (such excise tax, together with any such
interest or penalties, are collectively referred to as the "Excise Tax"),
then the Employee shall be entitled to receive an additional payment (an
"Excise Tax Restoration Payment") in an amount that shall fund the payment
by the Employee of any Excise Tax on the Total Payments as well as all
income taxes imposed on the Excise Tax Restoration Payment or any Excise
Tax. Employee shall also be entitled to reimbursement for the cost of tax
preparation, consultation and representation required in connection with
the application of any such Excise Tax.
5. Good Cause
----------
(a) Discharge from or termination of employment of Employee by BGC
for "Good Cause" shall require a finding by the Board of Directors
evidenced by a vote of 75% of the Board of:
(i) the willful and continued failure by Employee to
substantially perform his duties with BGC after a demand
for substantial performance is delivered to Employee by
the Chief Executive Officer and/or Board of Directors of
the Company which specifically identifies the manner in
which such Chief Executive Officer and/or Board of
Directors believes that Employee has not substantially
performed his duties, or
(ii) the willful engaging by Employee in misconduct which is
materially injurious to BGC, monetarily or otherwise. For
purposes of this subparagraph (a), no act, or failure to
act, on the part of Employee shall be considered
"willful" unless done, or admitted to be done by Employee
not in good faith and without reasonable belief that the
action or omission of Employee was in the best interest
of BGC. Employee's failure to perform any duties due to
physical or mental incapacity shall not be deemed
willful, but in certain cases of incapacity, employment
hereunder may be terminated in accordance with the
procedures set forth in paragraph 4.
(b) Notwithstanding the foregoing provisions of subparagraph (a),
above, Employee shall not be deemed to have been terminated for Good Cause
unless and until there shall have been delivered to Employee a copy of a
notice of termination containing the aforesaid finding and specifying in
detail the particulars thereof from the Board of Directors of BGC after
reasonable notice to Employee and an opportunity for Employee, together
with his counsel, to be heard before the Board of Directors.
If Employee shall incur legal fees and expenses in contesting any
termination of employment asserted by BGC to have been for Good Cause
including, without limitation thereto, those incurred for any such hearing,
then Employee shall be entitled to payment or reimbursement for such legal
fees and costs as are reasonable.
6. Change in Control.
------------------
The term, "Change in Control", shall mean the occurrence of any of
the following:
(a) The Company or Resources receives a report on Schedule 13D
filed with the Securities and Exchange Commission pursuant to Section 13(d)
of the Securities Exchange Act of 1934, as amended (hereinafter referred to
as the "Exchange Act"), disclosing that any person, group, corporation or
other entity (other than BGC) is the beneficial owner, directly or
indirectly, of twenty-five percent (25%) or more of the outstanding common
stock of the Company or Resources;
(b) Any Person (as such term is defined in Section 13(d) of the
Exchange Act), group, corporation or other entity other than Resources or a
wholly-owned subsidiary of Resources, purchases shares pursuant to a tender
offer or exchange offer to acquire any common stock of Resources (or
securities convertible into common stock) for cash, securities or any other
consideration, provided that after consummation of the offer, the Person,
group, corporation or other entity in question is the beneficial owner (as
such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of twenty-five percent (25%) or more of the outstanding common
stock of Resources (calculated as provided in paragraph (d) of Rule 13d-3
under the Exchange Act in the case of rights to acquire common stock); or
(c) The stockholders of the Company or Resources, as applicable,
approve (i) any consolidation or merger of the Company or Resources, in
which the Company or Resources, as applicable, is not the continuing or
surviving corporation or pursuant to which shares of common stock of the
Company or Resources would be converted into cash, securities or other
property, (ii) any acquisition, combination or merger of the Company or
Resources, as applicable, by or with another corporation in which,
immediately after such acquisition, combination or merger, less than a
majority of the outstanding voting shares (or less than a majority of any
combination of such voting shares, warrants, options, convertible
securities or the like as may represent control) of the parent or surviving
corporation are owned by the owners of the voting shares of the Company or
Resources, as applicable, outstanding immediately prior to such
acquisition, combination or merger, (iii) a complete liquidation or
dissolution of the Company or Resources, or (iv) any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions)
of all or substantially all the assets of the Company or Resources.
7. Effect of Other Agreements
--------------------------
This Agreement contains the entire understanding between the parties
and supercedes any prior employment agreement between Employee and BGC;
provided, however, this Agreement shall not have any effect on any
understandings between the parties on such matters as insurance,
supplemental retirement plans and other benefits. Without limiting the
foregoing, upon the execution of this Agreement, the Employment Agreement
between BGC and Employee dated June 13, 1985 and effective as of June 5,
1985, as amended on July 16, 1998, shall be terminated and this Agreement
shall be in effect in lieu thereof.
8. General Provisions
------------------
(a) Nonassignability. Neither this Agreement nor any right or
interest hereunder shall be assigned by Employee, his beneficiaries, or
legal representative, without BGC's prior written consent.
(b) No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge or
hypothecation or to execution, attachment, levy, or similar process of
assignment by operation of law, and any attempt, voluntary or involuntary,
to effect any such action shall be null, and of no effect.
(c) Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of Employee and BGC and their respective permitted
successors and assigns. If a merger, consolidation or sale of assets
occurs, this Agreement shall be expressly assumed and adopted by the
successor entity or person and shall be re-executed thereby.
(d) Amendment of Agreement. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto.
(e) Beneficiary. Employee hereby designates as his beneficiary
under this Agreement, the Scott S. Robinson Revocable Trust, under
agreement dated as of April 9, 1996, provided that Employee may change his
beneficiary, or provide for alternate beneficiaries, at any time by
notifying BGC in writing of such change, and no consent shall be required
from the beneficiary or from BGC.
(f) Headings. The headings or paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
(g) Severability. All provisions hereof are severable and if any
provision is determined to be unenforceable, no other provision shall be
affected thereby.
(h) Governing Law. This Agreement has been executed and delivered
in the Commonwealth of Massachusetts and its validity, interpretation,
performance, and enforcement shall be governed by the laws of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, BGC has caused this Agreement to be executed and
its seal to be affixed hereto by its agents thereunto duly authorized, and
Employee has signed this Agreement, all as of June __, 1999.
THE BERKSHIRE GAS COMPANY
/s/ Cheryl M. Clark By: /s/ Michael J. Marrone
- -------------------- -----------------------
Witness Vice President,
Treasurer & CFO
/s/ Cheryl M. Clark /s/ Scott S. Robinson
Witness Employee
Exhibit 10(q)
THE BERKSHIRE GAS COMPANY
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT, dated this 9th day of June, 1999 (the
"Agreement"), by and between THE BERKSHIRE GAS COMPANY, a Massachusetts
Corporation (herein referred to as the "Company"), AND CHERYL M. CLARK
having an address at 1645 DUBLIN ROAD, RICHMOND, MA 01254 (the
"Employee").
W I T N E S S E T H T H A T:
WHEREAS, the Employee is an Employee of the Company and an integral
part of its management who participates in the decision-making process
relating to short-and-long-term planning and policy for the Company;
WHEREAS, the Company is a wholly owned subsidiary of Berkshire Energy
Resources, a Massachusetts Business Trust (hereinafter referred to as the
"Parent"); and
WHEREAS, the Board of Trustees of Parent (the "Board"), at its
meeting on June 9, 1999, determined that it would be in the best interests
of the Company, its shareholder and the Employee to ensure continuity in
the management of the Company's administration and operations in the event
of a Change of Control (as defined in Section 3) by entering into a
Severance Agreement to retain the services of the Employee.
NOW THEREFORE, it is hereby agreed by and between the parties hereto
as follows:
1. Nature of Agreement. In order to induce the Employee to remain
in the employ of the Company and to provide continued services
to the Company now and in the event that a Change of Control is
imminent or occurring, this Agreement sets forth severance
benefits that the Company shall pay the Employee, after the
occurrence of a Change in Control, in the event of the
Employee's termination of his or her employment for Good Reason
(as defined in Section 4) or for any reason other than Cause
(as defined in Section 4), disability, death or retirement.
2. Terms:
(1) Term of Agreement. The initial term of this Agreement
shall commence immediately upon the date hereof and
continue in full force for a period of thirty-six (36)
calendar months.
(2) Extensions. This Agreement shall be subject to review
annually by the Board prior to June 30th each year. As
part of such annual review, the Board shall consider
whether to extend the term of this Agreement for an
additional year. Unless the Board affirmatively votes at
such review not to extend the term of this Agreement, the
term of this Agreement shall be extended automatically for
a period of twelve months from the previously effective
termination date. In the event that the Board votes not
to extend the terms of this Agreement, the termination
date of this Agreement shall be the later of thirty-six
(36) months from the effective date of this Agreement or
thirty-six (36) months from the June 30th of the year in
which this Agreement was most recently extended; provided,
however, that this Agreement shall expire automatically
and with no requirement of notice or action by either
party, on the third anniversary of a Change of Control,
unless earlier terminated as provided in this Agreement.
The Company shall give the Employee prompt notice of any
such vote to terminate this Agreement.
3. Change in Control. The term, "Change in Control", shall mean
the occurrence of any of the following:
(1) The Company or Parent receives a report on Schedule 13D
filed with the Securities and Exchange Commission pursuant
to Section 13(d) of the Securities Exchange Act of 1934,
as amended (hereinafter referred to as the "Exchange
Act"), disclosing that any person, group, corporation or
other entity is the beneficial owner, directly or
indirectly, of twenty-five percent (25%) or more of the
outstanding shares of the Company or Parent;
(2) Any Person (as such term is defined in Section 13(d) of
the Exchange Act), group, corporation or other entity
other than the Company or Parent or a wholly-owned
subsidiary of the Company or Parent, purchases shares
pursuant to a tender offer or exchange offer to acquire
any shares of the Company or Parent (or securities
convertible into shares) for cash, securities or any other
consideration, provided that after consummation of the
offer, the Person, group, corporation or other entity in
question is the beneficial owner (as such term is defined
in Rule 13d-3 under the Exchange Act), directly or
indirectly, of twenty-five percent (25%) or more of the
outstanding shares of the Company or Parent (calculated as
provided in Paragraph (d) of the Rule 13d-3 under the
Exchange Act in the case of rights to acquire shares); or
(3) The shareholders of the Company or Parent approve (i) any
consolidation or merger of the Company or Parent in which
the Company or Parent is not the continuing or surviving
corporation or pursuant to which shares of the Company or
Parent would be converted into cash, securities or other
property, (ii) any acquisition, combination or merger of
the Company or Parent by or with another corporation in
which, immediately after such acquisition, combination or
merger, less than a majority of the outstanding voting
shares (or less than a majority of any combination of such
voting shares, warrants, options, convertible securities
or the like as may represent control) of the parent or
surviving corporation are owned by the owners of the
voting shares of the Company or Parent outstanding
immediately prior to such acquisition, combination or
merger, (iii) a complete liquidation or dissolution of the
Company or Parent, or (iv) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of
the Company or Parent.
4. Severance Benefit:
(1) Amount. If, within twenty-four (24) months after a Change
of Control of the Company, the Employee is discharged
without Cause or resigns for Good Reason (as defined
below), the Company shall pay to the Employee, on a
monthly basis, a severance benefit in an amount equal to
one thirtieth (1/30th) of 250% of the Employee's then
current annual salary plus prior year's cash bonus,
continuing for a period of thirty (30) months. Severance
benefits payable hereunder shall not be considered in the
computation of pension benefits payable under the
Company's pension plan or benefits payable under the
Supplemental Executive Retirement Plan. All stock options
held by Employee as of the date of a Change of Control
shall become immediately exercisable.
(2) Good Reason. If any one or more of the following events
occur within twenty-four (24) months after a Change of
Control, the Employee may voluntarily terminate his or her
employment within thirty (30) days of the occurrence of
such event and be entitled to the severance benefits set
forth in Sections 4 and 5 of this Agreement:
(1) Employee in his or her sole discretion elects to
terminate their employment with the Company for any
reason whatsoever within ninety (90) days of a Change
of Control.
(2) the Company assigns any duties to the Employee that
are substantially different from the Employee's
position, duties, offices, titles, responsibilities,
reporting requirements or status with the Company
immediately prior to the Change of Control;
(3) the Company reduces the Employee's base salary,
including deferrals, as in effect immediately prior
to the Change of Control;
(4) the Company discontinues any bonus or other
compensation plans or any other benefit, stock
ownership plan, stock purchase plan, stock option
plan, life insurance plan, health plan, disability
plan or similar plan (as the same existed immediately
prior to the Change of Control) in which the Employee
participated or was eligible to participate
immediately prior to the Change of Control and in
lieu thereof does not make available plans providing
at least comparable benefits, or fails to provide the
Employee with the number of paid vacations days to
which the Employee was entitled in accordance with
normal vacation policy immediately prior to the
Change of Control;
(5) the Company takes action which adversely affects the
Employee's participation in, or eligibility for, or
materially reduces the Employee's benefits under, any
of the plans described in subsection (iv) above, or
which deprives the Employee of any material fringe
benefit enjoyed by the Employee immediately prior to
the Change of Control;
(6) the Company requires the Employee to be based at any
office or location other than one within a fifty (50)
mile radius of the Company's headquarters in
Pittsfield, Massachusetts;
(7) the Company purports to terminate the Employee
otherwise than for Cause (as defined below); or
(8) the Company fails to comply with and satisfy the
terms of Section 12 hereof, provided that such
successor has received at least ten (10) days' prior
written notice from the Company or from the Employee
of the terms of Section 12.
(3) Cause. Cause shall mean: dishonesty, misfeasance which
substantially interferes with the orderly business of the
Company or any of its affiliates, action that directly or
indirectly causes the Company or its affiliates to suffer
substantial loss or damage, refusal to follow or material
neglect of reasonable requests of the Company made
pursuant to this Agreement, conduct that substantially
interferes with or damages the standing or reputation of
the Company or any of its affiliates, conviction of a
felony or crime involving an act of moral turpitude, or
any reason constituting "Cause" or "Good Cause" for the
Employee's termination by the Company set forth in the
Employee's employment agreement, if any, with the Company.
(4) Notice of Termination. Any termination of the Employee's
employment by the Company for Cause, or by the Employee
for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance
with Section 17 hereof. For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i)
indicates the specific termination provision in the
Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the fact and circumstances
claimed to provide a basis for termination of employment
under the provision so indicated, and (iii) if the Date of
Termination (as defined below) is other than the date of
receipt of such Notice of Termination, specifies the
termination date (which date shall be not more than thirty
(30) days after the date the Notice of Termination is
received).
(5) Date of Termination. "Date of Termination" means (i) if
the Employee's employment is terminated by the Company for
Cause, or by the Employee for Good Reason, the date of
receipt of the Notice of Termination or any later date
specified therein (but not more than thirty (30) days
after the date of the Notice of Termination is received),
as the case may be, (ii) if the Employee is terminated by
the Company other than for Cause, retirement or
disability, the date on which the Company notifies the
Employee of such termination, and (iii) if the Employee is
terminated by reason of death, retirement or disability,
the date of the Employee's death or retirement, or the
date the Employee is determined to have a disability, as
the case may be.
(6) Retirement, Disability or Death. If the Employee's
employment is terminated due to retirement or disability,
or in the event of the Employee's death while still
employed, no severance benefits under this Agreement shall
be paid, regardless of any occurrence of a Change of
Control. If, in the judgment of the Board, the Employee
shall become physically or mentally incapacitated and as a
result thereof shall become unable to continue the proper
performance of the Employee's duties (reasonable absences
because of such incapacity for up to one hundred and
eighty (180) consecutive days excepted), or if the
Employee retires or is deceased while employed by the
Company, this Agreement shall thereupon cease and
terminate.
(7) Excise Tax Restoration Payment. In the event that it is
determined that any payment or distribution of any type to
or for the benefit of the Employee made by the Company, by
any of its affiliates, by any person who acquires
ownership or effective control or ownership of a
substantial portion of the Company's assets (within the
meaning of Section 280G of the Internal Revenue Code of
1986, as amended, and the regulations thereunder (the
"Code")) or by any affiliate of such person, whether paid
or payable or distributed or distributable pursuant to the
terms of a severance agreement or otherwise (the "Total
Payments"), would be subject to the excise tax (such
excise tax, together with any such interest or penalties,
are collectively referred to as the "Excise Tax"), then
the Employee shall be entitled to receive an additional
payment (an "Excise Tax Restoration Payment") in an amount
that shall fund the payment by the Employee of any Excise
Tax on the Total Payments as well as all income taxes
imposed on the Excise Tax Restoration Payment, any Excise
Tax imposed on the Excise Tax Restoration or any Excise
Tax. Employee shall also be entitled to reimbursement for
the cost of tax preparation, consultation and
representation required in connection with the application
of any such Excise Tax.
(8) Executive Retiree health Plan. Notwithstanding any
provision of this Agreement, Employee and Employee's
spouse shall retain eligibility under that certain
Executive Retiree Health Plan, dated August 25, 1998, in
the event Employee's employment with the Company is
terminated, voluntarily or involuntarily, subsequent to a
Change of Control, provided that the date of any such
termination is within thirty (30) months of Employee's
early retirement date as defined under the Company's
defined benefit pension plan.
5. Additional Benefits. Nothing in the Agreement shall affect the
Employee's eligibility to participate in all group health,
dental, hospitalization, life, travel or accident or other
insurance plans or programs and all other perquisites
(including the use of a Company-owned car where applicable),
fringe benefit or retirement plans or additional compensation,
which the Company or any subsidiary of the Company may
hereafter, in its or their sole and absolute discretion, elect
to make available to the senior management employees of the
Company generally, and the Employee shall be eligible to
receive, during the period of employment under this Agreement,
all benefits and emoluments for which key employees are
eligible under every such plan, program, perquisite or
arrangement to the extent permissible under the general terms
and provision thereof. Specifically, the Employee shall:
(1) enjoy the rights granted under any employment contract
between the Employee and the Company (except as limited
below);
(2) participate in The Berkshire Gas Company Retirement Plan
and any related excess benefit or supplemental retirement
program (hereinafter referred to collectively as the
"Retirement Program");
(3) participate in any savings or thrift plan maintained by
the Company;
(4) participate in any stock option, stock appreciation right,
equity incentive or deferred compensation plan maintained
by the Company;
(5) participate in the Company's death benefit plans;
(6) participate in the Company's disability benefit plans;
(7) participate in the Company's medical, dental and health
and welfare plans;
(8) participate in equivalent successor plans of the Company
for which senior management employees are eligible; and
(9) to be provided with such employee perquisites as may be
provided under Company policy to employees with a
comparable level of responsibility; provided, however,
that nothing in this Agreement shall preclude the Company
from amending or terminating any such plan or program, on
the condition that such amendment or termination is
applicable to all of the Company's senior management
employees generally. For purposes of the foregoing, any
plan or program maintained by any subsidiary of the
Company which is made available to the senior management
of the Company and its affiliates taken as a whole, shall
be deemed to be a plan or program maintained by the
Company.
In addition, if at the time the Employee becomes entitled to a
severance benefit under Section 4 the Company is providing the
Employee with a leased automobile, the Employee may (at the
Employee's option) elect to have such lease assigned to the Employee
so that the Employee will assume all rights and obligations with
regard to the lease of such automobile.
Notwithstanding the foregoing or any other provision of this
Agreement, the Company and the Employee intend that the severance
benefit payable by the Company pursuant to this Agreement shall be in
lieu of any termination pay (whether contractual, statutory or by way
of legal damages for breach of contract) that may now or hereafter be
provided for the Employee of for or to which the Employee may be or
become eligible or entitled under any employment contract, consulting
agreement or similar compensatory arrangement with the Company.
6. Source and Nature of Payments. All payments provided for in
Sections 4 and 5 hereof shall be paid in cash from the general
funds of the Company or any of its affiliates. The Company
shall not be required to establish a special or separate fund
or other segregation of assets to ensure such payments. All
payments provided pursuant to Section 4 hereof shall be deemed
severance pay in consideration of the Employee's past service,
and pay in consideration of the Employee's continued service
from the date of this Agreement.
7. Litigation Expenses. In the event of any litigation or other
proceeding between the Company and the Employee with respect to
the subject matter of this Agreement and the enforcement of
rights thereunder, the Company shall reimburse the Employee for
all reasonable costs and expenses relating to such litigation
or other proceeding as they are incurred, including reasonable
attorneys' fees and expenses, regardless of whether such
litigation results in any settlement or judgment or order in
favor of any party; provided, however, that any claim or action
initiated by the Employee relating to this Agreement shall have
been made or brought after reasonable inquiry and shall be
well-grounded in fact, and warranted by existing law or a good
faith argument for the extension, modification or reversal of
existing law, and that is not interposed for any improper
purpose; such as to harass or to cause unnecessary delay or
needless increase in the cost of litigation.
In no event shall the Employee be required to reimburse the
Company for any of the costs and expenses relating to such
litigation or other proceeding. The obligation of the Company
under this Section 7 shall survive the termination for any
reason of this Agreement (whether such termination is by the
Company, by the Employee, upon the expiration of this Agreement
or otherwise).
8. Late or Refused Payment. If the Company refuses or fails to
timely pay or provide the severance benefits specified in
Sections 4 and 5 upon demand as provided in this Agreement and
if such refusal or failure is not corrected within 10 business
days after the Employee provides written notice to the Company
concerning the refusal or failure, then the Company shall pay
immediately to the Employee an additional amount equal to 50%
of the severance benefit to which Employee is entitled under
Sections 4 and 5 of this Agreement.
9. Taxes. The Company may withhold from any payments made under
this Agreement all federal, state, city or other taxes as shall
be required pursuant to any law or governmental regulation or
ruling.
10. Payment Deductibility. The Company shall be obligated to pay
to the Employee pursuant to Sections 4 and 5 hereof even if the
Company is not entitled to deduct such severance benefit as a
result of the operation of Section 280G of the Internal Revenue
code of 1954 (or any successor section thereof), as amended.
11. Assignability. This Agreement is binding on and is for the
benefit of the parties hereto and their respective successors,
heirs, executors, administrators, and other legal
representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Company (except to
any subsidiary or affiliate) or by the Employee.
12. Successor. The Company shall require any successor (whether
direct or indirect), by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent the
Company would be required to perform. As used in this
Agreement, "Company" shall mean the company as hereinbefore
defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
13. Mitigation and Set-Off. The Employee shall have no duty to
mitigate damages under the terms of this Agreement. Moreover,
the amount of any compensation (including base compensation and
incentive or bonus compensation) received by Employee following
the termination of the Employee's employment with the Company,
whether from a subsequent full-time or part-time employer or
from self-employment, shall not reduce the amount of the
severance benefit that the Employee is entitled to receive
under Sections 4 and 5 hereof. The Employee is under no duty
to notify the Company of compensation received or to be
received from such other employment.
14. Entire Understanding. This Agreement contains the entire
understanding between the Company and the Employee with respect
to the subject matter hereof and supersedes any prior
employment agreement between the Company and the Employee.
15. Severability. If, for any reason, any one or more of the
provisions or part of a provision contained in this Agreement
shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall
not affect any other provisions or part of a provision of this
Agreement not held so invalid, illegal or unenforceable, and
each other provision or part of a provision shall to the full
extent consistent with the law continue in full force and
effect.
16. Consolidation, Merger or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all
of its assets to, another corporation with a net worth at least
equal to that of the Company and which assumes this Agreement
and all obligations and undertakings of the Company hereunder.
Upon such a consolidation, merger or transfer of assets and
assumption, the term "the Company", as used herein shall mean
such other corporation and this Agreement shall continue in
full force and effect.
17. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be given
in writing and shall be deemed to have been duly given if
delivered or mailed, postage prepaid, first class as follows:
(1) To the Company:
The Berkshire Gas Company
115 Cheshire Road
Pittsfield, Massachusetts 01201
(2) To the Employee:
at the address set forth
at the beginning of this Agreement
or to such other address as either party shall have previously
specified in writing to the other.
18. No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge,
pledge or hypothecation or to execution, attachment, levy or
similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action
shall be null, void and of no effect.
19. Binding Agreement. This Agreement shall be binding upon and
shall inure to the benefit of the Employee and the Company and
their respective permitted successors and assigns.
20. Modification and Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the
parties hereto. No term or condition of this Agreement shall
be deemed to have been waived, nor shall there be any estoppel
against the enforcement of any provision of this Agreement
except by written instrument signed by the party charged with
such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein,
and each such waiver shall operate only as to the specific term
or condition waiver and shall not constitute a waiver of such
term or condition for the future or as to any act other than
that specifically waived.
21. Headings of No Effect. The paragraph headings contained in
this Agreement are included solely for convenience of reference
and shall not in any way affect the meaning or interpretation
of any of the provisions of this Agreement.
22. Governing Law. This Agreement and its validity,
interpretation, performance and enforcement shall be governed
by the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of law provisions in effect in the
Commonwealth.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officer thereunto duly authorized, and the Employee has
signed this Agreement, all as of the date first above written.
COMPANY:
THE BERKSHIRE GAS COMPANY
By: /s/ Scott S. Robinson
-----------------------
its President
EMPLOYEE:
/s/ Cheryl M. Clark
-----------------------
Exhibit 10(r)
THE BERKSHIRE GAS COMPANY
SEVERANCE AGREEMENT
-------------------
THIS SEVERANCE AGREEMENT, dated this 9th day of June, 1999 (the
"Agreement"), by and between THE BERKSHIRE GAS COMPANY, a Massachusetts
Corporation (herein referred to as the "Company"), AND MICHAEL J. MARRONE
having an address at COLONIAL ACRES, RR#3, PITTSFIELD, MA 01201 (the
"Employee").
W I T N E S S E T H T H A T:
WHEREAS, the Employee is an Employee of the Company and an integral
part of its management who participates in the decision-making process
relating to short-and-long-term planning and policy for the Company;
WHEREAS, the Company is a wholly owned subsidiary of Berkshire Energy
Resources, a Massachusetts Business Trust (hereinafter referred to as the
"Parent"); and
WHEREAS, the Board of Trustees of Parent (the "Board"), at its
meeting on June 9, 1999, determined that it would be in the best interests
of the Company, its shareholder and the Employee to ensure continuity in
the management of the Company's administration and operations in the event
of a Change of Control (as defined in Section 3) by entering into a
Severance Agreement to retain the services of the Employee.
NOW THEREFORE, it is hereby agreed by and between the parties hereto
as follows:
1. Nature of Agreement. In order to induce the Employee to remain
in the employ of the Company and to provide continued services
to the Company now and in the event that a Change of Control is
imminent or occurring, this Agreement sets forth severance
benefits that the Company shall pay the Employee, after the
occurrence of a Change in Control, in the event of the
Employee's termination of his or her employment for Good Reason
(as defined in Section 4) or for any reason other than Cause
(as defined in Section 4), disability, death or retirement.
2. Terms:
(1) Term of Agreement. The initial term of this Agreement
shall commence immediately upon the date hereof and
continue in full force for a period of thirty-six (36)
calendar months.
(2) Extensions. This Agreement shall be subject to review
annually by the Board prior to June 30th each year. As
part of such annual review, the Board shall consider
whether to extend the term of this Agreement for an
additional year. Unless the Board affirmatively votes at
such review not to extend the term of this Agreement, the
term of this Agreement shall be extended automatically for
a period of twelve months from the previously effective
termination date. In the event that the Board votes not
to extend the terms of this Agreement, the termination
date of this Agreement shall be the later of thirty-six
(36) months from the effective date of this Agreement or
thirty-six (36) months from the June 30th of the year in
which this Agreement was most recently extended; provided,
however, that this Agreement shall expire automatically
and with no requirement of notice or action by either
party, on the third anniversary of a Change of Control,
unless earlier terminated as provided in this Agreement.
The Company shall give the Employee prompt notice of any
such vote to terminate this Agreement.
3. Change in Control. The term, "Change in Control", shall mean
the occurrence of any of the following:
(1) The Company or Parent receives a report on Schedule 13D
filed with the Securities and Exchange Commission pursuant
to Section 13(d) of the Securities Exchange Act of 1934,
as amended (hereinafter referred to as the "Exchange
Act"), disclosing that any person, group, corporation or
other entity is the beneficial owner, directly or
indirectly, of twenty-five percent (25%) or more of the
outstanding shares of the Company or Parent;
(2) Any Person (as such term is defined in Section 13(d) of
the Exchange Act), group, corporation or other entity
other than the Company or Parent or a wholly-owned
subsidiary of the Company or Parent, purchases shares
pursuant to a tender offer or exchange offer to acquire
any shares of the Company or Parent (or securities
convertible into shares) for cash, securities or any other
consideration, provided that after consummation of the
offer, the Person, group, corporation or other entity in
question is the beneficial owner (as such term is defined
in Rule 13d-3 under the Exchange Act), directly or
indirectly, of twenty-five percent (25%) or more of the
outstanding shares of the Company or Parent (calculated as
provided in Paragraph (d) of the Rule 13d-3 under the
Exchange Act in the case of rights to acquire shares); or
(3) The shareholders of the Company or Parent approve (i) any
consolidation or merger of the Company or Parent in which
the Company or Parent is not the continuing or surviving
corporation or pursuant to which shares of the Company or
Parent would be converted into cash, securities or other
property, (ii) any acquisition, combination or merger of
the Company or Parent by or with another corporation in
which, immediately after such acquisition, combination or
merger, less than a majority of the outstanding voting
shares (or less than a majority of any combination of such
voting shares, warrants, options, convertible securities
or the like as may represent control) of the parent or
surviving corporation are owned by the owners of the
voting shares of the Company or Parent outstanding
immediately prior to such acquisition, combination or
merger, (iii) a complete liquidation or dissolution of the
Company or Parent, or (iv) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of
the Company or Parent.
4. Severance Benefit:
(1) Amount. If, within twenty-four (24) months after a Change
of Control of the Company, the Employee is discharged
without Cause or resigns for Good Reason (as defined
below), the Company shall pay to the Employee, on a
monthly basis, a severance benefit in an amount equal to
one thirtieth (1/30th) of 250% of the Employee's then
current annual salary plus prior year's cash bonus,
continuing for a period of thirty (30) months. Severance
benefits payable hereunder shall not be considered in the
computation of pension benefits payable under the
Company's pension plan or benefits payable under the
Supplemental Executive Retirement Plan. All stock options
held by Employee as of the date of a Change of Control
shall become immediately exercisable.
(2) Good Reason. If any one or more of the following events
occur within twenty-four (24) months after a Change of
Control, the Employee may voluntarily terminate his or her
employment within thirty (30) days of the occurrence of
such event and be entitled to the severance benefits set
forth in Sections 4 and 5 of this Agreement:
(1) Employee in his or her sole discretion elects to
terminate their employment with the Company for any
reason whatsoever within ninety (90) days of a Change
of Control.
(2) the Company assigns any duties to the Employee that
are substantially different from the Employee's
position, duties, offices, titles, responsibilities,
reporting requirements or status with the Company
immediately prior to the Change of Control;
(3) the Company reduces the Employee's base salary,
including deferrals, as in effect immediately prior
to the Change of Control;
(4) the Company discontinues any bonus or other
compensation plans or any other benefit, stock
ownership plan, stock purchase plan, stock option
plan, life insurance plan, health plan, disability
plan or similar plan (as the same existed immediately
prior to the Change of Control) in which the Employee
participated or was eligible to participate
immediately prior to the Change of Control and in
lieu thereof does not make available plans providing
at least comparable benefits, or fails to provide the
Employee with the number of paid vacations days to
which the Employee was entitled in accordance with
normal vacation policy immediately prior to the
Change of Control;
(5) the Company takes action which adversely affects the
Employee's participation in, or eligibility for, or
materially reduces the Employee's benefits under, any
of the plans described in subsection (iv) above, or
which deprives the Employee of any material fringe
benefit enjoyed by the Employee immediately prior to
the Change of Control;
(6) the Company requires the Employee to be based at any
office or location other than one within a fifty (50)
mile radius of the Company's headquarters in
Pittsfield, Massachusetts;
(7) the Company purports to terminate the Employee
otherwise than for Cause (as defined below); or
(8) the Company fails to comply with and satisfy the
terms of Section 12 hereof, provided that such
successor has received at least ten (10) days' prior
written notice from the Company or from the Employee
of the terms of Section 12.
(3) Cause. Cause shall mean: dishonesty, misfeasance which
substantially interferes with the orderly business of the
Company or any of its affiliates, action that directly or
indirectly causes the Company or its affiliates to suffer
substantial loss or damage, refusal to follow or material
neglect of reasonable requests of the Company made
pursuant to this Agreement, conduct that substantially
interferes with or damages the standing or reputation of
the Company or any of its affiliates, conviction of a
felony or crime involving an act of moral turpitude, or
any reason constituting "Cause" or "Good Cause" for the
Employee's termination by the Company set forth in the
Employee's employment agreement, if any, with the Company.
(4) Notice of Termination. Any termination of the Employee's
employment by the Company for Cause, or by the Employee
for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance
with Section 17 hereof. For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i)
indicates the specific termination provision in the
Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the fact and circumstances
claimed to provide a basis for termination of employment
under the provision so indicated, and (iii) if the Date of
Termination (as defined below) is other than the date of
receipt of such Notice of Termination, specifies the
termination date (which date shall be not more than thirty
(30) days after the date the Notice of Termination is
received).
(5) Date of Termination. "Date of Termination" means (i) if
the Employee's employment is terminated by the Company for
Cause, or by the Employee for Good Reason, the date of
receipt of the Notice of Termination or any later date
specified therein (but not more than thirty (30) days
after the date of the Notice of Termination is received),
as the case may be, (ii) if the Employee is terminated by
the Company other than for Cause, retirement or
disability, the date on which the Company notifies the
Employee of such termination, and (iii) if the Employee is
terminated by reason of death, retirement or disability,
the date of the Employee's death or retirement, or the
date the Employee is determined to have a disability, as
the case may be.
(6) Retirement, Disability or Death. If the Employee's
employment is terminated due to retirement or disability,
or in the event of the Employee's death while still
employed, no severance benefits under this Agreement shall
be paid, regardless of any occurrence of a Change of
Control. If, in the judgment of the Board, the Employee
shall become physically or mentally incapacitated and as a
result thereof shall become unable to continue the proper
performance of the Employee's duties (reasonable absences
because of such incapacity for up to one hundred and
eighty (180) consecutive days excepted), or if the
Employee retires or is deceased while employed by the
Company, this Agreement shall thereupon cease and
terminate.
(7) Excise Tax Restoration Payment. In the event that it is
determined that any payment or distribution of any type to
or for the benefit of the Employee made by the Company, by
any of its affiliates, by any person who acquires
ownership or effective control or ownership of a
substantial portion of the Company's assets (within the
meaning of Section 280G of the Internal Revenue Code of
1986, as amended, and the regulations thereunder (the
"Code")) or by any affiliate of such person, whether paid
or payable or distributed or distributable pursuant to the
terms of a severance agreement or otherwise (the "Total
Payments"), would be subject to the excise tax (such
excise tax, together with any such interest or penalties,
are collectively referred to as the "Excise Tax"), then
the Employee shall be entitled to receive an additional
payment (an "Excise Tax Restoration Payment") in an amount
that shall fund the payment by the Employee of any Excise
Tax on the Total Payments as well as all income taxes
imposed on the Excise Tax Restoration Payment, any Excise
Tax imposed on the Excise Tax Restoration or any Excise
Tax. Employee shall also be entitled to reimbursement for
the cost of tax preparation, consultation and
representation required in connection with the application
of any such Excise Tax.
(8) Executive Retiree health Plan. Notwithstanding any
provision of this Agreement, Employee and Employee's
spouse shall retain eligibility under that certain
Executive Retiree Health Plan, dated August 25, 1998, in
the event Employee's employment with the Company is
terminated, voluntarily or involuntarily, subsequent to a
Change of Control, provided that the date of any such
termination is within thirty (30) months of Employee's
early retirement date as defined under the Company's
defined benefit pension plan.
5. Additional Benefits. Nothing in the Agreement shall affect the
Employee's eligibility to participate in all group health,
dental, hospitalization, life, travel or accident or other
insurance plans or programs and all other perquisites
(including the use of a Company-owned car where applicable),
fringe benefit or retirement plans or additional compensation,
which the Company or any subsidiary of the Company may
hereafter, in its or their sole and absolute discretion, elect
to make available to the senior management employees of the
Company generally, and the Employee shall be eligible to
receive, during the period of employment under this Agreement,
all benefits and emoluments for which key employees are
eligible under every such plan, program, perquisite or
arrangement to the extent permissible under the general terms
and provision thereof. Specifically, the Employee shall:
(1) enjoy the rights granted under any employment contract
between the Employee and the Company (except as limited
below);
(2) participate in The Berkshire Gas Company Retirement Plan
and any related excess benefit or supplemental retirement
program (hereinafter referred to collectively as the
"Retirement Program");
(3) participate in any savings or thrift plan maintained by
the Company;
(4) participate in any stock option, stock appreciation right,
equity incentive or deferred compensation plan maintained
by the Company;
(5) participate in the Company's death benefit plans;
(6) participate in the Company's disability benefit plans;
(7) participate in the Company's medical, dental and health
and welfare plans;
(8) participate in equivalent successor plans of the Company
for which senior management employees are eligible; and
(9) to be provided with such employee perquisites as may be
provided under Company policy to employees with a
comparable level of responsibility; provided, however,
that nothing in this Agreement shall preclude the Company
from amending or terminating any such plan or program, on
the condition that such amendment or termination is
applicable to all of the Company's senior management
employees generally. For purposes of the foregoing, any
plan or program maintained by any subsidiary of the
Company which is made available to the senior management
of the Company and its affiliates taken as a whole, shall
be deemed to be a plan or program maintained by the
Company.
In addition, if at the time the Employee becomes entitled to a
severance benefit under Section 4 the Company is providing the
Employee with a leased automobile, the Employee may (at the
Employee's option) elect to have such lease assigned to the Employee
so that the Employee will assume all rights and obligations with
regard to the lease of such automobile.
Notwithstanding the foregoing or any other provision of this
Agreement, the Company and the Employee intend that the severance
benefit payable by the Company pursuant to this Agreement shall be in
lieu of any termination pay (whether contractual, statutory or by way
of legal damages for breach of contract) that may now or hereafter be
provided for the Employee of for or to which the Employee may be or
become eligible or entitled under any employment contract, consulting
agreement or similar compensatory arrangement with the Company.
6. Source and Nature of Payments. All payments provided for in
Sections 4 and 5 hereof shall be paid in cash from the general
funds of the Company or any of its affiliates. The Company
shall not be required to establish a special or separate fund
or other segregation of assets to ensure such payments. All
payments provided pursuant to Section 4 hereof shall be deemed
severance pay in consideration of the Employee's past service,
and pay in consideration of the Employee's continued service
from the date of this Agreement.
7. Litigation Expenses. In the event of any litigation or other
proceeding between the Company and the Employee with respect to
the subject matter of this Agreement and the enforcement of
rights thereunder, the Company shall reimburse the Employee for
all reasonable costs and expenses relating to such litigation
or other proceeding as they are incurred, including reasonable
attorneys' fees and expenses, regardless of whether such
litigation results in any settlement or judgment or order in
favor of any party; provided, however, that any claim or action
initiated by the Employee relating to this Agreement shall have
been made or brought after reasonable inquiry and shall be
well-grounded in fact, and warranted by existing law or a good
faith argument for the extension, modification or reversal of
existing law, and that is not interposed for any improper
purpose; such as to harass or to cause unnecessary delay or
needless increase in the cost of litigation.
In no event shall the Employee be required to reimburse the
Company for any of the costs and expenses relating to such
litigation or other proceeding. The obligation of the Company
under this Section 7 shall survive the termination for any
reason of this Agreement (whether such termination is by the
Company, by the Employee, upon the expiration of this Agreement
or otherwise).
8. Late or Refused Payment. If the Company refuses or fails to
timely pay or provide the severance benefits specified in
Sections 4 and 5 upon demand as provided in this Agreement and
if such refusal or failure is not corrected within 10 business
days after the Employee provides written notice to the Company
concerning the refusal or failure, then the Company shall pay
immediately to the Employee an additional amount equal to 50%
of the severance benefit to which Employee is entitled under
Sections 4 and 5 of this Agreement.
9. Taxes. The Company may withhold from any payments made under
this Agreement all federal, state, city or other taxes as shall
be required pursuant to any law or governmental regulation or
ruling.
10. Payment Deductibility. The Company shall be obligated to pay
to the Employee pursuant to Sections 4 and 5 hereof even if the
Company is not entitled to deduct such severance benefit as a
result of the operation of Section 280G of the Internal Revenue
code of 1954 (or any successor section thereof), as amended.
11. Assignability. This Agreement is binding on and is for the
benefit of the parties hereto and their respective successors,
heirs, executors, administrators, and other legal
representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Company (except to
any subsidiary or affiliate) or by the Employee.
12. Successor. The Company shall require any successor (whether
direct or indirect), by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent the
Company would be required to perform. As used in this
Agreement, "Company" shall mean the company as hereinbefore
defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
13. Mitigation and Set-Off. The Employee shall have no duty to
mitigate damages under the terms of this Agreement. Moreover,
the amount of any compensation (including base compensation and
incentive or bonus compensation) received by Employee following
the termination of the Employee's employment with the Company,
whether from a subsequent full-time or part-time employer or
from self-employment, shall not reduce the amount of the
severance benefit that the Employee is entitled to receive
under Sections 4 and 5 hereof. The Employee is under no duty
to notify the Company of compensation received or to be
received from such other employment.
14. Entire Understanding. This Agreement contains the entire
understanding between the Company and the Employee with respect
to the subject matter hereof and supersedes any prior
employment agreement between the Company and the Employee.
15. Severability. If, for any reason, any one or more of the
provisions or part of a provision contained in this Agreement
shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall
not affect any other provisions or part of a provision of this
Agreement not held so invalid, illegal or unenforceable, and
each other provision or part of a provision shall to the full
extent consistent with the law continue in full force and
effect.
16. Consolidation, Merger or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all
of its assets to, another corporation with a net worth at least
equal to that of the Company and which assumes this Agreement
and all obligations and undertakings of the Company hereunder.
Upon such a consolidation, merger or transfer of assets and
assumption, the term "the Company", as used herein shall mean
such other corporation and this Agreement shall continue in
full force and effect.
17. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be given
in writing and shall be deemed to have been duly given if
delivered or mailed, postage prepaid, first class as follows:
(1) To the Company:
The Berkshire Gas Company
115 Cheshire Road
Pittsfield, Massachusetts 01201
(2) To the Employee:
at the address set forth
at the beginning of this Agreement
or to such other address as either party shall have previously
specified in writing to the other.
18. No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge,
pledge or hypothecation or to execution, attachment, levy or
similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action
shall be null, void and of no effect.
19. Binding Agreement. This Agreement shall be binding upon and
shall inure to the benefit of the Employee and the Company and
their respective permitted successors and assigns.
20. Modification and Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the
parties hereto. No term or condition of this Agreement shall
be deemed to have been waived, nor shall there be any estoppel
against the enforcement of any provision of this Agreement
except by written instrument signed by the party charged with
such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein,
and each such waiver shall operate only as to the specific term
or condition waiver and shall not constitute a waiver of such
term or condition for the future or as to any act other than
that specifically waived.
21. Headings of No Effect. The paragraph headings contained in
this Agreement are included solely for convenience of reference
and shall not in any way affect the meaning or interpretation
of any of the provisions of this Agreement.
22. Governing Law. This Agreement and its validity,
interpretation, performance and enforcement shall be governed
by the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of law provisions in effect in the
Commonwealth.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officer thereunto duly authorized, and the Employee has
signed this Agreement, all as of the date first above written.
COMPANY:
THE BERKSHIRE GAS COMPANY
By: /s/ Scott S. Robinson
----------------------
its President
EMPLOYEE:
/s/ Michael J. Marrone
-----------------------
Exhibit 10(s)
THE BERKSHIRE GAS COMPANY
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT, dated this 9th day of June, 1999 (the
"Agreement"), by and between THE BERKSHIRE GAS COMPANY, a Massachusetts
Corporation (herein referred to as the "Company"), AND ROBERT M. ALLESSIO
having an address at 180 RAYMOND DRIVE, DALTON, MA 01226 (the
"Employee").
W I T N E S S E T H T H A T:
WHEREAS, the Employee is an Employee of the Company and an integral
part of its management who participates in the decision-making process
relating to short-and-long-term planning and policy for the Company;
WHEREAS, the Company is a wholly owned subsidiary of Berkshire Energy
Resources, a Massachusetts Business Trust (hereinafter referred to as the
"Parent"); and
WHEREAS, the Board of Trustees of Parent (the "Board"), at its meeting
on June 9, 1999, determined that it would be in the best interests of the
Company, its shareholder and the Employee to ensure continuity in the
management of the Company's administration and operations in the event of a
Change of Control (as defined in Section 3) by entering into a Severance
Agreement to retain the services of the Employee.
NOW THEREFORE, it is hereby agreed by and between the parties hereto
as follows:
1. Nature of Agreement. In order to induce the Employee to remain
in the employ of the Company and to provide continued services
to the Company now and in the event that a Change of Control is
imminent or occurring, this Agreement sets forth severance
benefits that the Company shall pay the Employee, after the
occurrence of a Change in Control, in the event of the
Employee's termination of his or her employment for Good Reason
(as defined in Section 4) or for any reason other than Cause
(as defined in Section 4), disability, death or retirement.
2. Terms:
(1) Term of Agreement. The initial term of this Agreement
shall commence immediately upon the date hereof and
continue in full force for a period of thirty-six (36)
calendar months.
(2) Extensions. This Agreement shall be subject to review
annually by the Board prior to June 30th each year. As
part of such annual review, the Board shall consider
whether to extend the term of this Agreement for an
additional year. Unless the Board affirmatively votes at
such review not to extend the term of this Agreement, the
term of this Agreement shall be extended automatically for
a period of twelve months from the previously effective
termination date. In the event that the Board votes not
to extend the terms of this Agreement, the termination
date of this Agreement shall be the later of thirty-six
(36) months from the effective date of this Agreement or
thirty-six (36) months from the June 30th of the year in
which this Agreement was most recently extended; provided,
however, that this Agreement shall expire automatically
and with no requirement of notice or action by either
party, on the third anniversary of a Change of Control,
unless earlier terminated as provided in this Agreement.
The Company shall give the Employee prompt notice of any
such vote to terminate this Agreement.
3. Change in Control. The term, "Change in Control", shall mean
the occurrence of any of the following:
(1) The Company or Parent receives a report on Schedule 13D
filed with the Securities and Exchange Commission pursuant
to Section 13(d) of the Securities Exchange Act of 1934,
as amended (hereinafter referred to as the "Exchange
Act"), disclosing that any person, group, corporation or
other entity is the beneficial owner, directly or
indirectly, of twenty-five percent (25%) or more of the
outstanding shares of the Company or Parent;
(2) Any Person (as such term is defined in Section 13(d) of
the Exchange Act), group, corporation or other entity
other than the Company or Parent or a wholly-owned
subsidiary of the Company or Parent, purchases shares
pursuant to a tender offer or exchange offer to acquire
any shares of the Company or Parent (or securities
convertible into shares) for cash, securities or any other
consideration, provided that after consummation of the
offer, the Person, group, corporation or other entity in
question is the beneficial owner (as such term is defined
in Rule 13d-3 under the Exchange Act), directly or
indirectly, of twenty-five percent (25%) or more of the
outstanding shares of the Company or Parent (calculated as
provided in Paragraph (d) of the Rule 13d-3 under the
Exchange Act in the case of rights to acquire shares); or
(3) The shareholders of the Company or Parent approve (i) any
consolidation or merger of the Company or Parent in which
the Company or Parent is not the continuing or surviving
corporation or pursuant to which shares of the Company or
Parent would be converted into cash, securities or other
property, (ii) any acquisition, combination or merger of
the Company or Parent by or with another corporation in
which, immediately after such acquisition, combination or
merger, less than a majority of the outstanding voting
shares (or less than a majority of any combination of such
voting shares, warrants, options, convertible securities
or the like as may represent control) of the parent or
surviving corporation are owned by the owners of the
voting shares of the Company or Parent outstanding
immediately prior to such acquisition, combination or
merger, (iii) a complete liquidation or dissolution of the
Company or Parent, or (iv) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of
the Company or Parent.
4. Severance Benefit:
(1) Amount. If, within twenty-four (24) months after a Change
of Control of the Company, the Employee is discharged
without Cause or resigns for Good Reason (as defined
below), the Company shall pay to the Employee, on a
monthly basis, a severance benefit in an amount equal to
one thirtieth (1/30th) of 250% of the Employee's then
current annual salary plus prior year's cash bonus,
continuing for a period of thirty (30) months. Severance
benefits payable hereunder shall not be considered in the
computation of pension benefits payable under the
Company's pension plan or benefits payable under the
Supplemental Executive Retirement Plan. All stock options
held by Employee as of the date of a Change of Control
shall become immediately exercisable.
(2) Good Reason. If any one or more of the following events
occur within twenty-four (24) months after a Change of
Control, the Employee may voluntarily terminate his or her
employment within thirty (30) days of the occurrence of
such event and be entitled to the severance benefits set
forth in Sections 4 and 5 of this Agreement:
(1) Employee in his or her sole discretion elects to
terminate their employment with the Company for any
reason whatsoever within ninety (90) days of a Change
of Control.
(2) the Company assigns any duties to the Employee that
are substantially different from the Employee's
position, duties, offices, titles, responsibilities,
reporting requirements or status with the Company
immediately prior to the Change of Control;
(3) the Company reduces the Employee's base salary,
including deferrals, as in effect immediately prior
to the Change of Control;
(4) the Company discontinues any bonus or other
compensation plans or any other benefit, stock
ownership plan, stock purchase plan, stock option
plan, life insurance plan, health plan, disability
plan or similar plan (as the same existed immediately
prior to the Change of Control) in which the Employee
participated or was eligible to participate
immediately prior to the Change of Control and in
lieu thereof does not make available plans providing
at least comparable benefits, or fails to provide the
Employee with the number of paid vacations days to
which the Employee was entitled in accordance with
normal vacation policy immediately prior to the
Change of Control;
(5) the Company takes action which adversely affects the
Employee's participation in, or eligibility for, or
materially reduces the Employee's benefits under, any
of the plans described in subsection (iv) above, or
which deprives the Employee of any material fringe
benefit enjoyed by the Employee immediately prior to
the Change of Control;
(6) the Company requires the Employee to be based at any
office or location other than one within a fifty (50)
mile radius of the Company's headquarters in
Pittsfield, Massachusetts;
(7) the Company purports to terminate the Employee
otherwise than for Cause (as defined below); or
(8) the Company fails to comply with and satisfy the
terms of Section 12 hereof, provided that such
successor has received at least ten (10) days' prior
written notice from the Company or from the Employee
of the terms of Section 12.
(3) Cause. Cause shall mean: dishonesty, misfeasance which
substantially interferes with the orderly business of the
Company or any of its affiliates, action that directly or
indirectly causes the Company or its affiliates to suffer
substantial loss or damage, refusal to follow or material
neglect of reasonable requests of the Company made
pursuant to this Agreement, conduct that substantially
interferes with or damages the standing or reputation of
the Company or any of its affiliates, conviction of a
felony or crime involving an act of moral turpitude, or
any reason constituting "Cause" or "Good Cause" for the
Employee's termination by the Company set forth in the
Employee's employment agreement, if any, with the Company.
(4) Notice of Termination. Any termination of the Employee's
employment by the Company for Cause, or by the Employee
for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance
with Section 17 hereof. For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i)
indicates the specific termination provision in the
Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the fact and circumstances
claimed to provide a basis for termination of employment
under the provision so indicated, and (iii) if the Date of
Termination (as defined below) is other than the date of
receipt of such Notice of Termination, specifies the
termination date (which date shall be not more than thirty
(30) days after the date the Notice of Termination is
received).
(5) Date of Termination. "Date of Termination" means (i) if
the Employee's employment is terminated by the Company for
Cause, or by the Employee for Good Reason, the date of
receipt of the Notice of Termination or any later date
specified therein (but not more than thirty (30) days
after the date of the Notice of Termination is received),
as the case may be, (ii) if the Employee is terminated by
the Company other than for Cause, retirement or
disability, the date on which the Company notifies the
Employee of such termination, and (iii) if the Employee is
terminated by reason of death, retirement or disability,
the date of the Employee's death or retirement, or the
date the Employee is determined to have a disability, as
the case may be.
(6) Retirement, Disability or Death. If the Employee's
employment is terminated due to retirement or disability,
or in the event of the Employee's death while still
employed, no severance benefits under this Agreement shall
be paid, regardless of any occurrence of a Change of
Control. If, in the judgment of the Board, the Employee
shall become physically or mentally incapacitated and as a
result thereof shall become unable to continue the proper
performance of the Employee's duties (reasonable absences
because of such incapacity for up to one hundred and
eighty (180) consecutive days excepted), or if the
Employee retires or is deceased while employed by the
Company, this Agreement shall thereupon cease and
terminate.
(7) Excise Tax Restoration Payment. In the event that it is
determined that any payment or distribution of any type to
or for the benefit of the Employee made by the Company, by
any of its affiliates, by any person who acquires
ownership or effective control or ownership of a
substantial portion of the Company's assets (within the
meaning of Section 280G of the Internal Revenue Code of
1986, as amended, and the regulations thereunder (the
"Code")) or by any affiliate of such person, whether paid
or payable or distributed or distributable pursuant to the
terms of a severance agreement or otherwise (the "Total
Payments"), would be subject to the excise tax (such
excise tax, together with any such interest or penalties,
are collectively referred to as the "Excise Tax"), then
the Employee shall be entitled to receive an additional
payment (an "Excise Tax Restoration Payment") in an amount
that shall fund the payment by the Employee of any Excise
Tax on the Total Payments as well as all income taxes
imposed on the Excise Tax Restoration Payment, any Excise
Tax imposed on the Excise Tax Restoration or any Excise
Tax. Employee shall also be entitled to reimbursement for
the cost of tax preparation, consultation and
representation required in connection with the application
of any such Excise Tax.
(8) Executive Retiree health Plan. Notwithstanding any
provision of this Agreement, Employee and Employee's
spouse shall retain eligibility under that certain
Executive Retiree Health Plan, dated August 25, 1998, in
the event Employee's employment with the Company is
terminated, voluntarily or involuntarily, subsequent to a
Change of Control, provided that the date of any such
termination is within thirty (30) months of Employee's
early retirement date as defined under the Company's
defined benefit pension plan.
5. Additional Benefits. Nothing in the Agreement shall affect the
Employee's eligibility to participate in all group health,
dental, hospitalization, life, travel or accident or other
insurance plans or programs and all other perquisites
(including the use of a Company-owned car where applicable),
fringe benefit or retirement plans or additional compensation,
which the Company or any subsidiary of the Company may
hereafter, in its or their sole and absolute discretion, elect
to make available to the senior management employees of the
Company generally, and the Employee shall be eligible to
receive, during the period of employment under this Agreement,
all benefits and emoluments for which key employees are
eligible under every such plan, program, perquisite or
arrangement to the extent permissible under the general terms
and provision thereof. Specifically, the Employee shall:
(1) enjoy the rights granted under any employment contract
between the Employee and the Company (except as limited
below);
(2) participate in The Berkshire Gas Company Retirement Plan
and any related excess benefit or supplemental retirement
program (hereinafter referred to collectively as the
"Retirement Program");
(3) participate in any savings or thrift plan maintained by
the Company;
(4) participate in any stock option, stock appreciation right,
equity incentive or deferred compensation plan maintained
by the Company;
(5) participate in the Company's death benefit plans;
(6) participate in the Company's disability benefit plans;
(7) participate in the Company's medical, dental and health
and welfare plans;
(8) participate in equivalent successor plans of the Company
for which senior management employees are eligible; and
(9) to be provided with such employee perquisites as may be
provided under Company policy to employees with a
comparable level of responsibility; provided, however,
that nothing in this Agreement shall preclude the Company
from amending or terminating any such plan or program, on
the condition that such amendment or termination is
applicable to all of the Company's senior management
employees generally. For purposes of the foregoing, any
plan or program maintained by any subsidiary of the
Company which is made available to the senior management
of the Company and its affiliates taken as a whole, shall
be deemed to be a plan or program maintained by the
Company.
In addition, if at the time the Employee becomes entitled to a
severance benefit under Section 4 the Company is providing the
Employee with a leased automobile, the Employee may (at the
Employee's option) elect to have such lease assigned to the Employee
so that the Employee will assume all rights and obligations with
regard to the lease of such automobile.
Notwithstanding the foregoing or any other provision of this
Agreement, the Company and the Employee intend that the severance
benefit payable by the Company pursuant to this Agreement shall be in
lieu of any termination pay (whether contractual, statutory or by way
of legal damages for breach of contract) that may now or hereafter be
provided for the Employee of for or to which the Employee may be or
become eligible or entitled under any employment contract, consulting
agreement or similar compensatory arrangement with the Company.
6. Source and Nature of Payments. All payments provided for in
Sections 4 and 5 hereof shall be paid in cash from the general
funds of the Company or any of its affiliates. The Company
shall not be required to establish a special or separate fund
or other segregation of assets to ensure such payments. All
payments provided pursuant to Section 4 hereof shall be deemed
severance pay in consideration of the Employee's past service,
and pay in consideration of the Employee's continued service
from the date of this Agreement.
7. Litigation Expenses. In the event of any litigation or other
proceeding between the Company and the Employee with respect to
the subject matter of this Agreement and the enforcement of
rights thereunder, the Company shall reimburse the Employee for
all reasonable costs and expenses relating to such litigation
or other proceeding as they are incurred, including reasonable
attorneys' fees and expenses, regardless of whether such
litigation results in any settlement or judgment or order in
favor of any party; provided, however, that any claim or action
initiated by the Employee relating to this Agreement shall have
been made or brought after reasonable inquiry and shall be
well-grounded in fact, and warranted by existing law or a good
faith argument for the extension, modification or reversal of
existing law, and that is not interposed for any improper
purpose; such as to harass or to cause unnecessary delay or
needless increase in the cost of litigation.
In no event shall the Employee be required to reimburse the
Company for any of the costs and expenses relating to such
litigation or other proceeding. The obligation of the Company
under this Section 7 shall survive the termination for any
reason of this Agreement (whether such termination is by the
Company, by the Employee, upon the expiration of this Agreement
or otherwise).
8. Late or Refused Payment. If the Company refuses or fails to
timely pay or provide the severance benefits specified in
Sections 4 and 5 upon demand as provided in this Agreement and
if such refusal or failure is not corrected within 10 business
days after the Employee provides written notice to the Company
concerning the refusal or failure, then the Company shall pay
immediately to the Employee an additional amount equal to 50%
of the severance benefit to which Employee is entitled under
Sections 4 and 5 of this Agreement.
9. Taxes. The Company may withhold from any payments made under
this Agreement all federal, state, city or other taxes as shall
be required pursuant to any law or governmental regulation or
ruling.
10. Payment Deductibility. The Company shall be obligated to pay
to the Employee pursuant to Sections 4 and 5 hereof even if the
Company is not entitled to deduct such severance benefit as a
result of the operation of Section 280G of the Internal Revenue
code of 1954 (or any successor section thereof), as amended.
11. Assignability. This Agreement is binding on and is for the
benefit of the parties hereto and their respective successors,
heirs, executors, administrators, and other legal
representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Company (except to
any subsidiary or affiliate) or by the Employee.
12. Successor. The Company shall require any successor (whether
direct or indirect), by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent the
Company would be required to perform. As used in this
Agreement, "Company" shall mean the company as hereinbefore
defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
13. Mitigation and Set-Off. The Employee shall have no duty to
mitigate damages under the terms of this Agreement. Moreover,
the amount of any compensation (including base compensation and
incentive or bonus compensation) received by Employee following
the termination of the Employee's employment with the Company,
whether from a subsequent full-time or part-time employer or
from self-employment, shall not reduce the amount of the
severance benefit that the Employee is entitled to receive
under Sections 4 and 5 hereof. The Employee is under no duty
to notify the Company of compensation received or to be
received from such other employment.
14. Entire Understanding. This Agreement contains the entire
understanding between the Company and the Employee with respect
to the subject matter hereof and supersedes any prior
employment agreement between the Company and the Employee.
15. Severability. If, for any reason, any one or more of the
provisions or part of a provision contained in this Agreement
shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall
not affect any other provisions or part of a provision of this
Agreement not held so invalid, illegal or unenforceable, and
each other provision or part of a provision shall to the full
extent consistent with the law continue in full force and
effect.
16. Consolidation, Merger or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all
of its assets to, another corporation with a net worth at least
equal to that of the Company and which assumes this Agreement
and all obligations and undertakings of the Company hereunder.
Upon such a consolidation, merger or transfer of assets and
assumption, the term "the Company", as used herein shall mean
such other corporation and this Agreement shall continue in
full force and effect.
17. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be given
in writing and shall be deemed to have been duly given if
delivered or mailed, postage prepaid, first class as follows:
(1) To the Company:
The Berkshire Gas Company
115 Cheshire Road
Pittsfield, Massachusetts 01201
(2) To the Employee:
at the address set forth
at the beginning of this Agreement
or to such other address as either party shall have previously
specified in writing to the other.
18. No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge,
pledge or hypothecation or to execution, attachment, levy or
similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action
shall be null, void and of no effect.
19. Binding Agreement. This Agreement shall be binding upon and
shall inure to the benefit of the Employee and the Company and
their respective permitted successors and assigns.
20. Modification and Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the
parties hereto. No term or condition of this Agreement shall
be deemed to have been waived, nor shall there be any estoppel
against the enforcement of any provision of this Agreement
except by written instrument signed by the party charged with
such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein,
and each such waiver shall operate only as to the specific term
or condition waiver and shall not constitute a waiver of such
term or condition for the future or as to any act other than
that specifically waived.
21. Headings of No Effect. The paragraph headings contained in
this Agreement are included solely for convenience of reference
and shall not in any way affect the meaning or interpretation
of any of the provisions of this Agreement.
22. Governing Law. This Agreement and its validity,
interpretation, performance and enforcement shall be governed
by the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of law provisions in effect in the
Commonwealth.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officer thereunto duly authorized, and the Employee has
signed this Agreement, all as of the date first above written.
COMPANY:
THE BERKSHIRE GAS COMPANY
By: /s/ Scott S. Robinson
----------------------
its President
EMPLOYEE:
/s/ Robert M. Allessio
----------------------
Exhibit 10(t)
BERKSHIRE ENERGY RESOURCES
EXECUTIVE INCENTIVE PLAN
Revised December 2, 1998
BERKSHIRE ENERGY RESOURCES
--------------------------
EXECUTIVE INCENTIVE PLAN
------------------------
PLAN OBJECTIVES
- ---------------
The objectives of the plan are to:
Promote achievement of both Corporate and operating Company goals for
the benefit of customers and shareholders.
The Plan is intended to provide for competitive, market-based total
compensation for key employees comprised of base salary plus
incentive salary that is at risk.
By encouraging share ownership, the Company seeks to attract, retain
and motivate highly qualified key employees, and to align the
interests of key employees with the interests of shareholders and
ratepayers.
ELIGIBILITY
- -----------
Eligibility will include Corporate officers at the Vice-President
level and above, including incumbents of the following positions:
President and Chief Executive Officer
Vice President, Treasurer and Chief Financial Officer
Vice President Utility Operations
An employee joining the Company, or one who is promoted, during the
plan year who would be bonus eligible based on position grade may
have any earned incentive award prorated by the salary for that
period.
A minimum of six months service is required to earn any incentive
award.
The President and Chief Executive Officer of Berkshire Gas Company
will be responsible for recommending changes in eligibility to the
Board of Directors for review and approval.
PERFORMANCE MEASURES
- --------------------
Corporation performance will be measured in three categories:
Shareholder interests
Customer interests
Board of Directors discretion
Performance criteria will be weighted as follows:
<TABLE>
<CAPTION>
Category Weighting
-------- ---------
<S> <C>
Shareholder 50%
Customer 25
Board 25
---
100%
</TABLE>
With regard to the first category (shareholder interests), there will
be three specific measures of performance:
Berkshire Gas annual earnings compared to budget.
Total shareholder return (three-year measurement period) [for
year one of the plan it shall be a one-year measurement period,
for year two it shall be a two-year measurement period, and for
year three, and thereafter, a three-year measurement period].
Market-to-book value of stock.
Return on total shareholders' return and market-to-book value results
for Berkshire Gas will be judged in relation to the peer group.
(See Table C for the companies comprising the peer group)
Berkshire's Board may modify the Company's plan or target level
of achievement relative to the peer group.
The earnings (net income) measure will be judged against the budget
with 90 percent of target representing the threshold level of
performance.
The second performance category (customer issues), will be measured
by the following:
The ratio of Gross Margin to budget. This measure will
-------------------------------------------------------
compare the combined total of natural gas margin and propane margin to
- -----------------------------------------------------------------------
budget.
- -------
Other operating and maintenance expenses.
The ratio of other operating and maintenance expenses for Berkshire
Gas will be judged in relation to the peer group (three-year
measurement period). [For year one of the plan it shall be a one-year
measurement period, and for year two it shall be a two-year
measurement period, for year three, and thereafter, a three-year
measurement period]
The third performance category (Board discretion) will represent a
broad based qualitative evaluation of management's results over the
annual plan year (on both a group and individual basis).
In this way, important areas which may not be directly captured
in financial and operating results can be factored into the
determination of incentive results.
The Board's Compensation Committee and the CEO will evaluate
results in key areas for each participant.
Table A summarizes the performance measures and the related
weightings.
Berkshire Energy Resources
Executive Incentive Plan
Glossary of Terms
Earnings versus Budget
- ----------------------
This performance criterion measures the annual consolidated Earnings Per
Share of Berkshire Energy Resources compared to the fiscal operating
budget.
Earnings Per Share: The annual consolidated Earnings per Share for the
annual period ended June 30 shall be calculated by dividing the earnings
available for common stock by the average number of common shares
outstanding. The number of common shares shall be adjusted to reflect
normalized DRIP shares as compared to budget.
Weighted Performance Value: 20%
Total Shareholder Return
- ------------------------
This performance criterion measures the total shareholders return of
Berkshire Energy Resources to the total shareholders return of the seven
member Peer Group ("the Peer Group"). For year one (6/30/98) of the plan,
a one year measurement period is used, for year two, a two-year measurement
and year three, and thereafter, a three-year measurement period.
Shareholders return: The total value of $100 invested over a five-year
period, assuming the reinvestment of dividends.
Measurement of return: The difference between the current year shareholder
value and the base period (1,2,or 3 year) shareholder value is divided by
the base period to arrive at a percentage increase or decrease. The
percentages calculated for the Peer Group are averaged and compared to
Berkshire Energy Resources.
Sources: The latest available fiscal year published data for each of the
Peer Group will be used to obtain the total shareholders return data.
Weighted Performance Value: 15%
Market to Book Ratio
- --------------------
This performance criterion measures the market to book ratio of Berkshire
Energy Resources at June 30 to the market to book ratio of the Peer Group.
Market to Book Ratio: The market value of a company's common stock at June
30 divided by the total book value per share (total common equity/common
shares outstanding).
Measurement of return: The difference between the current year market to
book ratio and the prior year ratio is expressed as a percentage. This
percentage is compared to Peer Group's average increase/(decrease)
expressed as a percentage.
Sources: Market to book ratios for the Peer Group will be obtained from an
outside investor service such as Edward Jones.
Weighted Performance Value: 15%
Gross Margin
- ------------
This performance criterion measures the combined ratio of natural gas gross
margin (from gas sales and transportation) and propane gross margin growth
compared to budget.
Measurement of Growth: The gross margin from total firm natural gas sold
and transported and the gross margin from propane sales for the 12 months
ended June 30 will be weather normalized and compared to the projected
operating budget. The current year's total gross margin will be divided by
the budgeted total gross margin to determine the measured ratio.
Sources: June 30 final audited financial statements and the internal
weather normalization model.
Weighted Performance Value: 12.5%
Other Operating and Maintenance Expenses
- ----------------------------------------
This performance criterion measures the increase/(decrease) in consolidated
operating and maintenance expenses ("O&M") for Berkshire Energy Resources
as compared to the Peer Group. For year one (6/30/98) of the plan, a one
year measurement period is used, for year two, a two-year measurement and
year three, and thereafter, a three-year measurement period.
Measurement of Expense Comparisons: The total consolidated operating and
maintenance expenses as reported on the latest published annual report will
be divided by the number of customers to establish the O&M per customer for
each company.
The O&M expense per customer for the current fiscal year will be compared
to the prior fiscal years expense per customer. The difference will be
expressed as a percentage of change. The percentage of change for Berkshire
Energy Resources will be compared to the average of the Peer Group.
Sources: The most recent published annual reports of the companies will
provide the data.
Weighted Performance Value: 12.5%
Board of Directors Discretion
- -----------------------------
Weighted Performance Value: 25%
Revised 12/1/98
Table A
-------
Berkshire Energy Resources Executive Incentive Plan
---------------------------------------------------
Summary of 1998-1999 Performance Measures
-----------------------------------------
<TABLE>
<CAPTION>
Weight Threshold Target Maximum
------ --------- ------ -------
<S> <C> <C> <C> <C>
Earnings vs. Budget 20% 90% of Budget Budget* 120% of Budget
<CAPTION>
Pres. VP
- -------------------------------------
<S> <C> <C>
*At 102% of Budget 26% 21%
104% 27 22
106% 28 23
108% 29 24
110% 30 25
112% 31 26
114% 32 27
116% 33 28
118% 34 29
<S> <C> <C> <C> <C>
Total Shareholder Return 15% 5% Improvement 10% Improvement 15% Improvement
to Peer group to Peer group to Peer group
Market to Book Ratio 15% 5% Improvement 10% Improvement 15% Improvement
to Peer group to Peer group to Peer group
Gross Margin 12.5% 100% Budget 105% Budget 110% Budget
Natural Gas and Propane
Other Operating and 12.5% Peer Group 105% of 110% of
Maintenance Expenses Peer Group Peer Group
Board Discretion 25% N/A N/A N/A
</TABLE>
INCENTIVE POTENTIAL
- -------------------
The annual incentive potential will be stated as a percentage of each
participant's current salary.
Incentive potential will be as follows:
<TABLE>
<CAPTION>
Incentive
Percent of Salary
-----------------
Threshold Target Maximum
--------- ------ -------
<S> <C> <C> <C>
President and CEO 15% 25% 35%
Vice President 10 20 30
</TABLE>
INCENTIVE AWARD CALCULATION
- ---------------------------
Calculation of the incentive is done by comparing actual results to
planned or index results for each of the performance criteria.
Each Participant will be provided with a summary of threshold,
target and maximum standards and the potential incentive monies
associated with achieving each level of results.
The performance criteria generally operate independently of one
another such that if a minimum (threshold) level of performance is
achieved on a given factor, some incentive can be earned with the
following exception:
An incentive award will only be earned if earnings exceed
dividend payout.
If the threshold level is not met, no incentive may be earned,
except for Board discretion.
This provides a shareholder "cutout" mechanism to ensure
Berkshire achieves a minimum level of profits.
Table B illustrates a calculation of the incentive.
PLAN ADMINISTRATION
- -------------------
The plan will be administered by the Board of Directors.
Earned awards will be payable as ordinary income and expensed in the
plan year.
The results of the plan each year will be reviewed by the outside
independent accountants and reported to the Audit Committee of the
Board.
The payment of the award will be made as soon as practical following
the conclusion of the Company's fiscal year.
The Board of Directors strongly encourages stock ownership by key
executives, therefore the payment will be made 50% cash and 50% in
the form of Company stock. Stock shall be purchased by the Company
sending monies, at the employee's direction, to the optional cash
purchase portion of the Company's DRIP program. The participants are
encouraged to hold this investment in Company stock.
TERMINATION OR AMENDMENT
- ------------------------
The Board of Directors may at any time suspend, reinstate, or
terminate the Plan or make such changes in or additions to the Plan
as it deems advisable, except:
that in the event of a Change in Control, the Company may neither
terminate the Plan nor reduce benefits under the Plan with respect to
those individuals who are Participants as of the date of the Change
in Control for that plan year.
EMPLOYMENT
- ----------
Nothing in the Plan shall confer upon any employee the right to
continue in the employ of the Company, and it is understood and agreed
that all key employees are employees at will, except as may be
provided in specific employment agreements.
OTHER PLANS
- -----------
The adoption of the Plan shall not affect any other compensation plan
in effect for the Company, nor shall the Plan preclude the Company
from establishing any other forms of incentive or other compensation
for employees of the Company.
June, 1997
Amended August 26, 1998
Amended December 2, 1998
TABLE C
-------
BERKSHIRE ENERGY RESOURCES
UTILITY PEER GROUP
- ------------------
Valley Resources
Yankee Energy
Connecticut Energy Corp.
Connecticut Natural Gas (CTG)
EnergyNorth, Inc.
Delta Natural Gas
Fall River Gas Company
Think Energy
Berkshire Energy Resources is aggressively pursuing opportunities for
growth in today's changing and emerging energy markets. By capitalizing on
the flexibility of its new corporate structure, heightening its focus on
fueling customer growth and developing strategic programs to produce new
opportunities, the Company is realizing its goal of becoming a truly
integrated energy services company. This year's annual report provides an
overview of the innovative thinking, commitment to customer service and
proactive approach to growth opportunities that are driving Berkshire
Energy Resources toward achieving its goal of becoming the region's
acknowledged energy services leader. When you think energy, think Berkshire
Energy Resources.
FINANCIAL HIGHLIGHTS *
For the Fiscal Year Ended June 30,
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
1999/1998 1998/1997
OPERATIONS 1999 1998 % Change 1997 % Change
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 50,733 $ 54,601 -7.1% $ 53,584 1.9%
Operating Margin 28,248 27,578 2.4 27,711 -0.5
Operating and Other Income 9,576 8,841 8.3 9,756 -9.4
Net Income 3,233 2,794 15.7 3,556 -21.4
Earnings Available for Common Shares 3,218 2,778 15.8 3,316 -16.2
COMMON SHARE DATA
- -----------------
Earnings Per Common Share $ 1.34 $ 1.23 8.9% $ 1.52 -19.1%
Dividends Per Share 1.165 1.145 1.7 1.125 1.8
Book Value Per Share 15.07 14.48 4.1 14.18 2.1
Market Price (Year-End) 22.50 23.25 -3.2 16.00 45.3
Average Shares of Common Shares
Outstanding 2,405.2 2,263.6 6.3 2,181.5 3.8
Number of Registered Common
Shareholders 1,977 1,912 3.4 1,902 0.5
OTHER DATA
- ----------
Gross Property, Plant and Equipment $124,412 $119,438 4.2% $113,966 4.8%
Net Property, Plant and Equipment 83,364 81,647 2.1 79,736 2.4
Capital Expenditures 6,735 6,945 -3.0 7,393 -6.1
Total Gas Sold and Transported (MCF) 7,880 7,357 7.1 8,080 -8.9
Total Natural Gas Customers 34,494 34,166 1.0 33,887 0.8
<F*> Beginning in fiscal 1999, financial statements are presented for
Berkshire Energy Resources, a holding company consolidating the
operations of The Berkshire Gas Company, Berkshire Propane, Inc., and
Berkshire Energy Marketing, Inc. Prior years were reported as The
Berkshire Gas Company, which included nonregulated operating divisions.
</TABLE>
(Picture of Scott Robinson, President and CEO)
To Our Shareholders
Welcome to the first annual report issued by Berkshire Energy
Resources. With the formal adoption of a holding company corporate
structure in January of this year, The Berkshire Gas Company, formerly
listed on the NASDAQ under the symbol BGAS, became a member of the
Berkshire Energy Resources family. Listed on the NASDAQ under the symbol
BERK, Berkshire Energy Resources currently operates three subsidiaries, The
Berkshire Gas Company, Berkshire Propane and Berkshire Energy Marketing.
Berkshire Gas is a natural gas utility serving western Massachusetts
for more than 145 years. It provides natural gas service to 34,000
customers.
Berkshire Propane, established in 1955, provides retail propane
service across a 5,000-square-mile territory in western Massachusetts,
southern Vermont and eastern New York.
Berkshire Energy Marketing, established in 1998, provides one-stop
energy services to commercial and industrial customers in unregulated
energy commodity markets.
The adoption of a holding company structure represents one of the
biggest changes in the Company's history. As such, it reflects the
Company's aggressive efforts to drive change in the energy marketplace and
to strategically adapt and realign its resources to seize new opportunities
in the ever more competitive energy industry.
With separate subsidiaries for regulated and nonregulated operations,
Berkshire Energy Resources is structured to capitalize on changes in the
energy marketplace by expanding its energy-related offerings and
enterprises without delay. As the industry moves toward full and final
deregulation, a combination of vision and experience will continue to serve
the Company well. Opportunities have never been greater for Berkshire
Energy Resources as it looks toward diversification and continued growth.
Berkshire Gas
As Berkshire Energy Resources' core business, Berkshire Gas continues
to provide first-rate natural gas service to western Massachusetts.
With a focus on continued growth, ongoing efforts to increase market
share are being developed and implemented by the utility's Marketing
Department. One such initiative, highlighted in this year's report, aligns
our resources with outside energy engineering firms in an effort to expand
natural gas sales in our Commercial and Industrial market segment by
introducing new energy efficient technologies and methodologies to our
customers. Aided by our long-standing relationships with the Gas Research
Institute and the Institute for Gas Technology, this venture benefits all
parties and holds significant potential.
In a further effort to plan for future growth and to accommodate new
demand for natural gas service, Berkshire Gas has also been actively
engaged in planning and permitting a new facility for the storage of
liquefied natural gas (LNG) in the Town of Whately, Massachusetts. This is
the first such facility to be sited in Massachusetts in more than twenty
years. Similar projects are now being planned by utilities across the
Commonwealth.
After an extensive permitting process, which has included a multi-
year site selection and design process, Berkshire Gas submitted its
petition for approval to site and construct this facility to the
Massachusetts Energy Facilities Siting Board earlier this year. This
project was the subject of a series of regulatory hearings in June and has
been under exhaustive review by state regulators. The petition has been
approved by the Siting Board. An aggressive construction timetable is
planned which should make it possible for this facility to be in operation
for this year's heating season.
This facility will expand delivery capacity and enhance our ability
to serve growing demand for natural gas service in Franklin and Hampshire
counties in western Massachusetts. These counties represent the strongest
growth areas in the service territory.
Berkshire Gas is also exploring options to expand its natural gas
service territory in response to growing demand for service from commercial
and industrial enterprises as well as residential consumers. We look
forward to continuing our efforts with local officials in the Town of
Sunderland, Massachusetts, toward this end.
Berkshire Propane
Berkshire Propane is committed to the pursuit of new opportunities in
competitive energy markets. With a focus on growth, Berkshire Propane is
expanding its customer base and increasing sales volumes to enhance overall
performance.
In keeping with this business strategy, Berkshire Propane announced
its acquisition of County Propane of Great Barrington, Massachusetts, in
October of 1998. With this transaction, Berkshire Propane increased its
base of Massachusetts customers by approximately 8%. Operating
efficiencies achieved as a result of this purchase made it possible to
serve these new customers without any increase in personnel.
Berkshire Propane continues to realize real growth in customer
numbers across the remainder of its three-state service area as well. Over
the past year, its Vermont customer base has expanded by 39% with a
corresponding double-digit increase in gallons of propane sold. In its New
York market, gallons sold increased by double digits and customer numbers
also increased. Overall, sales volumes increased by better than 10% over
the year, despite significantly warmer than normal weather.
Plans to site satellite storage facilities are also in development.
These facilities will increase operating efficiencies, reduce costs and
strengthen our local presence in the markets that we serve.
Berkshire Propane continues to explore avenues for continued growth in
its Vermont and New York markets while also focusing on expanding its
influence in the highly competitive Massachusetts market.
Berkshire Energy Marketing
Berkshire Energy Marketing has worked diligently over the past year
selling natural gas supplies in unregulated markets, primarily to larger
commercial and industrial users.
As one of approximately twelve energy marketers currently competing
in the service area, Berkshire Energy Marketing capitalizes on its local
base and local presence, providing hands-on, year- round service to its
customers.
In keeping with the nature of the competitive markets, flexibility
and service have continued to be very strong selling points for Berkshire
Energy Marketing as it works to educate customers about their energy
options in the deregulated marketplace.
Shareholder Value
The prime focus of the Company's management and its Board of Trustees
is enhancing shareholder value and providing a fair return on shareholder
investment.
The achievements of the last year outlined in this letter and
throughout this report represent real investments in the success and
ultimately the value of the Company. We are focused on growing the Company
and enhancing performance while at the same time making investments in our
future on behalf of our shareholders. The adoption of a holding company
structure earlier this year was one such value-based investment that
provides a real asset to the Company and facilitates our entry into
competitive markets.
For the fifth consecutive year, the Company's Board of Trustees has
voted to increase the annual dividend paid on the Company's Common Shares.
The increase, which was effective with the dividend paid on July 15, 1999,
raised the annual dividend from $1.16 to $1.18 per share. With this vote,
the Board reaffirmed its commitment to a conservative, yet progressive
dividend policy that is intended to provide shareholders with a fair return
on their investment.
Performance
Weather trends seem to be a topic that is being discussed and
analyzed ever more frequently in the popular media. Whether these
discussions focus on global warming or turbulent weather, it is clear that
weather patterns over the course of the last decade have varied
significantly from statistical norms. These variances are of obvious
interest to the Company, as the lion's share of our revenues is derived
from serving the heating needs of our customers during the New England
winter.
Weather in our service area during the last fiscal year was, on
average, 12% warmer than normal. The norm is based on an average of
temperatures over the prior twenty years. Temperatures during the heating
season were 9% warmer than normal.
Recognizing this trend toward warmer winters years ago, we have
worked diligently to insulate the business as much as possible from the
influence of unusually warm weather. Our efforts have been positive in
this regard and we continue to explore additional ways to mitigate the
effect of warmer temperatures on overall performance.
One such measure the Company utilized this year was weather
insurance. As a hedge against warmer than normal weather, the Company made
a strategic decision to purchase insurance for the 1998-1999 heating
season. This insurance was intended to mitigate financial impacts
resulting from extended periods of warmer than normal winter temperatures.
The weather insurance provided coverage for the heating season
beginning November 1, 1998, and running through March 31, 1999. In
accordance with the terms of the policy, the Company received insurance
proceeds which partially offset revenues that would have been earned had
weather been normal.
Earnings for the year were $1.34 on revenues of $50.7 million as
compared to earnings of $1.23 on revenues of $54.6 million a year ago. The
9% increase in earnings is largely attributable to the receipt of weather
insurance proceeds as well as changes in the regulatory accounting for bad
debt expense.
For a number of years, the Company has offered its shareholders the
convenience of reinvesting their dividends toward the purchase of
additional shares in the Company through its Dividend Reinvestment Plan.
This program has been well received by our shareholders and has
enabled the Company to meet its capital needs. At the same time, the level
of additional investment has resulted in a dilution of earnings. This
dilution over the last twelve months has reduced per share earnings by
$.08. To prevent further dilution, the Company's Board of Trustees has
suspended the discount and optional cash payment provisions of the Plan.
Dividends may still be reinvested without the discount.
Y2K
The Year 2000 challenge is one that the Company has taken very
seriously. Over the course of the past year, we have been actively engaged
in assessing our exposure, and planning and implementing necessary remedial
action.
Our primary concern has been our core business applications, which
include software and hardware systems used for billing, customer service,
engineering and related activities. Fortunately, the Company's recently
completed upgrade of these systems and associated technology is Year 2000
compliant and testing of those systems has been completed.
The Company is also reviewing and taking remedial action associated
with a wide array of technologies used in the distribution of natural gas
to our customers. We are confident that our remedial efforts will be
complete by October 1999.
Additionally, the Company is developing contingency plans for
implementation in the event of unforeseen occurrences that may arise
internally or as a result of noncompliance of outside parties. Our efforts
in this area are near completion and will be ready for implementation, if
necessary, prior to year-end.
While we are taking the necessary actions internally, our ability to
provide service is contingent on assurances provided to us by our critical
vendors, associated utilities and service providers. We have aggressively
pursued assurances of compliance from these parties and will continue to
monitor their progress.
While no one is offering absolute assurances relative to the Year
2000 challenge, we are confident that our efforts and our planning have
been thorough and that our approach to this problem has been well
considered.
Summary
Berkshire Energy Resources is witnessing the dawn of a new day in the
energy industry, one for which we have planned and positioned the Company
and its resources for some time now. We look back at a year of significant
progress and we look at the challenges ahead as opportunities for future
growth and expansion.
I invite you to read the pages that follow and learn more about the
customers that we serve and about the many initiatives that have been taken
over the past year to improve operations, build revenues and enhance
performance.
Most of all, I would like to thank you for your interest in Berkshire
Energy Resources and for the confidence that you have placed in us by way
of your investment.
/s/Scott S. Robinson
Scott S. Robinson
President & Chief Executive Officer
Think Flexibility
The energy industry has never been more competitive. As their choice
of energy providers grows, customers are demanding competitive rates,
superior service and enhanced products. Unlike a traditional utility
business, the energy company of today must have the flexibility to move
quickly and decisively to create opportunity and seize success. Berkshire
Energy Resources is that dynamic company: poised to thrive in the
competitive energy marketplace.
The adoption of a more flexible organization is consistent with the
Company's rich history of driving change and capitalizing on opportunity.
Founded in 1853 as the Pittsfield Coal Gas Company, it became the first New
England distributor of pipeline natural gas in 1951. After acquiring The
Berkshire Gas Company in 1954 and adopting its name, the Company expanded
its operation with the acquisition of the Greenfield Gas Light Company in
1958.
Over the last decade, the Company has strategically aligned its
resources to capitalize on changes in the energy marketplace. Without
losing sight of its commitment to continued growth in its core business,
Berkshire Energy Resources has been actively shaping the changing
marketplace, working in collaboration with natural gas utilities,
regulators, marketers and customers. True corporate flexibility, a
prerequisite to success in today's marketplace, was realized with the
establishment of Berkshire Energy Resources as an energy holding company.
The holding company currently has three subsidiaries: Berkshire Gas, a
natural gas utility serving 19 cities and towns in western Massachusetts;
Berkshire Propane, a retail supplier of propane in western Massachusetts,
eastern New York and southern Vermont; and Berkshire Energy Marketing, an
unregulated full-service energy marketer. This flexible corporate structure
enables the Company to serve and expand its core business of natural gas
distribution, focusing on increasing load, while at the same time pursuing
growth opportunities in unregulated energy markets.
By diversifying its portfolio of energy services, Berkshire Energy
Resources has become the integrated energy services firm best equipped to
meet the growing needs of the unique region it serves. Its diverse customer
base includes commercial and industrial accounts, retail operations, world-
renowned cultural attractions, fast-growing technology firms and nationally
recognized academic institutions, to name a few. The region's economic
strength, natural beauty and rich heritage make it one of the most
desirable destinations in America. On the coming pages, you'll meet some of
the customers who found this region to be the perfect setting for their
enterprises and Berkshire Energy Resources to be the perfect choice for
their energy needs.
Dependability, fuel efficiency, competitive pricing and environmental
responsibility are just a few of the benefits that have motivated a diverse
range of customers to choose Berkshire Energy Resources as their energy
provider. Here is a small sample of the client base that the Company is proud
to serve.
(Berkshire Energy Resources logo with logo of each subsidiary)
(Map of service area)
Williams College
Williamstown, Massachusetts
One of the nation's premier liberal arts colleges, Williams is known for
the exceptional talent of its students and the dedication of its faculty.
The Norman Rockwell Museum
Stockbridge, Massachusetts
Maintains the world's largest collection of original Rockwell artwork,
including the Four Freedoms.
Tanglewood
Lenox, Massachusetts
Summer home of the Boston Symphony Orchestra, it draws thousands of
classical music lovers to the Berkshires annually.
General Dynamics Defense Systems
Pittsfield, Massachusetts
Designs and supports sophisticated systems for commercial and government
customers.
Lunt Silversmiths
Greenfield, Massachusetts
A world leader in precious metal personal accessories and home furnishings.
Greenfield Industries
Greenfield, Massachusetts
Manufactures a wide range of high-quality taps for domestic and
international customers.
Yankee Candle
Deerfield, Massachusetts
Manufacturer of "the world's most fragrant candles," attracting more than
2.5 million visitors annually.
Amherst College
Amherst, Massachusetts
Founded in 1821, Amherst is one of the most highly respected liberal arts
colleges in the United States, enrolling some 1,600 talented men and women.
Think Growth
Growth opportunities are realized by those with the initiative to
seek them, the knowledge to develop them and the vision to bring them to
fruition. Dedicated to providing its shareholders with a fair return,
Berkshire Energy Resources is pursuing multiple avenues for continued
growth in both new and traditional markets. The Company is taking advantage
of the knowledge and resources it has accumulated over nearly a century and
a half of service to create new opportunities and to expand its market
share by driving demand for its products and services.
The focus on expanding its markets and increasing capacity in areas
of rapid growth continues to serve the Company well. The Company is working
closely with regulators to site a state-of-the-art liquefied natural gas
(LNG) storage facility in the Town of Whately to ensure its ability to
continue to meet increasing demand along the vital Interstate 91 corridor
in Franklin and Hampshire counties, the fastest-growing area in its service
territory. This strategically located facility - which has been in
development for four years - will help the Company realize its vision of
increasing capacity at a fraction of the cost of expanding existing
distribution lines or installing new ones. In a similar move, Berkshire
Propane is exploring the strategic placement of a satellite propane storage
facility in southern Vermont that would empower the Company to reach new
markets, improve profitability and enhance its presence as a locally based
provider of clean-burning, efficient propane.
Information technology upgrades are also providing opportunities for
growth. A new information systems infrastructure has enabled the Berkshire
Gas Marketing Department to make more effective and efficient use of
information about its customers as a strategic tool. This comprehensive
customer data aids the Company in planning and developing targeted
marketing programs focused on increasing load and expanding revenues.
Combining the experience of nearly 150 years with innovative
strategies and new technology, Berkshire Energy Resources continues to
achieve the growth that keeps it well ahead of the competition. Berkshire
Energy Resources is building the energy services company of the future by
focusing on growth, capitalizing on its competitive advantages and
aggressively shaping the competitive landscape in the energy marketplace.
Food for Thought
Vegetarians and other with healthy appetites are helping to make
Lightlife Foods, located in Turners Falls, Massachusetts, a leader in the
natural foods industry. Lifelight has been operating around the clock to
meet the ever-growing domestic and international demand for its products.
Lightlife takes great pride in providing its customers with the very best
products that are 100% vegetarian and 100% natural, which means no
artificial additives of any kind. The company also is committed to the
ecological health of the planet, so it's no surprise that Lightlife chose
clean-burning natural gas to fuel its operations and its domestic hot water
system.
Expressive Energy
Randi and David Solin recently moved Solinglass Studios, a glass
blowing enterprise that produces one-of-a-kind artistic treasures, from
Santa Cruz, California, to Brattleboro, Vermont. The Solins have exhibited
their work all over the country and one of their pieces was commissioned
for the permanent White House collection. Glass blowing is very energy
intensive. They chose propane because it's dependable , claen, and burns
hot - and chose Berkshire Propane because of its competitive price and
peerless service. "Berkshire Propane did an amazing job for us," Randi
said. "They've really been a pleasure to work with."
Economical Expansion
By strategically placing a new liquefied natural gas (LNG) storage
facility in Whately, Massachusetts, Berkshire Gas will realize a vision
that's been four years in development and meet the growing demand of
Franklin County, one of the fastest-growing areas in its service territory.
Through this new facility, the Company will reinforce its deliverability
and support continued economic growth and increased demand for natural gas
in the area. The decision to build the facility makes good economic sense
as well, producing increased capacity at a fraction of the cost of
expanding existing distribution lines or installing new ones.
Think Customers
Berkshire Energy Resources is building the energy services company of
the future on a longstanding foundation of superior service and exceptional
value. Dedicated professionals throughout the Company are working to ensure
the continued satisfaction of existing customers and forging innovative
programs to win new ones. A number of initiatives are directed toward
educating commercial and industrial customers about new gas-energy
technologies and helping them realize the potential savings to be gained
through the conversion of their existing systems from competing fuels.
One exciting new program is the Fuel Blind Audit, designed to meet
the needs of commercial and industrial customers. Working together with its
customers, Berkshire Gas is employing this program to find opportunities to
expand base load while at the same time assuring its customers access to
the most efficient new energy technologies available.
The program begins with an exhaustive on-site investigation of the
customer's total energy use and expenditures, conducted by Berkshire Gas
marketing professionals and engineering firms specializing in energy
technologies with whom the Company has established cooperative working
partnerships. Potential applications of new gas-fired equipment and systems
are identified and a financial analysis is provided. From relatively simple
equipment, such as high-efficiency, gas-powered air conditioning, to
advanced cogeneration systems, significant cost savings often can be
achieved by replacing electricity with gas. The potential for customer
savings combined with the increased load for Berkshire Gas makes the
program a real "win-win" enterprise for the Company.
The Berkshire Gas Energy Management Program is another initiative
designed to encourage commercial and industrial customers to convert to
natural gas. By reducing the operation's conversion and upgrade costs,
Berkshire Gas can build load, improve a company's energy efficiency and
establish itself as an energy partner in a long-term relationship.
Customer satisfaction also has been a primary focus of Berkshire
Energy Marketing, which has developed a respectable portfolio of commercial
and industrial accounts in its first year of operation. Customers are being
won over by the Company's local presence, familiarity with the market,
dependable service and competitive pricing.
Through their long history of exceptional service, both Berkshire Gas
and Berkshire Propane have built strong brand identities that their
customers equate with quality, dependability and trust. This customer
loyalty creates opportunities throughout the Company to build sales and
enhance revenues.
Customer satisfaction will continue to play a major role in our
strategies for the future. By building on the rock-solid relationships it
has worked so hard to forge over the years, the Company is providing
lasting value not only to its customers, but to its shareholders, its
employees and the communities it serves.
Peak Efficiency
Clean-burning, efficient propane serves many unique needs at Jiminy
Peak in Hancock, Massachusetts, which draws in excess of 300,000 visitors
annually to its year-round resort, which includes a ski area, alpine slide,
conference center, restaurants and condominiums. All four of the resort's
on-site restaurants are fueled by Berkshire Propane, as are its laundry
facilities, and propane is being chosen over electric heat by
discriminating condominium owners for dependability and value. Propane is
the only energy source at the summit, so Jiminy's lift operators depend on
it for warmth. All year round, Jiminy's employees depend on Berkshire
Propane to keep them at their peak.
Dollars & Sense
A solid, long-term relationship and focus on customer service were
key factors in Crane & Company's decision to choose Berkshire Energy
Marketing as its transportation gas supplier. Founded in 1801 in Dalton,
Massachusetts, Crane is recognized worldwide for the quality of its 100%
cotton writing paper. Its most popular product, however, is the currency
paper it has produced for the U.S. Bureau of Engraving and Printing since
1879. "We looked at a number of alternatives," said Andy St. Pierre,
Crane's energy management engineer. "Our decision to go with Berkshire
Energy Marketing was based on two key factors: We've had a solid long-term
relationship and they offered the best price as well."
Selling Knowledge
Berkshire Gas has been teaming with specialists in energy
technologies to conduct innovative audits, such as this one at A.H. Rice
Corporation in Pittsfield, Massachusetts. These audits provide customers
with potential applications of new gas-fired equipment and a financial
analysis of potential savings through conversion from electricity to
natural gas. A.H. Rice manufactures customized threads and specialty braids
for high-end uses in the textile, automotive and aerospace industries. The
company is considering cogeneration to reduce total energy costs by
increasing its use of fuel-efficient natural gas and decreasing electricity
use.
(Picture of Berkshire Gas marketing representative reviewing audit with
two of A.H. Rice's employees)
Berkshire Gas has been teaming with specialists in energy
technologies to conduct innovative audits, such as this one at A.H. Rice
Corporation in Pittsfield, Massachusetts. These audits provide customers
with potential applications of new gas-fired equipment and a financial
analysis of potential savings through conversion from electricity to
natural gas. A.H. Rice manufactures customized threads and specialty braids
for high-end uses in the textile, automotive and aerospace industries. The
company is considering
Think Opportunity
Capitalizing on opportunity requires a great deal more than being in
the right place at the right time. In fact, the greatest achievements are
realized through a visionary approach that recognizes the opportunity for
success where it appears least likely. Such insight has generated an
amazing success story for the Massachusetts Museum of Contemporary Art,
which depends on Berkshire Gas to heat its 19 spacious galleries.
MASS MoCA is a thriving, vibrant laboratory for the fabrication and
presentation of new works in the visual and performing arts that has
blossomed in a former North Adams, Massachusetts, manufacturing complex
that once was the center of economic vitality for northern Berkshire
County. The triumphant reviews of its May opening in Time, USA Today and
The Wall Street Journal trumpeted the brilliance of MASS MoCA's mission to
be responsive to changes in art-making and art-presentation environments.
"I have seen the future," wrote one reviewer, "and it's MASS MoCA."
Just as MASS MoCA's vision has been transforming the art world,
Berkshire Energy Resources has been actively reshaping the energy
marketplace. The Company's flexibility ensures its forward-looking approach
to change in the energy industry, while its in-depth understanding of the
energy marketplace, active efforts in developing trends in new and emerging
markets and effective planning are continually creating new opportunities
to benefit both customers and shareholders.
The Berkshire Energy Resources vision encompasses the traditional
natural gas utility as well as multifaceted subsidiaries that comprise a
powerful new entity that is successfully competing in traditional and
competitive markets. With its new corporate structure in place and a
pervasive "think energy" philosophy, Berkshire Energy Resources is
proactively developing and implementing strategies for growth and
profitability. The Company is confident and excited about its prospects for
success in the energy markets of today, and the benefits it will provide
for its shareholders, customers and employees well into the future.
Rethinking Art
Thousands of art lovers are flocking to North Adams to visit the
Massachusetts Museum of Contemporary Art, the largest and most compelling
of the nation's new wave of modern art centers. Berkshire Gas is proud not
only to provide the clean-burning, efficient natural gas that heats MASS
MoCA's more than 100,000 square feet of exhibition space, but also to have
been one of the first corporate sponsors in this private-public venture
that is helping to revitalize North Adams. "Berkshire Gas stood by us
during our boot-strap days," said Joseph C. Thompson, MASS MoCA's director,
"and they continue to provide this institution with top- notch service,
excellent advice and friendly support."
Financial Review
- ----------------
10-Year Comparative Summary
of Operations and Statistics 12
Management's Discussion and
Analysis of Financial Condition
and Results of Operations 14
Financial Statements:
Consolidated Statements of Income 17
Consolidated Balance Sheets 18
Consolidated Statements of Shareholders'
Equity 19
Consolidated Statements of Cash Flows 20
Notes to Financial Statements 21
Independent Auditors' Report 29
Quarterly Financial Information 31
Officers and Trustees 32
<TABLE>
<CAPTION>
10-Year Comparative Summary of Operations and Statistics
- --------------------------------------------------------
For the Years Ended June 30,
OPERATIONS ($000) 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 50,733 $ 54,601 $ 53,584 $ 50,405 $51,627
Cost of Gas Sold 22,485 27,023 25,873 22,368 26,541
- -------------------------------------------------------------------------------------------
Operating Margin 28,248 27,578 27,711 28,037 25,086
- -------------------------------------------------------------------------------------------
Net Income 3,233 2,794 3,556 4,213 2,529
Earnings Available for
Common Shareholders 3,218 2,778 3,316 3,521 1,835
COMMON SHARE DATA
- -----------------
Earnings Per Share $ 1.34 $ 1.23 $ 1.52 $ 1.65 $ 0.92
Annualized Dividends Per Share 1.18 1.16 1.14 1.12 1.10
Dividends Declared Per Share 1.165 1.145 1.125 1.105 1.10
Book Value Per Share 15.07 14.48 14.18 13.75 13.16
Market Price (Year-End) 22.50 23.25 16.00 15.38 15.00
Average Shares of Common Stock
Outstanding (000s) 2,405.2 2,263.6 2,181.5 2,129.2 1,990.5
CAPITALIZATION ($000)
Common Equity $ 37,896 $ 33,536 $ 31,365 $ 29,595 $27,688
Preferred Stock 312 321 363 8,406 8,448
Long-Term Debt 40,000 34,000 40,000 31,999 30,983
- -------------------------------------------------------------------------------------------
Total Capitalization $ 78,208 $ 67,857 $ 71,728 $ 70,000 $67,119
- -------------------------------------------------------------------------------------------
% OF TOTAL
- ----------
Common Equity 48.5% 49.4% 43.7% 42.3% 41.2%
Preferred Stock 0.4 0.5 0.5 12.0 12.6
Long-Term Debt 51.1 50.1 55.8 45.7 46.2
RATIOS (%)
- ----------
Payout Ratio 87% 93% 74% 67% 120%
Market to Book Ratio 149 161 113 112 114
Return on Average
Common Equity 9.0 8.6 10.9 12.3 7.2
PROPERTY ($000)
- ---------------
Capital Expenditures $ 6,735 $ 6,945 $ 7,393 $ 6,507 $ 7,746
Pipeline Construction 0 0 0 0 0
Gross Utility Plant 110,405 106,654 101,983 96,571 91,863
Net Utility Plant 76,330 75,283 73,640 71,215 69,326
Net Non-Utility Plant 7,034 6,364 6,096 5,949 5,962
Total Assets 105,485 101,897 101,688 93,660 87,741
GAS SALES (MCF-000s)
- --------------------
Residential 2,551 2,548 2,730 2,814 2,513
Commercial & Industrial 1,783 2,261 2,289 2,626 2,305
Interruptible 683 542 592 522 1,104
- -------------------------------------------------------------------------------------------
Total Natural Gas Sales 5,017 5,351 5,611 5,962 5,922
- -------------------------------------------------------------------------------------------
GAS TRANSPORTED (MCF-000s)
- --------------------------
Firm Transportation 1,858 1,307 1,409 1,073 1,130
Interruptible Transportation 1,005 699 1,060 1,040 340
- -------------------------------------------------------------------------------------------
Total Gas Sold and Transported 7,880 7,357 8,080 8,075 7,392
- -------------------------------------------------------------------------------------------
OTHER STATISTICS
- ----------------
Customer Meters 34,494 34,166 33,887 33,763 33,596
Maximum Daily MCF Sendout 43,818 43,643 44,734 44,161 45,760
Minimum Daily MCF Sendout 8,876 7,481 7,847 8,381 8,216
Degree Days 6,287 6,506 6,953 7,402 6,748
20-Year Average Degree Days 7,163 7,241 7,301 7,300 7,354
Number of Employees 164 150 153 153 160
10-Year Comparative Summary of Operations and Statistics
- --------------------------------------------------------
For the Years Ended June 30,
OPERATIONS ($000) 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------
Operating Revenues $ 56,846 $ 50,690 $ 51,153 $ 44,507 $42,008
Cost of Gas Sold 29,558 26,502 28,178 23,826 21,990
- -------------------------------------------------------------------------------------------
Operating Margin 27,288 24,188 22,975 20,681 20,018
- -------------------------------------------------------------------------------------------
Net Income 3,673 2,810 1,952 1,462 2,047
Earnings Available for
Common Shareholders 2,953 2,066 1,849 1,377 1,955
COMMON SHARE DATA
- -----------------
Earnings Per Share $ 1.69 $ 1.20 $ 1.10 $ 0.83 $ 1.21
Annualized Dividends Per Share 1.10 1.08 1.08 1.08 1.28
Dividends Declared Per Share 1.085 1.08 1.08 1.23 1.28
Book Value Per Share 12.99 12.30 12.13 12.07 12.40
Market Price (Year-End) 16.25 18.00 14.75 13.00 14.50
Average Shares of Common Stock
Outstanding (000s) 1,751.8 1,718.5 1,687.7 1,655.6 1,622.6
CAPITALIZATION ($000)
- ---------------------
Common Equity $ 22,946 $ 21,326 $ 20,626 $ 20,155 $20,299
Preferred Stock 8,491 9,026 9,111 1,196 1,290
Long-Term Debt 31,083 25,413 26,564 28,156 29,147
- -------------------------------------------------------------------------------------------
Total Capitalization $ 62,520 $ 55,765 $ 56,301 $ 49,507 $50,736
- -------------------------------------------------------------------------------------------
% OF TOTAL
- ----------
Common Equity 36.7% 38.2% 36.6% 40.7% 40.1%
Preferred Stock 13.6 16.2 16.2 2.4 2.5
Long-Term Debt 49.7 45.6 47.2 56.9 57.4
RATIOS (%)
- ----------
Payout Ratio 65% 90% 98% 130% 106%
Market to Book Ratio 125 146 122 108 117
Return on Average
Common Equity 13.3 9.8 9.1 6.8 9.7
PROPERTY ($000)
- ---------------
Capital Expenditures $ 5,112 $ 5,458 $ 5,165 $ 4,245 $ 6,438
Pipeline Construction 0 5,659 1,539 4,526 6,475
Gross Utility Plant 86,098 83,016 79,942 76,404 71,805
Net Utility Plant 66,191 65,846 64,840 63,277 60,558
Net Non-Utility Plant 5,715 5,004 8,965 10,627 8,119
Total Assets 90,991 91,891 92,124 95,971 83,680
GAS SALES (MCF-000s)
- --------------------
Residential 2,839 2,730 2,639 2,347 2,545
Commercial & Industrial 2,625 2,681 2,703 2,480 2,778
Interruptible 807 1,012 1,468 1,092 1,163
- -------------------------------------------------------------------------------------------
Total Natural Gas Sales 6,271 6,423 6,810 5,919 6,486
- -------------------------------------------------------------------------------------------
GAS TRANSPORTED (MCF-000s)
- --------------------------
Firm Transportation 874 289 0 0 0
Interruptible Transportation 217 0 0 0 169
- -------------------------------------------------------------------------------------------
Total Gas Sold and Transported 7,362 6,712 6,810 5,919 6,655
- -------------------------------------------------------------------------------------------
OTHER STATISTICS
- ----------------
Customer Meters 33,047 32,565 32,207 31,711 31,260
Maximum Daily MCF Sendout 43,934 39,446 38,237 37,095 38,012
Minimum Daily MCF Sendout 8,114 7,371 8,060 6,855 7,294
Degree Days 7,651 7,396 7,210 6,261 7,045
20-Year Average Degree Days 7,356 7,341 7,348 7,432 7,474
Number of Employees 173 181 180 185 191
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------
(Dollars in Thousands, Except Share and Per Share Amounts)
1999 in Review
- --------------
In 1999, Berkshire Gas Company reorganized its corporate structure by
forming a holding company that will provide greater flexibility and new
opportunities for growth. The new holding company - Berkshire Energy
Resources - enables the Company to separate regulated and nonregulated
operations.
Berkshire Energy Resources has been organized as a Massachusetts
Business Trust and initially has as its subsidiaries: The Berkshire Gas
Company, Berkshire Propane, Inc., and Berkshire Energy Marketing, Inc.
Current operations of Berkshire Gas and Berkshire Propane will be largely
unaffected by the new corporate structure.
In 1999, Berkshire Energy Resources reported Earnings Available for
Common Shares of $3,218 or $1.34 per share as compared to $2,778 or $1.23
in 1998. Earnings were impacted by warmer weather during the heating
season. In fiscal 1999, weather was 12.2% warmer than the twenty-year
average resulting in decreased gas demand during the heating season. In
addition, the very positive response by our shareholders to the Dividend
Reinvestment Stock Purchase Plan has resulted in an $.08 per share dilution
on earnings. Lower sales revenues were partially offset by proceeds from
weather insurance.
Results of Operations
- ---------------------
1999 vs. 1998
Earnings per share for 1999 were $1.34 on $3,218 of Earnings
Available for Common Shares, as compared with $1.23 and $2,778 in 1998.
The $.11 or 8.9% increase in earnings is primarily due to proceeds from
weather insurance, lower bad debts as a result of a change in the recovery
mechanism for the portion of bad debt expense related to gas costs and a
reduction of pension costs due to growth in plan assets.
Operating Margin for both natural gas and propane increased $670 or
2.4% as compared to 1998.
Operating Margin on sales of natural gas increased $198 or 0.8% as
compared to 1998. Operating Margin (Operating Margin or Gross Profit =
Operating Revenues Net of Cost of Gas Sold) is primarily affected by the
level of firm gas sold and transported. Interruptible gas sold and
transported has minimal or no effect on Operating Margin since those
margins are primarily flowed back to the firm customers through rates. The
Company's sales are affected by weather as the majority of its firm
customers use natural gas for heating. Changes in the cost of natural gas
do not affect Operating Margin as these changes are recovered or returned
to customers through the Cost of Gas Adjustment Clause (CGAC).
The increase in Operating Margin in 1999 is a direct result of
increased sales volumes during the mid-winter period due to 9.9% colder
weather from January through March. Also, growth in the propane customer
base, in conjunction with the acquisition of a local propane dealer in
October 1998, contributed to the additional margins.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Firm MCF Sold and Transported 6,192 6,116
Consolidated Operating Margin $28,248 $27,578
Other Operating Expenses consisted of the following:
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Transmission and Distribution $ 3,855 $ 3,484
Customer Accounts 2,618 3,271
Administrative and General 4,148 4,149
Propane Operations 2,045 1,628
Other 1,771 1,529
------- -------
TOTAL $14,437 $14,061
======= =======
</TABLE>
Other Operating Expenses increased $376 or 2.7% from 1998 levels.
Increases in payroll and information technology were offset by lower
pension and employee benefits costs. Increases in Propane Operations
expenses were driven by customer growth. Partially offsetting these
increases was lower expense for bad debts due to a regulatory change in the
mechanism for the recovery of bad debts. The portion of bad debts related
to gas costs will now be recovered through the CGAC.
Other Income increased $591 or 36.9%, primarily representing proceeds
recognized from weather insurance. The Company purchased insurance to
protect against warmer than normal weather for the winter period
(November 1, 1998 through March 31, 1999).
Other Taxes increased $122 or 6.5% primarily due to increases in
plant property and municipal tax rates.
Income Taxes increased $306 due to a related increase in Pre-tax
Income.
Common Share Dividends increased $223 due to additional shares
outstanding through the Company's Dividend Reinvestment and Optional Cash
Purchase Plan (DRIP) over the twelve-month period, and to a lesser extent, an
increase in the quarterly dividend to $.295 per share from $.29 per share
effective the fourth quarter of 1999.
Results of Operations
- ---------------------
1998 vs. 1997
Earnings per share for 1998 were $1.23 on $2,778 of Earnings
Available for Common Shares, as compared with $1.52 and $3,316 in 1997.
The $.29 or 19.1% decrease in earnings was due primarily to 10% warmer than
normal weather and costs related to corporate restructuring. The book
value per share rose to $14.48 from $14.18 in 1997.
Operating Margin on sales of natural gas decreased $133 or 0.5% as
compared to 1997. The decrease in Operating Margin in 1998 was a direct
result of lower propane margins due to warmer temperatures, partially
offset by higher natural gas margins due to increased sales volumes during
the winter period. An increase in the number of commercial and industrial
customers had the effect of stabilizing margins as these customers tend to
be less weather sensitive.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Firm MCF Sold and Transported 6,116 6,428
Consolidated Operating Margin $27,578 $27,711
</TABLE>
Other Operating Expenses consisted of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Transmission and Distribution $ 3,484 $ 3,420
Customer Accounts 3,271 3,029
Administrative and General 4,149 4,382
Propane Operations 1,628 1,522
Other 1,529 1,231
------- -------
TOTAL $14,061 $13,584
======= =======
</TABLE>
Other Operating Expenses increased $477 or 3.5% from 1997 results.
Customer Accounts increased $242 reflecting the development and
implementation of new information systems company-wide. Administrative and
General decreased $233 from 1997 primarily due to reduced costs related to
the Company's pension plan and insurance, partially offset by costs
incurred for the restructuring for a holding company. Other Expenses
increased $298 resulting from increased marketing costs and other gas
supply and production costs.
Depreciation Expense increased by $130 in 1998 over 1997 due to an
increase in depreciable assets.
Other Income decreased $76 or 4.5% from 1997. The decrease was
primarily due to lower interest income on the undercollection of prior
period gas costs through the CGAC.
Due to the increase of long-term debt used to retire the 8.4%
Preferred Stock, Interest Expense increased $414 which was partially offset
by a reduction of $224 in the requirements for Preferred Stock Dividends.
Replacing Preferred Stock with debt resulted in a tax savings of $86.
Income Taxes decreased $567 from 1997 due to lower taxable earnings.
Common Share dividends increased $146 due to additional shares
outstanding because of the Company's Dividend Reinvestment and Optional
Cash Payment Plan over the twelve-month period and, to a lesser extent, an
increase in the quarterly dividends to $.29 per share from $.285 per share,
effective the fourth quarter of 1998.
Year 2000 Compliance
- --------------------
The Company has identified all significant applications that will
require modification to ensure Year 2000 compliance. Internal and external
sources are being used to make the required modifications and test Year
2000 compliance.
The Company believes that the most critical risk relates to the
replacement and modification of its business application software.
During the second quarter of fiscal 1999, the Company replaced its
core business applications which support customer service, billing,
collection, jobbing and engineering. This upgraded system is Year 2000
compliant. The installation and testing of the upgrade to the Company's
current finance, accounting, payroll and inventory system has been
completed. This system is Year 2000 compliant. These upgrades were
initiated in the normal course of addressing business needs.
The Company has also assessed the other areas of its business not
related to its core information systems. Presently, the Company believes
that these areas which include automated meter reading, dispatch,
administration and distribution, are being modified or upgraded without
disruption of service or material cost. Necessary upgrades and
replacements are expected to be completed by October 1999.
Due to the complexity of the Year 2000 problem and the reliance on
certain critical vendors and suppliers, there can be no guarantees that the
Company will achieve Year 2000 compliance or that critical vendors and
suppliers will achieve Year 2000 compliance. A vendor management program
has been undertaken as part of the Company's effort to obtain reasonable
assurances from key vendors that there will not be any interruptions in the
supply of goods and services as a result of the Year 2000 issues. The
Company is preparing strategies to address potential failures of
significant vendors in its contingency plans.
The Company is currently completing a business contingency plan
addressing Year 2000 risks associated with its internal systems and
critical vendors. The plan includes continuation strategies for critical
business processes and will be completed by September 1999.
The total cost to the Company of Year 2000 compliance activities has
not been and is not anticipated to be material to its financial position or
results of operations in any given year. Management has budgeted fifty
thousand dollars for fiscal year 2000 to address Year 2000 related
expenditures. These costs and the date on which the Company plans to
complete Year 2000 modification and testing processes are based on
management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of
certain resources, third party modification plans and other factors.
However, there can be no guarantee that these estimates will be achieved
and actual results could differ from those plans.
Liquidity and Capital Resources
- --------------------------------
Cash flows from operating activities have decreased from the twelve
months ended June 30, 1998, primarily due to an increase in accounts
receivable and less cash from recoverable gas costs. Capital requirements
have been primarily funded by internal sources, and to a lesser extent,
external sources. The issuance of long-term financing is dependent on
management's evaluation of need, financial market conditions and other
factors. Short-term financing is used to meet seasonal cash requirements.
The Company initially finances construction expenditures and other
funding needs primarily with internal sources and with the reinvestment of
dividends. The Company continually evaluates its short-term borrowing
position, and based on prevailing interest rates, market conditions, and
other considerations, makes determinations regarding conversion of short-
term borrowings to long-term debt or equity. As part of this process
during the second quarter of fiscal 1997, the Company repurchased the
80,000 shares of its Preferred Stock at $117 per share. To finance these
redemptions, the Company sold a $16,000 Senior Note at 7.8% due 2021.
The Company's capital expenditures were $6,735, $6,945, and $7,393 in
1999, 1998, and 1997, respectively. These construction expenditures
primarily represent investments in new and replacement mains and services.
The Company expects fiscal 2000's capital expenditures to total
approximately $5,700. Construction expenditures will be financed primarily
through internal sources, short term borrowings and the reinvestment of
dividends.
As of June 30, 1999, the Company had lines of credit aggregating
$30,500, of which $23,400 remained unused.
Like other companies in the natural gas industry, the Company is a
party to governmental actions associated with former gas manufacturing
sites. Management estimates that expenditures to remediate and monitor
known environmental sites will range from $3,355 to $12,673. In accordance
with SFAS No. 5, the Company has recorded the most likely cost of $3,355.
The Company's unamortized costs at June 30, 1999, were $718 and should be
recovered over a seven-year period through the Local Distribution Adjustment
Clause (LDAC) (See Contingencies footnote).
Capitalization, at June 30, 1999, consisted of 51.1% long-term debt,
48.5% common equity, and 0.4% preferred stock.
It is management's view that the Company has adequate access to
capital markets and will have sufficient capital resources, both internal
and external, to meet anticipated capital requirements.
Inflation
- ---------
The accompanying financial statements reflect the historical cost of
events and transactions, regardless of the purchasing power of the dollar
at the time. Due to the capital-intensive nature of the Company's
businesses, the most significant impact of inflation is on the Company's
depreciation of utility plant. Rate regulation, to which The Berkshire Gas
Company is subject, allows recovery through its rates of only the
historical cost of utility plant as depreciation. It is expected that any
higher costs experienced upon replacement of existing facilities will be
recovered through the normal regulatory process.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------
(In Thousands, Except Per Share Amounts)
Years Ended June 30,
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
Operating Revenues $ 50,733 $ 54,601 $ 53,584
Cost of Gas Sold 22,485 27,023 25,873
- --------------------------------------------------------------------------
Operating Margin 28,248 27,578 27,711
- --------------------------------------------------------------------------
Other Operating Expenses 14,437 14,061 13,584
Depreciation 4,437 4,409 4,279
Other Taxes 1,992 1,870 1,771
Total 20,866 20,340 19,634
- --------------------------------------------------------------------------
Operating Income 7,382 7,238 8,077
Other Income - Net 2,194 1,603 1,679
- --------------------------------------------------------------------------
Operating and Other Income 9,576 8,841 9,756
Interest Expense 4,382 4,392 3,978
- --------------------------------------------------------------------------
Pre-tax Income 5,194 4,449 5,778
Income Taxes 1,961 1,655 2,222
- --------------------------------------------------------------------------
NET INCOME $ 3,233 $ 2,794 $ 3,556
==========================================================================
Earnings Available for Common Shares $ 3,218 $ 2,778 $ 3,316
==========================================================================
Average Common Shares Outstanding 2,405.2 2,263.6 2,181.5
- --------------------------------------------------------------------------
Basic and Diluted Earnings Per
Common Share $ 1.34 $ 1.23 $ 1.52
==========================================================================
</TABLE>
Reference should be made to Notes to Financial Statements.
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- ---------------------------
(In Thousands) June 30,
1999 1998 1997
- --------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Property, Plant and
Equipment - at original cost
Gas-related activities $110,405 $106,654 $101,983
Unregulated activities 14,007 12,784 11,983
- --------------------------------------------------------------------------
124,412 119,438 113,966
- --------------------------------------------------------------------------
Less: Accumulated depreciation
and amortization
Gas-related activities 34,075 31,371 28,343
Unregulated activities 6,973 6,420 5,887
- --------------------------------------------------------------------------
41,048 37,791 34,230
- --------------------------------------------------------------------------
Property, Plant and Equipment - Net
Gas-related activities 76,330 75,283 73,640
Unregulated activities 7,034 6,364 6,096
- --------------------------------------------------------------------------
83,364 81,647 79,736
- --------------------------------------------------------------------------
Current Assets:
Cash 117 160 356
Accounts and Other Receivables - Net 7,152 6,277 7,587
Recoverable Gas Costs 188 224 1,404
Inventories 4,301 4,261 3,665
Prepayments and Other 1,238 979 689
Prepaid Taxes 397 370 96
- --------------------------------------------------------------------------
Total Current Assets 13,393 12,271 13,797
- --------------------------------------------------------------------------
Deferred Debits:
Unamortized Debt Expense - Net 2,150 2,200 2,302
Capital Share Expense - Net 232 275 319
Environmental Cleanup Costs 718 800 819
Other 2,293 1,414 1,425
- --------------------------------------------------------------------------
Total Deferred Debits 5,393 4,689 4,865
- --------------------------------------------------------------------------
Recoverable Environmental Cleanup Costs 3,335 3,290 3,290
- --------------------------------------------------------------------------
TOTAL ASSETS $105,485 $101,897 $101,688
==========================================================================
CAPITALIZATION AND LIABILITIES
Common Shareholders' Equity:
Common Shares $ 28,596 $ 24,625 $ 22,626
Retained Earnings 9,300 8,911 8,739
- --------------------------------------------------------------------------
Total Common Shareholder's Equity 37,896 33,536 31,365
- --------------------------------------------------------------------------
Redeemable Cumulative Preferred Stock 312 321 363
- --------------------------------------------------------------------------
Long-Term Debt (less current maturities) 40,000 34,000 40,000
- --------------------------------------------------------------------------
Current Liabilities:
Notes Payable to Banks 7,100 7,085 6,480
Current Maturities of Long-Term Debt 0 6,000 0
Accounts Payable 2,636 3,024 3,513
Other Current Liabilities 2,628 3,098 4,621
- --------------------------------------------------------------------------
Total Current Liabilities 12,364 19,207 14,614
- --------------------------------------------------------------------------
Other Liabilities 1,538 1,676 1,561
- --------------------------------------------------------------------------
Unamortized Investment Tax Credit 1,070 1,139 1,209
- --------------------------------------------------------------------------
Deferred Income Taxes 8,970 8,728 9,286
- --------------------------------------------------------------------------
Reserve for Recoverable
Environmental Cleanup
Costs 3,335 3,290 3,290
- --------------------------------------------------------------------------
TOTAL CAPITALIZATION
AND LIABILITIES $105,485 $101,897 $101,688
==========================================================================
</TABLE>
Reference should be made to Notes to Financial Statements.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- -----------------------------------------------
(In Thousands, Except Share Amounts)
Cumulative
Common Shares Preferred Stock
------------- ---------------
Number of Retained Number of
Shares Cost Earnings Shares Cost
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1996 2,152,592 $21,712 $7,883 84,055 $8,406
Issuance through Dividend
Reinvestment Program 59,059 914
Net Income 3,556
Dividends on Preferred Stock (240)
Dividends on Common Shares (2,460)
Redemption of Preferred Stock (80,423) (8,043)
- ------------------------------------------------------------------------------------
Balance at June 30, 1997 2,211,651 22,626 8,739 3,632 363
Issuance through Dividend
Reinvestment Program 104,263 1,999
Net Income 2,794
Dividends on Preferred Stock (16)
Dividends on Common Shares (2,606)
Redemption of Preferred Stock (420) (42)
- -----------------------------------------------------------------------------------
Balance at June 30, 1998 2,315,914 24,625 8,911 3,212 321
Issuance through Dividend
Reinvestment Program 197,991 3,971
Net Income 3,233
Dividends on Preferred Stock (15)
Dividends on Common Shares (2,829)
Redemption of Preferred Stock (91) (9)
- ------------------------------------------------------------------------------------
Balance at June 30, 1999 2,513,905 $28,596 $9,300 3,121 $ 312
====================================================================================
</TABLE>
Reference should be made to Notes to Financial Statements.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
(In Thousands) Years Ended June 30,
-------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income $3,233 $2,794 $3,556
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 5,092 5,110 4,897
Provision for Losses on Accounts Receivable 79 1,065 973
Recoverable Gas Costs 36 1,180 (2,235)
Deferred Income Taxes 242 (558) 620
Changes in Assets and Liabilities Which
Provided (Used) Cash:
Accounts and Other Receivables (954) 245 (1,747)
Inventories (40) (596) (595)
Unamortized Debt Expense (48) 0 (169)
Accounts Payable (388) (489) 337
Prepaid Taxes (27) (274) 153
Consumer Rebates and Other (1,666) (1,668) 2,108
- ------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 5,559 6,809 7,898
- ------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Capital Expenditures and Disposal Costs (6,735) (6,945) (7,393)
- ------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Dividends Paid (2,844) (2,622) (2,700)
Proceeds from (Principal Payments on)
Issuance of Long-Term Debt 0 0 16,000
Proceeds from (Principal Payments on)
Notes Payable Borrowings-Net 15 605 (5,155)
Redemption of Preferred Stock (Including Call Premium) (9) (42) (9,360)
Proceeds from Other Stock Transactions 3,971 1,999 870
- ------------------------------------------------------------------------------------
Net Cash Provided (Used in) by Financing Activities 1,133 (60) (345)
Net (Decrease) Increase in Cash (43) (196) 160
Cash at Beginning of Year 160 356 196
- ------------------------------------------------------------------------------------
Cash at End of Year $ 117 $ 160 $ 356
- ------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (net of amount capitalized) $4,358 $4,178 $3,974
Income Taxes (net of refund). 1,849 2,553 1,527
=====================================================================================
</TABLE>
Reference should be made to Notes to Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
(Dollars in Thousands, Except Share and Per Share Amounts)
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
- ----------------------
The Berkshire Gas Company adopted a holding company corporate
structure effective December 31, 1998, to capitalize on competitive
opportunities associated with the deregulation of the natural gas industry.
The adoption of a holding company structure effectively reorganized and
segregated the Company's regulated business activities from its
nonregulated markets. The holding company, known as Berkshire Energy
Resources (the Company), has been organized as a Massachusetts Business
Trust and initially has as its subsidiaries: The Berkshire Gas Company,
Berkshire Propane, Inc., and Berkshire Energy Marketing, Inc.
Beginning with fiscal 1999, the financial statements and results of
operations for these subsidiaries/divisions have been reflected in the
accompanying consolidated financial statements. Prior years were reported
as The Berkshire Gas Company, which reported nonregulated operating
divisions under Other Income. Effective December 31, 1998, the outstanding
shares of The Berkshire Gas Company Common Stock were automatically
exchanged on a share-for-share basis for Berkshire Energy Resources Common
Shares (no par value), and Berkshire Energy Resources became the holding
company of The Berkshire Gas Company. The Berkshire Gas Company is a
subsidiary engaged in the distribution and sale of natural gas for
residential, commercial and industrial use, as well as the transportation
of natural gas for larger commercial and industrial users, and also sells and
leases gas-burning equipment. The Berkshire Gas Company is subject to
regulation by the Massachusetts Department of Telecommunications and Energy
(DTE) as it relates to utility service. The Berkshire Gas Company's
accounting policies conform to Generally Accepted Accounting Principles
(GAAP) as applied to public utilities giving effect to the accounting
practices and policies of the DTE.
Berkshire Propane is the retail propane subsidiary, which provides
service to more than 100 communities in western Massachusetts, eastern New
York and southern Vermont.
The Berkshire Energy Marketing, Inc. subsidiary has formed a marketing
alliance with Conectiv/CNE Energy Services, LLC, a major regional energy
services company, to sell natural gas, electricity, fuel oil and other energy
service products in the Company's service territory and surrounding areas.
Berkshire Propane and Berkshire Energy Marketing's accounting policies
conform to GAAP.
New Accounting Standards
- ------------------------
In June 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 130, "Reporting Comprehensive Income" (SFAS No. 130). This
statement establishes standards for reporting and display of comprehensive
income and its components in the financial statements. Adoption of SFAS
No. 130 disclosure is required in fiscal 1999 and will have no impact on
the Company's financial condition or results of operations.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS No. 131). This
statement requires that public business enterprises report certain
additional information about operating segments. Adoption of SFAS No. 131
is required in fiscal 1999. The adoption of SFAS No. 131 will have no
impact on the Company's financial condition or results of operations.
In February 1998, the FASB issued SFAS No. 132 "Employers'
Disclosures about Pensions and Other Post-Retirement Benefits" (SFAS No.
132). This statement standardizes employers' disclosures requirements
about pension and other post-retirement benefit plans. Adoption of SFAS
No. 132 is required in fiscal 1999. The adoption of SFAS No. 132 will have
no impact on the Company's financial condition or results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activites" (SFAS No. 133). This
statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. Adoption of SFAS No. 133 is
required for fiscal years beginning after June 15, 2000. The Company is
aware of certain provisions which may impact the natural gas industry but
has not yet reviewed these provisions in detail against existing accounting
practices and disclosures. It is management's expectation that the
adoption of SFAS No. 133 will have no effect on the Company's financial
condition or results of operations.
SFAS No. 123, "Accounting for Stock-Based Compensation", if fully
adopted, changes the methods for recognition of cost on plans similar to
those of the Company. The Company's management has evaluated this
statement and feels it will have no effect on the company.
Segment Information
- -------------------
The Company operates two segments: regulated activities and
unregulated diversified businesses. Gas-related activities consist
primarily of natural gas distribution to residential, commercial and
industrial customers, as well as the sale and leasing of gas burning
equipment. Diversified businesses consist primarily of distribution of
liquefied petroleum gas and energy marketing.
Intersegment sales are priced at fair market value. Information
about the Company's operations, by business segment, is presented below:
<TABLE>
<CAPTION>
Revenues: 1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Gas-related activities $ 45,772 $ 49,859 $ 48,462
Unregulated activities 4,961 4,742 5,122
- ------------------------------------------------------------------
Total $ 50,733 $ 54,601 $ 53,584
==================================================================
Pre-tax Operating Income: 1999 1998 1997
- ------------------------------------------------------------------
Gas-related activities $ 4,786 $ 4,006 $ 4,966
Unregulated activities 408 443 812
- ------------------------------------------------------------------
Total $ 5,194 $ 4,449 $ 5,778
==================================================================
Income Taxes: 1999 1998 1997
- ------------------------------------------------------------------
Gas-related activities $ 1,804 $ 1,484 $ 1,909
Unregulated activities 157 171 313
- ------------------------------------------------------------------
Total $ 1,961 $ 1,655 $ 2,222
==================================================================
Depreciation and Amortization: 1999 1998 1997
- ------------------------------------------------------------------
Gas-related activities $ 4,249 $ 4,171 $ 4,021
Unregulated activities 188 238 258
- ------------------------------------------------------------------
Total $ 4,437 $ 4,409 $ 4,279
==================================================================
Identifiable Assets: 1999 1998 1997
- ------------------------------------------------------------------
Gas-related activities $104,396 $100,876 $100,522
Unregulated activities 1,089 1,021 1,166
- ------------------------------------------------------------------
Total $105,485 $101,897 $101,688
==================================================================
</TABLE>
Income Taxes
- -------------
The Company uses the liability method in calculating deferred income
taxes. The Company records deferred income tax liabilities for temporary
differences between the basis of assets and liabilities for financial
reporting and income tax purposes at tax rates expected to be in effect
during the periods the temporary differences reverse.
The Company has excess deferred taxes which has resulted in the
recording of a regulatory liability. The regulatory liability reflects
amounts due to the ratepayers which will be refunded through the regulatory
process.
Depreciation
- ------------
The Company depreciates its utility plant at straight line rates
approved by the DTE. The current composite depreciable rate is 4.04% and
has been in effect since April 1, 1993. Depreciable non-utility/unregulated
property consists of rental equipment, propane tanks and related equipment
used in the Company's liquefied petroleum gas operations, and is
depreciated at annual rates ranging from 2.5% to 20.0%.
Revenues
- --------
Customer meters are read on a cycle basis throughout each month.
After the reading is prepared, customers are billed for their gas usage and
any applicable monthly rental fee. At the time of billing, revenues are
recorded.
Pursuant to the DTE, The Berkshire Gas Company recovers the cost of
gas supplies by way of the Seasonal Cost of Gas Adjustment Clause (CGAC),
and recovers the cost of distribution charges through the Local
Distribution Adjustment Clause (LDAC). Gas costs to be recovered include
the cost of gas supplies, pipeline and storage capacity, certain bad debt
expenses, local production and storage expenses, and gas acquisition
expenses. The gas costs are offset by credits from supplier refunds and
margins from non-firm gas sales, capacity release, and off-system sales.
Any difference between actual and estimated costs, plus interest, is
accrued or deferred and is recorded in the month the related revenue is
billed.
Unamortized Debt Expense
- ------------------------
The issuance costs associated with long-term debt are deferred and
amortized over the life of the issue.
Investment Tax Credit
- ---------------------
The unamortized balance of the Investment Tax Credit (ITC) relating
to machinery and equipment acquisitions up through 1986 is deducted from
federal income taxes and is deferred on the balance sheet, as prescribed by
the DTE, and is being amortized over the expected lives of the applicable
assets.
The unamortized balance of the ITC for the years ended June 30,
1999, 1998 and 1997, was $1,070, $1,139 and $1,209, respectively. The
amortized portion for the years ended June 30, 1999, 1998 and 1997, was
$69, $70 and $71.
Utility Plant
- -------------
The cost of maintenance, repairs and the renewal of items determined
to be less than full units of plant property are charged to maintenance
expense accounts. The cost of betterments and the renewal of full units of
plant property are charged to plant property accounts. Costs include
materials, labor and indirect charges for engineering, general and
administrative and supervisory services. The book value of plant property
replaced, retired or sold is concurrently removed from such plant property
accounts and charged to accumulated depreciation along with its associated
removal costs, less any salvage value.
A functional classification for the cost of utility plant at June 30
is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Transmission and
Distribution Plant $ 97,072 $ 92,388 $ 87,206
General Plant 8,235 9,125 9,387
Manufactured Gas
Production Plant 4,564 4,544 4,518
Construction in Progress 534 597 872
- ---------------------------------------------------------------------
Total $110,405 $106,654 $101,983
=====================================================================
</TABLE>
Transmission and distribution plant consists of mains, the installed
costs of services and meters, land, rights of way and measuring and
regulating station equipment which is used to deliver and to monitor gas
used by the customer.
General plant consists of structures and their improvements, office
furniture and equipment, including computers, and transportation equipment.
The manufactured gas production plant consists of land, gas mixing
equipment and liquefied petroleum gas equipment used to supplement natural
gas volumes during the peak season in order to meet customer demand.
Earnings per Share
- ------------------
Earnings per Common Share have been computed by dividing earnings
applicable to Common Shares by the weighted average number of shares of
Common Shares outstanding during each year.
Effective December 31, 1997, the Company, as required, retroactively
adopted Statement of Financial Accounting Standards No. 128 "Earnings Per
Share" (SFAS No. 128). The statement established new standards for
computing and presenting earnings per share (EPS) and required restatement
of prior years information. As such, EPS for all prior periods presented
has been restated to conform with SFAS 128. Due to the capital structure
of the Company basic and diluted EPS are equal.
Estimates
- ---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
ACCOUNTS RECEIVABLE
- -------------------
Details of accounts receivable, net of allowance for doubtful
accounts, as of June 30 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------
<S> <C> <C> <C>
Gas-related activities $6,346 $5,476 $6,489
Unregulated activities 654 620 766
Other 152 181 332
- ---------------------------------------------------------------
Total - Net $7,152 $6,277 $7,587
===============================================================
</TABLE>
The allowance for doubtful accounts as of June 30, 1999, 1998 and
1997, respectively, is: Gas-related activities - $1,000, $927, and $943;
Unregulated activities - $19, $47 and $78.
INVENTORIES
- -----------
Materials, supplies and liquefied petroleum used in the non-utility
operations are valued at the lower of average cost or market value;
liquefied petroleum gas used in the utility operations is valued at cost,
and natural gas is recorded at cost. The details of these inventories as
of June 30 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------
<S> <C> <C> <C>
Gas-related activities $4,137 $4,127 $3,519
Unregulated activities 164 134 146
- ---------------------------------------------------------------
Total - Net $4,301 $4,261 $3,665
===============================================================
</TABLE>
RECLASSIFICATION
- ----------------
The Company has reclassified certain amounts for prior years to
conform with the 1999 presentation.
COMMON SHARES
- -------------
The Share Owner Dividend Reinvestment and Stock Purchase Plan (the
Plan) of Berkshire Energy Resources provides holders of record of Common
Shares of beneficial interest in the Company, a simple and convenient
method of investing in additional Common Shares by automatically
reinvesting cash dividends on all or a portion of their shares. The price
for shares purchased through the Plan shall be equal to the average of the
daily high and low sales prices for the Company's Common Shares (as quoted
in the NASDAQ National Market System) for the five consecutive trading days
prior to and including the date of purchase.
The Charter provisions applicable to the 4.8% Cumulative Preferred
Stock, the First Mortgage Indenture and the 7.8% Senior Note contain
restrictions on the use of The Berkshire Gas Company's retained earnings
for the payment of cash dividends on, or purchases of, Common Shares. At
June 30, 1999, The Berkshire Gas Company's retained earnings were $8,032.
At such date, under the most restrictive of these provisions, $4,259 of the
retained earnings were unrestricted.
REDEEMABLE CUMULATIVE PREFERRED STOCK
- -------------------------------------
(Actual Shares and Dollars)
The Company has one series of 4.8% Cumulative Preferred Stock
authorized. The redemption price per share (as well as the amount due on
voluntary liquidation) is $100.00. The provisions of the 4.8% Cumulative
Preferred Stock require the Company to offer to purchase up to 450 shares
at par annually on September 15. Pursuant thereto, the Company purchased
91, 420 and 423 shares during fiscal years 1999, 1998 and 1997,
respectively.
During fiscal 1997, the Company repurchased the 80,000 shares of the
8.4% Preferred Stock at $117 per share (see Long-Term Debt footnote).
LONG-TERM DEBT
- --------------
Details regarding the Company's First Mortgage Bond, Senior and
Medium-Term Notes Payable as of June 30 are as follows:
<TABLE>
<CAPTION>
Interest Final
Description Rate Maturity 1999 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Mortgage Bond:
Series P 10.06% 2019 $10,000 $10,000 $10,000
Senior Note: 9.60 2020 8,000 8,000 8,000
Medium-Term Note: 6.10 2004 6,000 6,000 6,000
Senior Note: 7.80 2021 16,000 16,000 16,000
- -------------------------------------------------------------------------
40,000 40,000 40,000
Less Current Portion 0 6,000 0
- -------------------------------------------------------------------------
Total $40,000 $34,000 $40,000
=========================================================================
</TABLE>
The aggregate amount of maturities due are: 2000 - 2003 = $0; 2004 -
$6,000; 2005 - 2010 = $0; 2011 - 2018 = $11,640; and $22,360 maturing
thereafter per the dates in the table above.
The First Mortgage Bond is collateralized by substantially all of the
utility plant.
During 1997, in conjunction with the Company's cost containment
policies, the Company revised its capital structure to lower its borrowing
costs. The Company issued a $16,000, 7.8% Senior Note and used the
proceeds to redeem 80,000 shares of the 8.4% Preferred Stock. On April 1,
1999 the Company rolled-over the $6,000 Medium-Term Note at 6.10%, for a
five-year term. The Indentures of the Series P Mortgage Bond and 7.8%
Senior Note contain certain restrictive and financial covenants,
principally a fixed charge ratio, and limitation on funded debt. As of June
30, 1999, the Company was not in violation of any such covenants.
SHORT-TERM LOANS AND
COMPENSATING BALANCES
- ---------------------
The Company has lines of credit aggregating $30,500 with various
banks, of which $23,400 remained unused as of June 30, 1999. The lines of
credit are reviewed periodically with various banks and may be renewed or
cancelled. In connection with these lines of credit, the Company borrows
at less than the prime rate. In lieu of compensating balance requirements,
the Company pays commitment fees on a portion of its credit lines equating
to 0.28% on $9,000 with the various banks.
Information as to short-term borrowings is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Balance Outstanding
at June 30 $ 7,100 $ 7,085 $ 6,480
Maximum Amount of
Borrowings at Any
Month-End 17,960 14,600 19,190
Average Borrowings During
the Year 11,701 9,528 12,434
Average Interest Rate
at End of Year 6.01% 6.75% 6.72%
Weighted Average Interest
Rate During the Year 6.31% 6.67% 6.44%
</TABLE>
OTHER CURRENT LIABILITIES
- -------------------------
Details of other current liabilities as of June 30 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Accrued Interest $ 908 $ 884 $ 927
Retirement Plan 224 350 192
Dividends Declared 745 675 635
Accrued Consumer Rebates 116 523 2,251
Other 635 666 616
- ------------------------------------------------------------------
Total $2,628 $3,098 $4,621
==================================================================
</TABLE>
Accrued consumer rebates represent refunds received from a major
supplier of natural gas to The Berkshire Gas Company. The refunds are the
result of suppliers' settlements with FERC and are to be refunded to
firm sales customers during the next fiscal year.
LEASE COMMITMENTS
- -----------------
The Company is committed under operating leases having an initial
lease term of one year or more expiring on various dates. Rental expense
under all long-term operating leases aggregated $1,264, $962 and $695 in
fiscal 1999, 1998 and 1997, respectively. The minimum future obligations
under long-term noncancelable leases in effect at June 30, 1999, are as
follows:
<TABLE>
<CAPTION>
<S> <C>
2000 1,265
2001 1,201
2002 795
2003 265
2004 40
-----------------------------------------
Total $3,566
=========================================
</TABLE>
INCOME TAXES
- ------------
The difference in the effective tax rate compared with the statutory
tax rate is shown in the following table:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
Tax at Statutory Rate 34% 34% 34%
State Taxes (Net of
Federal Benefit) 4.5 4.3 4.5
Investment Tax Credit (1.3) (1.6) (1.2)
Permanent Differences 0.7 .5 1.2
- -------------------------------------------------------------
Effective Tax Rate 37.9% 37.2% 38.5%
=============================================================
</TABLE>
A summary of the tax provision is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Federal Income - Current $1,446 $1,904 $1,393
Federal Income - Deferred 160 (542) 437
State - Current 307 390 285
State - Deferred 48 (97) 107
- ------------------------------------------------------------
Total $1,961 $1,655 $2,222
============================================================
</TABLE>
The components of the net deferred income tax liability at
June 30 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Deferred Liabilities:
Investment Tax Credit $ 410 $ 436 $ 467
Excess Tax over
Book Depreciation 9,086 8,924 8,837
Environmental Response Costs 135 171 228
- ------------------------------------------------------------
Total Deferred
Liabilities 9,631 9,531 9,532
- ------------------------------------------------------------
Deferred Assets:
Recoverable Gas Costs (70) (99) 301
Other (591) (704) (547)
- ------------------------------------------------------------
Total Deferred Assets (661) (803) (246)
- ------------------------------------------------------------
Total Net Deferred Income
Taxes $8,970 $8,728 $9,286
============================================================
</TABLE>
CONTINGENCIES
- -------------
Federal, state and local laws and regulations establishing standards
and requirements for the protection of the environment have increased in
number and scope in recent years. The Company cannot predict the future
impact of such standards and requirements, which are subject to change and
can be retroactively applied.
During fiscal 1990, the DTE issued a generic ruling on cost recovery
for environmental cleanup with respect to former gas manufacturing sites.
Under the ruling, The Berkshire Gas Company will recover annual cleanup
costs, excluding carrying costs, over a seven-year period through the LDAC.
This ruling also provides for the sharing of any proceeds received from
insurance carriers equally between Berkshire Gas and its ratepayers, and
establishes maximum amounts that can be recovered from customers in any one
year.
During the year ended June 30, 1999, Berkshire Gas continued the
analysis and field review of two parcels of real estate formerly used for
gas manufacturing operations, which had been found to contain coal tar
deposits and other substances associated with by-products of the gas
manufacturing process. The review and assessment process began in 1985
with respect to site #1, which is owned by Berkshire Gas, and in 1989 with
respect to site #2, which it formerly owned.
With the review and approval of the Massachusetts Department of
Environmental Protection (MDEP), work at site #1 has resulted in proposed
remedial activities which are currently being permitted through local and
state agencies and will be pursued in the near future. Site monitoring
activities will continue for the foreseeable future.
It is difficult to predict the potential financial impact of the
sites until first, the nature and risk is fully characterized, and second,
the remedial strategies and related technologies are determined. The
general philosophy is one of source removal and/or reduction coupled with
risk minimization.
Beginning in fiscal year 2000, Berkshire Gas will likely begin
remediation of site #1. It is anticipated that through 2014 the level of
expenditures for the sites will range from $3,335 to $12,673. The Company
has recorded the most likely cost of $3,335 in accordance with SFAS No. 5.
Ultimate expenditures cannot be determined until a remedial action plan for
site #2 is developed. The Company's unamortized costs at June 30, 1999,
were $718 and should be recovered using the formula discussed above.
FERC Order 636 provides for 100% recovery by pipelines of any
"Transition Costs" prudently incurred as a result of industry
restructuring. As these costs have been and may be approved in the
future, they have been and will be passed through to Berkshire Gas as
demand charges associated with the transportation of gas through the
pipeline. Under current rate structures, these costs are recovered through
the LDAC.
Legal Matters
- -------------
The Company is involved with other legal proceedings incidental to
its business. At the present time the Company cannot predict the outcome
of these proceedings and also believes that the outcomes will not have a
material adverse impact on its overall financial position or results of
operations.
OTHER INCOME
- ------------
A condensed summary of the Company's non-utility/unregulated
operations before income tax (included in the "Consolidated Statements of
Income" under "Other Income - Net") as of June 30 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------
<S> <C> <C> <C>
Merchandise and Jobbing:
Sales $1,100 $1,149 $1,064
Cost of Sales and
Expenses 855 836 730
- ---------------------------------------------------------------
Net 245 313 334
- ---------------------------------------------------------------
Appliance Rentals:
Revenues 1,544 1,452 1,410
Expenses 864 819 797
- ---------------------------------------------------------------
Net 680 633 613
- ---------------------------------------------------------------
Miscellaneous Net 1,269 657 732
- ---------------------------------------------------------------
Total $2,194 $1,603 $1,679
===============================================================
</TABLE>
POST-RETIREMENT BENEFITS
- ------------------------
The Company has noncontributory funded retirement income plans
covering substantially all employees. The cost of the plans is actuarially
determined, and it is the Company's policy to fund accrued pension costs.
The change in benefit obligations and plan assets for the years ended June
30, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------
<S> <C> <C> <C>
Change in Benefit Obligations:
Benefit Obligations at Beginning
of Year $19,827 $17,146 $16,946
Service Cost 468 496 556
Interest Cost 1,311 1,295 1,242
Benefits Paid (807) (885) (774)
Plan Amendments 233 0 285
Actuarial Loss(Gain) (235) 1,775 (1,109)
- --------------------------------------------------------------
Benefit Obligations at End
of Year $20,797 $19,827 $17,146
==============================================================
Change in Plan Assets:
Fair Value of Plan Assets at
Beginning of Year $27,664 $22,281 $20,593
Actual Return on Plan Assets 2,879 6,175 2,019
Employer Contribution 0 0 404
Benefits Paid (807) (792) (735)
- --------------------------------------------------------------
Fair Value of Plan Assets at End
of Year $29,736 $27,664 $22,281
==============================================================
Funded Status $8,939 $7,837 $5,135
Unrecognized Net Gain (10,945) (10,017) (7,674)
Unrecognized Prior Service Cost 1,032 900 1,000
Unrecognized Net Obligation
(at Transition) 750 930 1,110
- --------------------------------------------------------------
Accrued Benefit Liability $ (224) $ (350) $ (429)
==============================================================
</TABLE>
A summary of net periodic benefit(income)/cost for the years ended June 30,
1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------
<S> <C> <C> <C>
Service Cost $ 468 $ 496 $ 556
Interest Cost 1,311 1,295 1,242
Return on Plan Assets:
Actual (2,879) (6,175) (2,019)
Deferred 850 4,478 447
- --------------------------------------------------------------
Net Recognized
Return on Plan Assets (2,029) (1,697) (1,572)
Other 124 64 283
- --------------------------------------------------------------
Net Pension (Income)/Cost $ (126) $ 158 $ 509
==============================================================
</TABLE>
Significant assumptions used in determining pension expense and related
obligations for 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------
<S> <C> <C> <C>
Assumed Discount Rate 6.75% 7.75% 7.75%
Assumed Rate of Compensation
Increase 3.375% 4.125% 4.125%
Expected Rate of Return
on Plan Assets 9.50% 8.75% 8.75%
- ---------------------------------------------------------------
</TABLE>
Plan assets are invested in equity securities, debt securities and
cash equivalents, and the balance is in other investments, principally real
estate. The benefit formula is based either on the number of years of
service or the employee's average base salary for the five years yielding
the highest average.
The Company maintains a 401(k)Post-Retirement Plan for all Company
employees. The Company matches up to 3.5% of a participating employee's
annual salary. The expense for the years ended June 30, 1999, 1998 and
1997, related to the 401(k)Plan was $233, $226, and $219, respectively.
Fair Value of Financial Instruments
- -----------------------------------
Because of the short maturity of certain assets, which include Cash,
Accounts Receivable, and certain liabilities, which include Accounts
Payable, these instruments are stated at amounts which approximate fair
value.
Long-Term Debt:
- ---------------
Rates currently available to the Company for debt with similar terms
and remaining maturities are used to estimate fair values of existing debt.
As of June 30, 1999, 1998 and 1997, the estimated fair values of the Series
P Mortgage Bond are $11,165, $12,344, and $12,281, respectively. The
estimated fair values of the 9.6% Senior Note are $8,698, $9,044, and
$9,052, respectively. As of June 30, 1999, 1998 and 1997, the estimated
fair values of the 7.8% Senior Note are $15,863, $15,155 and $15,704,
respectively. The Medium-Term Note carried a variable interest rate for
1998 and 1997, and as such, the carrying value approximated fair value. As
a result of the roll-over in April with a fixed rate of interest, the fair
value as of June 30, 1999, of the Medium-Term Note is $4,675.
Redeemable Preferred Stock:
- ---------------------------
It was not practicable to estimate the fair value of the 4.8%
Redeemable Preferred Stock as any resultant difference between the fair
value and its carrying value is immaterial.
Subsequent Events
- -----------------
During September 1999, the Company announced that it had reached
agreements to purchase two privately held plumbing and heating contractors
headquartered in Pittsfield, Massachusetts. These companies will operate
under Berkshire Services Solutions, a nonregulated subsidiary.
The annual sales of these companies at the time of acquisition were $3.7
million.
INDEPENDENT AUDITORS' REPORT
Deloitte &
Touche LLP
City Place Telephone:(860)280-3000
185 Asylum Street Facsimile:(860)280-3051
Hartford, Connecticut 06103-3402
To the Shareholders of
Berkshire Energy Resources:
We have audited the accompanying consolidated balance sheets of Berkshire
Energy Resources (as successor to The Berkshire Gas Company) (the
"Company") as of June 30, 1999, 1998 and 1997, and the related consolidated
statements of income, shareholders' equity and cash flows for the years
then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at June 30,
1999, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/Deloitte & Touche LLP /s/
- ----------------------------
Deloitte & Touche LLP
August 12, 1999
QUARTERLY FINANCIAL INFORMATION
- -------------------------------
A comparison of unaudited quarterly financial information is
presented on page 31.
ANNUAL MEETING
- --------------
The annual meeting of shareholders will be held in Pittsfield,
Massachusetts, at the Crowne Plaza Hotel, on Thursday, November 4, 1999, at
10:00 A.M.
SHARE OWNER DIVIDEND
REINVESTMENT AND
STOCK PURCHASE PLAN
- --------------------
The Company has a program which allows for the reinvestment of
dividends to purchase additional Common Shares of the Company. The
Plan is available to all shareholders of 10 or more shares and provides
a convenient method to acquire additional shares without fees or other
charges. Shareholders who wish to take advantage of the Plan or want
additional information may do so by contacting:
Berkshire Energy Resources
Attn:Secretary of the Share Owner Dividend
Reinvestment and Stock Purchase Plan Committee
115 Cheshire Road
Pittsfield, Massachusetts 01201-1803
(413) 442-1511
TRANSFER AGENT
- --------------
State Street Bank and Trust Company
C/O EquiServe
P.O. Box 8200
Boston, Massachusetts 02266-8200
Shareholder Inquiries: 1-800-426-5523
STOCK LISTING
- -------------
The Common Shares of Berkshire Energy Resources are traded on the
National Over-the-Counter Market and are quoted through the NASDAQ National
Market System under the symbol BERK.
FORM 10-K INFORMATION
- ---------------------
Upon written request to the address below, a copy of the Company's
current Form 10-K Annual Report, as filed with the Securities and Exchange
Commission, will be provided to any shareholder without charge.
Berkshire Energy Resources
Attn: Corporate Secretary
115 Cheshire Road
Pittsfield, Massachusetts 01201-1803
This report has been prepared for the purposes of information and
record only and not in connection with the sale or offer for sale of
securities, or any solicitation of an offer to buy securities.
CONSOLIDATED QUARTERLY FINANCIAL INFORMATION
- --------------------------------------------
For the Fiscal Year Ended June 30, (In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
1999 First Second Third Fourth
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues(Consolidated) $ 4,837 $13,320 $23,544 $ 9,031
Operating and Other Income(Loss) (356) 2,104 6,832 995
Income (Loss) Before Income Taxes (1,434) 948 5,706 (27)
Net Income (Loss) (876) 602 3,514 (8)
Earnings (Loss) Per Share (0.38) 0.25 1.43 (0.01)
Dividends Declared Per Share 0.29 0.29 0.29 0.295
Prices of Common Shares:
High 25.000 24.250 23.125 23.750
Low 19.500 20.000 18.500 16.250
1998 First Second Third Fourth
- ------------------------------------------------------------------------------
Operating Revenues(Consolidated) $ 5,052 $15,752 $24,768 $ 9,030
Operating and Other Income(Loss) (69) 3,345 6,360 1,074
Income (Loss) Before Income Taxes (1,374) 1,724 4,419 (320)
Net Income (Loss) (836) 1,076 2,739 (185)
Earnings (Loss) Per Share (0.38) 0.47 1.20 (0.08)
Dividends Declared Per Share 0.285 0.285 0.285 0.29
Prices of Common Shares:
High 17.375 23.500 25.625 24.750
Low 15.250 16.250 21.500 21.625
1997 First Second Third Fourth
- ------------------------------------------------------------------------------
Operating Revenues (Consolidated) $ 4,657 $13,723 $23,978 $11,225
Operating and Other Income (Loss) (165) 3,298 6,834 1,560
Income (Loss) Before Income Taxes (1,143) 1,826 4,932 163
Net Income (Loss) (708) 1,124 3,042 98
Earnings (Loss) Per Share (0.41) 0.48 1.38 0.06
Dividends Declared Per Share 0.28 0.28 0.28 0.285
Prices of Common Shares:
High 16.750 18.000 17.500 16.000
Low 14.875 15.250 15.250 15.000
</TABLE>
The Common Shares of Berkshire Energy Resources are traded on the
National Over-the-Counter Market and are quoted through the NASDAQ National
Market System (BERK).
Earnings per Common Share have been computed based on average Common
Shares outstanding in each period after recognition of Preferred Stock
dividends.
It is currently the policy of the Board of Trustees to declare cash
dividends payable in July, October, January and April. The dividend rate
is reassessed regularly in light of existing conditions, the needs of the
Company and the interests of shareholders.
The sum of the quarterly earnings (loss) per share amounts may not
equal the annual income per share due to the issuance of Common Shares and
rounding.
The name "Berkshire Energy Resources" means the trustees for the time
being (as trustees but not individually) under a Declaration of Trust dated
2/17/98, as amended, which is hereby referred to, and a copy of which has
been filed with the Secretary of The Commonwealth of Massachusetts. Any
agreement, obligation or liability made, entered into or incurred by or on
behalf of said Berkshire Energy Resources binds only the trust estate, and
no shareholder, director, trustee, officer or agent assumes, or shall be
held to, any liability by reason thereof.
Officers
- --------
SCOTT S. ROBINSON ROBERT M. ALLESSIO
President and Chief Vice President
Executive Officer
MICHAEL J. MARRONE CHERYL M. CLARK
Vice President, Treasurer and Secretary of the
Chief Financial Officer Corporation
Trustees
- --------
GEORGE R. BALDWIN** JAMES R. KEYS
President, President, J.R. Keys & Assoc. Inc.,
Baldwin & Co., a marketing and government relations
an investment firm consulting firm
JOHN W. BOND* ** SCOTT S. ROBINSON*
President, President and Chief
Kimbell Financial, Inc., Executive Officer,
a financial services company Berkshire Energy Resources
PAUL L. GIOIA** ROBERT B. TRASK**
Of Counsel, President, The
LeBoeuf, Lamb, Greene & MacRae, Fitzpatrick Companies,
a law firm formerly Country
Curtains, Inc., a
FRANKLIN M. HUNDLEY* mail order/retail firm
Chairman of the Board,
Berkshire Energy Resources
Of Counsel, * Executive Committee
Rich, May, Bilodeau & Flaherty, P.C.,
a law firm ** Audit Committee
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 76,330
<OTHER-PROPERTY-AND-INVEST> 7,034
<TOTAL-CURRENT-ASSETS> 13,393
<TOTAL-DEFERRED-CHARGES> 5,393
<OTHER-ASSETS> 3,335
<TOTAL-ASSETS> 105,485
<COMMON> 28,596
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 9,300
<TOTAL-COMMON-STOCKHOLDERS-EQ> 37,896
0
312
<LONG-TERM-DEBT-NET> 40,000
<SHORT-TERM-NOTES> 7,100
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 20,177
<TOT-CAPITALIZATION-AND-LIAB> 105,485
<GROSS-OPERATING-REVENUE> 50,733
<INCOME-TAX-EXPENSE> 1,961
<OTHER-OPERATING-EXPENSES> 14,437
<TOTAL-OPERATING-EXPENSES> 20,866
<OPERATING-INCOME-LOSS> 7,382
<OTHER-INCOME-NET> 2,194
<INCOME-BEFORE-INTEREST-EXPEN> 9,576
<TOTAL-INTEREST-EXPENSE> 4,382
<NET-INCOME> 3,233
15
<EARNINGS-AVAILABLE-FOR-COMM> 3,218
<COMMON-STOCK-DIVIDENDS> 2,829
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 5,559
<EPS-BASIC> 1.34
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 75,283
<OTHER-PROPERTY-AND-INVEST> 6,364
<TOTAL-CURRENT-ASSETS> 12,271
<TOTAL-DEFERRED-CHARGES> 4,689
<OTHER-ASSETS> 3,290
<TOTAL-ASSETS> 101,897
<COMMON> 24,625
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 8,911
<TOTAL-COMMON-STOCKHOLDERS-EQ> 33,536
0
321
<LONG-TERM-DEBT-NET> 34,000
<SHORT-TERM-NOTES> 7,085
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 6,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 20,595
<TOT-CAPITALIZATION-AND-LIAB> 101,897
<GROSS-OPERATING-REVENUE> 54,601
<INCOME-TAX-EXPENSE> 1,655
<OTHER-OPERATING-EXPENSES> 14,061
<TOTAL-OPERATING-EXPENSES> 20,340
<OPERATING-INCOME-LOSS> 7,238
<OTHER-INCOME-NET> 1,603
<INCOME-BEFORE-INTEREST-EXPEN> 8,841
<TOTAL-INTEREST-EXPENSE> 4,392
<NET-INCOME> 2,794
16
<EARNINGS-AVAILABLE-FOR-COMM> 2,778
<COMMON-STOCK-DIVIDENDS> 2,606
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 6,809
<EPS-BASIC> 1.23
<EPS-DILUTED> 0
</TABLE>
