EASTERN EDISON COMPANY
1993 Annual Report on Form 10-K
Table of Contents
PART I
Page
Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . (i)
Glossary of Defined Terms. . . . . . . . . . . . . . . . . . . . . (iv)
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Construction Program. . . . . . . . . . . . . . . . . . . . . 3
Fuel for Generation . . . . . . . . . . . . . . . . . . . . . 4
Nuclear Power Issues. . . . . . . . . . . . . . . . . . . . . 6
General . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Decommissioning . . . . . . . . . . . . . . . . . . . . . . 7
Yankee Atomic . . . . . . . . . . . . . . . . . . . . . . . 8
Seabrook Unit 2 . . . . . . . . . . . . . . . . . . . . . . 8
Public Utility Regulation . . . . . . . . . . . . . . . . . . 8
Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FERC Proceedings. . . . . . . . . . . . . . . . . . . . . . 10
Massachusetts Proceedings . . . . . . . . . . . . . . . . . 11
Environmental Regulation . . . . . . . . . . . . . . . . . . 12
General . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Electric and Magnetic Fields. . . . . . . . . . . . . . . . 13
Water Regulation. . . . . . . . . . . . . . . . . . . . . . 14
Air Regulation. . . . . . . . . . . . . . . . . . . . . . . 14
Environmental Regulation of Nuclear Power . . . . . . . . . . 16
Energy Policy . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . 17
Power Supply. . . . . . . . . . . . . . . . . . . . . . . . . 17
Generating Units in Service . . . . . . . . . . . . . . . . . 19
Other Property. . . . . . . . . . . . . . . . . . . . . . . . 20
(i)
PART I (continued)
Page
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 20
Rate Proceedings. . . . . . . . . . . . . . . . . . . . . . . 20
Environmental Proceedings . . . . . . . . . . . . . . . . . . 20
Other Proceedings . . . . . . . . . . . . . . . . . . . . . . 21
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS. . . . . . . . . . . . . . . . . . . 22
PART II
Item 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . 22
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA. . . . . . . . . . . 23
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND REVIEW OF OPERATIONS. . . . . 23
Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Comparison of Financial Results . . . . . . . . . . . . . . . 24
Rate Activity . . . . . . . . . . . . . . . . . . . . . . . . 26
Financial Condition and Liquidity . . . . . . . . . . . . . . 27
Environmental Matters . . . . . . . . . . . . . . . . . . . . 28
Change in Accounting Standards. . . . . . . . . . . . . . . . 29
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA. . . . . . . . . . . . . . . . . . . . . . . . . 31
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES . . 31
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT. . . . . . . . . . . . . . . . . . . . . . 31
Item 11. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . 34
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . 36
(ii)
PART III (continued)
Page
Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . 38
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . 38
(a)(1) Financial Statements. . . . . . . . . . . . . . . . . 38
(a)(2) Financial Statement Schedules . . . . . . . . . . . . 38
(a)(3) Exhibits. . . . . . . . . . . . . . . . . . . . . . . 39
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Consolidated Financial Statements and Notes. . . . . . . . . . . . 51
Supplementary Schedules. . . . . . . . . . . . . . . . . . . . . . 71
Report of Independent Accountants . . . . . . . . . . . . . . . . . 75
(iii)
GLOSSARY OF DEFINED TERMS
The following is a glossary of frequently used abbreviations or
acronyms found throughout this report:
The EUA System Companies
Blackstone Blackstone Valley Electric Company
Company Eastern Edison Company
Eastern Edison Eastern Edison Company
EUA Eastern Utilities Associates
EUA Cogenex EUA Cogenex Corporation
EUA Energy EUA Energy Investment Corporation
EUA Ocean State EUA Ocean State Corporation
EUA Power EUA Power Corporation (now Great Bay Power
Corporation)
EUA Service EUA Service Corporation
Montaup Montaup Electric Company
Newport Newport Electric Corporation
Registrant Eastern Edison Company
Retail Subsidiaries Blackstone, Eastern Edison
and Newport
Non-Affiliated_Companies
Aquidneck Aquidneck Power Limited Partnership
Maine Yankee Maine Yankee Atomic Power Company
OSP Ocean State Power Project Units 1 and 2
Yankee Atomic Yankee Atomic Electric Company
NHEC New Hampshire Electric Cooperative, Inc.
Regulators/Regulations
1935 Act Public Utility Holding Company Act of 1935
CERCLA Federal Comprehensive Environmental
Response, Compensation and Liability
Act of 1980 as amended by the Superfund
Amendments and Reauthorization Act of
1986
Chapter 21E Massachusetts Oil and Hazardous Material
Release Prevention and Response Act of
1986
Clean Air Act Amendments Clean Air Act Amendments of 1990
DEP Massachusetts Department of Environmental
Management
DOE United States Department of Energy
Energy Act Energy Policy Act of 1992
EPA Federal Environmental Protection Agency
FASB Financial Accounting Standards Board
FAS87 Employers Accounting for Pensions
FAS96 Statement No. 96 "Accounting for Income
Taxes"
(iv)
GLOSSARY OF DEFINED TERMS (Cont'd)
Regulators/Regulations (continued)
FAS106 Statement No. 106 "Accounting for
Post-Retirement Benefits"
FAS107 Statement No. 107 "Disclosures about
Fair Value of Financial Instruments"
FAS109 Statement No. 109 "Accounting for Income
Taxes"
FAS112 Statement No. 112 "Accounting for Post-
Employment Benefits"
FERC Federal Energy Regulatory Commission
IRS Internal Revenue Service
MCP Massachusetts Contingency Plan
MDPU Massachusetts Department of Public
Utilities
NESCAUM Northeast States for Coordinated Air Use
Management
NHPUC New Hampshire Public Utilities Commission
NRC Nuclear Regulatory Commission
NWPA Nuclear Waste Policy Act
OPA-90 Oil Pollution Act of 1990
PURPA Public Utility Regulatory Policies Act
of 1978
RACT Reasonably Available Control Technology
RCRA Resource Conservation and Recovery Act of
1976
RIDEM Rhode Island Department of Environmental
Managment
RIPUC Rhode Island Public Utilities Commission
SEC Securities and Exchange Commission
SPCC Spill Prevention Control and
Countermeasures
TSCA Toxic Substances Control Act
USCG United States Coast Guard
Other
AFUDC Allowance for Funds Used During
Construction
BTU British Thermal Unit
C&LM Conservation and Load Management
EITF Emerging Issues Task Force
EMF Electric and Magnetic Fields
EWG Exempt Wholesale Generator
FMBs First Mortgage and Collateral Trust Bonds
IPP Independent Power Producer
kWh Kilowatthour
Millstone Unit 3 Millstone Nuclear Power Project
Generating Unit No. 3
(v)
MOU Memorandum of Understanding
MW Megawatt
NEPOOL New England Power Pool
PCAC Purchase Capacity Adjustment Clause
PCB Polychlorinated Biphenyls
PRP Potentially Responsible Parties
QF Qualifying cogeneration and small power
production facilities pursuant to PURPA
Seabrook Project Seabrook Nuclear Power Project
Seabrook Unit 1 Seabrook Nuclear Power Project
generating Unit No. 1
Seabrook Unit 2 Seabrook Nuclear Power Project
generating Unit No. 2
VEBA Voluntary Employee Benefits Association
Yankee Rowe Yankee Nuclear Power Station
(vi)
PART I
Item 1. BUSINESS
General
The Registrant, Eastern Edison Company, a retail electric utility company,
is a corporation organized under the laws of the Commonwealth of Massachu
setts. Eastern Edison is a wholly owned subsidiary of EUA, a Massachusetts
voluntary association organized and existing under a Declaration of Trust dated
April 2, 1928, as amended, and is a registered holding company under the 1935
Act. EUA owns directly all of the shares of common stock of three operating
retail electric utility companies: Eastern Edison, Blackstone, and Newport.
Blackstone operates in northern Rhode Island, Eastern Edison operates in
southeastern Massachusetts, and Newport operates in south coastal Rhode
Island. These subsidiaries are collectively referred to as the Retail
Subsidiaries. Eastern Edison owns all of the permanent securities of Montaup,
a generation and transmission company, which supplies electricity to Eastern
Edison, to Blackstone, to Newport and to two unaffiliated utilities for
resale. EUA also owns directly all of the shares of common stock of EUA
Cogenex, EUA Energy, EUA Ocean State and EUA Service. EUA Service provides
various accounting, financial, engineering, planning, data processing and other
services to all EUA System companies. EUA Cogenex is an energy service and
cogeneration company. EUA Energy was organized to invest in energy-related
projects. EUA Ocean State owns a 29.9% interest in OSP's two gas-fired
generating units. (See Item 2. Properties -- Power Supply.) The holding company
system of EUA, the Retail Subsidiaries, Montaup, EUA Service, EUA Cogenex, EUA
Energy and EUA Ocean State is referred to as the EUA System. For the three
years 1991 through 1993, electric operations accounted for 100% of Eastern
Edison's total operating revenues.
Eastern Edison supplies retail electric service in 22 cities and towns in
southeastern Massachusetts. The largest communities served are the cities of
Brockton and Fall River, Massachusetts. The retail electric service territory
covers approximately 390 square miles and has an estimated population of
approximately 445,000. At December 31, 1993, Eastern Edison served approxi
mately 177,000 retail customers.
Montaup supplies Eastern Edison with nearly 100% of its electric
requirements and approximately 85% of the electric requirements of the EUA
System. About 47% of the net generating capacity of the EUA System comes from
a combination of the following sources: (i) wholly owned EUA System generating
plants, primarily Montaup's 156 MW Somerset facility located in Somerset,
Massachusetts; (ii) Montaup's net entitlement of 207 MW from the 584 MW Canal
No. 2 unit, which is located in Sandwich, Massachusetts and is 50% owned by
Montaup; and, (iii) entitlements from units in which Montaup or Newport have
partial ownership interests (by joint ownership through tenancy-in-common or by
stock ownership) in which Montaup's or Newport's share is 4.5% or less. The
remaining 53% of the net generating capacity of the EUA System comes from units
in which Montaup or Newport have long-term or short-term power contracts for
shares ranging from 0.49% to 41.67% of the unit's capacity, including 28% of
the OSP units 1 and 2 in which EUA Ocean State has a 29.9% partnership
interest, or entitlements from the Hydro-Quebec Project through NEPOOL. On
January 25, 1994, Somerset's Unit No. 5 was placed in deactivated reserve,
resulting in the reduction of approximately 69 MW of Montaup's total net
generating capacity. Newport intends to become an all requirements customer of
Montaup when Montaup's next change in its all requirements wholesale tariff
rate is approved by FERC. At that time Newport, subject to obtaining
regulatory approval, if necessary, expects to lease all of its generation and a
share of its transmission facilities to Montaup. (See Item 2. PROPERTIES --
Power Supply for further details of the EUA System's sources of power supply.)
Eastern Edison and Montaup hold valid franchises, permits and other rights
which are necessary to allow these companies to conduct electric business
within the territories which they serve. Such franchises, permits and other
rights contain no unduly burdensome restrictions or limitations upon duration.
Eastern Edison's electric sales are seasonal to some extent due to
electricity usage for heating and lighting in the winter and air conditioning
in the summer.
Eastern Edison is not dependent on a single customer or a few customers
for its electric sales.
There is no competition from other electric utilities within the retail
territories served by Eastern Edison at this time. Federal law permits,
however, certain federal facilities to by-pass the local utility and purchase
power directly from another utility. It is possible that in the future retail
competition could be imposed by legislative or regulatory action at the federal
or state level.
At the wholesale level, Montaup faces new sources of competition primarily
as a result of PURPA, the Energy Act and other policies being implemented by
the MDPU relating to the solicitation of competitive proposals for new
generation sources. Non-utility wholesale generators, generally known as
independent power producers or IPPs, are subject to FERC regulation under the
Federal Power Act as well as various other federal, state, and local
regulators. However, PURPA was intended, among other things, to promote
national energy independence and diversification of energy supply and to
improve the overall efficiency of energy usage. PURPA created a new class of
non-utility power generation facilities called QFs. PURPA allows QFs to sell
power generated by the QF to local utilities at specified rates based on each
utilities' avoided cost. In order to further promote competition in energy
supply, the Energy Act established a new class of non-utility generators called
exempt wholesale generators, generally referred to as EWGs, which are exempt
from the 1935 Act. As a complement to the federal initiatives, the MDPU and
RIPUC have implemented regulations which require utilities to integrate
least-cost planning with competitive proposals to meet requirements for new
generation. Both states have also approved a Memorandum of Understanding among
Montaup and the Retail Subsidiaries that establishes a framework which makes
possible a coordinated, regional review of the resource planning and
procurement process of the EUA Companies. Montaup will face increased
competition in the wholesale generating market, primarily based on price, from
QFs, IPPs and EWGs and in the future could be affected by such competition
supplying generation to its customers. Several states have begun discussions
on retail wheeling (the transmission of power from one utility for sale by that
system to the retail customer of a different system). In Massachusetts two
House Bills dealing with retail wheeling were introduced in the legislature.
Neither bill was enacted. Therefore, no directives on retail wheeling are
expected in Massachusetts in the near future.
All of the transmission facilities within the EUA System are inter
connected with the NEPOOL transmission grid. Montaup and Eastern Edison are
members of NEPOOL, which is open to all investor-owned, municipal and
cooperative electric utilities in New England that are connected to the New
England power grid. NEPOOL provides for coordinated planning of future
facilities as well as operation of nearly 100% of existing generating capacity
in New England and of related transmission facilities essentially as if they
were one system. The NEPOOL agreement imposes obligations concerning
generating capacity reserve and the right to use major transmission lines, and
provides for central dispatch of the generating capacity of NEPOOL's members
with the objective of achieving economical use of the region's facilities.
Pursuant to the NEPOOL agreement, interchange sales to NEPOOL are made at a
price approximately equal to the fuel cost for generation without contribution
to the support of fixed charges. The capacity responsibilities of Montaup and
Eastern Edison under the NEPOOL agreement are based on an allocated share of a
New England capacity requirement which is determined for each period on the
basis of certain regional reliability criteria. Because of their participation
in NEPOOL, Montaup's and Eastern Edison's operating revenues and costs are
affected to some extent by the operations of other members.
As of December 31, 1993, Eastern Edison and Montaup had 483 regular
employees. Relations with employees are considered to be satisfactory. Labor
bargaining unit contracts covering approximately 194 employees of Eastern
Edison in the Fall River area and of Montaup expire in June 1995 and March
1996, respectively. Approximately 30 of the 140 employees at Montaup's
Somerset Station may be impacted by the deactivation of Unit No. 5, announced
in January 1994. (See Item 2. PROPERTIES--Power Supply.)
Construction Program
Construction expenditures of Eastern Edison and Montaup for 1994, 1995 and
1996, as set forth below, are estimated to total $100.5 million (including
AFUDC of approximately $4.7 million estimated environmental expenditures and
nuclear fuel costs, where applicable). These projections do not include
expenditures for compliance with oxides of nitrogen emissions standards
promulgated under Clean Air Act Amendments for certain units in which Montaup
has a joint ownership interest.
Construction expenditures for the year ended December 31, 1993 were
approximately $23.3 million (including AFUDC of approximately $675,000).
CONSTRUCTION PROGRAM
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C>
1994 1995 1996 3-Yr. Total
---------------- ---------------- ---------------- --------------------------
Eastern Eastern Eastern Eastern
Edison Montaup Edison Montaup Edison Montaup Edison Montaup Combined
Generation $ $21,173 $ $15,502 $ $20,809 $ $57,484 $ 57,484
Transmission 247 3,577 202 1,586 73 211 522 5,374 5,896
Distribution 12,297 12,379 12,035 36,711 36,711
General 47 56 213 127 47 396 443
------- -------- -------- ------- -------- ------- ------- ------- --------
Total $12,591 $24,806 $12,581 $17,301 $12,108 $21,147 $37,280 $63,254 $100,534
======= ======= ======= ======= ======= ======= ======= ======= ========
</TABLE>
Fuel for Generation
For 1993, Montaup's sources of energy, by fuel type, were as follows: 35%
nuclear, 29.9% oil 23.6% gas, 5.8% coal, and 5.7% other. During 1993, Montaup
had an average inventory of 87,108 tons of coal for its steam generating units
at the Somerset Station, the equivalent of 62 days' supply (based on average
daily output at 80% capacity factor for the coal units (see Item 2.
PROPERTIES-- Power Supply). The cost of coal averaged about $46.14 per ton in
1993 which is equivalent to oil at $11.18 per barrel. Montaup intends to
solicit bids from various suppliers of low sulfur content coal during the last
three quarters of 1994. The 1993 year-end inventory of approximately 95,000
tons of high sulfur content coal will be reduced in order to facilitate the
necessary changeover to all low sulfur content coal by December 31, 1994.
Montaup also maintained an average inventory of jet oil of 3,397 barrels at an
average cost per barrel of $26.28 during 1993 for its two peaking units at the
Somerset Station.
Canal Electric Company (Canal), on behalf of itself, Montaup and others
has contracts with two suppliers for up to 100% of the fuel-oil requirements of
Canal Unit Nos. 1 and 2 for the period ending April 30, 1995. The contracts
permit up to 20% of fuel oil purchases in the spot market. For 1993, the cost
of oil per barrel at Canal averaged $13.78. Canal and Montaup have entered
into agreements with Algonquin Gas Transmission Company (Algonquin) for
Algonquin to provide gas transmission facilities and services to the Canal
facilities. The agreements are subject to (i) Algonquin obtaining the
appropriate permits and authorization to construct and operate the transmission
facilities and (ii) Canal and Montaup receiving the necessary permits and
authorizations to construct natural gas fired electric generation equipment and
the facilities to receive natural gas.
Montaup's costs of fossil and nuclear fuels for the years 1991 through
1993, together with the weighted average cost of all fuels, are set forth
below:
___________Mills*_per_kWh__________
1993 1992 1991
Nuclear . . . . . . . . . 7.5 7.7 8.7
Coal . . . . . . . . . 24.1 21.2 21.4
Oil . . . . . . . . . 25.5 26.0 18.9
Gas . . . . . . . . . 15.1 13.0 16.2
All fuels . . . . . . . . . 15.5 14.8 15.7
*One Mill is 1/10 of one cent
The rate schedules of Eastern Edison and Montaup are designed to pass on
to customers the increases and decreases in fuel costs and the cost of
purchased power, subject to review and approval by appropriate regulatory
authorities (see Rates below).
The owners (or lead participants) of the nuclear units in which Montaup
has an interest have made, or expect to make, various arrangements for the
acquisition of uranium concentrate, the conversion, enrichment, fabrication and
utilization of nuclear fuel and the disposition of that fuel after use. The
owners (or lead participants) of United States nuclear units have entered into
contracts with the DOE for disposal of spent nuclear fuel in accordance with
the NWPA. The NWPA requires (subject to various contingencies) that the
federal government design, license, construct and operate a permanent
repository for high level radioactive wastes and spent nuclear fuel and
establish prescribed fees for the disposal of such wastes and fuel. The NWPA
specifies that the DOE provide for the disposal of such wastes and spent
nuclear fuel starting in 1998. Objections on environmental and other grounds
have been asserted against proposals for storage as well as disposal of spent
fuel. The DOE anticipates that a permanent disposal site for spent fuel will
be ready to accept fuel for storage or disposal by the year 2010. However, the
NRC, which must license the site, stated only that a repository will become
available by the year 2025. Montaup owns a 4.01% interest in Millstone Unit 3
and a 2.9% interest in Seabrook Unit 1. Northeast Utilities, the operator of
the units, indicates that Millstone Unit 3 has sufficient on-site storage
facilities to accommodate high-level wastes and spent fuel for the projected
life of the units. Only minimal capital expenditures are projected for the
foreseeable future. Similarly, at the Seabrook Project, there is on-site
storage capacity which, with minimal capital expenditures, should be sufficient
for twenty years or until the year 2010. No near-term capital expenditures are
anticipated to accommodate an increase in storage requirements after 2010. The
Energy Act requires that a fund be created for the decommissioning and
decontamination of the DOE uranium enrichment facilities. The fund will be
financed in part by special assessments on nuclear power plants in which
Montaup has an interest. These assessments will be calculated based on the
utilities' prior use of the government facilities. These special assessments
have been levied by the DOE starting in September 1993 and will continue over
15 years. This cost is passed on to the joint owners or power buyers as an
additional fuel charge on a monthly basis.
Nuclear Power Issues
General:
Nuclear generating facilities, including those in service in which Montaup
participates, as shown in the table under Item 2. PROPERTIES -- Power Supply,
are subject to extensive regulation by the NRC. The NRC is empowered to
authorize the siting, construction and operation of nuclear reactors after
consideration of public health, safety, environmental and anti-trust matters
(see Yankee Atomic below).
The NRC has promulgated numerous requirements affecting safety systems,
fire protection, emergency response planning and notification systems, and
other aspects of nuclear plant construction, equipment and operation. These
requirements have caused modifications to be made at some of the nuclear units
in which Montaup has an interest. Montaup has been affected, to the extent of
its proportionate share, by the costs of such modifications.
Nuclear units in the United States have been subject to widespread
criticism and opposition. Some nuclear projects have been cancelled following
substantial construction delays and cost overruns as the result of licensing
problems, unanticipated construction defects and other difficulties. Various
groups have by litigation, legislation and participation in administrative
proceedings sought to prohibit the completion and operation of nuclear units
and the disposal of nuclear waste. In the event of cancellation or shutdown of
any unit, NRC regulations require that it be completely decontaminated of any
residual radioactivity. The cost of such decommissioning, depending on the
circumstances, could substantially exceed the owners' investment at the time of
cancellation.
The continuing public controversy concerning nuclear power could affect
the operating units in which Montaup has an interest. While management cannot
predict the ultimate effect of such controversy, it is possible that it could
result in the premature shutdown of one or more of the units (see Yankee Atomic
below).
The Price-Anderson Act provides, among other things, that the liability
for damages resulting from a nuclear incident would not exceed an amount which
at present is about $9.2 billion. Under the Price-Anderson Act, prior to
operation of a nuclear reactor, the licensee is required to insure against this
exposure by purchasing the maximum amount of liability insurance available from
private sources (currently $200 million) and to maintain the insurance
available under a mandatory industry-wide retrospective rating program. Should
an individual licensee's liability for an incident exceed $200 million, the
difference between such liability and the overall maximum liability, currently
about $9.2 billion, will be made up by the retrospective rating program. Under
such a program, each owner of an operating nuclear facility may be assessed a
retrospective premium of up to a limit of $79.3 million (which shall be
adjusted for inflation at least every five years) for each reactor owned in the
event of any one nuclear incident occurring at any reactor in the United
States, with provision for payment of such assessment to be made over time as
necessary to limit the payment in any one year to no more than $10 million per
reactor owned. With respect to operating nuclear facilities of which it is a
part owner or from which it contracts (on terms reflecting such liability) to
purchase power, Montaup would be obligated to pay its proportionate share of
any such assessment.
Joint owners of nuclear projects are also subject to the risk that one of
their number may be unable or unwilling to finance its share of the project's
costs, thus jeopardizing continuation of the project. On February 28, 1991,
EUA Power (now known as Great Bay Power Corporation), a 12.13% owner of the
Seabrook Project in which Montaup has a 2.9% ownership interest, filed for
protection under Chapter 11 of the federal Bankruptcy Code. The Great Bay
Power Corporation Plan of Reorganization was confirmed by the Bankruptcy Court
on March 5, 1993. On February 2, 1994, the Official Bondholders Committee of
Great Bay Power Corporation announced that it accepted a plan of reorganization
financing proposal from Omega Advisers, Inc. which provided for a $35 million
equity investment in exchange for 60% of the equity of the reorganized Great
Bay Power Corporation. Implementation of the Omega proposal will require
modification of the plan of reorganization and approval from the Bankruptcy
Court, the NRC, FERC and the NHPUC. Under the plan, as modified, the
bondholders will receive 40% of the equity in the reorganized Great Bay Power
Corporation in exchange for their bondholder claims.
On May 6, 1991, the New Hampshire Electric Cooperative, Inc. (NHEC), a
2.2% owner of the Seabrook Project, announced that it had filed for Chapter 11
bankruptcy protection. A reorganization plan, filed by the NHEC with the
Bankruptcy Court in September, 1991 and revised on January 14, 1992 was
approved by the Bankruptcy Court in March 1992 and approved by the NHPUC on
October 5, 1992. All appeals of the NHPUC order approving the reorganization
plan have been resolved in NHEC's favor and the effective date of the plan
occurred on December 1, 1993.
Decommissioning:
Each of the three operating nuclear generating companies in which Montaup
has an equity ownership interest (see Item 2. PROPERTIES -- Power Supply) has
developed its estimate of the cost of decommissioning its unit and has received
the approval of FERC to include charges for the estimated costs of
decommissioning its unit in the cost of energy which it sells. From time to
time, these companies re-estimate the cost of decommissioning and apply to FERC
for increased rates in response to increased decommissioning costs. Maine
Yankee has filed a decommissioning financing plan under a Maine statute which
requires the establishment of a decommissioning trust fund. That statute also
provides that if the trust has insufficient funds to decommission the plant,
the licensee (Maine Yankee) is responsible for the deficiency and, if the
licensee is unable to provide the entire amount, the "owners" of the licensee
are jointly and severally responsible for the remainder. The definition of
"owner" under the statute includes Montaup and may include companies affiliated
with Montaup. The applicability and effect of this statute cannot be
determined at this time. Montaup would seek to recover through its rates any
payments that might be required (see Yankee Atomic below).
Montaup is recovering through rates its share of estimated decommissioning
costs for Millstone Unit 3 and Seabrook Unit 1. Montaup's share of the current
estimate of total costs to decommission Millstone Unit 3 is $15.1 million in
1993 dollars, and Seabrook Unit 1 is $10.6 million in 1993 dollars. These
figures are based on studies performed for the lead owners of the plants. In
addition, pursuant to contractual arrangements with other nuclear generating
facilities in which Montaup has an equity ownership interest or life of the
unit entitlement, Montaup pays into decommissioning reserves. Such expenses
are currently recoverable through rates.
Yankee Atomic:
On February 26, 1992, Yankee Atomic announced that it would permanently
cease power operation of Yankee Rowe and began preparing for an orderly
decommissioning of the facility. Montaup has a 7.8 MW entitlement from the
plant and has a 4.5% equity ownership in Yankee Atomic with a book value of
approximately $1.1 million at December 31, 1993. Under the terms of its
purchased power contract with the facility, Montaup must pay its proportionate
share of unrecovered costs and expenses incurred after the plant is retired.
In December 1992, Yankee Atomic received FERC authorization to recover
essentially all costs related to the decommissioning of the plant.
Seabrook Unit 2:
Montaup also has 2.9% ownership interest in Seabrook Unit 2. On November
6, 1986, the joint owners of the Seabrook Project, recognizing that Seabrook
Unit 2 had been cancelled in 1984, voted to dispose of Seabrook Unit 2. Plans
regarding disposition of Seabrook Unit 2 are now under consideration, but have
not been finalized and approved. Montaup is unable, therefore, to estimate the
costs for which it would be responsible in connection with the disposition of
Seabrook Unit 2. Monthly charges are required to be paid by Montaup with
respect to Seabrook Unit 2 in order to preserve and protect its components and
various warranties. Montaup recovered its investment in Seabrook Unit 2 under
a FERC approved rate case settlement. As of December 31, 1993, Montaup had
fully amortized its investment in Seabrook Unit 2.
Public Utility Regulation
Eastern Edison and Montaup are subject to regulation by the MDPU with
respect to the issuance of securities, the form of accounts, and in the case of
Eastern Edison, rates to be charged, services to be provided and other
matters. Montaup, by reason of its ownership of fractional interests in
certain facilities located in other states, is subject to limited regulation in
those states.
The EUA System is subject to the jurisdiction of the SEC under the 1935
Act by virtue of which the SEC has certain powers of regulation, including
jurisdiction over the issuance of securities, changes in the terms of
outstanding securities, acquisition or sale of securities or utility assets or
other interests in any business, intercompany loans and other intercompany
transactions, payment of dividends under certain circumstances, and related
matters. Eastern Edison is a holding company under the 1935 Act by reason of
its ownership of securities of Montaup. As a subsidiary of EUA, a registered
holding company, Eastern Edison is exempted from registering as a holding
company by complying with the applicable rules thereunder.
Eastern Edison and Montaup are also subject to the jurisdiction of FERC
under Parts II and III of the Federal Power Act. That jurisdiction includes,
among other things, rates for sales for resale, interconnection of certain
facilities, accounts, service, and property records.
The MDPU and RIPUC have approved a Memorandum of Understanding (MOU) with
Eastern Edison, Blackstone, Newport and Montaup. The MOU establishes a
framework for a coordinated, regional review of the resource planning and
procurement process of those companies. It is based on the assumption that
resource planning and procurement by a regional electric company may be
implemented more effectively under a coordinated, consensual review process
involving the EUA Retail companies and the state public utility commissions to
which the EUA retail companies are subject. Pursuant to the terms of the MOU,
at least every two years Montaup and each EUA Retail subsidiary will file a
integrated resource plan concurrently with the MDPU and RIPUC. The MOU
outlines a mechanism and a timetable by which the reviews by the two
commissions will be coordinated and any inconsistencies among the decisions by
the state commissions will be resolved.
In conjunction with its approval of the MOU, the MDPU granted Eastern
Edison and Montaup an exemption from the MDPU's Integrated Resource Management
regulations, but required them to plan, solicit and procure additional
resources according to newly promulgated regional Integrated Regional Planning
procedures consistent with the MOU.
Implementation of the MOU is not expected to have a material affect on the
Company.
See Rates with respect to regulation of rates charged to customers. See
Environmental Regulation. See Fuel for Generation with respect to the disposal
of spent nuclear fuel. See Environmental Regulation of Nuclear Power and see
Nuclear Power Issues with respect to regulation of nuclear facilities by NRC.
See also Energy Policy.
Rates
Rates charged by Montaup (which sells power only for resale) are subject
to the jurisdiction of FERC. The rates for services rendered by Eastern Edison
are subject to approval by and are on file with the MDPU. For the twelve
months ended December 31, 1993, 83% of Eastern Edison's consolidated revenues
were subject to the jurisdiction of FERC, and 17% to the MDPU.
Recent general rate increases for Montaup and Eastern Edison are as
follows (thousands of dollars):
<TABLE>
<S> <C> <C> <C> <C>
Applied for Implemented(1) Effective(2)
Return on
Annual Annual Annual Common
Revenue Date Revenue Date Revenue Date Equity %
Federal
- Montaup
M-12 20,500 3/5/90 20,500 8/19/90 20,000 1/23/91 12.00
M-13 10,500 3/6/91 10,500 5/7/91 8,100 12/3/91 11.72(4)
Massachusetts
- Eastern Edison
MDPU 92-148 14,927(3) 6/15/92 8,100 1/12/93 11.50(4)
___________________
Notes:
(1) Montaup's rate increases were implemented on a subject to refund
basis.
(2) Per final FERC order or settlement agreement.
(3) Reduced from $16,401 as originally filed.
(4) Rate used for AFUDC calculation purposes. Settlement contains no
specific finding on allowed common equity return. Rates approved for
consumption of electricity on or after January 1, 1993.
FERC Proceedings:
On March 5, 1990, Montaup filed its M-12 rate request based on a
forward-looking test year beginning May 1, 1990. The requested annual increase
of $20.5 million primarily reflected the increased operation and maintenance
expenses and full rate base treatment of Seabrook Unit 1. The application
included a request to add approximately $124.4 million of Seabrook Unit 1
construction costs to Montaup's rate base in addition to the $74.6 million of
Seabrook Unit 1 construction work in progress previously allowed in rate base.
The annual increase also included $7.0 million for the implementation of
conservation and load management programs in the service territories of
Montaup's affiliated companies. On April 25, 1990, FERC authorized the
implementation of the rate increase, subject to refund, effective with the
commercial operation of Seabrook Unit 1. On May 22, 1990, a FERC
administrative law judge issued an order to separate the M-12 request into two
phases. Phase I was to address all cost of service issues other than Seabrook
Unit 1 prudency concerns, and Phase II would address the Seabrook Unit 1
prudency issues. On August 19, 1990, commercial operation of Seabrook Unit 1
was declared and the M-12 rate was made effective, subject to refund. On
October 22, 1990, Montaup filed a settlement agreement with FERC with respect
to Phase I, reducing the originally filed rate by $500,000. The Phase I
settlement agreement was approved by the FERC on January 23, 1991.
On December 6, 1991, the FERC administrative law judge presiding over
Phase II of Montaup's M-12 rate case proceeding issued an initial decision
finding that Montaup had been prudent in its oversight of its Seabrook Unit 1
investment with respect to emergency planning and recommended no prudency
disallowance. Exceptions to the initial decision were filed by the intervening
parties. The Commission's Order with respect to Phase II was issued on August
4, 1992 and affirmed the FERC administrative law judge's initial decision, thus
allowing Montaup to recover and earn a return on its full investment in
Seabrook Unit 1 through rates.
On December 3, 1991, FERC approved a settlement agreement between Montaup
and the intervenors in Montaup's March 1991 wholesale rate increase request
(M-13). Montaup had filed for an annual increase of $10.5 million and FERC
allowed implementation of the new rate commencing May 7, 1991 subject to refund
pending final adjudication. The approved settlement agreement called for an
annual increase of $8.1 million. Montaup refunded the difference collected to
its wholesale electric utility customers in December 1991 billings.
After the acquisition of Newport, Montaup and Newport had instituted a
90/10 allocation of the energy savings which the two companies realize through
their treatment as a single entity in NEPOOL in recognition of the difference
in the size of each company. On December 20, 1991, after discussions with the
staff of FERC and in compliance with their position, Montaup and Newport filed
with FERC an application to have a proposed 50/50 allocation of their energy
savings approved. Protests and motions to intervene opposing the filing and
seeking a larger allocation of the savings to Montaup were filed with the FERC
in January 1992 by the MDPU, the Attorney General of Massachusetts and
Montaup's non-affiliated customers. On May 19, 1992 FERC approved the 50/50
allocation method as appropriate and accepted the revised energy savings
agreement for filing. However, the agreement incorrectly defined the
calculations necessary to compute a shared savings rate. Montaup and Newport
were directed to file a revised shared savings formula. On June 1, 1992
Montaup and Newport filed a rate schedule revision and Montaup M-Rate fuel
clause revisions in compliance with the FERC's order.
On December 17, 1992, FERC issued a Statement of Policy regarding the
recovery through rates of the cost of post-employment benefits other than
pensions (PBOP), as a result of FAS106 issued to address accounting procedures
for these costs. The Commission's policy recognizes allowances for prudently
incurred costs of such benefits of company employees when determined on an
accrual basis that are consistent with the accounting principles set forth in
FAS106. Furthermore, companies must agree to make cash deposits to an
irrevocable external trust fund equal to the annual test period allowance for
the cost of such benefits and they must maximize the use of income tax
deductions for contributions to the trust fund. If tax deductions are not
available for some portion of currently funded amounts, deferred income tax
accounting must be followed for the tax effects of such transactions.
Within three years of their adoption of FAS106, FERC regulated companies
must also file a general rate change and seek inclusion of these costs in their
rates. Companies may defer the jurisdictional portion of the difference
between the costs determined pursuant to accounting principles previously
followed and FAS106 accruals from the time they adopt FAS106 until they file
the general rate case described above. Montaup deferred its incremental FAS106
expenses of approximately $1.4 million in 1993 and will file with the FERC a
request for recovery of such amounts in its 1994 rate application.
On March 21, 1994 Montaup filed a rate application with the FERC to reduce
annual revenues by $10.1 million. This request is intended to match more
closely Montaup's revenues with its decreasing cost of doing business resulting
from, among other things, a reduced rate base, lower capital costs and
successful cost control efforts. The application also includes a request for
recovery of all of Montaup's FAS106 expenses as provided in FERC's generic
order of December 1992. Also incorporated in this filing is a request to make
Newport an all requirements customer of Montaup. Currently Newport purchases
approximately 47% of its power requirements from suppliers other than Montaup.
If approved Montaup would assume all purchased power contracts of Newport and
subsequently provide Newport with 100% of its power needs. FERC can approve
Montaup's requested reduction to take effect as early as May 21, 1994 pending
final adjudication and approval. A final decision on this application is
expected during second half of 1994.
Massachusetts Proceedings:
On December 31, 1992, the MDPU issued its order in response to a $14.9
million (reduced from $16.4 million, as originally filed) rate increase request
of Eastern Edison. The $8.1 million rate relief granted represented 49% of
Eastern Edison's original rate request filed on June 15, 1992 based on a 1991
test year. The new rates filed in compliance with the order became effective
for sales subsequent to January 1, 1993.
In authorizing the increase, the MDPU accepted a settlement proposal
offered jointly by Eastern Edison and the Massachusetts Attorney General, the
sole intervenor. The settlement stipulated the total revenue requirement which
included an amortization of Hurricane Bob costs over a five-year period without
a return on the unamortized amount. The settlement also reflects the recovery
of the full tax deductible amount of post-retirement benefits other than
pensions (FAS106 expenses), without any phasing-in of the increase over the
current ("pay-as-you-go") level. All FAS106 amounts recovered are required to
be placed in trusts permitted by the IRS which will maximize tax deductibility
and provide tax-free benefits to retirees. The depreciation rate and the
common equity component of AFUDC were also specified. The composite rate for
the depreciation calculation was set at 4.13%, up slightly from the 4.07%
previously authorized. Solely for the purpose of calculating AFUDC, the common
equity return component was set at 11.5%.
In a recently decided rate case, the MDPU put all companies on notice that
it expects them..."to consider mergers or acquisitions in order to further
optimize least-cost planning efforts and better fulfill their obligations to
serve." Thereafter, the MDPU instituted an investigation, which is now
underway, for the purpose of establishing, among other things, guidelines and
standards for acquisitions and mergers of utilities and evaluating proposals
regarding the recovery of costs associated with such activities. It is not
possible to predict what effects, if any, the MDPU proceeding will have on the
Eastern Edison.
Environmental Regulation
General:
Eastern Edison and Montaup and other companies owning generating units
from which power is obtained are subject, like other electric utilities, to
environmental and land use regulations at the federal, state and local levels.
The EPA, and certain state and local authorities, have jurisdiction over
releases of pollutants, contaminants and hazardous substances into the
environment and have broad authority in connection therewith including the
ability to require installation of pollution control devices and remedial
actions.
Federal, Massachusetts and Rhode Island legislation requires consideration
of reports evaluating environmental impact as a prerequisite to the granting of
various permits and licenses with a view of limiting such impact. Federal,
Massachusetts and Rhode Island air quality regulations also require that plans
(including procedures for operation and maintenance) for construction or
modification of fossil fuel generating facilities receive prior approval from
the DEP or RIDEM. In addition, in Massachusetts, certain electric generation
and transmission facilities will be permitted to be built only if they are
consistent with a long-range forecast filed by the utility concerned and
approved by the Massachusetts Energy Facilities Siting Board.
Montaup, its affiliates and non-affiliates with which it has power supply
arrangements and are required to pay a share of the costs, are also subject,
like other electric utilities, to regulation with regard to zoning, land use
and similar controls by various state and local authorities.
The EPA and state and local authorities may, after appropriate
proceedings, require modification of generating facilities for which
construction permits or operating licenses have already been issued, or impose
new conditions on such permits or licenses, and may require that the operation
of a generating unit cease or that its level of operation be temporarily or
permanently reduced. Such action may result in increases in capital costs and
operating costs which may be substantial in delays or cancellation of
construction of planned facilities, or in modification or termination of
operations of existing facilities.
Other activities of Eastern Edison and Montaup from time to time are
subject to the jurisdiction of various other local, state and federal
regulatory agencies. It is not possible to predict with certainty what effects
the above described statutes and regulations will have on Eastern Edison and
Montaup.
The EPA has issued regulations relating to the generation, transportation,
storage and disposal of certain wastes under the RCRA in Massachusetts, the
requirements are implemented and enforced by the DEP.
There is an extensive body of federal and state statutes governing
environmental matters, including CERCLA, as amended by the Superfund Amendments
and Reauthorization Act of 1986, and, at the state level, Chapter 21E, which
permit, among other things, federal and state authorities to initiate legal
action providing for liability, compensation, cleanup, and emergency response
to the release or threatened release of hazardous substances into the
environment and for the cleanup of inactive hazardous waste disposal sites
which constitute substantial hazards. Under CERCLA and Chapter 21E, joint and
several liability for cleanup costs may be imposed on, among others, the owners
or operators of a facility where hazardous substances were disposed, the party
who generated the substances, or any party who arranged for the disposition or
transport of the substances. Due to the nature of the business of Montaup and
Eastern Edison, certain materials are generated that may be classified as
hazardous under CERCLA and Chapter 21E. As a rule, Montaup and Eastern Edison
employ licensed contractors to dispose of such materials (see Item 3, LEGAL
PROCEEDINGS -- Environmental Proceedings.
The EPA, pursuant to TSCA, regulates the use, storage, and disposal of
PCBs. Because Eastern Edison and Montaup own and use some electrical
transformers containing PCBs, they are subject to EPA regulation under TSCA.
The Company is in the process of phasing out its use of transformers which
contain PCBs.
Electric and Magnetic Fields:
A number of scientific studies in the past several years have examined the
possibility of health effects from EMF that are found wherever there is
electricity. While some of the studies have indicated some association between
exposure to EMF and health effects, many of the others have indicated no direct
association. The research to date has not conclusively established a direct
causal relationship between EMF exposure and human health. Additional studies,
which are intended to provide a better understanding of EMF, are continuing.
Some states where Eastern Edison and Montaup do not operate have enacted
regulations to limit the strength of EMF at the edge of transmission line
rights-of way. Rhode Island has enacted a statute which authorizes and directs
the Rhode Island Energy Facility Siting Board to establish rules and/or
regulations governing construction of high voltage transmission lines of 69 KV
or more. Various bills are pending in the Massachusetts legislature that would
require certain disclosures about the potential health effects of EMF.
Management cannot predict the impact, if any, which legislation or other
developments concerning EMF may have on Eastern Edison or Montaup.
Water Regulation:
The objective of the Federal Water Pollution Control Act is to restore and
maintain the chemical, physical, and biological integrity of the nation's
navigable waters. The elimination of pollutant discharges (including heat)
into navigable waters is one goal aimed at achieving this objective. Another
step mandated by Federal Water Pollution Control Act was the creation of a
rigorous permit program. All water discharge permits for plants in
Massachusetts, including those for the Somerset and Canal plants, are issued
jointly by the EPA and DEP. These same agencies also regulate certain
industrial storm water discharges.
Under the Federal Water Pollution Control Act, the Massachusetts Wetland
Protection Act, and the Rhode Island Wetland Act, standards have been
established to control the dredging and filling of wetlands. The EPA's Army
Corps of Engineers, RIDEM, CRMC and the DEP are pursuing a non-degradation (no
loss) policy for wetlands.
Under the Massachusetts Water Management Act, the DEP is responsible for
promulgating regulations relating to water usage and conservation.
Most of the generating units from which Montaup obtains power operate
under permits which limit their effluent discharges into water and which
require monitoring and, in some instances, biological studies and toxicity
testing of the impact of the discharges. Such permits are issued for a period
of not more than five years, at the expiration of which renewal must be
sought. The permit for the Somerset Plant must be renewed by August 30, 1994.
The Oil Pollution Act of 1990 (OPA-90) was passed after several major oil
spills occurred in waters of the United States. The primary intent of this
legislation is to mandate strong contingency plans to prevent releases of oil
and to require that sufficient resources are in place and ready to respond to
any release. EPA, USCG, RIDEM, and DEP have a number of other rules in place,
such as EPA's SPCC regulations, which are designed to minimize the release of
oil and other substances to navigable waters and the environment.
Air Regulation:
All fossil fuel plants from which Montaup obtains power operate under
permits which limit their emissions into the air and require monitoring of the
emissions. Air quality requirements adopted by state authorities in
Massachusetts pursuant to the Clean Air Act impose limitations with respect to
pollutants such as sulfur dioxide, oxides of nitrogen and particulate matter.
Montaup's Somerset Station currently is permitted to burn coal which results in
sulfur dioxide emissions not in excess of 2.42 pounds per million BTU heat
release potential (approximately 1.5% sulfur content coal). The Canal Station
Unit 2 is permitted to burn fuel oil which results in sulfur dioxide emissions
not in excess of 2.42 pounds per million BTU heat release potential
(approximately 2.2% sulfur content fuel oil) when operating at 450 MW or above
and 1% sulfur content fuel oil when operating at less than 450 MW.
The EPA has established clean air standards for certain pollutants,
including standards limiting emissions from coal-fired and oil-fired
generators. Congress passed amendments to the new Clean Air Act in 1990 which
created regulatory programs and generally updated and strengthened air
pollution control laws. These amendments will expand the regulatory role of
the EPA regarding emissions from electric generating facilities. Title IV of
the Clean Air Act Amendments addresses acid deposition abatement and
establishes a 2-phase utility power plant pollution control program to reduce
emissions of sulfur dioxide and oxides of nitrogen. The first phase begins in
1995 and affects 261 large units in 21 eastern and midwestern states. Phase
II, which begins in the year 2000, tightens the emission limits imposed on
these larger plants and also sets restrictions on smaller, cleaner plants fired
by coal, oil and gas. Montaup's Somerset Station is classified as a Phase II
facility with a compliance deadline by the end of 1999. The control program
establishes a national cap of 8.95 million tons per year for sulfur dioxide
emissions. This reflects a reduction of about 10 million tons per year.
Beginning in the year 2000, EPA will issue 8.95 million sulfur dioxide
allowances to utilities annually. The sulfur allowance program will not affect
Montaup's Somerset Station until January 1, 2000.
Massachusetts DEP regulations establish a statewide cap on sulfur dioxide
emissions and require Montaup's facilities to meet an average emission rate of
1.21 pounds of sulfur dioxide per million BTU of fuel input by the end of
1994. Under federal standards, Montaup would not be required to meet this
sulfur dioxide emission level until the year 2000 as a result of Title IV of
the Clean Air Act. However, Massachusetts DEP regulations require compliance
five years earlier. As required by state regulations, Montaup submitted and
received approval of a plan detailing how it would meet the 1995 sulfur dioxide
standard. Montaup intends to achieve compliance by substituting lower sulfur
content fuels. Tests at Montaup's Somerset Station indicate that Unit #6 will
be able to utilize lower sulfur content coal than is already being burned to
meet the 1995 air standards with only a minimal capital investment. Montaup
determined that it would not be economical to repair Unit #5 of the Somerset
Station and has placed it in deactivated reserve (see Item 2. PROPERTIES).
Other provisions of the Clean Air Act Amendments will likely impact
Montaup by 1995. Title I of the Act sets a strategy for states to move toward
attaining national air quality standards, with the emphasis on meeting the
ozone standard. Ozone relates directly to the nation's smog problem. Oxides
of nitrogen are one of the precursors of ozone formation. Title I requires
additional controls on industrial sources of Oxides of nitrogen including
utility power plants. The Act creates the Northeast Ozone Transport Region,
covering the area from Virginia to Maine, including Massachusetts and Rhode
Island. Areas within the transport region will become subject to enhanced
controls on oxides of nitrogen emissions.
In April 1992, NESCAUM, an environmental advisory group for eight
Northeast states including Massachusetts and Rhode Island issued
recommendations for oxides of nitrogen controls for existing utility boilers
required to meet the ozone non-attainment requirements of the Clean Air Act
Amendments. The NESCAUM recommendations are more restrictive than EPA's
requirements. Massachusetts has issued new regulations to implement oxides of
nitrogen reduction requirements. The DEP has amended its regulations to
require that Reasonably Available Control Technology (RACT) be implemented at
all stationary sources potentially emitting 50 tons per year or more of oxides
of nitrogen. Rhode Island has not yet issued regulations to implement oxides
of nitrogen reduction requirements. Montaup is in the process of reviewing
compliance strategies and of providing input to Massachusetts environmental
regulators. Any compliance strategy may require the implementation of
additional pollution control technology as early as 1995. Montaup would seek
recovery of pollution control expenditures through rates.
Title V of the Clean Air Act Amendments provide EPA with broad new
permitting authority by 1995, with the goal of having states issue federally
enforceable operating permits which will outline limits and conditions
necessary to comply with all applicable air requirements. The Act's permitting
program will be phased in over the next several years. Although individual
sources will be required to pay fees to the various states which will
administer the program, the impact of these requirements is not expected to
have a material financial impact on Eastern Edison or Montaup.
Environmental Regulation of Nuclear Power
The NRC has promulgated a variety of standards to protect the public from
radiological pollution caused by the normal operation of nuclear generating
facilities. For example, the NRC requires licensed facilities to develop plans
to respond to unexpected developments.
In some environmental areas the NRC and the EPA have overlapping
jurisdiction. Thus, NRC regulations are subject to all conditions imposed by
the EPA and a variety of federal environmental statutes, including obtaining
permits for the discharge of pollutants (including heat) into the nation's
navigable waters. In addition, the EPA has established standards, and is in
the process of reviewing existing standards, for certain toxic air pollutants,
including radionuclides, under the Clean Air Act Amendments which apply to
NRC-licensed facilities. The effective date for the new radionuclide standards
has been stayed as to nuclear generating units. The EPA has also promulgated
environmental radiation protection standards for nuclear power plants which
regulate the doses of radiation received by the general public.
The NWPA provides for development by the federal government of facilities
for the disposal or permanent storage of civilian nuclear waste. For further
details about NWPA see Item 1. BUSINESS -- Fuel for Generation. The NRC has
also promulgated regulations regarding the disposal of nuclear waste materials
designed to protect the public from radiological dangers.
Environmental regulation of nuclear facilities in which Montaup has an
interest or from which they purchase power may result in significant increases
in capital and operating costs, in delays or cancellation of construction of
planned improvements, or in modification or termination of existing facilities.
Energy Policy
The Energy Act deals with many aspects of national energy policy and
includes important changes for electric utilities and registered holding
companies. Eastern Edison and its generating subsidiary, Montaup, as
subsidiaries of EUA, a public utility holding company, cannot predict the
impact that the Energy Act and the rules and regulations which will be
promulgated by various regulatory agencies pursuant to the Energy Act will have
on Eastern Edison. Certain provisions of the Energy Act will increase
competition in the generation of electricity, while other provisions will open
up new investment opportunities for registered holding companies. Certain
provisions of the Energy Act are intended to encourage conservation of
electricity while other provisions may create additional demand for
electricity.
The Energy Act encourages investments in certain types of energy
conversion and energy efficient equipment and requires the federal government
to undertake major new conservation projects. On the other hand, by
encouraging the development of electric motor vehicles, the Energy Act may
create additional demand for electricity.
One of the more significant provisions of the Energy Act creates a new
class of generation companies exempt from the 1935 Act, which sell exclusively
at wholesale, called exempt wholesale generators or EWGs. The Energy Act also
grants FERC new authority to mandate transmission access for QFs, EWGs and
traditional utilities. The Energy Act reduces the restrictions on certain
types of investments by registered holding companies including investments in
EWGs, investments in foreign utilities which do not operate in the United
States and investments in certain types of QFs which were previously limited to
the holding company's service territories or areas closely interconnected with
those service territories. Pursuant to certain provisions of the Energy Act,
the SEC has promulgated regulations to minimize the risks of investments in
EWGs by registered holding companies and their utility subsidiaries.
Regulations regarding investments in foreign utilities are also required under
the Energy Act but have not yet been promulgated by the SEC.
The Energy Act prevents an EWG directly or indirectly owned by a
registered holding company from entering into a power contract with a utility
affiliate of the holding company without the approval of each state commission
having jurisdiction over the rates of the utility affiliate.
It is also not possible to predict the timing or content of future energy
policy legislation and the significance of such legislation to Eastern Edison.
Various issues not addressed by the 1992 Energy Act, including regional
planning and transmission arrangements, could be addressed in future
legislation.
Item 2. PROPERTIES
P1ower Supply
Montaup supplies Eastern Edison with nearly 100% of its electric
requirements and approximately 85% of the electric requirements of the EUA
System. In 1993 the EUA System's wholly owned generating units referred to in
the following table below consisted of Montaup's jet-fueled peaking units
(Somerset Jet 1 and Jet 2) and Somerset Unit 6 which was converted from oil to
coal burning in 1983, Blackstone's Pawtucket Hydro, which was repowered in 1985
and Newport's diesel peaking units (Jepson in Jamestown and Eldred in
Portsmouth) which supplied the EUA System with 8 MW and 8.25 MW, respectively.
With the exception of Somerset's Jet 1 and Jet 2, Montaup has not significantly
increased its wholly owned generating units since 1959. The EUA System has
found it more economical to join with other utilities in the joint ownership of
large generating units and in long-term purchase contracts, and to supplement
these sources with short-term purchases as required. EUA believes that
spreading the EUA System's sources of electricity among a number of plants
should improve the reliability of its power supply and limit the financial
exposure relating to construction and potentially prolonged outages of a
generating unit. Under the Eastern Edison/Request for Proposal process,
Montaup negotiated a purchase power contract with Meridian Middleboro
Corporation for approximately 44 MW of capacity. The proposed facility will be
a combined cycle unit. Its primary source of fuel will be natural gas and
secondary source of fuel will be No. 2 fuel oil. The contract is estimated to
be in effect at the beginning of the year 2001.
On January 25, 1994, the generating Unit No. 5 at Somerset Station was
placed in deactivated reserve. The 69 MW, 42 year old unit had been out of
service for 5 months because of mechanical problems. An assessment of the cost
and feasibility of repairing and refurbishing the unit to meet reliability
standards and Clean Air Act Amendments regulations concluded that rebuilding
the unit would not be economical. Current forecasts indicate that with a
combination of company owned generation, current long-term purchased power
contracts, expected short-term power opportunities, and Montaup's C&LM
programs, no additional capacity requirements will be needed through the year
1999.
In 1993, Montaup recovered through rates approximately $13.5 million for
its C&LM programs. C&LM is designed to (i) decrease existing energy demand and
(ii) offset future load growth through conservation incentives, thereby
minimizing future need for large capital investment in generating facilities.
The peak EUA System demand experienced in 1993 was approximately 854 MW on
August 27, 1993. The all time EUA System peak demand experienced to date was
approximately 879 MW, experienced on July 19, 1991.
EUA SYSTEM CAPABILITY
GENERATING UNITS IN SERVICE AS OF DECEMBER 31, 1993
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS WINTER MAX GROSS NET
IN SYSTEM CLAIMED SYSTEM UNIT SYSTEM
SERVICE SHARE CAPABILITY SHARE SALES SHARE
DATE UNIT NAME FUEL TYPE OWNER/OPERATOR % MW MW MW MW
100% OWNERSHIP:
1951 SOMERSET 1 COAL MONTAUP ELECTRIC CO. 100.00 68.93 68.93 0.00 68.93
1959 SOMERSET 6 COAL MONTAUP ELECTRIC CO. 100.00 107.00 107.00 0.00 107.00
1970 SOMERSET J1 JET OIL MONTAUP ELECTRIC CO. 100.00 25.50 25.50 0.00 25.50
1971 SOMERSET J2 JET OIL MONTAUP ELECTRIC CO. 100.00 23.00 23.00 0.00 23.00
1985 PAWTUCKET HYDRO HYDRO BLACKSTONE VALLEY ELEC. 100.00 1.24 1.24 0.00 1.24
1961 JEPSON DIESEL NEWPORT ELECTRIC CORP. 100.00 8.00 8.00 0.00 8.00
1978 ELDRED DIESEL NEWPORT ELECTRIC CORP. 100.00 8.25 8.25 0.00 8.25
SUBTOTAL: 242 0.00 241.92
JOINT OWNERSHIP:
1976 CANAL 2 NO. 6 OIL CANAL ELECTRIC COMPANY 50.00 584.00 292.00 85.00 207.00
1978 WYMAN 4 (YAR 4) NO. 6 OIL CENTRAL MAINE POWER CO. 2.63 (1) 619.25 16.28 0.00 16.28
1986 MILLSTONE 3 NUCLEAR NORTHEAST UTILITIES 4.01 1148.70 46.05 0.00 46.05
1990 SEABROOK NUCLEAR NORTH ATLANTIC ENERGY CORP. 2.90 1150.00 33.35 0.00 33.35
SUBTOTAL: 388 85.00 302.68
EQUITY OWNERSHIP:
1968 CONN. YANKEE NUCLEAR CONN. YANKEE ATOMIC POWER 4.50 583.20 26.24 0.00 26.24
1972 MAINE YANKEE NUCLEAR MAINE YANKEE ATOMIC POWER 3.59 880.00 31.61 0.00 31.61
1972 VERMONT YANKEE NUCLEAR VT. YANKEE NUCLEAR POWER 2.25 519.33 11.68 0.00 11.68
SUBTOTAL: 69.53 0.00 69.53
PURCHASED POWER:
1968 CANAL1 NO. 6 OIL CANAL ELECTRIC COMPANY 25.00 (2) 572.00 143.00 0.00 143.00
1972 PILGRIM 1 NUCLEAR BOSTON EDISON COMPANY 11.00 (2) 670.00 73.70 0.00 73.70
1977 POTTER 2 GAS/OIL BRAINTREE ELEC. LIGHT DEPT. 41.67 (2) 96.00 40.00 0.00 40.00
1975 CLEARY 9 GAS/OIL TAUNTON MUNIC. LIGHTING 13.64 (2) 110.00 15.00 0.00 15.00
1982 STONY BROOK 2A NO.2 OIL MASS. MUNIC. WHOLESALE CO. 32.35 85.00 27.50 0.00 27.50
1986 STONY BROOK 2B NO.2 OIL MASS. MUNIC. WHOLESALE CO. 32.35 85.00 27.50 0.00 27.50
1984 MCNEIL WOOD VERMONT ELECTRIC POWER 15.24 (3) 53.00 8.08 0.00 8.08
1978 WYMAN 4 NO. 6 OIL CENTRAL MAINE POWER 0.81 (3) 619.25 5.00 0.00 5.00
1972 SALEM HBR 4 NO. 6 OIL NEW ENGLAND POWER 1.25 (3) 400.00 5.00 0.00 5.00
1974 BRAYTON 4 NO. 6 OIL NEW ENGLAND POWER 1.13 (3) 442.00 5.00 0.00 5.00
1990 OSP 1 GAS OCEAN STATE POWER 28.00 (4) 281.00 78.68 0.00 78.68
1991 OSP 2 GAS OCEAN STATE POWER 28.00 (4) 281.00 78.68 0.00 78.68
1991 NEA GAS NORTHEAST ENERGY ASSOC. 8.62 334.38 28.83 0.00 28.83
NU SLICE-EUA
1970 SMDW J11-J14 JET OIL NORTHEAST UTILITIES 0.98 195.60 1.91 0.00 1.91
1969 COS COB 10-12 JET OIL NORTHEAST UTILITIES 0.98 68.60 0.67 0.00 0.67
1971 MONTVILLE 6 NO. 6 OIL NORTHEAST UTILITIES 0.86 410.00 3.51 0.00 3.51
1964 MIDDLETOWN 3 NO. 6 OIL NORTHEAST UTILITIES 0.86 245.00 2.10 0.00 2.10
1973 MIDDLETOWN 4 NO. 6 OIL NORTHEAST UTILITIES 0.86 400.00 3.42 0.00 3.42
1960 NORWALK HBR 1 NO. 6 OIL NORTHEAST UTILITIES 0.86 164.00 1.40 0.00 1.40
1963 NORWALK HBR 2 NO. 6 OIL NORTHEAST UTILITIES 0.86 172.00 1.47 0.00 1.47
1970 MILLSTONE 1 NUCLEAR NORTHEAST UTILITIES 0.65 647.70 4.22 0.00 4.22
1975 MILLSTONE 2 NUCLEAR NORTHEAST UTILITIES 0.49 874.50 4.32 0.00 4.32
1986 MILLSTONE 3 NUCLEAR NORTHEAST UTILITIES 0.61 1148.70 6.97 0.00 6.97
1972 NFLD G 1-4 PUMPED HYDRO NORTHEAST UTILITIES 0.99 1080.00 10.72 0.00 10.72
SUBTOTAL: 576.68 0.00 576.68
HYDRO QUEBEC ENTITLEMENT:
1991 HYDRO QUEBEC I&II HYDRO HQ / NEPOOL 4.06 (5) 1215.00 49.31 0.00 49.31
SUBTOTAL: 49.31 0.00 49.31
TOTAL GROSS SYSTEM CAPABILITY (MW) --------------------- 1325.12 (6)
LESS: UNIT CONTRACT SALES (MW) --------------------------- 85.00
TOTAL NET SYSTEM CAPABILITY (MW) -------------------------- 1240.12 (6)
NOTES (1) REPRESENTS MONTAUP JOINT OWNERSHIP SHARE OF 1.9618% AND NEWPORT JOINT OWNERSHIP OF .6666%.
(2) "LIFE OF UNIT" PURCHASE CONTRACT.
(3) PURCHASED POWER OF NEWPORT.
(4) FOR EACH UNIT, MONTAUP IS A POWER PURCHASER WITH 22% ENTITLEMENT AND NEWPORT IS A POWER PURCHASER
WITH 6% ENTITLEMENT. (EUA OCEAN STATE HOLDS A 29.9% EQUITY INTEREST IN OCEAN STATE POWER PARTNERSHIP.)
(5) ENTITLEMENT % IS WEIGHTED AVERAGE OF PHASE I & II SHARES (40% PHASE I (4.01987%); 60% PHASE II (4.0842%)).
(6) TOTAL CAPABILITY INCLUDES SOMERSET 5 (68.93 MW) WHICH WAS PLACED ON DEACTIVATED RESERVE ON
JANUARY 25, 1994.
</TABLE>
Montaup's participation in generating units of which it is not the sole
owner takes various forms including stock (equity) ownership, joint ownership
and purchase contracts. In most cases (other than short-term purchased power
contracts) the purchaser is required to pay its share (i.e., the same
percentage as the percentage of its entitlement to the output) of all of the
costs of the generating unit (whether or not the unit is operating) including
fixed costs, operating costs, costs of additional construction or modification,
costs associated with condemnation, shutdown, retirement, or decommissioning of
the unit, and certain transmission charges. Under its contracts with Maine
Yankee, Connecticut Yankee Atomic Power Company, Vermont Yankee Nuclear Power
Corporation and Yankee Atomic and, under its agreements relating to Phase II of
the interconnection with Hydro-Quebec, Montaup may be called upon to provide
additional capital and/or other types of direct or indirect financial support.
(See Item 1. BUSINESS -- Yankee Atomic)
Other Property
Eastern Edison and Montaup own approximately 3,100 miles of transmission
and distribution lines and approximately 58 substations located in the cities
and towns served.
In addition to the above, Eastern Edison and Montaup also own several
buildings which house distribution, maintenance or general office personnel.
See Note F of Notes to Consolidated Financial Statements regarding encum
brances.
Item 3. LEGAL PROCEEDINGS
Rate Proceedings
See descriptions of proceedings under Item 1, BUSINESS -- Rates.
Environmental Proceedings
1. Montaup and EUA Service received a Notice of Responsibility on July
27, 1987 from the DEP for suspected hazardous material at a site owned by
Montaup on Hortonville Road in Swansea, Massachusetts. EUA Service has
contracted for and received an environmental site assessment for the property,
identifying the previous property owner as the party likely responsible for the
deposit of suspected hazardous waste materials on the site. This assessment
has been submitted to the DEP, identifying the previous property owner. Under
MCP regulations, Montaup must take the initiative to complete investigative and
remedial actions by August 1997.
2. During March-April 1990, Eastern Edison conducted a limited
environmental investigation (Phase I study) of a portion of its Dupont
Substation in Brockton, Massachusetts. During the investigation, Eastern
Edison notified the DEP that it had encountered oils and PCBs. On May 3, 1990,
the DEP notified Eastern Edison of its liability for releases of oil and/or
hazardous materials at the site, and requested a copy of the Phase I study.
Following its review of the Phase I study on January 23, 1991, the DEP issued a
Notice of Responsibility to Eastern Edison requiring a Phase II - Comprehensive
Site Investigation. On February 12, 1991, Eastern Edison notified the DEP that
it will perform the Phase II study and continue to work with DEP at this site.
A scope of work for the Phase II study was submitted on April 12, 1991.
Eastern Edison will proceed once the DEP approves the scope of work. Under the
new MCP, the DEP must classify this site before Eastern Edison can proceed with
further studies. A Phase II study and a site ranking may be required by July
1995.
Eastern Edison and Montaup are unable to predict the outcome of any of the
foregoing environmental matters or to estimate the potential costs which may
ultimately result. It is the policy of these companies in such cases to
provide notice to liability insurers and to make claims. However, at this
time, no claims have been filed against any insurer and it is not possible at
this time to predict whether liability, if any, will be assumed by, or can be
enforced against, the insurance carrier in these matters. Under CERCLA, each
responsible party can be held "jointly and severally" liable for clean-up
costs. Eastern Edison and Montaup could thus be held fully liable for
environmental damages for which they were only partially responsible. However,
Eastern Edison and Montaup might then be entitled to recover costs from other
PRPs.
As of December 31, 1993, Eastern Edison and Montaup have incurred costs of
approximately $108,000 in connection with the foregoing environmental matters
and estimate that additional expenditures may be incurred through 1994 up to
$850,000.
As a general matter Eastern Edison and Montaup will seek to recover costs
relating to environmental proceedings in their rates, although there is no
assurance that they will be authorized to recover any particular cost. Montaup
is currently recovering certain of the incurred costs in its rates. Estimated
amounts after 1995 are not now determinable since site studies which are the
basis of these estimates have not been completed. As a result of the
recoverability in current rates, and the uncertainty regarding both its
estimated liability, as well as potential contributions from insurance carriers
and other responsible parties Eastern Edison and Montaup do not believe that
the ultimate impact of the environmental costs will be material to either of
them and thus, no loss accrual has been recorded.
Other_Proceedings
In December 1992, Montaup commenced a declaratory judgment action in which
it sought to have the Massachusetts Superior Court determine its rights under
the Power Purchase Agreement between it and Aquidneck Power Limited Partnership
(Aquidneck). Montaup sought a declaration that the Power Purchase Agreement
was binding on the parties according to its terms. Aquidneck asserted that
Montaup had either an express or implied obligation to negotiate new terms and
conditions to the Power Purchase Agreement. Specifically, the defendants
sought to amend, through negotiations, certain milestone events to which they
were bound in the Power Purchase Agreement as written. Aquidneck failed to
meet the first milestone of January 1, 1993. Accordingly, on January 5, 1993,
Montaup exercised its rights to terminate the Power Purchase Agreement
effective immediately. In January 1994, a counterclaim by Aquidneck claimed
certain breaches of the Power Purchase Agreement, including an alleged failure
on the part of Montaup to renegotiate the terms and conditions of the Power
Purchase Agreement relating to the first milestone event. Also in January
1994, Aquidneck sought to join EUA and EUA Service as parties to the suit.
Aquidneck apparently claims $11 million of damages on the theory that EUA
can "avoid an approximately $11 million obligation to purchase capacity and
power which it does not currently need." Aquidneck seeks treble damages
claiming Montaup, EUA and EUA Service violated state laws willfully and
knowingly.
Montaup, EUA and EUA Service intend to defend the counterclaim vigorously
and believe that Aquidneck's claims have no basis in law.
On June 30, 1987, the MDPU commenced a proceeding for the purpose of inves
tigating Eastern Edison's power planning process after rejecting a proposed
Purchased Capacity Adjustment Clause. One of the purposes of this proceeding
is to investigate the prudency of Eastern Edison's all requirements contract
with Montaup. No procedural dates have been set nor has any other activity
occurred in this docket. Eastern Edison cannot predict the outcome of this
matter at this time.
On January 8, 1992, the Massachusetts Municipal Wholesale Electric
Cooperative and its member municipalities, all of which are members of NEPOOL,
filed a suit in Massachusetts Superior Court against the investor-owned
utilities that are also members of NEPOOL. The suit alleges damages by
NEPOOL's establishment of minimum size requirements for generating units
designated as pool-planned generating units. The suit names as defendants
members of NEPOOL, including Blackstone, Eastern Edison, Montaup and Newport
(NEPOOL members of the EUA System). Discovery has not begun, pending
resolution of certain procedural matters. FERC, initiated an action when the
EUA subsidiaries and other participants filed and amendment to the NEPOOL
Agreement with the FERC that concerns many of the issues raised in the
Massachusetts litigation. The plaintiffs in the Massachusetts litigation, and
one other participant have objected to the amendment, and have sought tot
prevent or delay its effectiveness. The FERC has not yet determined whether or
when it will hold hearings on this matter. Management cannot predict the
ultimate outcome of this proceeding at this time.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART_II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of Eastern Edison's common stock is owned beneficially and of record
by EUA.
The dividends paid on Eastern Edison's common stock during the past two
years are as follows:
Dividends Paid Dividends Paid
1993 Per Share 1992 Per Share
-------------- --------------
First Quarter $1.91 First Quarter $1.55
Second Quarter 1.93 Second Quarter 1.72
Third Quarter 1.96 Third Quarter 1.70
Fourth Quarter 2.77 Fourth Quarter 1.77
No dividends may be paid on Eastern Edison's common stock unless full
dividends on Eastern Edison's outstanding Preferred Stock for all past and the
current quarterly dividend periods have been paid or declared and set apart for
payment, nor may any dividends be paid on Eastern Edison's common stock if
Eastern Edison is in default on any sinking fund obligation provided for its
Preferred Stock. See also Notes C, D and E of Notes to Consolidated Financial
Statements.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
________For_the_Years_ended_December_31,________
1993 1992 1991 1990 1989
(In Thousands)
<S>_____________________________<C>_______<C>_______<C>_______<C>_______<C> _____
Operating Revenues (1) $417,021 $420,188 $414,609 $375,573 $385,667
Consolidated Net Earnings 28,145 29,231 23,763 24,083 31,258
Total Assets 742,273 776,510 785,365 770,640 717,980
Capitalization:
Long-Term Debt - Net 264,134 269,995 304,991 319,986 269,982
Redeemable Preferred Stock Net 24,824 28,171 29,558 34,012 34,612
Non-Redeemable Preferred
Stock 8,949 8,949 8,949 8,949
Common Equity _223,005 220,257 _211,126 _203,879 _212,526
Total Capitalization $511,963 $527,372 $554,624 $566,826 $526,069
======== ======= ======== ======== ========
Short-Term Debt $______0 $______0 $______0 $______0 $_43,882
</TABLE>
(1) Certain amounts in 1990 and 1989 have been reclassified to conform with
current presentations.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND REVIEW
OF OPERATIONS
Overview
Consolidated Net Earnings for 1993 were $28.1 million as compared to $29.2
million for 1992, a decrease of $1.1 million. Retail sales increased by 2.2%
as sales to residential and industrial customers grew by 3.3% and 5.8%,
respectively, indicating that the region's economy may be starting to recover
from its recession. The positive impacts of: (i) growth in kWh sales, (ii) a
rate increase granted Eastern Edison effective in mid-January 1993, (iii)
interest savings from Eastern Edison's refinancings and, (iiii) a decrease in
direct controllable operation and maintenance expenses did not entirely offset
the negative impact of increases in indirect operations and maintenance
expenses on Consolidated Net Earnings.
Consolidated Net Earnings for 1992 were $29.2 million as compared to $23.8
million for 1991. The 1992 results were positively impacted by the following
factors: (i) a rate increase granted to Montaup effective May 7, 1991; (ii) a
reduction in operating expenses (discussed below); and, (iii) increased retail
kWh sales in 1992 compared to 1991 levels. Retail sales increased by 0.9% as
sales to industrial and commercial customers grew by 2.6% and 1.3%,
respectively. In response to the continuing weak economic conditions in the
Northeast, Eastern Edison and Montaup exercised cost control measures and
during the year Eastern Edison received authorization to increase rates by $8.1
million effective January 1993.
Comparison of Financial Results
Operating Revenues
Operating Revenues for 1993 decreased $3.2 million as compared to 1992.
Revenues attributable to the recovery of fuel expense declined $11.2 million
primarily as a result of outages of company-owned units and reduced fuel costs.
Also, other operating revenues, primarily of Montaup, decreased $0.9 million.
Offsetting these decreases somewhat were: (i) increased base revenues
aggregating approximately $5.0 million related to the Company's rate increase
in January 1993; (ii) increased recoveries of purchased power expense and
Conservation and Load Management (C&LM) expenses aggregating approximately $3.9
million and, (iii) increased kWh sales (see Expenses below).
Operating Revenues for 1992 increased $5.6 million as compared to 1991.
The increase is due primarily to an increase of $5.7 million in purchased power
expense recovery for the period along with a $2.1 million increase relating to
Montaup's rate increase of May 1991 and increased kWh sales in 1992. These
increases were partially offset by lower fuel recoveries of $1.6 million.
Expenses
1993 vs. 1992
The Company's most significant expense items continue to be Fuel and
Purchased Power-Demand which comprised 57% of Total Operating expenses in
1993. Fuel expense decreased approximately $11.5 million or 11.9%, from 1992,
due largely to a decrease in total generation resulting from outages
experienced by company-owned units. Canal Unit 2, which is 50% owned by
Montaup, began a scheduled outage on February 13, 1993, and returned to service
on April 5, 1993 while Somerset Unit No. 6, a wholly owned unit of Montaup, was
out of service for most of 1993 due to unanticipated waterwall restoration.
Offsetting these impacts on fuel expense somewhat was a 3.7% decrease of
Montaup's average cost of fuel for the period.
Purchased Power expense decreased $1.8 million or 1.4% as compared to
1992. The decrease was caused primarily by a $3.8 million decrease in C&LM
expense recorded as purchase power. Offsetting these decreases somewhat was
the increased costs of $1.6 million billed by Montaup's suppliers.
Other Operation and Maintenance expenses are comprised of two components,
Direct Controllable and Indirect. Direct Controllable expenses include expense
items such as salaries, fringe benefits, insurance, maintenance, etc. Indirect
expenses include items over which the Company has limited short-term control
and include such expense items as Montaup's joint ownership interests in
generating facilities such as Seabrook Unit 1 and Millstone Unit 3, power
contracts where transmission rental fees are fixed, conservation and load
management expenses that are fully recovered in revenues and expenses related
to new accounting standards such as FAS87 and FAS106, to name a few.
Total Other Operation and Maintenance expense increased $8.8 million or
12.2% in 1993 when compared to the same period of 1992. The increase reflects
the increases in direct expenses including (i) an increase of $3.9 million in
maintenance expenses of jointly owned units of Montaup; (ii) an increase of
$4.1 million in C&LM expenses; (iii) an increase of $2.2 million due to
expenses relating to the Company's adoption of the FASB Statement No. 106,
"Accounting for Post Retirement Benefits"; and, (iv) an increase of $0.4
million related to a pension accrual. The above increases were partially offset
by a reduction in direct controllable expenses resulting from by the Company's
strict attention to cost control.
AFUDC represents a non-cash element of income and was only 2.4% of 1993
Consolidated Net Earnings. Total AFUDC in 1993 decreased $273,000 from 1992
due primarily to lower AFUDC rates used in 1993.
Other Income & (Deductions) - Net decreased $5.9 million or over 100% in
1993. The decrease is due primarily to the 1992 reversal of certain previously
established reserves relating to matters in litigation, the favorable
resolution of which was reached in 1992.
Interest Expense on long-term debt decreased by $4.9 million or 17.9% for
1993 as compared to 1992 primarily due to Eastern Edison's refinancing activity
more fully described under Financial Condition and Liquidity, below.
Other Interest Expense increased $1.6 million or over 100% in 1993 as
compared to 1992. The increase is primarily due to an increase in Eastern
Edison's amortization of debt expense of about $0.7 million and the allocation
of $0.4 million of EUA Service interest expense in 1993, previously included in
operating expense.
The Preferred Dividend requirement of the the Company decreased by
approximately $0.7 million or 19.6% in 1993 due to Eastern Edison's 1993
Preferred Stock financing activity. See Financial Condition and Liquidity,
below for further discussion.
Inflation continues to have an impact on the operations of Eastern Edison
and Montaup. At the federal level, wholesale rate-making practices permit a
forward-looking test period enabling anticipation of inflationary increases.
The MDPU's traditional use of historical test periods for Eastern Edison at the
state level is more limiting in this respect.
1992 vs. 1991
The Company's Fuel and Purchased Power-Demand expenses comprised 60% of
total operating expenses in 1992. For 1992, Fuel expense decreased $2.3
million or 2.3% as compared to 1991. The change is due primarily to the
offsetting effects of an increase in kWh requirements of 4.4% and significantly
greater use of less expensive gas fuel in 1992 resulting from a full year's
operation of OSP Unit II. Purchased Power-Demand expense did not change
significantly in 1992 vs. 1991.
Other Operation and Maintenance expense decreased $1.2 million or 1.3% in
1992 when compared to the same periods of 1991. The decrease reflects the
offsetting impact of a 1992 decrease in Eastern Edison amortization expenses
and increased legal expenses of Montaup. Certain previously deferred items of
Eastern Edison became fully amortized in December 1991. Effective cost control
measures by Eastern Edison and Montaup helped to defray the impact of inflation
on the Company.
AFUDC represents a non-cash element of income and was only 3.2% of 1992
Consolidated Net Earnings. Total AFUDC in 1992 decreased $590,000 from 1991
due primarily to lower AFUDC rates used in 1992.
Other Income & (Deductions) - Net increased $4.1 million or over 100% in
1992. This increase is explained by the net reduction of $6.2 million in the
level of reserves required to be established under Generally Accepted
Accounting Principles relating to certain matters in litigation, the favorable
resolution of which occurred in 1992. This increase was partially offset by a
reduction of $2.5 million in the amount of income tax credits allocated to this
account in 1991 as a result of the utilization of EUA Parent tax losses
incurred in 1991.
Interest Expense on long-term debt decreased by $2.6 million or 8.8% for
1992 as compared to 1991 primarily due to the redemption of $45 million First
Mortgage and Collateral Trust Bonds (FMBs) and the refinancing of the Company's
10% First Mortgage Bonds with lower cost debt. (See Financial Condition and
Liquidity, below).
Other Interest Expense increased $1.7 million or over 100% in 1992 as
compared to 1991. The increase is primarily due to a 1991 reversal of interest
previously accrued with respect to the proposed tax disallowance of the
Seabrook Unit 2 abandonment loss. (See Note J -- Commitments and Contingencies
- - Other for further details.)
Rate Activity
Montaup expects to file a rate reduction application with the Federal
Energy Regulatory Commission. This application will match more closely
Montaup's revenues with its decreasing cost of doing business resulting from,
among other things, a reduced rate base, lower capital costs and successful
cost control efforts. The application will also include a request for recovery
of all of Montaup's FAS106 expenses as provided in FERC's generic order of
December 1992. A decision on this application is expected during second half
of 1994.
Financial_Condition_and_Liquidity
Eastern Edison's and Montaup's need for permanent capital is primarily
related to the construction of facilities required to meet the needs of
existing and future customers. For 1993, 1992 and 1991, Eastern Edison's and
Montaup's cash construction expenditures were $22.6 million, $14.7 million and
$20.0 million, respectively.
Cash construction expenditures are expected to be approximately $36.0
million in 1994 and will aggregate approximately $104.3 million for the years
1995 through 1998.
In the utility industry, cash construction requirements not met with
internally generated funds are obtained through short-term borrowings which are
ultimately funded with permanent capital. EUA System companies including,
Eastern Edison and Montaup, maintain short-term lines of credit with various
banks aggregating approximately $140 million. These credit lines are available
to other affiliated companies under joint credit line arrangements. At
December 31, 1993, unused short-term lines of credit amounted to approximately
$103 million. At December 31, 1993, neither Eastern Edison nor Montaup had any
outstanding short-term debt. In 1993, internally generated funds amounted to
$39.4 million or in excess of 100% of the cash construction requirements.
In addition to construction expenditures, projected requirements for
maturing long-term debt securities through 1998 are: $35 million, $7 million,
and $60 million in 1995, 1996, and 1998, respectively. The Company has no
sinking fund requirements until the year 2003.
Financing Activity:
Preferred Equity:
Eastern Edison redeemed with available cash its 8.32% Series and 4.64%
Series non-redeemable preferred stock on June 1, 1993 and December 1, 1993,
respectively. In connection with these redemption, Eastern Edison incurred
premiums of approximately $106,000 related to the 8.32% Series and $179,000
related to the 4.64% Series. These amounts are included in Preferred Stock
Redemption Costs on the Consolidated Statement of Capitalization. Eastern
Edison will seek recovery of these amounts in its next rate proceeding.
On June 1, 1993, Eastern Edison used available cash to redeem all of its
9.00% Series Preferred Stock. In connection with this redemption, a premium of
approximately $850,500 was incurred and is included in Preferred Stock
Redemption Costs on the Consolidated Statement of Capitalization.
On August 11, 1993, Eastern Edison issued 300,000 shares of $100 par
value, 6-5/8% Preferred Stock. The proceeds were used to redeem its
outstanding 9.80% Series Preferred Stock and for other corporate purposes. In
connection with the 9.80% Series redemption, Eastern Edison incurred a premium
of approximately $1,352,000. This premium is also included in Preferred Stock
Redemption Costs on the Consolidated Statement of Capitalization. Eastern
Edison will seek recovery of these premiums in its next rate proceeding.
Debt:
In May 1993, Eastern Edison issued $100 million of First Mortgage Bonds
(FMBs) in the following denominations: (i) $20 million of 5-7/8% Bonds due May
1, 1998; (ii) $40 million of 6-7/8% Bonds due May 1, 2003; and (iii) $40
million of 8% Bonds due May 1, 2023. The proceeds were used to redeem FMBs of
Eastern Edison of $55 million of 9-5/8%, $35 million of 10-1/8% and $10 million
of 8-3/8%.
In June 1993, Eastern Edison used available cash to redeem $5 million of
8-3/8% FMBs.
In July 1993, Eastern Edison issued $40 million of 5-3/4% FMBs, proceeds
of which were used to redeem its $40 million of 9-7/8% FMBs in September 1993.
Eastern Edison redeemed in mid-August 1993 its $40 million of 10-1/8%
Pollution Control Revenue Bonds with the proceeds from the July issuance of $40
million of 5-7/8% Pollution Control Revenue Bonds.
In September 1993, Eastern Edison issued $8 million of 6.35% FMBs due
September 1, 2003 and $7 million of 4.875% FMBs due September 1, 1996. The
proceeds were used to redeem $8 million of 7-7/8% FMBs due 2002 and $7 million
of 6.5% FMBs due 1997.
In October 1993, the Company used available cash to retire $5 million of
4-1/2% FMBs at maturity.
Environmental Matters
The EPA, as well as state and local authorities, have jurisdiction over
releases of pollutants into the environment. They have broad authority to set
rules and regulations, including the required installation of pollution control
devices and remedial actions. The EPA has updated its clean air standards
regulating the emissions from utility power plants into the air to take effect
in 1995. Tests at Montaup's Somerset Station indicate that Unit No. 6 will be
able to utilize lower sulfur coal than is already being burned to meet the 1995
air standards with only a minimal capital investment. Montaup determined that
it would not be economical to repair Unit No. 5 of Somerset Station and has
placed it in deactivated reserve. (see Item 2. PROPERTIES).
In April 1992, the NESCAUM, an environmental advisory group for eight
Northeast states including Massachusetts and Rhode Island issued recommenda
tions for oxides of nitrogen controls for existing utility boilers required to
meet the ozone non-attainment requirements of the Clean Air Act. The NESCAUM
recommendations are more restrictive than the Clean Air Act requirements.
Massachusetts has issued new regulations to implement oxides of nitrogen
reduction requirements. The DEP has amended its regulations to require that
Reasonable Availably Control Technology (RACT) be implemented at all stationary
sources potentially emitting 50 tons or more per year of oxides of nitrogen.
Rhode Island has not yet issued regulations to implement oxides of nitrogen
reduction requirements. Montaup is in the process of reviewing compliance
strategies. Any compliance strategy may require the implementation of
additional pollution control technology as early as 1995. Montaup would seek
recovery of pollution control expenditures through rates.
Eastern Edison and Montaup are also parties to certain other environmental
proceedings. Management is unable to predict the outcome of any of these
environmental matters or to estimate the ultimate costs which may result. It
is the policy of these companies in such cases to provide notice to liability
insurers and to initiate claims. However, at this time no claims have been
filed against any insurer and it is not possible at this time to predict
whether liability, if any, will be assumed by, or can be enforced against, the
insurance carrier in these matters. As of December 31, 1993, Eastern Edison
and Montaup have incurred costs of approximately $108,000 in connection with
such environmental matters. It is estimated that additional costs of up to
$850,000 may be incurred through 1995. Montaup is currently recovering certain
of its incurred environmental costs in rates. As a result of the
recoverability in current rates of environmental costs, and the uncertainty
regarding both its estimated liability, as well as potential contributions from
insurance carriers, Eastern Edison and Montaup do not believe that the ultimate
impact of environmental costs will be material to either of them and thus, no
loss accrual has been recorded. (see Item 3. LEGAL PROCEEDINGS --
Environmental Proceedings).
A number of scientific studies in the past several years have examined the
possibility of health effects from EMF that are found wherever there is
electricity. While some of the studies have indicated there may be some
association between exposure to EMF and health effects, many others have
indicated no direct association. The research to date has not conclusively
established a direct causal relationship between EMF exposure and human
health. Additional studies, which are intended to provide a better
understanding of the subject, are continuing.
Some states have enacted regulations to limit the strength of EMF at the
edge of transmission line rights-of-way. Rhode Island has enacted a statute
which authorizes and directs the Rhode Island Energy Facilities Siting Board to
establish rules and/or regulations governing construction of high voltage
transmission lines of 69 KV or more. Various bills are pending in the
Massachusetts legislature that would require certain disclosures about the
potential health effects of EMF. Management cannot predict the impact which
legislation or other developments concerning EMF may have on Eastern Edison or
Montaup.
Change in Accounting Standards
The Company adopted FAS106, "Accounting for Post-Retirement Benefits Other
Than Pensions," as of January 1, 1993. This standard establishes accounting
and reporting standards for such post-retirement benefits as health care and
life insurance. FAS106 further requires the accrual of the cost of such
benefits during an employee's years of service and the recognition of the
actuarially determined total post-retirement benefit obligations (Transition
Obligation) earned by existing employees and retirees. Previously, Eastern
Edison followed the "pay-as-you-go" methodology of accounting for such costs.
The Company elected to recognize the Transition Obligation over a period of 20
years as permitted by FAS106. The resultant annual expense, including
amortization of the Transition Obligation and net of capitalized amounts, was
approximately $4.8 million in 1993. Regulatory decisions issued in December
1992 permitted Eastern Edison to recover through rates approximately $2.1
million of this amount in 1993 and Montaup was allowed to defer FAS106 related
costs through 1995 until it filed for recovery of such amounts prior to that
time. Accordingly approximately $1.4 million of FAS106-related costs were
deferred by Montaup in 1993. Montaup will request recovery of all of its
FAS106 expenses, including amortization of deferred amounts in its March 1994
rate application. Eastern Edison has also established an irrevocable external
Voluntary Employee Benefit Association (VEBA) Trust Fund as required by the
aforementioned regulatory decisions. Contributions to the fund began in March
1993 and totaled approximately $2.3 million were made during 1993.
Effective January 1993, Eastern Edison adopted the Financial Accounting
Standards Board (FASB) Statement No. 109, "Accounting for Income Taxes"
(FAS109), which essentially supersedes its Statement No. 96 (FAS96). As a
result of the adoption of FAS96 in 1990, FAS109 resulted only in the
reclassification of certain assets and liabilities and did not significantly
impact the Company.
In November 1992, FASB issued Statement No. 112, "Employers' Accounting
for Postemployment Benefits." EUA is required to adopt this standard no later
than January 1, 1994. The estimated impact of this standard on the Company is
immaterial and therefore it is anticipated that no liability will be recorded.
Other
On January 25, 1994, the generating Unit No. 5 at Somerset Station was
placed in deactivated reserve. The 69 MW, 42 year old unit had been out of
service for 5 months because of mechanical problems. An assessment of the cost
and feasibility of repairing and refurbishing the unit to meet reliability
standards and Clean Air Act Amendments regulations concluded that rebuilding
the unit would not be economical. Current forecasts indicate that with a
combination of company owned generation, current long-term purchased power
contracts, expected short-term power opportunities, and Montaup's C&LM
programs, no additional capacity requirements will be needed through the year
1999.
Montaup, as a 3.27% equity participant in two companies which built and
operate certain transmission interconnection facilities between the
Hydro-Quebec Electric System and New England has guaranteed approximately $6.0
million of their outstanding debt. In addition, Montaup has minimum rental
commitments under a non-cancellable transmission facilities support agreement
for years subsequent to 1993 which total approximately $14.3 million.
Montaup is recovering through rates its share of estimated decommissioning
costs for Millstone Unit 3 and Seabrook Unit 1. Montaup's share of the current
estimate of total costs to decommission Millstone Unit 3 is $15.1 million in
1993 dollars, and Seabrook Unit 1 is $10.6 million in 1993 dollars. These
figures are based on studies performed by the lead owners of the plants. In
addition, Montaup pays into decommissioning reserves pursuant to contractual
arrangements with other nuclear generating facilities in which it has an equity
ownership interest or life-of-the-unit entitlement. Such expenses are
currently recovered through rates.
Montaup owns a 4.01% interest in Millstone Unit 3 and a 2.9% interest in
Seabrook Unit 1. Northeast Utilities, the operator of the units, indicates
that Millstone Unit 3 has sufficient on-site storage facilities to accommodate
high-level wastes and spent fuel for the projected life of the units. Only
minimal capital expenditures are projected for the foreseeable future.
Similarly, at the Seabrook Project there is on-site storage capacity which,
with minimal capital expenditures, should be sufficient for twenty years or
until the year 2010. No near-term capital expenditures are anticipated to
accommodate an increase in storage requirements after 2010.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this
report under Item 14(a)(1).
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
(a), (b), (c), (d) and (e) The names, ages and positions of all of the
directors and executive officers of Eastern Edison as of March 17, 1994 are
listed below with their business experience during the past five years. The
directors, Treasurer and Clerk of Eastern Edison are each elected to serve
until the next annual stockholders' meeting. All other officers are elected to
serve until the next meeting of directors following the annual stockholders'
meeting. There is no family relationship between any of the directors or
officers of Eastern Edison. Messrs. Pardus and Stevens are Trustees of EUA.
Name, Age Business Experience
and_Position During_Past_5_Years
Elizabeth J. Alden, 40 President, Alden Products Company. Director since
Director June 1993.
Richard M. Burns, 56 Vice President, Assistant Treasurer and Assistant
Vice President (1) Clerk since April 1986; Comptroller of parent
since 1976, Assistant Secretary of parent since
1978 and Assistant Treasurer of parent since
April 1986; responsible primarily for the
accounting affairs of Eastern Edison.
John D. Carney, 49 President and Director since January 1990; Vice
Director and President from April 1986 to December 1989;
President (2) responsible for the day-to-day activities of the
Company.
Robert W. Giggey, 58 Chairman and CEO of Innovative Medical Inc.,
Director President of Deknatel, Inc., previously a
Division of Pfizer Hospital Products Group, Inc.
from January 1987 to October 1993; Director
since January 1991.
Barbara A. Hassan, 44 Vice President since January 1990; prior to that
Vice President she was both Director and Manager of Customer
Service for the EUA System since January 1985;
responsible for the operation and maintenance of
the transmission and distribution facilities of
the Company.
Arthur A. Hatch, 63 Executive Vice President and Director since
Director and Executive January 1990; Executive Vice President of
Vice President (3) parent since January 1990; President of Eastern
Edison from June 1986 to December 1989;
responsible for power supply, purchasing
management, engineering and operations of the
transmission and distribution facilities of the
EUA System.
Clifford J. Hebert, Jr., 46 Treasurer since April 1986; Treasurer of parent
Treasurer(4) since April 1986; responsible for financial and
treasury activities of the EUA System.
Robert W. Lavoie, 56 Vice President since March 1987; responsible for
credit, meter reading and consumer services
activities of the company.
William F. O'Connor, 54 Clerk since 1974; Secretary of parent since 1971;
Clerk (5) responsible primarily for the corporate affairs
of Eastern Edison.
Donald G. Pardus, 53 Chairman of the Board since July 1989; Vice Chair-
Director and man of the Board from January 1986 to July 1989;
Chairman of the Board (6) Chairman of parent since July 1990; President of
parent from December 1985 to June 1990; Chief
Executive Officer of parent since April 1989;
Chief Operating Officer of parent from January
1988 to April 1989; responsible for the overall
management of the EUA System; Director since
1979.
Robert G. Powderly, 46 Executive Vice President since March 1992;
Director and Executive President of Newport from March 1990 to April
Vice President (7) 1992; prior to that time he was a Vice
President of EUA Service for more than five
years; responsible for the corporate
communications, information systems and rate
activities of the EUA System; Director since
March 1992.
Donald H. Ramsbottom, 64 Executive Director, University of Massachusetts
Director Dartmouth Foundation since April 1991; Vice
President of The First National Bank of Boston
from 1987 to January 1991; Director since
January 1982.
John R. Stevens, 53 Vice Chairman of the Board since July 1989; Exec-
Director and Vice utive Vice President from July 1987 to July
Chairman of the Board (8) 1989; President of parent since July 1990; Chief
Operating Officer of parent since January 1990;
Executive Vice President of parent from June
1987 to December 1989; responsible for retail
operations and new ventures of the EUA System;
Director since July 1987.
_________________
(1) Comptroller, Assistant Treasurer and Assistant Secretary of EUA; Vice
President, Comptroller, Assistant Treasurer, Assistant Clerk/Secretary and
Director of EUA Service; Vice President, Assistant Treasurer and Assistant
Secretary of Blackstone; Vice President, Assistant Treasurer, Assistant
Clerk and Director of Montaup and EUA Energy; Comptroller, Assistant
Treasurer and Director of EUA Cogenex; Assistant Treasurer of EUA Ocean
State; Vice President and Assistant Treasurer of Newport.
(2) Vice President and Director of EUA Service and Montaup.
(3) Executive Vice President of EUA; Executive Vice President and Director of
Blackstone, EUA Cogenex, EUA Energy, EUA Ocean State, EUA Service, Montaup
and Newport.
(4) Treasurer of EUA, EUA Service, Blackstone, Montaup, EUA Energy, EUA Ocean
State and Newport; Treasurer and Assistant Clerk/Secretary of EUA Cogenex.
(5) Secretary of EUA; Vice President, Secretary, Clerk and Director of EUA
Service; Clerk and Director of EUA Cogenex, EUA Energy and Montaup;
Secretary/Clerk of Blackstone, EUA Ocean State and Newport.
(6) Chairman, Trustee, and Chief Executive Officer of EUA; Chairman and
Director of Blackstone, EUA Cogenex, EUA Energy, EUA Ocean State, EUA
Power, EUA Service, Montaup, and Newport.
(7) Executive Vice President of EUA; Executive Vice President and Director of
Blackstone, EUA Cogenex, EUA Energy, EUA Ocean State, EUA Service and
Newport.
(8) President, Trustee and Chief Operating Officer of EUA; Vice Chairman and
Director of Blackstone, EUA Cogenex and Newport; President and Director of
EUA Energy, EUA Ocean State, EUA Service and Montaup.
(f) Except as described below, there have been no events under any
bankruptcy act, no criminal proceedings and no judgements or injunctions
material to the evaluation of the ability and integrity of any director or
executive officer during the past five years.
On February 28, 1991, EUA Power (now Great Bay Power Corporation), filed a
voluntary petition with the federal Bankruptcy Court for protection under
Chapter 11 of the federal Bankruptcy Code. EUA Power, a wholly owned
subsidiary of EUA prior to February 5, 1993, the date it redeemed all of its
equity securities held by EUA, was organized solely for the purpose of
acquiring an interest in the Seabrook Project and selling in the wholesale
market its share of electricity generated by the project.
Messrs. Burns, Hatch, Hebert, O'Connor, Pardus and Stevens, who have been
officers or directors of EUA Power within the last two years, resigned their
positions effective December 30, 1992, with the exception of Mr. Stevens who
remains the sole officer and director of Great Bay Power Corporation. Mr.
Stevens serves at the request, and subject to the discretion of the officially
appointed committee representing the holders of outstanding EUA Power Secured
Notes.
Item 11. EXECUTIVE COMPENSATION
Information is set out below as to cash compensation paid by Eastern
Edison during the year 1993 to each executive officer of Eastern Edison whose
aggregate cash compensation for the year exceeded $100,000.
Long-Term All
Compensation Other
Name and Annual Compensation Restricted Compen-
Principal Fiscal Incentive Stock sation
Position Year Salary Bonus Other(1) Awards(2)
(3)
John D. Carney 1993 $134,025 $38,867 $6,618 $ - $3,015
President 1992 126,025 24,003 3,443 60,616 2,520
1991 113,025 10,170 - - -
Barbara A. Hassan 1993 101,025 23,343 - - 2,272
Vice President 1992 91,025 11,557 - - 1,668
1991 84,025 5,040 - - -
Robert W. Lavoie 1993 100,758 21,352 - - 2,269
Vice President 1992 94,925 12,179 - - 1,898
1991 88,942 5,934 - - -
___________________
(1) Represents amounts reimbursed for the tax liability accruing as a result
of the personal use of a company-owned automobile.
(2) Aggregate amount and value (including the value reflected in the table
under "Restricted Stock Awards") of shares granted under EUA's Restricted
Stock Plan to the officers listed above is as follows: Mr. Carney 3,725
shares, $84,286. Dividends are paid on these shares.
(3) Contributions made under the Employees' Savings Plan.
The Employees' Retirement Plan of Eastern Utilities Associates and its
subsidiary companies (Plan) is a tax-qualified defined benefit plan available
to employees who have completed one year of service and have attained the age
of twenty-one. The officers named in the compensation table above participate
in the Plan. Directors of Eastern Edison who are not also employees of the EUA
System are not covered by the Plan. The benefits of participants become fully
vested after five years of service. Annual lifetime benefits are determined
under formulas applicable to all employees regardless of position and the
amounts depend on length of credited service and salaries prior to retirement.
Benefits are equal to one and six tenths percent of salaries (averaged over the
four years preceding retirement) for each year of credited service up to
thirty-five, reduced for each year by one and two tenths percent of the
participant's estimated age sixty-five Social Security benefit, plus
seventy-five hundredths percent of salaries for each year of credited service
in excess of thirty-five years up to the Plan maximum of forty years.
Any contributions to provide benefits under the Plan are made by the EUA
System in amounts determined by the Plan's actuaries to meet the funding stand
ards established by the Employee Retirement Income Security Act of 1974. These
contributions are actuarially determined and cannot appropriately be allocated
to individual participants. The annual benefits shown in the table below are
straight life annuity amounts, without reduction for primary Social Security
benefits as described above. Federal law limits the annual benefits payable
from qualified pension plans in the form of a life annuity, after reduction for
Social Security benefits, to $115,641 plus adjustments for increases in the
cost of living. The number of years of service credited at present under the
Plan to Mr. Carney, Ms. Hassan and Mr. Lavoie is twenty-seven, thirty-two and
twenty-three, respectively.
Average Annual _____________________Years_of_Service______________________
____Salary____ ___15___ ___20___ ___25___ ___30___ ___35___ ___40___
$ 50,000 $ 12,000 $ 16,000 $ 20,000 $ 24,000 $ 28,000 $ 29,875
100,000 24,000 32,000 40,000 48,000 56,000 59,750
150,000 36,000 48,000 60,000 72,000 84,000 89,625
200,000 48,000 64,000 80,000 96,000 112,000 119,500
250,000 60,000 80,000 100,000 120,000 140,000 149,375
Mr. Carney is a participant in a non-qualified supplemental retirement
plan for certain officers of the EUA System. The plan provides for the annual
payment of supplemental retirement benefits equal to 25% of the officer's base
salary when he retires, for a period of fifteen (15) years following the date
of retirement. In addition, in the event of the death of the participant prior
to retirement an amount equal to 200% of the officer's base salary at that time
will be paid to his beneficiary. Eastern Edison, through its affiliate, EUA
Service, maintains life insurance on the participants to fund, in whole or in
part, its future liabilities under the plan, and that corporation is the owner
and beneficiary of such life insurance. Any amounts not covered by insurance
will be paid out of other funds available to Eastern Edison. In the event of a
change in control of the Company, a trust fund will be established by the
Company to ensure the performance of its payment obligations under the
supplemental retirement plan.
The EUA System maintains a non-qualified, unfunded Retirement and Savings
Restoration Plan (The Restoration Plan). The purpose of the Restoration Plan
is to restore benefits under the qualified Plans' formulas which can not be
paid from, or into, the qualified plan trusts due to federal limitations on
either earnings, contributions or benefits. Payments or contributions which
exceed the applicable federal limitations are made outside the qualified plans
in the same manner and under the same conditions as are applicable to benefits
payable from, or contributions payable to, the qualified plans. In the event
of a change of control of the Association, a trust fund will be established by
the Association to ensure the performance of its payment obligations under the
Restoration Plan.
Severance agreements with certain officers of the EUA System provide that
an officer's stipulated compensation, benefits, position, responsibilities and
other conditions of employment will not be reduced during the term of the
agreement, which is thirty-six months commencing upon the date on which a
Change in Control, as defined in the agreements, of the Company. If within
thirty-six months after a Change in Control the officer's employment is
terminated for any reason other than Cause, as defined in the agreements, the
Company will, subject to certain limitations to comply with provisions of the
Internal Revenue Code, pay the officer within five business days a lump-sum
cash amount equal to three times the present value of such officer's annualized
total compensation, continue or vest certain fringe benefits and common share
grants, and reimburse legal fees and expenses incurred as a result of the
termination or to enforce the provisions of the severance agreement. If the
officer leaves the employ of the Company following a reduction in his position,
compensation, responsibilities, authority or other benefits existing prior to
the Change in Control, or suffers a relocation of regular employment of more
than fifty miles, such departure will be deemed to be a termination for reasons
other than Cause.
Each non-management director of Eastern Edison receives, as a standard
arrangement, compensation in the amount of $600 for each directors' meeting
attended and additional compensation for all services as a director in the
amount of $4,000 annually.
Compensation Committee Interlocks and Insider Participation:
John D. Carney, President and a Director of the Registrant, participated
in deliberations concerning the compensation of executive officers other than
himself.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of certain beneficial owners.
Amount (number of
Name and Address of shares) and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class
Common Stock Eastern Utilities 2,891,357* 100%
$25 par value, Associates
of Eastern One Liberty Square
Edison Boston, Massachusetts
_______________
*All shares, which are the only voting securities of Eastern Edison, are
registered in the name of the beneficial owner.
(b) Security ownership of management as of January 7, 1994.
Amount (number of
Name shares) and Nature of Percent of
Title_of_Class Beneficial_Owner Beneficial_Ownership_(1) Class
Common Shares, John D. Carney 387 Less than
$5 par value, 641 (3) one percent
of Eastern 3,725 (4) for each
Utilities Arthur A. Hatch 1,408 individual
Associates 244 (2)
1,832 (3)
5,433 (4)
Donald G. Pardus 977
3,631 (2)
3,648 (3)
13,607 (4)
Robert G. Powderly 401
125 (2)
1,002 (3)
3,919 (4)
324 (5)
John R. Stevens 1,449
1,098 (3)
9,798 (4)
Directors and Executive
Officers as a Group 64,618 (6)
_____________________
(1) Unless otherwise indicated, beneficial ownership is based on sole
investment and voting power.
(2) Jointly owned with spouse.
(3) Shares held under the ESP as to which the individual indicated has voting
power.
(4) Shares received under the Grant Plan as to which each has voting power.
(5) Held in fiduciary capacity.
(6) Represents less than four-tenths of one percent of the outstanding common
shares of EUA at January 7, 1994. Included are 14,920 shares held for
officers under EUA's ESP, 4,008 shares jointly owned with the officers'
spouses, 39,636 shares received under EUA's Restricted Stock Plan, and
390 shares held in a fiduciary capacity.
- ---------
The directors and executive officers of Eastern Edison did not own any of
Eastern Edison's 6-5/8% Preferred Stock at January 7, 1994.
(c) Eastern Edison knows of no contractual arrangements which may at a
subsequent date result in a change in control of the Company.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements:
The following financial statements and supplementary data are filed
herewith as required by Item 8.
Consolidated Statement of Income for the three years in the period ended
December 31, 1993.
Consolidated Statement of Retained Earnings for the three years in the
period ended December 31, 1993.
Consolidated Statement of Cash Flows for the three years in the period
ended December 31, 1993.
Consolidated Balance Sheet at December 31, 1993 and 1992.
Consolidated Statement of Capitalization at December 31, 1993 and 1992.
Notes to Consolidated Financial Statements at December 31, 1993, 1992, and
1991.
Report of Independent Accountants, dated March 4, 1994.
(a)(2) Financial Statement Schedules:
The following additional consolidated financial statement schedules are
filed herewith:
1. Financial Statement Schedules:
Schedule V - Property, Plant and Equipment for the three years
ended December 31, 1993.
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment for the three years
ended December 31, 1993.
Schedule IX - Short-Term Borrowings for the three years ended
December 31, 1993.
Schedule X - Supplementary Income Statement Information for the
three years ended December 31, 1993.
All other schedules have been omitted since the required information is
not present or not sufficiently material to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.
(a)(3) Exhibits (*denotes filed herewith)
Articles of Incorporation and By-Laws:
3-1.08 - Form of Restated and Amended Articles of Organization (filed as
Exhibit A-39 to Form U-1 File No. 70-7865 of Eastern Edison)
3-2.08 - By-Laws of Eastern Edison, as amended (Exhibit 3-2, Form 10-K for
1980, File No. 0-8480).
Instruments Defining the Rights of Shareholders, Including Indentures:
- Eastern Edison -
4-1.08 - Indenture of First Mortgage and Deed of Trust dated as of
September 1, 1948 of Eastern Edison (Exhibit 4-1, Registration No.
2-77468).
4-2.08 - First Supplemental Indenture dated as of February 1, 1953 of
Eastern Edison (Exhibit A, File No. 70-3015).
4-3.08 - Second Supplemental Indenture dated as of May 1, 1954 of Eastern
Edison (Exhibit A-3, File No. 70-3371).
4-4.08 - Third Supplemental Indenture dated as of June 1, 1955 of Eastern
Edison (Exhibit C to Certificate of Notification, File No. 70-
3371).
4-5.08 - Fourth Supplemental Indenture dated as of September 1, 1957 of
Eastern Edison (Exhibit D to Certificate of Notification, File No.
70-3619).
4-6.08 - Fifth Supplemental Indenture dated as of April 1, 1959 of Eastern
Edison (Exhibit D to Certificate of Notification, File No. 70-
3798).
4-7.08 - Sixth Supplemental Indenture dated as of October 1, 1963 of
Eastern Edison (Exhibit F to Certificate of Notification, File No.
70-4164).
4-8.08 - Seventh Supplemental Indenture dated as of June 1, 1969 of Eastern
Edison (Exhibit D to Certificate of Notification, File No. 70-
4748).
4-9.08 - Eighth Supplemental Indenture dated as of July 1, 1972 of Eastern
Edison (Exhibit C to Certificate of Notification, File No. 70-
5195).
4-10.08 - Ninth Supplemental Indenture dated as of September 1, 1973 of
Eastern Edison (Exhibit F to Certificate of Notification, File No.
70-5379).
4-11.08 - Tenth Supplemental Indenture dated as of October 1, 1975 of
Eastern Edison (Exhibit C to Certificate of Notification, File No.
70-5719).
4-12.08 - Eleventh Supplemental Indenture dated as of January 1, 1979 of
Eastern Edison (Exhibit 5-24, Registration No. 2-65785).
4-13.08 - Twelfth Supplemental Indenture dated as of October 1, 1980 of
Eastern Edison (Exhibit F to Certificate of Notification, File No.
70-6463).
4-14.08 - Thirteenth Supplemental Indenture dated as of July 1, 1981 of
Eastern Edison (Exhibit C to Certificate of Notification, File No.
70-6608).
4-15.08 - Fourteenth Supplemental Indenture dated as of June 1, 1982 of
Eastern Edison (Exhibit C to Certificate of Notification, File No.
70-6737).
4-16.08 - Fifteenth Supplemental Indenture dated as of August 1, 1983 of
Eastern Edison (Exhibit F to Certificate of Notification, File No.
70-6851).
4-17.08 - Sixteenth Supplemental Indenture dated as of September 1, 1984 of
Eastern Edison (Exhibit 4-31, Form 10-K of EUA for 1984, File No.
1-5366).
4-18.08 - Seventeenth Supplemental Indenture dated as of July 1, 1986 of
Eastern Edison (Exhibit F to Certificate of Notification, File No.
70-7254).
4-19.08 - Eighteenth Supplemental Indenture dated as of June 1, 1987 of
Eastern Edison (Exhibit C to Certificate of Notification, File No.
70-7373).
4-20.08 - Nineteenth Supplemental Indenture dated as of November 1, 1987 of
Eastern Edison (Exhibit C to Certificate of Notification, File No.
70-7373).
4-21.08 - Twentieth Supplemental Indenture dated as of May 1, 1988 of
Eastern Edison (Exhibit C to Certificate of Notification, File No.
70-7373).
4-22.08 - Twenty-first Supplemental Indenture dated as of September 1, 1988
of Eastern Edison (Exhibit F to Certificate of Notification, File
No. 20-7511).
4-23.08 - Twenty-second Supplemental Indenture dated as of December 1, 1990
of Eastern Edison (Exhibit 4-34, Form 10-K of Eastern Edison for
1990, File No. 0-8480).
4-24.08 - Twenty-third Supplemental Indenture dated as of July 1, 1992 of
Eastern Edison (Exhibit 4-24, Form 10-K of Eastern Edison for
1992, File No. 8480).
4-25.08 - Indenture dated as of December 1, 1990 of Eastern Edison with
Citibank, N.A., as Trustee (Exhibit 4-35, Form 10-K of Eastern
Edison for 1990, File No. 0-8480).
4-26.08 - Form of Eastern Edison Medium Term Note (Exhibit 4-36, Form 10-K
of Eastern Edison for 1990, File No. 0-8480).
4-27.08 - Twenty-Fourth Supplemental Indenture dated as of May 1, 1993
(filed as Exhibit A-27 to Form U-1, File No. 70-7865 of Eastern
Edison).
4-28.08 - Twenty-Fifth Supplemental Indenture dated as of July 1, 1993
(filed as Exhibit A-28 to Form U-1, File No. 70-7865 of Eastern
Edison).
- Montaup -
4-1.05 - Form of 8% Debenture Bonds due 2000 of Montaup (Exhibit 4-10,
Registration No. 2-41488).
4-2.05 - Form of 8-1/4% Debenture Bonds due 2003 of Montaup (Exhibit B-3,
Form U5S of EUA for year 1973).
4-3.05 - Form of 14% Debenture Bonds due 2005 of Montaup (Exhibit 4-11,
Registration No. 2-55990).
4-4.05 - Form of 10% Debenture Bonds due 2008 of Montaup (Exhibit 5-3,
Registration No. 2-65785).
4-5.05 - Form of 16-1/2% Debenture Bonds due 2010 of Montaup (Exhibit 4-11,
Form 10-K of EUA for 1980, File No. 1-5366).
4-6.05 - Form of 12-3/8% Debenture Bonds due 2013 of Montaup (Exhibit 4-13,
Form 10-K of EUA for 1983, File No. 1-5366).
4-7.05 - Form of 10-1/8% Debentures due 2008 of Montaup (Exhibit 4, Form
10-Q of Eastern Edison for quarter ended September 30, 1983, File
No. 0-8480).
4-8.05 - Form of 9% Debenture Bonds due 2020 of Montaup (Exhibit 4-10, Form
10-K of Eastern Edison for 1990, File No. 0-8480).
4-9.05 - Form of 9 3/8% Debenture Bonds due 2020 of Montaup (Exhibit 4-11,
Form 10-K of Eastern Edison for 1990, File No. 0-8480).
Material Contracts:
- EUA -
10-1.03 - Employees' Retirement Plan of Eastern Utilities Associates and its
Subsidiary Companies Trust Agreement as amended and restated,
effective July 1, 1981 (Exhibit 10-1, Registration No. 2-80205).
10-2.03 - Employees' Retirement Plan of Eastern Utilities Associates and its
Subsidiary Companies Plan as amended and restated, effective
January 1, 1985 as amended as of January 1, 1985, July 1, 1987,
January 1, 1989, December 30, 1990, July 1, 1991, September 2,
1991, and March 1, 1992 (Exhibit 10-2, Form 10-K of EUA for 1985,
File No. 1-5366; Exhibit 10-77, Form 10-K of EUA for 1986, File
No. 1-5366; Exhibit 10-118, Form 10-K of EUA for 1987, File No.
1-5366; Exhibit 10-95, Form 10-K of EUA for 1988, File No. 1-5366;
Exhibit 10-79, Form 10-K of Eastern Edison for 1990, File No.
0-8480; Exhibit 10-120, Form 10-K of EUA for 1991, File No. 1-
5366; Exhibit 10-122, Form 10-K of EUA for 1991, File No. 1-5366;
Exhibit 10-123, Form 10-K of EUA for 1991, File No. 1-5366;
Exhibit 10-69, Form 10-K of EUA for 1992, File No. 1-5366).
10-3.03 - Eastern Utilities Associates Employees' Savings Plan Trust
Agreement. (Filed on Exhibit 10-3 of Form 10-K of EUA for 1992,
File No. 1-5366).
10-4.03 - Eastern Utilities Associates Employees' Savings Plan as amended
and restated effective January 1, 1989. (Filed as Exhibit 10-4 of
Form 10-K of EUA for 1992, File No. 1-5366).
10-5.03 - Form of Service Contract between EUA Service and each of the other
companies (including Eastern Edison and Montaup) in the EUA System
(Exhibit 13-1, Registration No. 2-55990).
10-6.03 - Form of EUA Restricted Stock Plan effective July 17, 1989 (Exhibit
10-13 of EUA Form 10-K for 1992, File No. 1-5366).
10-7.03 - Service contract and supplement among the EUA System, New England
Electric System, Boston Edison Co., New England Gas & Electric
Association system and Vermont Electric Power Company, Inc. for
services to be provided by the New England Power Service
Company (Exhibit 10-14.03, EUA 10-K for 1993, File No. 1-5366).
10-8.03 - Thirtieth Amendment to NEPOOL Agreement regarding pool planning,
pool-planned facilities, pool-planned purchases and pool-planned
unit provisions (Exhibit 10-15.03, EUA 10-K for 1993, File No.
1-5366).
- Eastern Edison -
*10-1.08 - Trust Indenture dated as of July 1, 1993 between Massachusetts
Industrial Finance Agency and Shawmut Bank, N.A.
*10-2.08 - Loan Agreement dated as of July 1, 1993 between Massachusetts
Industrial Finance Agency and Eastern Edison.
*10-3.08 - Power Purchase Agreement entered into as of September 20, 1993 by
and between Meridian Middleboro Limited Partnership and Eastern
Edison Company.
*10-4.08 - Inducement Letter dated July 14, 1993 from Eastern Edison to
the Massachusetts Industrial Finance Agency and Goldman, Sachs &
Company and Citicorp Securities Markets, Inc.
- Montaup -
10-1.05 - Montaup Contract, as amended (Exhibit 4-B, Registration No.
2-14119; Exhibit 13-A1, Registration No. 2-14718; Exhibit
4-B-2, Registration No. 2-26509; Exhibit 4-B-3, Registration
No. 2-33061; Exhibits 13-3 and 13-4, Registration No. 2-48966;
Exhibit B-2, Form U5S of EUA for year 1974 and Exhibit 5-40,
Registration No. 2-62862).
10-2.05 - Transmission Contract (composite copy) among Yankee Atomic
Electric Company's Sponsors, including Montaup, dated June 30,
1959 (Exhibit 13-6-D, Registration No. 2-15798).
10-3.05 - Power Contract (composite copy) between Connecticut Yankee Atomic
Power Company and Montaup dated July 1, 1964 (Exhibit B-1, File
No. 70-4245).
10-4.05 - Capital Funds Agreement (composite copy) between Connecticut
Yankee Atomic Power Company and Montaup dated September 1, 1964
(Exhibit B-2, File No. 70-4245).
10-5.05 - Stockholder Agreement (composite copy) among Connecticut Yankee
Atomic Power Company's Sponsors, including Montaup, dated July 1,
1964 (Exhibit B-4, File No. 70-4245).
10-6.05 - Capital Funds Agreement (composite copy) between Vermont Yankee
Nuclear Power Corporation and Montaup dated as of February 1,
1968, and Amendment thereto dated as at March 12, 1968 (Exhibit B-
2, File No. 70-4611; Exhibit B-3, File No. 70-4611).
10-7.05 - Form of Power Contract between Vermont Yankee Nuclear Power
Corporation and Montaup dated as of February 1, 1968, as amended
June 1, 1972, April 15, 1983, April 24, 1985, June 1, 1985, May 6,
1988 (2), June 15, 1989 and December 1, 1989 (Exhibit B-4, File
No. 70-4591; Exhibit 13-21, Registration No. 2-46612; Exhibit 10-
63, Form 10-K of EUA for 1983, File No. 1-5366; Exhibit 10-74,
Form 10-K of EUA for 1985, File No. 1-5366; Exhibit 10-78, Form
10-K of EUA for 1986, File No. 1-5366; Exhibits 10-97 and 10-98,
Form 10-K of EUA for 1988, File No. 1-5366; Exhibit 10-95, Form
10-K of EUA for 1989, File No. 1-5366; Exhibit 10-80, Form 10-K of
Eastern Edison for 1990, File No. 0-8480).
10-8.05 - Sponsor Agreement (composite copy) among Vermont Yankee Nuclear
Power Corporation's Sponsors, including Montaup, dated as of
August 1, 1968 (Exhibit 4-0, Registration No. 2-33061).
10-9.05 - Capital Funds Agreement (composite copy) between Maine Yankee and
Montaup dated May 20, 1968 and as amended August 1, 1985 (Exhibit
B-2, File No. 70-4658; Exhibit 10-78, Form 10-K of EUA for 1985,
File No. 1-5366).
10-10.05 - Power Contract (composite copy) between Maine Yankee Atomic and
Montaup dated May 20, 1968, as amended December 19, 1983 and
January 1, 1984 (Exhibit B-3, File No. 70-4658; Exhibit 10-64,
Form 10-K of EUA for 1983, File No. 1-5366; Exhibit 10-66, Form
10-K of EUA for 1984, File No. 1-5366).
10-11.05 - Stockholder Agreement (composite copy) among Maine Yankee
Sponsors, including Montaup, dated May 20, 1968 (Exhibit B-4, File
70-4658).
10-12.05 - Agreement (composite copy) among Vermont Yankee Nuclear Power
Corporation's Sponsors, including Montaup, dated as of April 30,
1969 (Exhibit B-7, File No. 70-4435).
10-13.05 - Form of Agreement among Maine Yankee Atomic Power Company's
Sponsors dated as of May 20, 1969 (Exhibit B-5, File No. 70-4658).
10-14.05 - Form of New England Power Pool Agreement dated as of September 1,
1971, as amended as of July 1, 1972, March 1, 1973, April 2, 1973,
March 15, 1974, June 1, 1975, September 1, 1975, December 31,
1976,
January 18, 1977, July 1, 1977, August 1, 1977, August 15, 1978,
January 31, 1980, February 1, 1980, September 1, 1981, December 1,
1981, June 1, 1982, June 15, 1983, October 1, 1983, August 1,
1985, August 15, 1985, January 1, 1986, September 1, 1986, March
1, 1988, May 1, 1988, March 15, 1989 and October 1, 1990, (Exhibit
13-45, Registration No. 2-41488; Exhibit 13-38, Registration No.
2-46612; Exhibits 13-39 and 13-40, Registration No. 2-48966;
Exhibit B-3, Form U5S of EUA for year 1974; Exhibit 13-35(a),
Registration No. 2-54449; Exhibit 13-35, Registration No. 2-55990,
Exhibits 5-69 and 5-70, Registration Exhibit 13-35(a),
Registration No. 2-54449; Exhibit 13-35, Registration No. 2-55990,
Exhibits 5-69 and 5-70, Registration No. 2-58625; Exhibit 6, Form
10-K of EUA for 1977, File No. 1-5366; Exhibit 1, Form 10-K of EUA
for 1979, File No. 1-5366; Exhibit No. 10-67, Registration No. 2-
80205; Exhibit 10-65, Form 10-K of EUA for 1983, File No. 1-5366;
Exhibit 10-66, Form 10-K of EUA for 1983, File No. 1-5366;
Exhibits 10-75, 10-76, and 10-77, Form 10-K of EUA for 1985, File
No. 1-5366; Exhibit 10-79, Form 10-K of EUA for 1986, File No. 1-
5366; Exhibits 10-99 and 10-100, Form 10-K of EUA for 1988, File
No. 1-5366; Exhibit 10-96, Form 10-K of EUA for 1989, File No. 1-
5366; Exhibit 10-81, Form 10-K of Eastern Edison for 1990, File
No. 0-8480).
10-15.05 - Joint Ownership Agreement--NEPCO Nuclear Units dated as of January
2, 1976 as amended August 6, 1976 among New England Power Company
and other utilities, including Montaup (Exhibit 13-41,
Registration No. 2-55990; Exhibit 5-77, Registration No. 2-58625).
10-16.05 - Unit Participation Agreement between Maine Electric Power Company,
Inc. and New Brunswick Electric Power Commission dated November
15, 1971 (Exhibit 13-43.1, Registration No. 2-44377).
10-17.05 - Assignment Agreement dated March 20, 1972 between Maine Electric
Power Company, Inc. and New Brunswick Electric Power Commission
(Exhibit 13-43.3, Registration No. 2-44377).
10-18.05 - Agreement dated October 13, 1972 for Joint Ownership, Construction
and Operation of Pilgrim Unit No. 2 among Boston Edison Company
and other utilities including Montaup, as amended July 25, 1973,
September 15, 1974, December 1, 1974, February 15, 1975, April 30,
1975, June 30, 1975, November 30, 1975 and December 15, 1975
(Exhibit 13-51, Registration No. 2-46612; Exhibit 13-56,
Registration No. 2-48966; Exhibit B-5, Form U5S of EUA for year
1974; Exhibit 13-52-A and 13-52-B, Registration No. 2-53819;
Exhibit 13-45(a), Registration No. 2-54449; Exhibits 13-48 and
13-47(a), Registration No. 2-55990).
10-19.05 - Agreement dated as of May 1, 1973 for Joint Ownership,
Construction and Operation of New Hampshire Nuclear Units among
Public Service Company of New Hampshire and other utilities
including Montaup, as amended as of May 24, 1974, June 21, 1974,
September 25, 1974, October 25, 1974, January 31, 1975, as
supplemented by Letter Agreement dated April 27, 1978 and amended
as of April 18, 1979 (two amendments), April 25, 1979, June 8,
1979, October 11, 1979, December 15, 1979, June 16, 1980, December
31, 1980, June 1, 1982, April 27, 1984, June 15, 1984, March 8,
1985, March 14, 1986, May 1, 1986, September 19, 1986, November
1987, January 13, 1989 and November 1, 1990. (Exhibit 13-57,
Registration No. 2-48966; Exhibit B-6, Form U5S of EUA for year
1974; Exhibit 5-130, Registration No. 2-62862; Exhibit 5-70,
Registration No. 2-65785; Exhibit 2, Form 10-K of EUA for 1979,
File No. 1-5366; Exhibit 5-34, Registration No. 2-69052; Exhibit
20-1, Form 10-K of EUA for 1980, File No. 1-5366; Exhibit 10-69,
Registration No. 2-80205; Exhibit 2, Form 10-Q of EUA for the
Quarter Ended March 31, 1984, File No. 1-5366; Exhibit 3, Form 10-
Q of EUA for the Quarter Ended June 30, 1984, File No. 1-5366;
Exhibit 10-70, Form 10-K of EUA for 1985, File No. 1-5366;
Exhibits 10-80 and 10-81, Form 10-K of EUA for 1986, File No. 1-
5366; Exhibits 10-95 and 10-96, Form 10-K of EUA for 1987, File
No. 1-5366; Exhibit 10-101, Form 10-K of EUA for 1988, File No. 1-
5366; Exhibit 10-82, Form 10-K of Eastern Edison for 1990, File
No. 0-8480).
10-20.05 - Sharing Agreement dated as of September 1, 1973 among The
Connecticut Light and Power Company and other utilities, including
Montaup, concerning participation in a nuclear generating unit
located in Connecticut (Millstone Unit No. 3), as amended and
supplemented by Amendatory Agreement dated May 11, 1984 as amended
as of April 1, 1986 (Exhibit B-17, Form U5S of EUA for year 1973;
Exhibit B-8, as amended as of April 11, 1986, Form U5S of EUA for
year 1974; Exhibit B-30, Form U5S of EUA for year 1976; Exhibit
10-68, Form 10-K of EUA for 1984, File No. 1-5366; Exhibit 10-82,
Form 10-K of EUA for 1986, File No. 1-5366).
10-21.05 - Agreement for Joint Ownership, Construction and Operation of
William F. Wyman Unit No. 4 dated November 1, 1974 as amended June
30, 1975, August 16, 1976 and December 31, 1978 among Central
Maine Power Company and other utilities including Montaup (Exhibit
B-9, Form U5S of EUA for year 1974; Exhibit 13-58, Registration
No. 2-55990; Exhibit 5-95, Registration No. 2-58625; Exhibit 5-
40, Registration No. 2-69052).
10-22.05 - Agreement for Joint Ownership dated as of October 27, 1970 between
Canal Electric Company and Montaup (Exhibit 13-71, Registration
No. 2-55990).
10-23.05 - Agreement for use of Common Facilities by Canal Units I and II and
for Allocation of Related Costs dated as of October 27, 1970
between Canal Electric Company and Montaup (Exhibit 13-72,
Registration No. 2-55990).
10-24.05 - Supplementary Power Contract dated as of April 1, 1978, by and
between Connecticut Yankee Atomic Power Company and Montaup
(Exhibit 10-45, Form 10-K of EUA for 1987, File No. 1-5366).
10-25.05 - Guarantee Agreement (composite copy) dated as of November 13, 1981
between The Connecticut Bank and Trust Company, as Trustee, and
Montaup relating to debentures of Connecticut Yankee Atomic Power
Company (Exhibit 10-61, Form 10-K of EUA for 1981, File No. 1-
5366).
10-26.05 - Guarantee Agreement dated as of November 5, 1981 between Bankers
Trust Company, as Trustee of the Vernon Energy Trust, and Montaup
relating to a nuclear fuel sales agreement and related
transactions entered into by Vermont Yankee Nuclear Power
Corporation (Exhibit 10-63, Form 10-K of EUA for 1981, File No. 1-
5366).
10-27.05 - Agreement for Seabrook Project Disbursing Agent, dated as of May
23, 1984, as amended March 8, 1985, May 20, 1985, June 18, 1985,
January 1, 1986, November, 1987, August 1, 1989, and restated as
of November 1, 1990, among the participants in the Seabrook
nuclear generating project, including Montaup and Yankee Atomic
Electric Company (Exhibit 2, Form 10-Q of EUA for the Quarter
Ended June 30, 1984, File No. 1-5366; Exhibit 10-69, Form 10-K of
EUA for 1985, File No. 1-5366; Exhibits 10-86, 10-87 and 10-88,
Form 10-K of EUA for 1986, File No. 1-5366; Exhibit 10-97, Form
10-K of EUA for 1987, File No. 1-5366; Exhibit 10-105, Form 10-K
of EUA for 1989, File No. 1-5366; Exhibit 10-84, Form 10-K of
Eastern Edison for 1990, File No. 0-8480).
10-28.05 - Guarantee Agreement dated as of August 1, 1985 among The
Connecticut Bank and Trust Company, Connecticut Yankee Atomic
Power Company and Montaup Electric Company relating to Revolving
Credit Loans of Connecticut Yankee (Exhibit 10-85, Form 10-K of
EUA for 1985, File No. 1-5366).
10-29.05 - Equity Funding Agreement for New England Hydro-Transmission
Corporation dated as of June 1, 1985, between New England
Hydro-Transmission Corporation and several New England electric
utilities, including Montaup as amended as of May 1, 1986 and
September 1, 1987 (Exhibits 10-96 and 10-97, Form 10-K of EUA for
1986, File No. 1-5366; Exhibit 10-116, Form 10-K of EUA for 1987,
File No. 1-5366).
10-30.05 - Equity Funding Agreement for New England Hydro-Transmission
Electric Company, Inc. dated as of June 1, 1985, between New
England Hydro-Transmission Electric Company, Inc. and several New
England electric utilities, including Montaup as amended as of May
1, 1986 and September 1, 1987 (Exhibits 10-98 and 10-99, Form 10-K
of EUA for 1986, File No. 1-5366; Exhibit 10-117, Form 10-K of EUA
for 1987, File No. 1-5366).
10-31.05 - Unit Power Agreement for the Sale of Unit Capacity and Energy from
Ocean State Power Project to Montaup Electric Company dated as of
May 14, 1986 as amended as of August 27, 1986, September 27, 1987,
October 21, 1988, July 21, 1989, February 1, 1990 and December 21,
1990 (Exhibits 10-101 and 10-102, Form 10-K of EUA for 1986, File
No. 1-5366; Exhibits 10-106 and 10-107, Form 10-K of EUA for 1988,
File No. 1-5366; Exhibit 10-106, Form 10-K of EUA for 1989, File
No. 1-5366; Exhibits 10-86 and 10-87, Form 10-K of Eastern Edison
for 1990, File No. 0-8480).
10-32.05 - Power Purchase Agreement dated as of October 17, 1986, between
Northeast Energy Associates and Montaup as amended as of June 28,
1989 (Exhibit 10-103, Form 10-K of EUA for 1986, File No. 1-5366;
Exhibit 10-103, Form 10-K of EUA for 1989, File No. 1-5366).
10-33.05 - Unit Sales Agreement between Montaup Electric Company and
Massachusetts Municipal Wholesale Electric Company for Purchase of
Capacity and Energy from Canal No. 2 dated as of November 1, 1986
(Exhibit 10-105, Form 10-K of EUA for 1986, File No. 1-5366).
10-34.05 - Settlement Agreement dated as of January 13, 1989 among Montaup,
EUA Power, certain past and present owners of the Seabrook Project
and Yankee Atomic Electric Company (Exhibit 10-110, Form 10-K of
EUA for 1988, File No. 1-5366).
10-35.05 - Unit Power Agreement for the Sale of Second Unit Capacity and
Energy from Ocean State Power Project to Montaup Electric Company
dated as of September 28, 1988 as amended by an amendment dated
July 21, 1989, and February 7, 1990 and a Supplemental Agreement
dated July 21, 1989 (Exhibit 10-104, Form 10-K of EUA for 1989,
File No. 1-5366; Exhibit No. 10-88, Form 10-K of Eastern Edison
for 1990, File No. 0-8480).
10-36.05 - Purchase Power Contract between Newport and Montaup dated July 23,
1963, as revised on March 23, 1983 (Exhibit 10-108, Form 10-K of
EUA for 1990, File No. 1-5366).
10-37.05 - Purchase Power Contract between Newport and Montaup for Contract
Demand Service effective May 1, 1983, as amended on July 1, 1983,
December 28, 1983 and November 1, 1984 (Exhibit 10-89, Form 10-K
of Eastern Edison for 1990, File No. 0-8480 and Exhibit 10-109,
Form 10-K of EUA for 1990, File No. 1-5366).
10-38.05- Power Contract (composite copy) between Yankee Atomic and Montaup
dated June 30, 1959 as Revised April 1, 1975 and as further
amended October 1, 1980, April 1, 1985, May 6, 1988, June 26, 1989
and July 1, 1989 (Exhibit 13-6, Registration No. 2-72654; Exhibit
10-73, Form 10-K of EUA for 1985, File No. 1-5366; Exhibit 10-96,
Form 10-K of EUA for 1988, File No. 1-5366; Exhibits 10-93 and 10-
94, Form 10-K of EUA for 1989, File No. 1-5366).
*10-39.05 - Memorandum of understanding by and between Canal Electric Company
and Montaup Electric Company dated September 23, 1993.
*10-40.05 - Ancillary Agreement by and between Algonquin Gas Transmission
Company, Canal Electric Company and Montaup Electric Company dated
October 8, 1993.
Amendments to Exhibits Previously Filed:
None.
Subsidiaries of the Registrant:
23-1.08 - Montaup Electric Company, which is organized in Massachusetts, is
the only subsidiary of Eastern Edison Company and does business
under its indicated corporate name.
(b) Reports on Form 8-K.
- On January 25, 1994, the Registrant filed a current report on Form
8-K with respect to Item 5. (Other Events).
- On March 23, 1994, the Registrant filed a current report on Form
8-K with respect to Item 5. (Other Events).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Signature Title Date
EASTERN EDISON COMPANY
March 21,
1994
By /s/ Richard M. Burns Vice President
----------------------- (Principal Accounting Officer)
Richard M. Burns
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Donald G. Pardus Chairman of the Board (Principal
------------------------ Executive Officer) and Director
Donald G. Pardus
/s/ John R. Stevens Vice Chairman and Director
------------------------ (Principal Financial Officer)
John R. Stevens
/s/ Richard M. Burns Vice President
------------------------ (Principal Accounting Officer)
Richard M. Burns
/s/ John D. Carney President and Director
------------------------
John D. Carney
/s/ Arthur A. Hatch Executive Vice President and
------------------------ Director
Arthur A. Hatch
March 21, 1994
/s/ Robert G. Powderly Executive Vice President and
------------------------ Director
Robert G. Powderly
/s/ Robert W. Giggey Director
------------------------
Robert W. Giggey
/s/ Donald H. Ramsbottom Director
------------------------
Donald H. Ramsbottom
/s/ Elizabeth Alden Director
------------------------
Elizabeth Alden
EASTERN EDISON COMPANY AND SUBSIDIARY
Item 8 and Item 14(a)(1).
Consolidated Financial Statements and
Supplementary Data
Item 14(a)(2).
Financial Statement Schedules
Eastern Edison Company and Subsidiary
Consolidated Statement of Income
Years Ended December 31,
(In Thousands)
<TABLE>
<S> <C> <C> <C>
1993 1992 1991
Operating Revenues:
From Affiliated Companies $ 121,934 $ 118,080 $ 120,774
Other 295,087 302,108 293,835
Total Operating Revenues 417,021 420,188 414,609
Operating Expenses:
Fuel 85,066 96,589 98,874
Purchased Power - Demand 121,379 123,151 122,811
Other Operation and Maintenance (Schedul 80,781 72,009 72,827
Affiliated Company Transactions 23,700 23,840 24,239
Depreciation and Amortization 26,450 25,991 25,604
Taxes - Other than Income (Schedule X) 9,287 9,400 8,062
- Income 15,945 16,074 10,030
Total Operating Expenses 362,608 367,054 362,447
Operating Income 54,413 53,134 52,162
Equity in Earnings of Jointly Owned Compani 1,750 1,953 2,011
Allowance for Other Funds Used During
Construction 289 417 547
Other (Deductions) Income - Net (289) 5,643 1,540
Income Before Interest Charges 56,163 61,147 56,260
Interest Charges:
Interest on Long-Term Debt 22,584 27,509 30,151
Other Interest Expense 2,863 1,261 (448)
Allowance for Borrowed Funds Used During
Construction (Credit) (385) (530) (990)
Net Interest Charges 25,062 28,240 28,713
Net Income 31,101 32,907 27,547
Preferred Dividend Requirements 2,956 3,676 3,784
Consolidated Net Earnings $ 28,145 $ 29,231 $ 23,763
</TABLE>
Consolidated Statement of Retained Earnings
Years Ended December 31,
(In Thousands)
<TABLE>
<S> <C> <C> <C>
1993 1992 1991
Retained Earnings - Beginning of Year $ 100,767 $ 91,636 $ 84,389
Net Income 31,101 32,907 27,547
Redemption Cost of Preferred Stock (16) (17)
Amortization of Preferred Stock Redemption (597) (596) (597)
Total 131,271 123,931 111,322
Dividends Paid:
Preferred 2,977 3,676 3,784
Common 24,779 19,488 15,902
Retained Earnings - End of Year $ 103,515 $ 100,767 $ 91,636
</TABLE>
The accompanying notes are an integral part of the financial statements.
Eastern Edison Company and Subsidiary
Consolidated Statement of Cash Flows
Years Ended December 31,
(In Thousands)
<TABLE>
<S> <C> <C> <C>
1993 1992 1991
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 31,101 $ 32,907 $ 27,547
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Depreciation and Amortization 29,477 28,582 31,663
Amortization of Nuclear Fuel 5,136 5,055 4,219
Deferred Taxes 2,981 8,530 5,409
Investment Tax Credit, Net (1,016) (1,078) 153
Allowance for Funds Used During Cons (675) (947) (1,537)
Other - Net (2,246) (3,744) (1,089)
Changes to Operating Assets and Liabilities:
Accounts Receivable (7) 21,255 (24,987)
Fuel, Materials and Supplies 899 (145) 4,998
Accounts Payable (792) 1,772 3,102
Accrued Taxes 835 585 7,215
Other - Net (6,148) (5,866) 817
Net Cash Provided from Operating Activities 59,545 86,906 57,510
CASH FLOW FROM INVESTING ACTIVITIES:
Construction Expenditures (22,581) (14,664) (20,045)
Investment in Subsidiaries 30
Net Cash Used in Investing Activities (22,581) (14,664) (20,015)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuances:
Long-Term Debt 195,000 35,000
Preferred Stock 30,000
Redemptions:
Long-Term Debt (205,000) (80,000)
Preferred Stock (41,600) (1,200) (1,200)
Premium on Reacquisition and Financing (12,430) (3,102) (520)
Common Stock Dividends Paid (24,779) (19,488) (15,902)
Preferred Dividends Paid (2,977) (3,676) (3,784)
Net Cash Used in Financing Activities (61,786) (72,466) (21,406)
Net (Decrease) Increase in Cash
and Temporary Cash Investments (24,822) (224) 16,089
Cash and Temporary Cash Investments at
Beginning of Year 25,519 25,743 9,654
Cash and Temporary Cash Investments at
End of Year $ 697 $ 25,519 $ 25,743
Cash paid during the year for:
Interest (Net of Amounts Capitaliz $ 27,200 $ 26,786 $ 29,102
Income Taxes $ 13,372 $ 911 $ 2,202
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
Eastern Edison Company and Subsidiary
Consolidated Balance Sheet
December 31,
(In Thousands)
<CAPTION>
ASSETS
<S> <C> <C>
1993 1992
Utility Plant and Other Investments:
Utility Plant (Schedule V) $ 791,443 $ 780,295
Less Accumulated Provision for Depreciation
(Schedule VI) 226,391 209,374
Net Utility Plant 565,052 570,921
Non-Utility Property - Net (Schedules V & VI) 2,705 2,705
Investment in Jointly Owned Companies 13,425 13,596
Other Investments (at cost) 50 50
Total Utility Plant and Other Investments 581,232 587,272
Current Assets:
Cash and Temporary Cash Investments 697 25,519
Accounts Receivable:
Customers 25,989 26,181
Others 2,569 2,134
Accrued Unbilled Revenue 8,595 8,090
Associated Companies 11,220 11,962
Fuel (at average cost) 6,324 7,180
Plant Materials and Operating Supplies (at average cost) 3,514 3,557
Prepayments and Other Current Assets 10,848 14,022
Total Current Assets 69,756 98,645
Deferred Debits:
Unrecovered Regulatory Plant Costs 16,908 22,663
Other Deferred Debits 74,377 67,930
Total Deferred Debits 91,285 90,593
Total Assets $ 742,273 $ 776,510
LIABILITIES AND CAPITALIZATION
Capitalization:
Common Equity $ 223,005 $ 220,257
Non-Redeemable Cumulative Preferred Stock - Net 0 8,949
Redeemable Preferred Stock - Net 29,670 30,643
Preferred Stock Redempton Cost (4,846) (2,472)
Long-term Debt - Net 264,134 269,995
Total Capitalization 511,963 527,372
Current Liabilities:
Redeemable Preferred Stock Sinking Fund 0 1,400
Long-term Debt Due Within One Year 0 5,000
Accounts Payable:
Public 22,611 24,748
Associated Companies 4,221 2,876
Customer Deposits 1,141 1,036
Taxes Accrued 4,225 3,391
Interest Accrued 6,136 9,276
Other Current Liabilities 9,009 15,295
Total Current Liabilities 47,343 63,022
Deferred Credits:
Unamortized Investment Credit 19,132 20,149
Other Deferred Credits 46,229 50,699
Total Deferred Credits 65,361 70,848
Accumulated Deferred Taxes 117,606 115,268
Commitments and Contingencies (J)
Total Liabilities and Capitalization $ 742,273 $ 776,510
( ) Denotes Contra
</TABLE>
The accompanying notes are an integral part of the financial statements.
Eastern Edison Company and Subsidiary
Consolidated Statement of Capitalization
December 31,
(In Thousands)
<TABLE>
<S> <C> <C>
1993 1992
Common Stock:
$25 par value, authorized and outstanding
2,891,357 shares $ 72,284 $ 72,284
Other Paid-In Capital 47,249 47,249
Common Stock Expense (43) (43)
Retained Earnings 103,515 100,767
Total Common Equity 223,005 220,257
Non-Redeemable Cumulative Preferred Stock:
4.64%, $100 par value, 60,000 shares (1) 6,000
8.32%, $100 par value, 30,000 shares (1) 3,000
Expense, Net of Premium (51)
Total Non-Redeemable Preferred Stock 0 8,949
Redeemable Preferred Stock:
9.00%, $100 par value 120,000 shares (1) 12,000
9.80%, $100 par value 200,000 shares (1) 19,200
6 5/8%, $100 par value, 300,000 shares (1) 30,000
Expense, Net of Premium (330) (557)
Preferred Stock Redemption Cost (4,846) (2,472)
Total Redeemable Preferred Stock 24,824 28,171
Long-Term Debt:
First Mortgage and Collateral Trust Bonds:
5 7/8% due 1998 20,000
6 7/8% due 2003 40,000
8% due 2023 40,000
5 3/4% due 1998 40,000
6.35% due 2003 8,000
4.875% due 1996 7,000
4 1/2% due 1993 5,000
8.90% Secured Medium-Term Notes due 1995 10,000 10,000
7.78% Secured Medium-Term Notes due 2002 35,000 35,000
6 1/2% due 1997 7,000
10 1/8% due 1997 35,000
9 7/8% due 1998 40,000
8 3/8% due 1999 5,000
7 7/8% due 2002 8,000
8 3/8% due 2003 10,000
9 5/8% due 2016 55,000
Pollution Control Revenue Bond:
5 7/8% due 2008 40,000
10 1/8% due 2008 40,000
Unsecured Medium-Term Notes:
9-9 1/4% due 1995 - Series A 25,000 25,000
Unamortized (Discount) - Net (866) (5)
Total 264,134 274,995
Less Portion Due Within One Year 5,000
Total Long-Term Debt 264,134 269,995
Total Capitalization $ 511,963 $ 527,372
</TABLE>
(1) Authorized and Outstanding.
The accompanying notes are an integral part of the financial statements.
EASTERN EDISON COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992, and 1991
(A) Summary of Significant Accounting Policies:
General: The accounting policies and practices of Eastern Edison and of
Montaup are subject to regulation by FERC and the MDPU with respect to their
rates and accounting. Eastern Edison and Montaup conform with generally
accepted accounting principles, as applied in the case of regulated public
utilities, and conform with the accounting requirements and ratemaking
practices of the regulatory authority having jurisdiction.
Principles_of_Consolidation: The consolidated financial statements
include the accounts of Eastern Edison and its subsidiary, Montaup. All
material intercompany balances and transactions have been eliminated in
consolidation.
Jointly_Owned_Companies: Montaup follows the equity method of accounting
for its stock ownership investments in jointly owned companies including four
regional nuclear generating companies. Montaup's investments in these nuclear
generating companies range from 2.25 to 4.50 percent. Montaup is entitled to
the electricity produced from these facilities based on its ownership interests
and is billed pursuant to contractual agreements which are approved by FERC.
One of the four nuclear generating facilities is being decommissioned, but
Montaup is required to pay its share of certain continuing costs (see Note J -
Commitments and Contingencies -- Nuclear Power Supply).
Montaup also has an equity investment of 3.27% in each of the two
companies which own and operate interconnection facilities used to transmit
hydroelectric power between the Hydro-Quebec Electric System and New England.
Transactions_with_Affiliates: Eastern Edison is a wholly owned subsidiary
of EUA. In addition to its investment in Eastern Edison, EUA has interests in
two other retail companies, a service corporation, and three other non-utility
companies.
Transactions between Montaup and other affiliated companies include the
following: sales of electricity by Montaup to Blackstone and Newport of
approximately $121,447,000 in 1993, $117,714,000 in 1992 and $120,511,000 in
1991; accounting, engineering and other services rendered by EUA Service to
Eastern Edison and Montaup of approximately $27,418,000, $23,196,000, and
$23,206,000 in 1993, 1992 and 1991, respectively; and, operating expense from
the rental of transmission facilities by Blackstone to Montaup of approximately
$2,884,000 in 1993 $2,445,000 in 1992, and $2,660,000 in 1991. Montaup rental
of transmission facilities to Newport for the years 1993, 1992, and 1991
amounted to $487,000, $365,000, and $263,000 respectively. Transactions with
affiliated companies are subject to review by applicable regulatory
commissions.
Utility_Plant_and_Depreciation: Utility plant is stated at original
cost. The cost of additions to utility plant includes contracted work, direct
labor and material, allocable overhead, allowance for funds used during
(A) Summary of Significant Accounting Policies: -- (Continued)
construction and indirect charges for engineering and supervision. For
financial statement purposes, depreciation is computed on the straight-line
method based on estimated useful lives of the various classes of property.
Provisions for depreciation, on a consolidated basis, were equivalent to a
composite rate of approximately 3.2% for 1993 and 1992, and 3.1% for 1991 based
on the average depreciable property balances at the beginning and end of each
year.
Allowance_for_Funds_Used_During_Construction: AFUDC represents the
estimated cost of borrowed and equity funds used to finance Eastern Edison's
and Montaup's construction program. In accordance with regulatory accounting,
AFUDC is capitalized, as a cost of utility plant, in the same manner as certain
general and administrative costs. AFUDC is not an item of current cash income,
but is recovered over the service life of utility plant in the form of
increased revenues collected as a result of higher depreciation expense. The
combined rate used in calculating AFUDC was 9.3% in 1993, 10.83% in 1992, and
11.56% in 1991.
Operating_Revenues: Revenues are based on billing rates authorized by
applicable federal and state regulatory commissions. Eastern Edison follows
the policy of accruing the estimated amount of unbilled base rate revenues for
electricity provided at the end of the month to more closely match costs and
revenues. Montaup recognizes revenues when billed. In addition, Eastern
Edison and Montaup also record the difference between fuel costs incurred and
fuel costs billed. Montaup also records the difference between purchased power
costs incurred and billed.
Income_Taxes: The general policy of Eastern Edison and Montaup with
respect to accounting for federal income taxes is to reflect in income the
estimated amount of taxes currently payable, as determined from the
consolidated tax return on an allocated basis, and to provide for deferred
taxes on certain items subject to temporary differences to the extent permitted
by the various regulatory commissions.
As permitted by the regulatory commissions, it is the policy of Eastern
Edison and Montaup to defer recognition of the annual investment tax credits
and to amortize these credits over the productive lives of the related assets.
Cash_and_Temporary_Cash_Investments: Eastern Edison and Montaup consider
all highly liquid investments and temporary cash investments with a maturity of
three months or less, when acquired, to be cash equivalents.
(B) Income Taxes:
Components of income tax expense for the years 1993, 1992 and 1991 are as
follows:
________________________________________________________________
(In_Thousands)____________________1993________1992________1991__
Federal:
Current $11,554 $ 8,236 $ 3,548
Deferred 2,841 6,141 3,619
Investment Tax Credit, Net _(1,016) _(1,078) ____153
_13,379 _13,299 __7,320
State:
Current 2,359 2,044 725
Deferred ____207 ____731 __1,985
__2,566 __2,775 __2,710
Charged to Operations 15,945 16,074 10,030
Charged to Other Income:
Current 392 171 (1,592)
Deferred ____(67) __1,658 ___(195)
Total $16,270 $17,903 $ 8,243
======= ======= =======
Total income tax expense was different than the amounts computed by
applying federal income tax statutory rates to book income subject to tax for
the following reasons:
__________________________________________________________________________
(In_Thousands)______________________________1993________1992________1991__
Federal Income Tax Computed at
Statutory Rates $16,580 $17,275 $12,169
(Decreases) Increases in Tax from:
Equity Component of AFUDC (101) (142) (186)
Depreciation of Equity AFUDC 851 493 67
Amortization and Utilization of ITC (1,066) (1,069) (1,071)
Consolidated Tax Savings (314) (3,060)
State Taxes, Net of Federal Income
Tax Benefit 1,735 2,087 1,890
Cost of Removal (273) 150 (853)
Other __1,142 ___(891) ___(713)
Total Income Tax Expense $16,270 $17,903 $ 8,243
======= ======= =======
(B) Income Taxes -- Continued
The provision for deferred taxes resulting from temporary differences is
comprised of the following:
_________________________________________________________________________
(In_Thousands)_____________________________1993________1992________1991__
Excess Tax Depreciation $ 5,704 6,851 $ 7,121
Debt Component of AFUDC (1,899) (1,899) (1,924)
Abandonment Losses (622) (706)
Capitalized Overheads (97) (337) (690)
Effect of State and Local Taxes 196 1,020 1,985
Deferred Charges 556 (538) (751)
Conservation and Load Management (315) (315) (325)
Pilgrim Refund 83 112 2,180
Net Operating Loss Carry Forward 1,702 (1,469)
Other -- Net (1,201) 1,309 (12)
Alternative Minimum Tax 256
Pensions ___(46) ____991 _______
Total $ 2,981 $ 8,530 $ 5,409
======= ======= =======
Eastern Edison and Montaup adopted FASB statement No. 109, "Accounting for
Income Taxes" (FAS109) effective as of January 1, 1993. FAS109 superseded FASB
Statement No. 96 (FAS96) which required recognition of deferred income taxes
for temporary differences that are reported in different years for financial
reporting and tax purposes using the liability method. Under the liability
method deferred tax liabilities or assets are computed using the tax rates that
will be in effect when temporary differences reverse. Generally, for regulated
companies, the change in tax rates may not be immediately recognized in
operating results because of rate making treatment and provisions in the Tax
Reform Act of 1986. The adoption of FAS109 had no impact on the results of
operations for 1993. At December 31, 1993 total deferred tax assets for which
no valuation allowance was deemed necessary were $24.3 million and total
deferred tax liabilities were $141.6 million.
Total deferred tax assets and liabilities are comprised as follows:
Deferred Tax Deferred Tax
Assets Liabilities
($000) ($000)
Plant Related Plant Related
Differences 16,721 Differences 135,707
Alternative Refinancing
Minimum Tax 4,254 Costs 1,866
Litigation Provisions 811 Pensions 1,404
Pensions 421
Other 2,142 Other 2,595
Total 24,349 Total 141,572
====== =======
As of December 31, 1993 and 1992, the Company had recorded on its
Consolidated Balance Sheet a regulatory liability to ratepayers of
approximately $24.7 million and $31.3 million, respectively. This amount
primarily represents excess deferred income taxes resulting from the reduction
in the federal income tax rate and also includes deferred taxes provided on
investment tax credits. Also at December 31, 1993, and 1992 a regulatory asset
of approximately $42.3 million and $46.5 million, respectively had been
recorded, representing the cumulative amount of federal income taxes on
temporary depreciation differences which were previously flowed through to
ratepayers.
Montaup has approximately $597,000 of investment tax credit carryforwards
which expire between the years 2001 and 2005. Eastern Edison and Montaup have
approximately $100,000 and $4.2 million, respectively, of alternative minimum
tax credits which can be utilized to reduce the EUA System's consolidated
regular tax liability and have no expiration.
(C) Capital Stock:
Eastern Edison redeemed with available cash its 8.32% Series and 4.64%
Series non-redeemable preferred stock on June 1, 1993 and December 1, 1993,
respectively. In connection with these redemptions, Eastern Edison incurred
premiums of approximately $106,000 related to the 8.32% Series and $179,000
related to 4.64% Series. These amounts are included in Preferred Stock
Redemption Costs on the Consolidated Statement of Capitalization. Eastern
Edison will seek recovery of these amounts in its next rate proceeding.
Under the terms and provisions of the issues of preferred stock of Eastern
Edison, certain restrictions are placed upon the payment of dividends on common
stock by Eastern Edison. At December 31, 1993 and 1992, the respective
capitalization ratios were in excess of the minimum requirements which would
make these restrictions effective.
(D) Redeemable Preferred Stock:
On June 1, 1993, Eastern Edison used available cash to redeem all of its
9.00% Series Preferred Stock. In connection with this redemption, a premium of
approximately $850,500 was incurred and is included in Preferred Stock
Redemption Costs on the Consolidated Statement of Equity Capital and Preferred
Stock.
On August 11, 1993, Eastern Edison issued 300,000 shares of $100 par
value, 6-5/8% Preferred Stock. The proceeds were used to redeem its
outstanding 9.80% Series Preferred Stock and for other corporate purposes. In
connection with the 9.80% Series redemption, Eastern Edison incurred a premium
of approximately $1,352,000. This premium is also included in Preferred Stock
Redemption Costs on the Consolidated Statement of Equity Capital and Preferred
Stock. Eastern Edison will seek recovery of these premiums in its next rate
proceeding.
Eastern Edison's 6-5/8% Preferred Stock issue is entitled to mandatory
sinking funds sufficient to redeem 15,000 shares during each twelve-month
period commencing September 1, 2003. The redemption price is $100 per share
plus accrued dividends. All outstanding shares of the 6-5/8% issue will be
subject to mandatory redemption on September 1, 2008 at a price of $100 per
share plus accrued dividends.
(D) Redeemable Preferred Stock -- Continued
In the event of liquidation, the holders of Eastern Edison's 6-5/8%
Preferred Stock are entitled to $100 per share plus accrued dividends.
(E) Retained Earnings:
Under the provisions of Eastern Edison's Indenture securing the First Mort
gage and Collateral Trust Bonds, retained earnings in the amount of
approximately $97,803,000 as of December 31, 1993 were unrestricted as to the
payment of cash dividends on its Common Stock.
(F) Long-Term Debt:
The various mortgage bond issues of Eastern Edison are collateralized by
substantially all of their utility plant. In addition, Eastern Edison's bonds
are collateralized by securities of Montaup, which are wholly-owned by Eastern
Edison, in the principal amount of approximately $259 million.
In May 1993, Eastern Edison issued $100 million of First Mortgage and
Collateral Trust Bonds (FMBs) in the following denominations: (i) $20 million
of 5-7/8% Bonds due May 1, 1998; (ii) $40 million of 6-7/8% Bonds due May 1,
2003; and (iii) $40 million of 8% Bonds due May 1, 2023. The proceeds were
used to redeem Eastern Edison's $55 million of 9-5/8%, $35 million of 10-1/8%
and $10 million of 8-3/8% FMBs.
In June 1993, Eastern Edison used available cash to redeem $5 million of
8-3/8% FMBs.
In July 1993, Eastern Edison issued $40 million 5-3/4% FMBs, proceeds of
which were used to redeem its $40 million 9-7/8% FMBs in September 1993.
Eastern Edison redeemed in mid-August 1993 its $40 million 10-1/8%
Pollution Control Revenue Bonds with the proceeds from the July issuance of $40
million 5-7/8% Pollution Control Revenue Bonds.
In September 1993, Eastern Edison issued $8 million of 6.35% FMBs due
September 1, 2003 and $7 million of 4.875% FMBs due September 1, 1996. The
proceeds were used to redeem $8 million of 7-7/8% FMBs due 2002 and $7 million
of 6.5% FMBs due 1997.
The Company aggregate amount of current cash sinking fund requirements and
maturities of long-term debt, (excluding amounts that may be satisfied by
available property additions) for each of the five years following 1993 are:
none in 1994, $35 million in 1995, $7 million in 1996, none in 1997 and $60
million in 1998.
(G) Lines of Credit:
EUA System companies including Eastern Edison maintain short-term lines of
credit with various banks aggregating approximately $140 million. At December
31, 1993, unused short-term lines of credit were approximately $103 million.
In accordance with informal agreements with the various banks, commitment fees
are required to maintain certain lines of credit.
(H) Jointly Owned Facilities:
At December 31, 1993, in addition to the stock ownership interests
discussed in Note A, Summary of Significant Accounting Policies - Jointly Owned
Companies, Montaup had direct ownership interests in the following electric
generating facilities (dollars in thousands):
Accumulated
Provision For Net Construc-
Utility Depreciation Utility tion
Percent Plant in and Plant in Work in
Owned Service Amortization Service Progress
Montaup:
Canal Unit 2 50.00% $ 67,000 $40,142 $ 26,858 $ 873
Wyman Unit 4 1.96% 4,020 1,803 2,217 11
Seabrook Unit 1 2.90% 207,898 15,676 192,222 1,480
Millstone Unit 3 4.01% 183,938 33,491 150,447 486
The foregoing amounts represent Montaup's interest in each facility,
including nuclear fuel where appropriate, and are included on the
like-captioned lines on the Consolidated Balance Sheet. At December 31, 1993,
Montaup's total net investment in nuclear fuel of the Seabrook and Millstone
Units amounted to $5.7 million and $2.8 million, respectively. Montaup's
shares of related operating and maintenance expenses with respect to units
reflected in the table above are included in the corresponding operating
expenses.
(I) Fair Value of Financial Instruments:
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate:
Cash and Temporary Cash Investments: The carrying amount approximates
fair value because of the short-term maturity of those instruments.
Redeemable Preferred Stock and Long-Term Debt: The fair value of the
Company's redeemable preferred stock and long-term debt were based on quoted
market prices for such securities.
The estimated fair values of the Company's financial instruments at
December 31, 1993 are as follows (dollars in thousands):
Carrying Fair
Amount Value
_________________________________________________________________
Cash and Temporary Cash Investments $ 697 $ 697
Redeemable Preferred Stock 30,000 30,975
Long-Term Debt 265,000 270,827
(J) Commitments and Contingencies:
Joint owners of nuclear projects are also subject to the risk that one of
their number may be unable or unwilling to finance its share of the project's
costs, thus jeopardizing continuation of the project. On February 28, 1991,
EUA Power (now known as Great Bay Power Corporation), a 12.13% owner of the
Seabrook Project in which Montaup has a 2.9% ownership interest, filed for
protection under Chapter 11 of the federal Bankruptcy Code. The Great Bay
Power Corporation Plan of Reorganization was confirmed by the Bankruptcy Court
on March 5, 1993. On February 2, 1994, the Official Bondholders Committee of
Great Bay Power Corporation announced that it accepted a plan of reorganization
financing proposal from Omega Advisers, Inc. which provided for a $35 million
equity investment in exchange for 60% of the equity of the reorganized Great
Bay Power Corporation. Implementation of the Omega proposal will require
modification of the plan of reorganization and approval from the Bankruptcy
Court, the NRC, FERC and the NHPUC. Under the plan, as modified, the
bondholders will receive 40% of the equity in the reorganized Great Bay Power
Corporation in exchange for their bondholder claims.
Nuclear Fuel Disposal and Nuclear Plant Decommissioning Costs: The
Nuclear Waste Policy Act of 1982 (NWPA) establishes that the federal government
is responsible for the disposal of spent nuclear fuel and obligates the
Department of Energy (DOE) to design, license, build and operate a permanent
repository for high level radioactive wastes and spent nuclear fuel. NWPA
specifies that DOE provide for the disposal of the waste and spent fuel
starting in 1998. DOE does not expect to achieve this date. As an interim
strategy, DOE is considering making available other federal government sites to
temporarily accommodate those firms that have depleted their own on-site spent
nuclear fuel storage capacity. The DOE anticipates that a permanent disposal
site for spent fuel will be ready to accept fuel for storage or disposal on or
before 2010. However, the NRC, which must license the site, has stated only
that a permanent repository will become available by the year 2025. Millstone
Unit 3 management has indicated it has sufficient on-site storage facilities to
accommodate high level wastes and spent fuel for the projected life of the
unit. Only minimal capital expenditures are projected for the foreseeable
future. At Seabrook there is on-site storage capacity which, with minimal
capital expenditures, should be sufficient for twenty years, or to the year
2010. No near-term capital expenditures are anticipated to accommodate an
increase in storage requirements after 2010. Montaup is required to pay a fee
based on its share of the generation from Millstone Unit 3 and Seabrook Unit
1. Montaup is recovering these fees through its fuel adjustment clause.
Also, Montaup is recovering through rates its share of estimated
decommissioning costs for Millstone Unit 3 and Seabrook Unit 1. Montaup's
share of the current estimate of total costs to decommission Millstone Unit 3
is $15.1 million in 1993 dollars, and Seabrook Unit 1 is $10.6 million in 1993
dollars. These figures are based on studies performed for the lead owners of
the plants. Montaup also pays into decommissioning reserves pursuant to
contractual arrangements with other nuclear generating facilities in which it
has an equity ownership interest or life of the unit entitlement. Such expenses
are currently recoverable through rates.
In December 1992, Montaup commenced a declaratory judgment action in which
it sought to have the Massachusetts Superior Court determine its rights under
(J) Commitments and Contingencies -- Continued
the Power Purchase Agreement between it and Aquidneck Power Limited Partnership
(Aquidneck). Montaup sought a declaration that the Power Purchase Agreement
was binding on the parties according to its terms. Aquidneck asserted that
Montaup had either an express or implied obligation to negotiate new terms and
conditions to the Power Purchase Agreement. Specifically, the defendants
sought to amend, through negotiations, certain milestone events to which they
were bound in the Power Purchase Agreement as written. Aquidneck failed to
meet the first milestone of January 1, 1993. Accordingly, on January 5, 1993,
Montaup exercised its rights to terminate the Power Purchase Agreement
effective immediately. In January 1994, a counterclaim by Aquidneck claimed
certain breaches of the Power Purchase Agreement, including an alleged failure
on the part of Montaup to renegotiate the terms and conditions of the Power
Purchase Agreement relating to the first milestone event. Also in January
1994, Aquidneck sought to join EUA and EUA Service as parties to the suit.
Aquidneck apparently claims $11 million of damages on the theory that EUA
can "avoid an approximately $11 million obligation to purchase capacity and
power which it does not currently need." Aquidneck seeks treble damages
claiming Montaup, EUA and EUA Service violated state laws willfully and
knowingly.
Montaup, EUA and EUA Service intend to defend the counterclaim vigorously
and believe that Aquidneck's claims have no basis in law.
Pensions: Eastern Edison and Montaup participate with the other EUA
System companies in non-contributory defined benefit pension plans covering
substantially all of their employees. Regulatory plan benefits are based on
years of service and average compensation over the four years prior to
retirement. In the case of the supplemental retirement plan for certain
officers of the EUA System, benefits are based on compensation at retirement
date. It is the EUA System's policy to fund the regular plan on a current
basis in amounts determined to meet the funding standards established by the
Employee Retirement Income Security Act of 1974.
Net pension (income) expenses for 1993, 1992 and 1991 included the
following
components (in thousands):
<TABLE>
<S> <C> <C> <C>
1993 1992 1991
Service cost - benefits earned during
the period $ 1,414,382 $ 1,342,740 $ 1,256,862
Interest cost on projected benefit
obligation 5,133,080 4,719,450 4,385,884
Actual return on assets (10,891,951) (4,834,470) (13,754,350)
Net amortization and deferrals 4,017,972 (1,689,973) 7,294,633
Total pension
(income) expense $( 326,517) $( 462,253) $( 816,971)
=========== =========== ===========
(J) Commitments and Contingencies -- Continued
Assumptions used to determine pension cost:
1993 1992 1991
Discount Rate 8.75% 8.75% 8.75%
Compensation Increase Rate 6.00% 6.00% 6.00%
Long-Term Return on Assets 10.00% 10.00% 10.00%
The assumptions used to determine pension costs were changed effective
January 1, 1994 to 7.25%, 4.75%, and 9.50%, for the discount rate, compensation
increase rate, and long-term return on assets rate, respectively. The funded
status of the plan cannot be presented separately for Eastern Edison and
Montaup as they participate in the plan with other subsidiaries of EUA.
All benefits provided under the supplemental plan are unfunded and any
payments to plan participants are made by Eastern Edison or Montaup. As of
December 31, 1993 approximately $1.2 million was included in accrued expenses
and other liabilities for this plan. For the years ended December 31, 1993 and
1992 expenses related to the supplemental plan were $169,000 and for the year
ended December 31, 1991, such expenses were $116,000.
Post-Retirement Benefits: Retired employees are entitled to participate
in health care and life insurance benefit plans. Health care benefits are
subject to deductibles and other limitations. Health care and life insurance
benefits are partially funded by EUA System companies for all qualified
employees.
Eastern Edison adopted FAS106, "Accounting for Post-Retirement Benefits
Other Than Pensions," as of January 1, 1993. This standard establishes
accounting and reporting standards for such post-retirement benefits as health
care and life insurance. FAS106 further requires the accrual of the cost of
such benefits during an employee's years of service and the recognition of the
actuarially determined total post-retirement benefit obligations (Transition
Obligation) earned by existing employees and retirees. The Company elected to
recognize the Transition Obligation over a twenty year period as permitted by
FAS106. The resultant annual expense, including amortization of the Transition
Obligation and net of capitalized amounts, amounted to approximately $4.8
million in 1993. The Regulatory decisions issued in December 1992 permitted
Eastern Edison to recover through rates approximately $2.1 million of this
amount in 1993. Montaup was allowed to defer FAS106-related costs through 1995
or until it filed for recovery of such amounts prior to that time. Accordingly
approximately $1.4 million of FAS106-related costs were deferred by Montaup in
1993. Montaup has requested recovery of all of its FAS106 expenses including
amortization of deferred amounts in its current rate application. The total
cost of Post-Retirement Benefits other than Pensions for 1993 includes the
following components (in thousands):
(J) Commitments and Contingencies -- Continued
1993
Service cost 767
Interest cost 3,556
Actual return on plan assets (41)
Amortization of transition obligation 2,040
Net other amortization & deferrals (40)
______________________________________________________________________________
Total Post-Retirement Benefit Cost 6,282
Assumptions
Discount rate 8.75%
Health care cost trend rate-near-term 13.00%
-long-term 6.25%
Salary increase rate 6.00%
Rate of return on plan assets- Union 8.50%
- Non-union 5.50%
Reconciliation of funded status:
1993
Accumulated Post-Retirement Benefit Obligation (APBO):
Retirees (20,556)
Active employee fully eligible for benefits (7,669)
Other active employees (9,488)
Total (37,713)
Fair Value of assets 747
Unrecognized Transition Obligation 31,674
Unrecognized Prior Service Cost -
Unrecognized Net Loss (Gain) 2,597
(Accrued)/Prepaid Post-Retirement Benefit Cost (2,695)
The assumptions used to determine post-retirement benefit costs were
changed effective January 1, 1994, to 7.25%, 13.0% and 5.0% for the discount
rate, near-term health care cost trend and long-term health care cost trend,
respectively. These assumptions were used to calculate the funded status of
Post-Retirement Benefits at December 31, 1993.
Increasing the assumed health care cost trend rate by 1% each year would
increase the total post-retirement benefit cost for 1993 by $0.6 million and
increase the total accumulated post-retirement benefit obligation by $5.2
million.
Eastern Edison has also established an irrevocable external Voluntary
Employee Benefit Association (VEBA) Trust Fund as required by the
aforementioned regulatory decisions. Contributions to the VEBA fund commenced
in March 1993 and contributions totaling approximately $2.3 million were made
during 1993.
Prior to 1993, Eastern Edison and Montaup followed the "pay-as-you-go"
methodology for accounting for post-retirement benefits other than pensions.
The costs of the benefit, which amounted to approximately $1.5 million in 1992
and $1.1 million in 1991 were charged to expense.
Post-Employment Benefits: In November 1992, FASB issued Statement No.
112, "Employers' Accounting for Postemployment Benefits". EUA is required to
(J) Commitments and Contingencies -- Continued
adopt this standard no later than January 1, 1994. The estimated impact of
this standard on the Eastern Edison is immaterial and therefore it is
anticipated that no liability will be recorded.
Long-Term Purchased Power Contracts: Eastern Edison is committed under
long-term purchased power contracts, expiring on various dates through
September 2021, to pay demand charges whether or not energy is received. Under
terms in effect at December 31, 1993, the aggregate annual minimum commitments
for such contracts are approximately $121 million in 1994, $118 million in 1995
and 1996, and will aggregate $1.7 billion for the ensuing years. In addition,
the EUA System is required to pay additional amounts depending on the actual
amount of energy received under such contracts. The demand costs associated
with these contracts are reflected as Purchased Power-Demand on the
Consolidated Statement of Income. Such costs are recoverable through rates.
Construction: The Company cash construction requirements are estimated
at $36.0 million for the year 1994 and $104.3 million for the years 1995
through 1998.
Environmental Matters: The Comprehensive Environmental Response,
Compensation Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, and certain similar state statutes authorize
various governmental authorities to seek court orders compelling responsible
parties to take cleanup action at disposal sites which have been determined by
such governmental authorities to present an imminent and substantial danger to
the public and to the environment because of an actual or threatened release of
hazardous substances. Because of the nature of the Eastern Edison business,
various by-products and substances are produced or handled which are classified
as hazardous under the rules and regulations promulgated by the EPA as well as
state and local authorities. The Company generally provides for the disposal
of such substances through licensed contractors, but these statutory provisions
generally impose potential joint and several responsibility on the generators
of the wastes for cleanup costs. Eastern Edison and Montaup have been notified
with respect to a number of sites where they may be responsible for such costs,
including sites where they may have joint and several liability with other
responsible parties. It is the policy of the Company companies to notify
liability insurers and to initiate claims; at this time, however, no claims
have been filed against any insurer and the Company is unable to predict
whether liability, if any, will be assumed by, or can be enforced against, the
insurance carrier in these matters.
As of December 31, 1993, Eastern Edison and Montaup have incurred costs of
approximately $108,000 in connection with these sites. These amounts have been
financed primarily by internally generated cash.
The Company estimates that additional costs ranging from $450,000 to
$850,000 may be incurred at these sites through 1995 by the Company and the
other responsible parties. Estimates beyond 1995 cannot be made since site
studies, which are the basis of these estimates, have not been completed.
As a general matter Eastern Edison and Montaup will seek to recover costs
relating to environmental proceedings in their rates, although there is no
assurance that they will be authorized to recover any particular cost. Montaup
(J) Commitments and Contingencies -- Continued
is currently recovering certain of the incurred costs in its rates. Estimated
amounts after 1995 are not now determinable since site studies which are the
basis of these estimates have not been completed. As a result of the
recoverability of cleanup costs in rates and the uncertainty regarding both its
estimated liability, as well as its potential contributions from insurance
carriers and other responsible parties, the Company does not believe that the
ultimate impact of the environmental costs will be material to Eastern Edison
and thus no loss accrual has been made.
The Clean Air Act Amendments of 1990 (Clean Air Act) created new
regulatory programs and generally updated and strengthened air pollution
control laws. These amendments will expand the regulatory role of the United
States Environmental Protection Agency (EPA) regarding emissions from electric
generating facilities and a host of other sources. Montaup generating
facilities will most probably be first affected in 1995, when EPA regulations
will take effect. Tests at Montaup's coal-fired Somerset Unit No. 6 indicate
it will be able to utilize lower sulfur coal than is already being burned to
meet the 1995 air standards with only a minimal capital investment. Montaup
determined that it would not be economical to repair Unit No. 5 of the Somerset
Station and therefore has placed it in deactivated reserve. Eastern Edison
does not anticipate the impact from the Amendments to be material to its
financial position.
In April 1992, the Northeast States for Coordinated Air Use Management
(NESCAUM), an environmental advisory group for eight Northeast states including
Massachusetts and Rhode Island, issued recommendations for oxides of nitrogen
controls for existing utility boilers required to meet the ozone non-attainment
requirements of the Clean Air Act Amendments of 1990 (Clean Air Act). The
NESCAUM recommendations are more restrictive than the Clean Air Act
requirements. The Massachusetts Department of Environmental Management has
amended its regulations to require that Reasonably Available Control Technology
(RACT) be implemented at all stationary sources potentially emitting 50 tons or
more per year of oxides of nitrogen Rhode Island has not yet issued regulations
to implement oxides of nitrogen reduction requirements. Montaup is in the
process of reviewing compliance strategies. Any compliance strategy may
require the implementation of additional pollution control technology as early
as 1995. Montaup would seek recovery of pollution control expenditures through
rates.
A number of scientific studies in the past several years have examined the
possibility of health effects from electric and magnetic fields (EMF) that are
found everywhere there is electricity. While some of the studies have
indicated there may be some association between exposure to EMF and health
effects, many studies have indicated no direct association. In addition, the
research to date has not conclusively established a direct causal relationship
between EMF exposure and human health. Additional studies, which are intended
to provide a better understanding of the subject, are continuing.
Some states have enacted regulations to limit the strength of magnetic
fields at the edge of transmission line rights-of-way. Rhode Island has
enacted a statute which authorizes and directs the Energy Facility Siting Board
to establish rules and regulations governing construction of high voltage
transmission lines of 69 KV or more. Various bills are pending in the
(J) Commitments and Contingencies -- Continued
Massachusetts legislature that would require certain disclosures about the
potential health effects of EMF. Management cannot predict the ultimate
outcome of the EMF issue.
Guarantee of Financial Obligations: Montaup is a 3.27% equity participant
in two companies which own and operate transmission facilities interconnecting
New England and the Hydro Quebec system in Canada. Montaup has guaranteed
approximately $6.0 million of the outstanding debt of these two companies. In
addition, Montaup has a minimum rental commitment which totals approximately
$14.3 million under a noncancellable transmission facilities support agreement
for years subsequent to 1993.
Other
On January 8, 1992, the Massachusetts Municipal Wholesale Electric
Cooperative and its member municipalities, all of which are members of NEPOOL,
filed a suit in Massachusetts Superior Court against the investor-owned
utilities that are also members of NEPOOL. The suit alleges damages by
NEPOOL's establishment of minimum size requirements for generating units
designated as pool-planned generating units. The suit names as defendants
members of NEPOOL, including Blackstone, Eastern Edison, Montaup and Newport
(NEPOOL members of the EUA System). Discovery has not begun, pending
resolution of certain procedural matters. FERC, initiated an action when the
EUA subsidiaries and other participants filed and amendment to the NEPOOL
Agreement with the FERC that concerns many of the issues raised in the
Massachusetts litigation. The plaintiffs in the Massachusetts litigation, and
one other participant have objected to the amendment, and have sought tot
prevent or delay its effectiveness. The FERC has not yet determined whether or
when it will hold hearings on this matter. Management cannot predict the
ultimate outcome of this proceeding at this time.
</TABLE>
<TABLE>
Eastern Edison Company and Subsidiary Schedule V
Property, Plant and Equipment
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
COL. A COL. B COL. C COL. D COL. E COL. F
Balance at Other Charges Balance at
Beginning Additions Add (Deduct) - End of
Classification of Period at Cost Retirements Describe Period
For the Year Ended December 31, 1993:
Production Nuclear........ $367,193 $492 $498 ($48) (a) $367,139
Production --Steam........ 124,377 3,578 894 127,061
Production -- Other....... 4,571 1 4,572
Transmission and Distribution 239,779 10,191 3,075 246,895
General Plant............. 19,061 453 275 19,239
Intangible Plant.......... 273 273
Electric Property Held for Future Use 605 605
Nuclear Fuel in Service... 20,358 2,347 4,512 18,193
Construction Work in Progress 3,174 3,605 6,779
Nuclear Fuel in Process... 903 (216) 687
Total Utility Plant............ $780,294 $20,451 $0 $9,254 $0 ($48) $0 $791,443
Non-Utility Property $2,715 $0 $0 $0 $2,715
For the Year Ended December 31, 1992:
Production Nuclear........ $367,748 $654 $509 ($700) (b) 367,193
Production --Steam........ 122,336 2,409 368 124,377
Production -- Other....... 4,564 7 4,571
Transmission and Distribution 234,292 11,842 6,348 (7) (b) 239,779
General Plant............. 18,835 251 20 (5) (b) 19,061
Intangible Plant........ 273 273
Electric Property Held for Future Use 608 3 605
Nuclear Fuel in Service. 18,857 4,998 3,497 20,358
Construction Work in Progress 5,014 (1,840) 3,174
Nuclear Fuel in Process. 4,003 (3,100) 903
Total Utility Plant.......... $776,530 $15,221 $10,745 ($712) $780,294
Non-Utility Property $2,715 $0 $0 $0 $2,715
For the Year Ended December 31, 1991:
Production Nuclear...... $367,562 $689 $503 $367,748
Production --Steam........ 131,244 3,886 12,792 (b (2) (c) 122,336
Production -- Other....... 4,472 97 5 4,564
Transmission and Distribution 225,933 13,138 4,779 234,292
General Plant........... 18,054 866 45 (40) (c) 18,835
Intangible Plant........ 231 42 (c) 273
Electric Property Held for 608 608
Nuclear Fuel in Service... 15,557 6,343 3,043 18,857
Construction Work in Progress 5,310 (296) 5,014
Nuclear Fuel in Process. 9,026 (5,023) 4,003
Total Utility Plant.......... $777,997 $19,700 $21,167 $0 $776,530
Non-Utility Property $2,715 $0 $0 $0 $2,715
</TABLE>
(a) Millstone Sales Tax Refund received for years 1982-1986.
(b) Includes:
Credit for Millstone Connecticut Sales Tax Adjustment of ($245).
Credit for Seabrook Decommissioning Refund of ($586).
Seabrook Pre-Operating Decommissioning Surety Premium of $119.
(c) Transfer to Other Accounts.
<TABLE>
Eastern Edison Company and Subsidiary Schedule VI
Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment
(in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
Other
Additions Charges
Balance at Charged to Add Balance at
Beginning Costs and (Deduct) - End of
Description of Period Expenses Retirements Describe Period
For the Year Ended December 31, 1993:
Accumulated Depreciation, Depletion
and Amortization $209,374 $29,131 $12,057 ($57) (a) $266,391
Nonutility Property $10 $0 $10
For the Year Ended December 31, 1992:
Accumulated Depreciation, Depletion and
Amortization $191,700 $28,622 $11,417 $469 (b) $209,374
Nonutility Property $10 $0 $10
For the Year Ended December 31, 1991:
Accumulated Depreciation, Depletion and
Amortization $186,449 $27,497 $22,189 ($57) (a) $191,700
Nonutility Property $10 $0 $10
(a) FERC audit adjustment for period 1/1/81 to 12/31/85 due to change in rate - ($57)
(b) Sale of Water Heaters, Buyout of Nuclear Fuel Contract , and FERC Audit Adjustment
Sale of Water Heaters - $494
NEMAL Buyout - $32
FERC Audit Adjustment - ($57)
</TABLE>
<TABLE>
Eastern Edison Company and Subsidiary Schedule IX
Short-Term Borrowings
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
Maximum Average Weighted
Category of amount amount average
aggregate Balance Weighted outstanding outstanding Interest rate
short-term at end Average during during the during the
borrowings of period Interest Rate the period period (a) period (b)
Notes Payable
to Banks:
December 31,
1993 $0 0.0% $12,403 $1,818 3.5%
1992 $0 0.0% $7,055 $0 4.1%
1991 $0 0.0% $1,985 $25 6.0%
</TABLE>
(a) The average amount outstanding during the period was computed by
dividing the summation of the daily principal balances outstanding by
365 days in 1993 and 1991, respectively and 366 in 1992.
(b) The weighted average interest rate during the period was computed by
dividing the actual interest expense by the daily average
short-term debt outstanding.
Schedule X
Eastern Edison Company and Subsidiary
Supplementary Income Statement Information
(In Thousands of Dollars)
COLUMN A COLUMN B
For the Years Ended December 31,
1993 1992 1991
Charged to Costs and Expense
Taxes -- Other than Income: (a)
Eastern Edison Company................. 4,398 3,715 3,529
Montaup Electric Company............... 5,438 6,235 5,161
Total.................................. 9,836 9,950 8,690
Less: Charged to Other Accounts....... 550 550 628
Charged to Operating Expenses.......... 9,286 9,400 8,062
Maintenance Expense Charged to Operations 16,254 13,364 14,706
Amounts of rents, advertising costs and research and development costs did
not exceed 1% of gross revenues.
Amounts of depreciation expense were as shown in the income statement and
notes thereto.
Local
NOTES: (a) Payroll Property Sales and Other Tax
Taxes Taxes Use Tax Expense Total
For the Year Ended
December 31, 1993:
Eastern Edison.......... 1,231 2,722 445 4,398
Montaup................. 970 4,172 91 205 5,438
Total................... 2,201 6,894 91 650 9,836
For the Year Ended
December 31, 1992:
Eastern Edison.......... 1,214 2,500 1 3,715
Montaup................. 880 5,016 339 6,235
Total................... 2,094 7,516 340 9,950
For the Year Ended
December 31, 1991:
Eastern Edison.......... 1,218 2,308 3 3,529
Montaup................. 824 4,337 0 5,161
Total................... 2,042 6,645 3 8,690
Report of Independent Accountants
To the Directors and Shareholders of
Eastern Edison Company and Subsidiary:
We have audited the consolidated financial statements and the consolidated
financial statement schedules of Eastern Edison Company (a wholly-owned
subsidiary of Eastern Utilities Associates) and its subsidiary, Montaup
Electric Company, (collectively referred to as the "Company" hereafter) listed
in item 14 (a) (1) and (2) of this Form 10-K. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules 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 reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1993 and 1992, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1993 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
Coopers & Lybrand
Boston, Massachusetts
March 4, 1994
EXHIBIT-10.1.08
TRUST AGREEMENT
between
MASSACHUSETTS INDUSTRIAL FINANCE AGENCY
and
SHAWMUT BANK, N.A.
as Trustee
Dated as of July 1, 1993
And Providing for the Issue of
$40,000,000
Massachusetts Industrial Finance Agency
5 7/8% Pollution Control Revenue Refunding Bonds, 1993 Series
(Eastern Edison Company Project)
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS ..................................... 3
ARTICLE II - THE BOND ........................................ 6
Section 2.1 Issuance, Certain Terms and Form of
1993 Series Bonds............................6
Section 2.2 Delivery of 1993 Series Bonds...............18
Section 2.3 Issuance of Additional Bonds................19
Section 2.4 Execution, Authentication...................20
Section 2.5 Interchangeability of Bonds.................20
Section 2.6 Transfer and Ownership......................21
Section 2.7 Regulation With Respect to Exchanges and
Transfers...................................21
Section 2.8 Bonds Mutiliated, Destroyed, Stolen or Lost.21
Section 2.9 Temporary Bonds.............................22
Section 2.10 Cancellation and Destruction of Bonds......23
ARTICLE III - REDEMPTION OF BONDS BEFORE MATURITY..............23
Section 3.1 Redemption Dates and Prices for 1993 Series
Bonds.......................................23
Section 3.2 Notice of Redemption of Bonds...............24
Section 3.3 Payment of Bonds Called for Redemption......24
ARTICLE IV - FUNDS AND REVENUES................................24
Section 4.1 Bond Fund...................................24
Section 4.2 Deposits and Payments.......................25
Section 4.3 Investment of Moneys in Bond Fund...........25
Section 4.4 Moneys to be Held in Trust..................25
ARTICLE V - REPRESENTATIONS AND COVENANTS OF THE AGENCY........25
Section 5.1 Representations.............................25
Section 5.2 Covenant as to Payment; Faith and Credit
of Commonwealth Not Pledged.................26
Section 5.3 Issuance of Refunding Bonds.................27
ARTICLE VI - DEFEASANCE........................................27
Section 6.1 Defeasance..................................27
Section 6.2 Nonpresentment of Bonds.....................28
Section 6.3 Right of Company to Purchase Bonds for
Cancellation................................28
ARTICLE VII - DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND
BONDHOLDERS......................................28
Section 7.1 Defaults; Events of Default.................28
Section 7.2 Acceleration................................28
Section 7.3 Other Remedies; Rights of Bondholders.......29
Section 7.4 Right of Bondholders to Direct Proceedings..30
Section 7.5 Application of Moneys.......................30
Section 7.6 Remedies Vested in Trustee..................30
Section 7.7 Rights and Remedies of Bondholders..........30
Section 7.8 Waivers of Events of Default................31
ARTICLE VIII - THE TRUSTEE.....................................32
Section 8.1 Acceptance of the Trusts....................32
Section 8.2 Fees, Charges and Expenses of Trustee and
Paying Agents...............................33
Section 8.3 Notice of Bondholders if Default or Event
of Default Occurs...........................33
Section 8.4 Successor Trustee...........................33
Section 8.5 Resignation of Trustee; Removal.............34
Section 8.6 Appointment of Successor Trustee............34
Section 8.7 Dealing in Bonds............................34
Section 8.8 List of Bondholders.........................34
Section 8.9 Designation and Succession of Paying Agents.35
ARTICLE IX - SUPPLEMENTAL AGREEMENTS; AND AMENDMENTS TO LOAN
AGREEMENT.........................................35
Section 9.1 Supplemental Agreements Not Requiring
Consent of Bondholders......................35
Section 9.2 Supplemental Agreements Requiring Consent
of Bondholders, etc.........................36
Section 9.3 Amendments, etc., to Loan Agreement.........37
Section 9.4 Consent of Company..........................37
Section 9.5 Opinion of Counsel..........................37
Section 9.6 Modification by Unanimous Consent...........38
ARTICLE X - MISCELLANEOUS......................................38
Section 10.1 Instruments of Further Assurance; Recording
and Filing.................................38
Section 10.2 Rights Under Loan Agreement................38
Section 10.3 Consents, etc., of Bondholders.............38
Section 10.4 Limitations of Rights......................39
Section 10.5 Severability...............................39
Section 10.6 Notices....................................39
Section 10.7 Payments Due on Saturdays, Sundays and
Holidays...................................39
Section 10.8 Extent of Covenants; No Personal Liability.39
Section 10.9 Captions; Table of Contents................40
Section 10.10 Counterparts..............................40
Section 10.11 Governing Law.............................40
TRUST AGREEMENT
THIS TRUST AGREEMENT (the "Trust Agreement") is entered into as of the 1st
day of July, 1993 by and between the Massachusetts Industrial Finance
Agency (the "Agency") and Shawmut Bank, N.A., a national banking association
authorized to accept and execute trusts of the character herein set out, with
its principal office located in Boston, Massachusetts, as Trustee (the
'trustee"). WHEREAS, the Agency, by virtue of the laws of The Commonwealth of
Massachusetts, including Chapters 23A and 40D of the Massachusetts General
Laws (the "Enabling Act"), is authorized and empowered, among other things,
(a) to refund its revenue bonds by the issuance of refunding bonds, and (b) to
secure said refunding bonds by a trust agreement with a corporate trustee and
by a pledge of revenues, as provided for herein; and
WHEREAS Eastern Edison Company (the "Company") has requested that the
Agency issue and sell revenue refunding bonds and loan the proceeds to the
Company pursuant to a Loan Agreement dated as of July 1, 1993 between the
Agency and the Company (which agreement, including all amendments and
supplements thereto is hereinafter referred to as the "Loan Agreement") for
the purpose of repaying the Loan made by the Agency to the Company pursuant
to a Loan Agreement dated as of August 1, 1983 (the "1983 Loan"); and
WHEREAS the Agency has heretofore determined that the amount necessary in
order for the Company to repay the 1983 Loan will require the issuance, sale
and delivery of bonds to be issued pursuant to the Enabling Act in the
aggregate principal amount of Forty Million Dollars ($40,000,000) (the
"1993 Series Bonds"); and
WHEREAS all things necessary to make the 1993 Series Bonds, when
authenticated by the Trustee and issued as provided in this Trust Agreement,
the valid, binding and legal obligations of the Agency according to the import
thereof and to constitute this Trust Agreement a valid pledge of the Pledged
Receipts (hereinafter defined), provision for which is herein made, to secure
the payment of the principal of, premium, if any, and interest on the
1993 Series Bonds and any bonds thereafter issued on a parity therewith (said
1993 Series Bonds and any Additional Bonds (as hereinafter defined) are
hereinafter collectively called the "Bonds"), have been done and performed,
and the execution and delivery of this Trust Agreement, and the issuance,
execution and delivery of the 1993 Series Bonds, subject to the terms hereof,
have in all respects been duly authorized:
NOW, THEREFORE, THIS TRUST AGREEMENT WITNESSETH that, in consideration of
the acceptance by the Trustee of the trusts hereby created and of the
purchase and acceptance of the Bonds by the holders and owners thereof, and
also in order to secure the payment of the principal of, premium, if any, and
interest on the Bonds and the payment, performance and observance by the
Agency of all agreements, covenants and conditions expressed or implied
herein, in the Loan Agreement, in the Bond Purchase Agreement (hereinafter
defined) and in the Bonds on their respective parts to be paid performed and
observed, the Agency has executed and delivered this Trust Agreement and
hereby grants, pledges and assigns unto the Trustee, and to its successors in
said trusts, and to its assigns, and grants a security interest under the
Enabling Act and the Uniform Commercial Code in (to the maximum extent
possible), the Pledged Receipts (hereinafter defined) and all right, title and
interest of the Agency in and to the Loan Agreement, including without
limitation all rights and remedies to enforce the Loan Agreement and the
making of payments thereunder, excepting from such grant, pledge and
assignment the right of the Agency to any payment or reimbursement or
indemnification for its own account pursuant to the Loan Agreement,
TO HAVE AND TO HOLD the Trust Estate (hereinafter defined), whether now
owned or hereafter acquired, unto the Trustee and its respective successors in
said trusts and assigns forever IN TRUST upon the terms and trusts
herein set forth for the benefit, security and protection of all present and
future holders of all Bonds from time to time issued under and secured by this
Trust Agreement; PROVIDED, NEVERTHELESS, that the pledge and assignment hereby
made is upon the further condition that if the Agency, its successors or
assigns, shall pay, or cause to be paid, as provided herein the principal of
the Bonds and the premium, if any, and interest due or to become due thereon,
at the times and in the manner mentioned herein and in the Bonds and shall pay
or cause to be paid to the Trustee all sums of money due or to become due in
accordance with the terms and provisions hereof, and if the Agency and the
Company shall perform and observe all of the agreements, covenants and
conditions on their respective parts to be performed and observed hereunder,
under the Loan Agreement, under the Bond Purchase Agreement, under the
Inducement Letter and under the Bonds, upon such final payments, performance
and observance, this Trust Agreement shall cease and the security interests
created hereby shall terminate.
THIS TRUST AGREEMENT FURTHER WITNESSETH that the Agency and the Trustee
have further agreed as follows (except that in the performance of the
agreements of the Agency herein contained any obligation it may thereby
incur for the payment of money shall not be a general debt or obligation on
its part or a general obligation or charge against or pledge of the faith and
credit or taxing power of The Commonwealth of Massachusetts but shall be
payable solely from the Pledged Receipts and Funds provided under this Trust
Agreement):
ARTICLE I
DEFINITIONS
In addition to the words and terms defined in the Loan Agreement or elsewhere
in this Trust Agreement, the following words and terms as used in this Trust
Agreement, in the Loan Agreement, in the Bonds and in any certificate or other
document executed by any party in connection therewith shall have the
following meanings unless the context or use indicates another or different
meaning or intent:
"Act of Bankruptcy" means the filing of a petition in bankruptcy by or
against the Company under the United States Bankruptcy Code.
"Additional Bonds" means the one or more Bonds which may be issued pursuant
to Section 2.3.
"Banking Day" means any day other than a Saturday, Sunday or public or bank
holiday or the equivalent for banks generally under the laws of Massachusetts.
"Beneficial Owner" shall have the meaning set forth in Section 2.1(b).
"Bonds" means the 1993 Series Bonds, any Bond or Bonds issued in exchange
there for or replacement thereof pursuant to Sections 2.5, 2.6, 2.7, 2.8 and
2.9 and any Additional Bonds.
"Bond Fund" means the Fund established by Section 4.1.
"Bondholder" or "holder" or "owner" of Bonds means, as of any time, the
registered owner of any Bond as shown in the register kept by the Trustee as
bond registrar.
"Bond Payment Date" means, as to the 1993 Series Bonds and any Bond or
Bonds issued in replacement thereof or exchange there for, any date, which may
include an Interest Payment Date, upon which any payment of principal of such
Bonds shall be due pursuant hereto and, as to Additional Bonds and any Bond or
Bonds issued in replacement thereof or exchange there for, any date, which may
include an Interest Payment Date, upon which any payment of principal of such
Bonds shall be due pursuant to the resolution of the Agency authorizing the
issuance of such Bonds.
"Bond Purchase Agreement" means the agreement dated July 14, 1993 between
the Agency and the Representative whereby, among other things, the Agency
agrees to issue and sell the 1993 Series Bonds to the Purchasers and the
Purchasers agree to purchase the 1993 Series Bonds.
"Book-Entry Only System" means the system of registration of the 1993
Series Bonds described in Section 2.1(b).
"Closing Date" shall have the meaning such term has by definition in the
Bond Purchase Agreement.
"Code" means the Internal Revenue Code of 1954, as amended from time to
time, and such provisions of the Internal Revenue Code of 1986, as amended
from time to time, as are applicable to the Bonds.
"DTC" shall mean The Depository Trust Company, a New York corporation.
"Enabling Act" means Massachusetts General Laws Chapters 23A and 40D, each
as amended.
"Event of default" means an event referred to in Section 7.1.
"Inducement Letter" means the letter dated July 14, 1993 from the Company
to the Agency and the Purchasers relating to the 1993 Series Bonds.
"Interest Payment Date" means, as to the 1993 Series Bonds and any Bond or
Bonds issued in replacement thereof or exchange there for, any date upon which
interest is to be paid on such Bonds pursuant hereto, and, as to Additional
Bonds and any Bond or Bonds issued in replacement thereof or exchange there
for, any date upon which interest is to be paid on such Bonds pursuant to the
resolution of the Agency authorizing the issuance of such Bonds.
"Investments" means (i) any bonds, notes, bills or other obligations which
as to principal and interest constitute direct obligations of or are
unconditionally and fully guaranteed by the United States of America; (ii) an
investment agreement or other interest-bearing obligation issued by a bank,
trust company (including the Trustee), or state or federally chartered savings
and loan association, which has capital, surplus and undivided profits of
at least $ 100,000,000; (iii) repurchase agreements secured by any of the
investments of the types described in clauses (i), (ii) and (iv) and entered
into with banks, trust companies or savings and loan associations described in
clause (ii); (iv) commercial paper or finance company paper rated not less
than "P-1" or its equivalent by Moody's Investors Service, Inc., and not less
than "A-1" or its equivalent by Standard & Poor's Corporation, or an
equivalent rating by any successor to either of them, excluding
commercial paper issued by the Company, any subsidiary of the Company or any
entity controlling, controlled by, or under common control with the Company;
and (v) obligations of a State, Territory or possession of the United States
of America or political subdivision of any of the foregoing or of the District
of Columbia rated AA or better by Standard and Poor's Corporation; provided
that such investment or deposit is not prohibited by federal or state banking
laws applicable to the Trustee; provided that in circumstances under which
investment earnings may affect the status of interest on the 1993 Series Bonds
under Section 103 of the Code and Treasury Regulations thereunder,
"Investments" means (vi) obligations of a State, Territory or possession of
the United States of America or political subdivision of any of the foregoing
or of the District of Columbia.
"Montaup" means Montaup Electric Company, a Massachusetts corporation and a
wholly-owned subsidiary of the Company.
"Outstanding" and "Outstanding Principal Amount" when used in connection
with Bonds means, at any time, the principal amount of the Bonds theretofore
issued hereunder which has not been paid within the meaning of the second
paragraph of Section 6.1, exclusive of the principal amount of a Bond
in exchange for or replacement of which another Bond has been authenticated
under Sections 2.5., 2.6, 2.7, 2.8 or 2.9.
"Participant" shall have the meaning set forth in Section 2.1(b).
"Paying Agent" means any bank or trust company designated as paying agent
for the Bonds (and may include the Trustee) and its successor or successors
hereafter appointed in the manner provided in this Trust Agreement.
"Person" means natural persons, firms, associations, corporations and
public bodies.
"Plant" means Montaup's electrical generating facilities in Somerset,
Massachusetts.
"Pledged Receipts" means (a) the Loan Payments received or receivable by
the Agency pursuant to the Loan Agreement, except for payments to the Agency
under items (1) and (2) of Section 5.2 of the Loan Agreement, (b) all other
receipts and revenues received or receivable by the Agency, or the Trustee for
the account of the Agency, in respect of the Loan (as that term is defined in
the Loan Agreement), including without limitation moneys received or
receivable by the Trustee for deposit in any Fund established hereunder and
(c) moneys deposited in said Funds and any securities in which moneys in
said Funds are invested and the proceeds derived therefrom.
"Project" means the pollution control facilities described in Exhibit A to
the Loan Agreement.
"Purchasers" means the several Underwriters named in the Bond Purchase
Agreement, as initial purchasers of the 1993 Series Bonds.
"Representative" means Goldman, Sachs & Co., as representative of the
Purchasers.
"Trust Estate" means the properties, rights and interests pledged and
assigned by the Agency in its pledge and assignment preceding this Article I.
"Uniform Commercial Code" means Massachusetts General Laws Chapter 106 as the
same may be amended.
ARTICLE II
THE BONDS
Section 2.1 Issuance. Certain Terms and Form of 1993 Series Bonds.
a. The 1993 Series Bonds shall be designated "Massachusetts Industrial Finance
Agency 5 7/8% Pollution Control Revenue Refunding Bonds, 1993 Series (Eastern
Edison Company Project)", and shall be issued in the aggregate principal
amount of $40,000,000. The 1993 Series Bonds shall be issued in fully
registered form; shall be in the denomination of $5,000 or any integral
multiple thereof; shall be numbered consecutively from R-1 upwards;
shall be substantially in the form set forth below in this subsection 2.1(a),
with such variations, omissions and insertions as are permitted or required
hereby; shall be payable, as to principal of and premium, if any, at the
principal corporate trust office of the Trustee in Boston, Massachusetts,
which is a Paying Agent of the Agency, or of its successor as such Paying
Agent, and as to interest by check drawn upon the Trustee and mailed to the
registered address of the registered owner entitled thereto; and shall be
dated as of July 1, 1993 if authenticated prior to the first Interest Payment
Date on such 1993 Series Bonds and otherwise shall be dated as of the Interest
Payment Date next preceding the date of their authentication, except that if
authenticated on an Interest Payment Date they shall be dated as of such date
of authentication; provided that if at the time of authentication interest
thereon is in default, they shall be dated as of the date to which interest
has been paid, or if no interest has been paid, they shall be dated as of
July 1, 1993. The 1993 Series Bonds shall mature August 1, 2008 and
shall bear interest from the date thereof payable semi- annually on
February 1 and August 1 in each year, commencing February 1, 1994, at the
rate shown below. Interest shall be calculated using a year of 360 days and
twelve thirty-day months.
The person in whose name any 1993 Series Bond is registered at the close of
business on any record date (as hereinbelow defined) with respect to any
Interest Payment Date shall be entitled to receive the interest payable on
such Interest Payment Date notwithstanding the cancellation of such 1993
Series Bond upon any transfer or exchange thereof (including any exchange
effected as an incident to a partial redemption thereof) subsequent to the
record date and prior to such Interest Payment Date, except that, if and to
the extent that the Agency shall default in the payment of the interest due on
any Interest Payment Date, then the registered holders of 1993 Series Bonds on
the record date with respect to such Interest Payment Date shall have no
further right to or claim in respect of such defaulted interest as such
registered holders on such record date, and the persons entitled to receive
payment of such defaulted interest thereafter payable or paid on any 1993
Series Bonds shall be the registered holders of such 1993 Series Bonds on the
record date for payment of such defaulted interest. The term "record date" as
used in this Section 2.1, and in the form of the 1993 Series Bonds, with
respect to any Interest Payment Date applicable to the 1993 Series Bonds shall
mean the January 15 next preceding a February 1 Interest Payment Date
or the July 15 next preceding an August 1 Interest Payment Date, as the case
may be (or the business day next preceding such January 15 or July 15 if such
January 15 or July 15 is not a business day), or such record date established
for defaulted interest as hereinafter provided.
In case of failure by the Agency to pay any interest when due, the claim
for such interest shall be deemed to have been transferred by transfer of any
1993 Series Bond registered on the books of the Agency, and the Trustee, by
not less than 15 days prior written notice mailed to the persons in whose
names the 1993 Series Bonds are registered at the close of business on the
fifth day preceding the date of mailing, may fix a subsequent record date
for determination of holders entitled to payment of such interest. Such
provision for establishment of a subsequent record date, however, shall in no
way affect the rights of Bondholders or of the Trustee consequent on any
default.
[FORM OF 1993 SERIES BOND]
No. R_ $
MASSACHUSETTS INDUSTRIAL FINANCE AGENCY
5 7/8% POLLUTION CONTROL REVENUE REFUNDING BOND
1993 SERIES
(EASTERN EDISON COMPANY PROJECT)
THIS BOND DOES NOT CONSTITUTE A GENERAL OBLIGATION OF THE MASSACHUSETTS
INDUSTRIAL FINANCE AGENCY NOR A DEBT OR PLEDGE OF THE FAITH AND CREDIT OR THE
TAXING POWER OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY POLITICAL SUBDIVISION
THEREOF; THE PRINCIPAL OF AND INTEREST AND PREMIUM, IF ANY, ON THIS BOND ARE
PAYABLE SOLELY FROM THE REVENUES AND FUNDS PLEDGED FOR THEIR PAYMENT IN
ACCORDANCE WITH THE LOAN AGREEMENT AND THE TRUST AGREEMENT REFERRED TO HEREIN.
The Massachusetts Industrial Finance Agency (the "Agency"), for value
received, hereby promises to pay (but only from the special funds hereinafter
referred to) to, or registered assigns, on August 1, 2008, the principal
sum of Dollars in lawful money of the United States of America, and to pay
(but only from the special funds hereinafter referred to) interest thereon in
like money from the Interest Payment Date next preceding the date of
authentication of this Bond (unless this Bond is authenticated on an Interest
Payment Date, in which event it shall bear interest from that date, or unless
this Bond is authenticated prior to February 1, 1994, in which event it shall
bear interest from July 1, 1993) until payment of such principal sum,
at the rate of five and seven-eighths percent (5 7/8%) per annum, payable
semi-annually on February 1 and August 1 in each year, commencing February 1,
1994. Interest shall be calculated using a year of 360 days and twelve thirty-
day months.
The principal of and premium, if any, on this Bond are payable, upon the
surrender hereof, at the corporate trust office in Boston, Massachusetts, of
Shawmut Bank, N.A., as Trustee and Paying Agent (with any successor trustee
and paying agent, the "Trustee") under a Trust Agreement dated as of July
1, 1993 (the "Trust Agreement") between the Agency and the Trustee. Interest
on this Bond is payable by check drawn upon the Trustee and mailed to the
registered address of the registered owner of this Bond. The interest so
payable upon any February 1 or August 1 will, subject to certain exceptions
described on the reverse thereof, be paid to the person in whose name this
Bond is registered at the close of business on the January 15 preceding such
February 1 or the July 15 preceding such August 1, as the case may be (or the
business day next preceding such January 15 or July 15 if such January 15 or
July 15 is not a business day). Payment of the principal of, premium, if any,
and interest on this Bond shall be made in any coin or currency of the United
States of America which, at the time of payment, is legal tender for payment
of public and private debts.
Unless this 1993 Series Bond is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the
Agency or its agent for registration of transfer, exchange, or payment,
and any 1993 Series Bond issued is registered in the name of CEDE &
Co., or in such other name as is requested by an authorized representative of
DTC (and any payment is made to CEDE & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, CEDE & Co., has an interest
herein.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH
FOLLOWING THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION HEREON AND SUCH FURTHER
PROVISIONS SHALL FOR AT.T. PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT
THIS PLACE.
It is hereby certified that all of the conditions, things and acts required
to exist, to have happened and to have been performed precedent to and in
the issuance of this Bond do exist, have happened and have been performed in
due time, form and manner as required by the Constitution and laws of The
Commonwealth of Massachusetts.
This Bond shall not be entitled to any benefit under the Trust Agreement,
or become valid or obligatory for any purpose, until the certificate of
authentication hereon shall have been signed by the Trustee.
IN WITNESS WHEREOF, the Agency has caused this Bond to be executed in its
name by the manual or facsimile signature of its Deputy Director and its
official seal to be impressed (or a facsimile thereof to be imprinted)
hereon.
DATED: MASSACHUSETTS INDUSTRIAL FINANCE AGENCY
by Deputy Director
(Form of Trustee's Certificate of Authentication)
Trustee's Certificate of Authentication
This Bond is one of the Bonds of the issue described in and issued under the
within-mentioned Trust Agreement.
SHAWMUT BANK, N.A.,
as Trustee
Dated: By Authorized Signer
(FORM OF REVERSE OF 1993 SERIES BOND)
This Bond is one of the bonds of the Agency designated as the
"Massachusetts Industrial Finance Agency 5 7/8% Pollution Control Revenue
Refunding Bonds, 1993 Series (Eastern Edison Company Project)" (the "1993
Series Bonds"), aggregating $40,000,000 in principal amount. The proceeds of
the 1993 Series Bonds will be used to make a loan to Eastern Edison Company
(the "Company") evidenced by a Loan Agreement dated as of July 1, 1993 (the
"Loan Agreement") between the Company and the Agency, which will be used
to repay the 1983 Loan (as defined in the Trust Agreement). The Loan Payments
under (and as defined in) the Loan Agreement will include amounts sufficient
to pay the principal of and interest on, and the premium, if any, on the 1993
Series Bonds as the same become due.
The 1993 Series Bonds are authorized to be issued pursuant to the
provisions of Chapters 23A and 40D of the Massachusetts General Laws, each as
amended (the "Enabling Act"), and, together with any Additional Bonds (as
defined in the Trust Agreement) as may be issued on a parity therewith under
the Trust Agreement (said 1993 Series Bonds and any such Additional Bonds
being hereinafter collectively called the "Bonds") are all issued or to
be issued under and equally and ratably secured by the Trust Agreement. The
1993 Series Bonds are special obligations of the Agency and, as and to
the extent set forth in the Trust Agreement, are payable solely from,
and are secured by a pledge of and lien on, the Pledged Receipts (as
defined in the Trust Agreement).
This Bond is transferable, as provided in the Trust Agreement, only upon
the books of the Agency kept for that purpose at the principal corporate trust
office of the Trustee, by the registered owner hereof in person or by his
attorney duly authorized in writing, upon surrender hereof together with a
written instrument of transfer satisfactory to the Trustee duly executed by
the registered owner or such duly authorized attorney, and thereupon a
new 1993 Series Bond or Bonds of the same aggregate principal amount as the
surrendered Bond shall be issued in the name of the transferee as provided in
the Trust Agreement and upon payment of charges therein prescribed. The
Agency, the Trustee and any Paying Agent of the Agency may treat and consider
the person in whose name this Bond is registered as the holder and absolute
owner hereof for the purpose of receiving payment of, or on account of, the
principal or premium hereof and interest due hereon and for all other
purposes whatsoever. Neither the Agency nor the Trustee shall be required (a)
to transfer or exchange Bonds during a period beginning at the opening of
business on the fifteenth day next preceding an Interest Payment Date
or next preceding any date of selection of Bonds to be redeemed and ending at
the close of business on such Interest Payment Date or the day on which notice
of such redemption is given; or (b) to transfer or exchange any Bond
called in whole, or the called portion of any Bond called in part, for
redemption. Subject to the provisions of the Trust Agreement, if this Bond is
surrendered for any transfer or exchange between the record date for any
Interest Payment Date and such Interest Payment Date, the new Bond will be
dated such Interest Payment Date.
The Trust Agreement provides that in the event of any default in payment of
the interest due on any Interest Payment Date, such interest shall not be
payable to the holder of this Bond on the original record date but shall be
paid to the registered holder of such Bond on the subsequent record date
established for payment of such defaulted interest.
The Bonds are issuable in the form of registered Bonds only without
coupons, in the denomination of $5,000 or any integral multiple thereof. This
Bond may, at the option of the registered owner hereof, be exchanged for an
equal aggregate principal amount of 1993 Series Bonds of any of the authorized
denominations, upon surrender hereof at the principal corporate trust office
of the Trustee together with a written instrument of transfer satisfactory to
the Trustee duly executed by the registered owner or by his attorney, duly
authorized in writing, as provided in the Trust Agreement and upon the payment
of charges therein prescribed.
Reference is hereby made to the Trust Agreement and to the Loan Agreement
and to all agreements supplementing or amending either thereof, for a
description of the rights under the Trust Agreement of the registered owners
of the 1993 Series Bonds, of the nature and extent of the security for the
1993 Series Bonds, of the rights, duties and immunities of the Trustee and of
the rights, obligations and immunities of the Agency thereunder, to all
of the provisions of which Trust Agreement and Loan Agreement the registered
owner of this 1993 Series Bond, by acceptance hereof, assents and agrees.
The holder of this 1993 Series Bond shall have no right to enforce the
provisions of the Trust Agreement or to institute action to enforce the
covenants therein, or to take any action with respect to any event of default
under the Trust Agreement, or to institute, appear in or defend any suit or
other proceedings with respect thereto, except as provided in the Trust
Agreement. Modifications or alterations of the Loan Agreement or the
Trust Agreement, or of any amendments or supplements thereto, may be
made only to the extent and in the circumstances permitted by the Trust
Agreement. In certain events, on the conditions, in the manner and with
the effect set forth in the Trust Agreement, the principal of all the
1993 Series Bonds issued under the Trust Agreement and then outstanding may
become or may be declared due and payable before the stated maturity thereof,
together with interest accrued thereon.
Optional Redemption: The 1993 Series Bonds are subject to redemption prior
to stated maturity on any date on or after August 1, 2003, at the option of
the Company, in whole or in part by lot or in any other manner deemed fair
by the Trustee, provided that for so long as CEDE & Co., as nominee of
The Depository Trust Company ("DTC") is the registered owner of the
1993 Series Bonds, the particular bonds or portions thereof to be redeemed
shall be selected by DTC, in such manner as DTC may deem fair. The 1993
Series Bonds may be redeemed from any source of available funds, on any date
on or after August 1, 2003, at the following redemption prices (expressed in
terms of the percentages of the principal amount of Bonds to be redeemed),
together, in each case, with interest accrued thereon to the date fixed for
redemption:
Redemption Dates Inclusive Price
August 1, 2003-July31,2004 102%
August 1, 2004-July31,2005 101%
Thereafter 100%o
Extraordinary Optional Redemption: The 1993 Series Bonds are subject to
redemption in whole on any date prior to their stated maturity, at the option
of the Company, upon the occurrence of any of the following events:
(a) Damage or destruction to the Project or the Plant shall have occurred
to such extent that, in the reasonable judgment of the Company and Montaup,
the Project or the Plant, as the case may be, cannot reasonably be repaired,
rebuilt or restored within a period of six months to its condition immediately
preceding such damage or destruction.
(b) Loss of title to or use of a substantial part of the Project or the
Plant as a result of the exercise of the power of eminent domain shall have
occurred which, in the reasonable judgment of the Company and Montaup, results
or is likely to result in Montaup being prevented from carrying on its normal
operations at the Plant for a period of not less than six months.
(c) (i) Unreasonable burdens or regulations or excessive liabilities shall
have been imposed upon Montaup with respect to the Project or the Plant or the
operation thereof, or (ii) changes in the economic availability of raw
materials, operating supplies, fuel or other energy sources or supplies, or
facilities necessary for the operation of the Project or any other property of
Montaup material to the conduct of its operations at the site of the Project
or such technological or other changes shall have occurred, which the Company
and Montaup cannot reasonably overcome or control, either of which events in
the reasonable judgment of the Company and Montaup renders the Project or such
other property of Montaup material to the conduct of its operations at the
site of the Project uneconomic for such purposes.
(d) The acquisition, construction, installation and/or operation of the
Project or operation of the Plant shall have been enjoined or shall otherwise
have been prohibited by any order, decree, rule or regulation of any court or
of any location, state or federal regulatory body, administrative agency or
other governmental body for a period of not less than six months.
(e) A determination that the interest income on any 1993 Series Bond does
not qualify for the exclusion from gross income of the owner thereof ("exempt
interest") under Section 103 of the Code, other than a determination that such
owner is a "substantial user" of the Project or a "related person" within the
meaning of Section 103(b)(13) of the Code, which determination shall be deemed
to have been made upon the occurrence of the first to occur of the following:
(i) the date on which the Company determines that the interest income
on any 1993 Series Bond does not qualify as exempt interest if
such determination is supported by a written opinion to that
effect of nationally recognized bond counsel satisfactory to the
Trustee (who may also be counsel to the Company); or
(ii) the date on which the Company shall receive notice from the
Trustee in writing that the Trustee has been advised by the
holder of any 1993 Series Bond that, as a result of any
authorized federal administrative action or by final decree,
judgment or order of any federal court or authorized federal
administrative body, it has been determined that, as a result of
a failure by the Company to observe any agreement or
representation in the Loan Agreement, the interest payable on the
1993 Series Bonds does not qualify as exempt interest. Any such
determination will not be considered final for this purpose:
(A) unless the holder of the 1993 Series Bond involved in the
proceeding or action resulting in the determination gives
the Company and the Trustee prompt written notice of the
commencement thereof and such holder offers the Company
an opportunity to contest the determination, either
directly or in the name of the holder of the 1993 Series
Bond; and either
(B) the Company declines to contest such determination; or
(C) the Company elects to contest such determination and agrees
to pay all expenses in connection therewith and indemnify
such 1993 Series Bond holder against all liabilities in
connection therewith, in which case such determination
shall not be considered final until the earlier of: (1) the
date on which the Company in its sole discretion elects to
discontinue such contest, or (2) conclusion of any
appellate court review of such determination, if sought.
If this 1993 Series Bond or any portion hereof is called for redemption,
and payment is duly provided there for as specified in the Trust Agreement,
interest on this 1993 Series Bond or the portion hereof called for redemption
shall cease to accrue from and after the date fixed for redemption.
1993 Series Bonds or portions thereof may be redeemed only in the principal
amount of Five Thousand Dollars ($5,000) or any integral multiple thereof.
Notice of redemption shall be mailed, not less than 30 nor more than 60
days prior to the redemption date, to each registered owner of each 1993
Series Bond called for redemption, but neither failure to mail such notice nor
any defect in any notice so mailed shall affect the sufficiency of the
proceedings for the redemption of any other 1993 Series Bonds.
If an event of default, as defined in the Trust Agreement, shall occur, the
principal of all 1993 Series Bonds may be declared due and payable upon the
conditions, in the manner and with the effect provided in the Trust Agreement.
The Trust Agreement also provides that in certain events such declaration and
its consequences may be rescinded as therein provided.
This 1993 Series Bond shall not constitute the personal obligation, either
jointly or severally, of any director, officer, employee or agent of the
Agency.
[FORM FOR TRANSFER]
FOR VALUE RECEIVED, , the undersigned _______ hereby sells, assign, and
transfers unto (Please insert Social Security Number or other identifying
number of assignee) the within Bond and all rights thereunder and hereby
irrevocably constitutes and appoints _____________ attorney to transfer the
within Bond on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: NOTICE:
The signature to this assignment must correspond with the name as it
appears upon the face of the within Bond in every particular, without
alteration or enlargement or any change whatever.
b. The provisions of this subsection 2.1(b) shall apply with respect to any
1993 Series Bond registered to CEDE & Co. or any other nominee of DTC while
the Book-Entry Only System is in effect. Book-Entry Only System shall mean
the system of registration of the 1993 Series Bonds described below: The 1993
Series Bonds shall be issued in the form of a single authenticated fully-
registered bond in substantially the form set forth in this Section 2.1. Prior
to the Closing Date, there shall be deposited with DTC one certificated
Bond registered in the name of CEDE & Co. as DTC's nominee in the aggregate
amount of the 1993 Series Bonds. Such Bond shall bear the following legend:
Unless this 1993 Series Bond is presented by an authorized representative
of The Depository Trust Company, a New York Corporation ("DTC"), to the Agency
or its agent for registration of transfer, exchange or payment, and any 1993
Series Bond issued is registered in the name of CEDE & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment
is made to CEDE & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, CEDE & Co., has an interest herein.
On the date of original delivery thereof, the 1993 Series Bonds shall be
registered in the registry books of the Trustee in the name of CEDE & Co., as
nominee of DTC as agent for the Agency in maintaining the Book-Entry Only
System. With respect to 1993 Series Bonds registered in the registry books
kept by the Trustee in the name of CEDE & Co. as nominee of DTC, the Agency,
the Paying Agent, the Company and the Trustee shall have no responsibility or
obligation to any Participant (which means securities brokers and dealers,
banks, trust companies, clearing corporation and various other entities, some
of whom or their representatives own DTC) or to any Beneficial Owner (which
means, when used with reference to the Book-Entry-Only System, the person who
is considered the beneficial owner of a 1993 Series Bond pursuant to the
arrangements for book-entry determination of ownership applicable to DTC) with
respect to the following:
i. the accuracy of the records of DTC, CEDE & Co. or any Participant with
respect to any ownership interest in the 1993 Series Bonds;
ii. the delivery to any Participant, any Beneficial Owner or any other
person, other than DTC, of any notice with respect to the 1993 Series
Bonds, including any notice of redemption; or
iii. the payment to any Participant, any Beneficial Owner or any other
person, other than DTC, of any amount with respect to the principal of
or premium, if any, or interest on the 1993 Series Bonds.
The Trustee or any Paying Agent shall pay all principal of and premium, if
any, and interest on the 1993 Series Bonds only to or upon the order of DTC,
and all such payments shall be valid and effective fully to satisfy and
discharge the Agency's obligations with respect to the principal of and
premium, if any, and interest on such 1993 Series Bonds to the extent
of the sum or sums so paid. Except as provided below, no person other than
DTC shall receive an authenticated 1993 Series Bond evidencing the obligation
of the Agency to make payments of principal of and premium, if any, and
interest pursuant to this Trust Agreement. Upon delivery by DTC to the
Trustee of written notice to the effect that DTC has determined to substitute
a new nominee in place of CEDE & Co., the words "CEDE & Co." in this Trust
Agreement shall refer to such new nominee of DTC.
c. Upon receipt by the Agency and the Trustee of written notice from DTC to
the effect that DTC is unable or unwilling to discharge its responsibilities,
the Trustee shall authenticate, transfer and exchange the 1993 Series
Bonds as requested by DTC in appropriate amounts, and whenever DTC requests
the Agency, the Paying Agent and the Trustee to do so, the Trustee, the Paying
Agent and the Agency will cooperate with DTC in taking appropriate action
after reasonable notice: (i) to arrange for a substitute bond depository
willing and able upon reasonable and customary terms to maintain custody of
the 1993 Series Bonds or (ii) to make available 1993 Series Bonds registered
in whatever name or names the Bondholders transferring or exchanging such 1993
Series Bonds shall designate.
d. In the event the Agency determines that it is in the best interests of
the Beneficial Owners that they be able to obtain 1993 Series Bond
certificates, the Agency may so notify DTC, the Paying Agent and the Trustee,
whereupon DTC will notify the Participants of the availability through DTC of
certificates for the 1993 Series Bonds. In such event, the Trustee shall
authenticate, transfer and exchange certificates for the 1993 Series Bonds as
requested by DTC in appropriate amounts and in authorized denominations.
Whenever DTC requests the Agency and the Paying Agent to do so, the Paying
Agent and the Authority will cooperate with DTC in taking appropriate action
after reasonable notice to make available 1993 Series Bonds registered in
whatever name or names the Beneficial Owners transferring or exchanging 1993
Series Bonds shall designate.
e. Notwithstanding any other provision of this Trust Agreement to the
contrary, so long as any 1993 Series Bond is registered in the name of CEDE &
Co., as nominee of DTC, all payments with respect to the principal of,
premium, if any, and interest on such 1993 Series Bond and all notices with
respect to such 1993 Series Bond shall be made and given, respectively,
to DTC, as provided in the Representation Letter, the form of which is
Included as Exhibit 2.1 to this Trust Agreement.
Section 2.2 Delivery of 1993 Series Bonds. Upon the execution and delivery
of this Trust Agreement, the Agency shall execute and deliver the 1993 Series
Bonds to the Trustee. The Trustee shall authenticate the 1993 Series Bonds and
deliver them to the Purchasers upon the filing with the Trustee of the
following documents, namely:
1. A copy, duly certified by the Secretary of the Agency, of the
resolutions adopted by the Agency authorizing the execution and delivery of
the Loan Agreement, this Trust Agreement, the Inducement Letter and the Bond
Purchase Agreement and the issuance and sale of the 1993 Series Bonds.
2. A copy, duly certified by the Clerk or any Assistant Clerk of the
Company, of the vote or votes adopted by its Board of Directors authorizing
the execution and delivery of the Loan Agreement and the Inducement Letter.
3. Original executed counterparts of the Loan Agreement, this Trust
Agreement, the Bond Purchase Agreement, the Inducement Letter and all other
agreements, if any, required by the Purchasers as provided in the Bond
Purchase Agreement and a signed counterpart of the opinion of McDermott, Will
& Emery as Bond Counsel required by the Bond Purchase Agreement with an
accompanying opinion of said Bond Counsel directed to the Trustee.
4. A request and authorization to the Trustee on behalf of the Agency,
signed by its Executive Director, its Deputy Director or its Vice Chairman to
authenticate and deliver the 1993 Series Bonds to the Purchasers, upon payment
to the Trustee for the account of the Agency, of the sum specified in said
request to be paid by the Purchasers.
The proceeds of the 1993 Series Bonds (except for any accrued interest paid
at the sale of the 1993 Series Bonds) shall be transferred by the Trustee to
State Street Bank and Trust Company, as trustee, for credit to the Bond Fund
established pursuant to the Loan Agreement dated as of August 1, 1983
between the Company and the Agency, and shall be immediately applied by the
Agency to the outstanding principal balance of the Loan made by the Agency to
the Company pursuant to such Loan Agreement. Accrued interest paid at the sale
of the 1993 Series Bonds shall be deposited in the Bond Fund established under
section 4.1 hereof.
Section 2.3 Issuance of Additional Bonds. The Agency and the Company may,
without notice to or the consent of the Bondholders, from time to time agree
upon and approve the issuance and delivery of Additional Bonds hereunder for
any one or more of the following purposes: (a) acquiring, constructing,
reconstructing, improving and/or installing additional property to become part
of the Plant, including incidental expenses, or (b) refunding the Bonds.
Additional Bonds shall be issued only in fully registered form and shall bear
such date or dates, interest rate or rates, maturities, redemption dates,
redemption premiums and prices as are approved in writing by the Agency and
the Company. All of such Additional Bonds shall be on a parity with the 1993
Series Bonds and any Additional Bonds theretofore or thereafter issued, except
as may be otherwise provided in Section 7.5 as to the application of moneys.
The Agency shall execute and deliver such Additional Bonds to the Trustee
which shall authenticate and deliver the same to the purchaser thereof upon
the filing with the Trustee of the following documents, namely:
1. A copy, duly certified by the Secretary of the Agency, of the
resolutions adopted by the Agency authorizing the issuance and sale of the
Additional Bonds and the execution and delivery of the related supplemental
agreements to this Trust Agreement and the Loan Agreement and a bond purchase
agreement pertaining to the Additional Bonds.
2. A copy, duly certified by the Clerk or any Assistant Clerk of the
company, of the vote or votes adopted by its Board of Directors authorizing
the execution and delivery of the applicable amendment or supplement to the
Loan Agreement in connection with the issuance of such Additional Bonds.
3. Original executed counterparts of such supplemental agreements and
bond purchase agreement and of such other guaranties and agreements, if any,
as may be required by the purchaser or purchasers of such Additional Bonds as
provided in such bond purchase agreement and a signed counterpart of the
opinion of nationally recognized bond counsel with an accompanying opinion of
nationally recognized bond counsel addressed to the Trustee.
4. A request and authorization to the Trustee on behalf of the Agency,
signed by its Executive Director, Deputy Director or Vice Chairman to
authenticate and deliver the Additional Bonds to the purchaser or purchasers
thereof upon payment to the Trustee for the account of the Agency of the sum
specified in such request to be paid by the Purchaser. The proceeds of the
Additional Bonds shall be deposited with the Trustee (except for accrued
interest thereon) to the credit of a project fund or comparable fund created
by a supplemental agreement entered into pursuant to Article IX.
5. An opinion of nationally recognized bond counsel (who may be counsel
to the Company) that the issuance of such Additional Bonds will not affect the
exemption from federal income taxation on the interest paid on any Outstanding
Bonds.
Section 2.4 Execution. Authentication. The Bonds shall be executed on
behalf of the Agency by the manual or facsimile official signature of its
Executive Director, its Deputy Director or its Vice Chairman and shall have
the official seal of the Agency impressed thereon or a facsimile imprinted
thereon. In case any officer whose signature or facsimile of whose signature
shall appear on the Bonds shall cease to be such officer before the delivery
of such Bond, such signature or such facsimile shall nevertheless be valid and
sufficient for all purposes, as if he had remained in office until delivery,
and any Bond may be signed on behalf of the Agency by such persons as, at the
time of execution of such Bond shall be the proper officers of the Agency,
even though at the date of such Bond or of the delivery of this Trust
Agreement any such person was not such officer.
No Bond shall be valid or obligatory for any purpose or be entitled to any
security or benefit hereunder unless and until a certificate of authentication
on the Bond, as provided in Section 2.1, shall have been duly executed by an
authorized signer of the Trustee, and such executed certificate of the Trustee
upon a Bond shall be conclusive evidence that the Bond has been authenticated
and delivered hereunder. It shall not be necessary that the same person sign
the certificate of authentication on all of the Bonds issued
hereunder.
Section 2.5 Interchangeability of Bonds. Subject to the conditions and
upon the payment of the charges provided in this Trust Agreement, Bonds, upon
surrender thereof at the principal corporate trust office of the Trustee with
a written instrument of transfer satisfactory to the Trustee duly executed by
the registered owner thereof or by his attorney duly authorized in writing,
may, at the option of the registered owner thereof, be exchanged for an equal
aggregate principal amount of registered Bonds of the same series,
designation, maturity and interest rate of any other authorized denominations.
Section 2.6 Transfer and Ownership. Each Bond shall be transferable only
upon the books of the Agency, which shall be kept for the purpose at the
principal corporate trust office of the Trustee, by the registered owner
thereof in person or by his attorney duly authorized in writing, upon
surrender thereof together with a written instrument of transfer satisfactory
to the Trustee duly executed by the registered owner or his duly authorized
attorney and containing the Social Security or federal tax identification
number of the transferee and, if such transferee is a trust, the name and
social security or federal tax identification number of the settlor and the
trustee of the transferee. Upon the transfer of any such Bond, the Agency
shall issue and the Trustee shall authenticate in the name of the transferee a
new Bond or Bonds of the same aggregate principal amount and of the same
series, designation, maturity and interest rate as the surrendered Bond.
The Trustee, the Agency and any Paying Agent may treat and consider the
person in whose name any Bond for the time being shall be registered upon the
books of the Trustee as the absolute owner of such Bond, whether such Bond
shall be overdue or not, for the purpose of receiving payment of, or on
account of, the principal or premium, if any, thereof and the interest
thereon, and for all other purposes whatsoever and all such payments so
made to any such registered owner or upon his order shall be valid and
effectual to satisfy and discharge the liability upon such Bond to the extent
of the sum or sums so paid, and neither the Trustee, the Agency nor any
Paying Agent shall be affected by any notice to the contrary.
Section 2.7 Regulations With Respect to Exchanges and Transfers. In all
cases in which the privilege of exchanging Bonds or transferring Bonds is
exercised, the Agency shall execute and the Trustee shall authenticate and
deliver Bonds in accordance with the provisions of this Trust Agreement. For
every such exchange or transfer of Bonds, whether temporary or definitive, the
Agency or the Trustee may make a charge sufficient to reimburse them for any
tax, fee or other governmental charge required to be paid with respect to such
exchange or transfer. Neither the Agency nor the Trustee shall be required
(a) to transfer or exchange Bonds during a period beginning at the opening of
business on the fifteenth day next preceding an Interest Payment Date or next
preceding any date of selection of Bonds to be redeemed and ending at the
close of business on such Interest Payment Date or the date on which notice of
such redemption is given; or (b) to transfer or exchange any Bond called in
whole, or the called portion of any Bond called in part, for redemption.
Section 2.8 Bonds Mutilated. Destroyed. Stolen or Lost. In case any Bond
shall become mutilated or be destroyed, stolen or lost, the Agency shall
execute and the Trustee shall authenticate and deliver, a new Bond of like
series, designation, maturity, interest rate and principal amount as the Bond
so mutilated, destroyed, stolen or lost, (a) in exchange and substitution for
such mutilated Bond, upon surrender and cancellation of such mutilated
Bond or (b) in lieu of and substitution for the Bond destroyed, stolen or
lost, upon filing with the Trustee of evidence satisfactory to the Agency and
the Trustee that such Bond has been destroyed, stolen or lost and proof of
ownership thereof. In every case the applicant for a substituted Bond shall
furnish the Agency, the Company and the Trustee with indemnity satisfactory to
them and comply with such other reasonable regulations as the Agency, the
Company and the Trustee may prescribe and pay such expenses as the Agency,
the Company and the Trustee may incur. All Bonds so surrendered to the Trustee
shall be canceled by it. Any such new Bonds issued pursuant to this Section in
substitution for Bonds alleged to be destroyed, stolen or lost shall
constitute original additional contractual obligations on the part of the
Agency, whether or not the Bonds so alleged to be destroyed, stolen or lost be
at any time enforceable by anyone, and shall be equally secured by and
entitled to equal proportionate benefits with all other Bonds issued
under the Trust Agreement, in any moneys or securities held by the Agency or
the Trustee for the benefit of the holders of Bonds.
Section 2.9 Temporary Bonds. Until the definitive Bonds are prepared, the
Agency may execute, in the same manner as is provided in Section 2.4, and,
upon the request of the Agency, the Trustee shall authenticate and deliver one
or more temporary Bonds, registerable as to principal and interest. Such
temporary Bonds shall be subject to the same provisions, limitations and
conditions as the definitive Bonds except as to the denomination thereof and
as the exchangeability for Bonds and shall be substantially of the tenor of
the definitive Bonds in lieu of which such temporary Bond or Bonds are issued,
in denominations of $5,000 or any integral multiple thereof authorized by the
Agency, and with such omissions, insertions and variations as may be
appropriate to temporary Bonds. The Agency at its own expense shall prepare
and shall deliver in exchange there for, definitive Bonds, of the same
aggregate principal amount and maturity as the temporary Bonds surrendered.
Until so exchanged, the temporary Bonds shall in all respects be entitled to
the same benefits and security as definitive Bonds issued pursuant to the
Trust Agreement.
If the Agency shall authorize the issuance of temporary Bonds in more than
one denomination, the holder of any temporary Bond or Bonds may, at his
option, surrender the same to the Trustee in exchange for another temporary
Bond or Bonds of like aggregate principal amount and maturity of any other
authorized denomination or denominations, and thereupon the Agency shall
execute and the Trustee, in exchange for the temporary Bond or Bonds so
surrendered and upon payment of the taxes, fees and charges provided for in
Section 2.7, shall authenticate and deliver a temporary Bond or Bonds of like
aggregate principal amount and maturity in such other authorized denomination
or denominations as shall be requested by such holder.
All temporary Bonds surrendered in exchange either for another temporary
Bond or Bonds or for a definitive Bond or Bonds shall be forthwith canceled by
the Trustee.
Section 2.10 Cancellation and Destruction of Bonds. All Bonds paid or
redeemed, either at or before maturity, shall be delivered to the Trustee when
such payment or redemption is made, and such Bonds, together with all Bonds
purchased by the Trustee and all registered Bonds surrendered in any exchanges
or transfers, shall thereupon be promptly canceled. Bonds so canceled may at
any time be cremated or otherwise destroyed by the Trustee, which shall
execute a certificate of cremation or destruction in duplicate by the
signature of one of its authorized officers describing the Bonds so cremated
or otherwise destroyed, and one executed certificate shall be filed with the
Agency and the other executed certificate shall be retained by the Trustee.
ARTICLE III
REDEMPTION OF BONDS BEFORE MATURITY
Section 3.1 Redemption Dates and Prices for 1993 Series Bonds.
3.1.1 The 1993 Series Bonds are subject to redemption by the Agency, at
the option of the Company, prior to stated maturity on any date on or after
August 1, 2003, in whole or in part. The Bonds may be redeemed from any source
of available funds on any date, on or after August 1, 2003, at redemption
prices equal to the following percentages of the principal amount redeemed,
plus in each case accrued interest to the date fixed for redemption:
Redemption Dates Incluvsive Price
August 1, 2003 - July 31, 2004 102%
August 1, 2004 - July 31, 2005 101%
Thereafter 100%
3.1.2 In addition to redemption provided for in Section 3.1.1, the 1993
Series Bonds shall be redeemed in whole and not in part by the Agency, at the
option of the Company, on any date at a redemption price of 100% of the
principal amount redeemed, plus accrued interest to the redemption date, if
any of the events set forth in the paragraph headed "Extraordinary Optional
Redemption" in the form of the 1993 Series Bond in Section 2.1 shall have
occurred.
3.1.3 If less than all of the Outstanding 1993 Series Bonds are called for
redemption at any time, the selection of such 1993 Series Bonds, or portions
of 1993 Series Bonds, to be called shall be made by lot or in any other manner
deemed fair by the Trustee provided that for so long as CEDE & Co., as nominee
of DTC is the registered owner of the 1993 Series Bonds, the particular bonds
or portions thereof to be redeemed shall be selected by DTC, in such manner as
DTC may deem fair. Upon redemption of any 1993 Series Bond in part only, the
Trustee shall authenticate and deliver to the owner thereof a new 1993 Series
Bond or Bonds of authorized denominations in any aggregate principal amount
equal to the unredeemed portion of the Bond so redeemed. Bonds for portions
thereof) may be redeemed only in the principal amount of Five Thousand Dollars
($5,000) or any integral multiple thereof.
Section 3.2 Notice of Redemption of Bonds. Notice of the call for any
redemption of Bonds, identifying by designation, letters, numbers, or other
distinguishing marks, the Bonds, or portions of Bonds in amounts of $S,000 or
an integral multiple thereof, to be redeemed, the redemption price to be paid,
the date fixed for redemption and the place or places where the amounts due
upon such redemption are payable, shall be mailed by the Trustee by first
class mail, postage prepaid not less than 30 nor more than 60 days prior to
the redemption date, to the registered owner of any Bonds or portions thereof
to be redeemed, but neither failure to mail such notice nor any defect in any
notice so mailed shall affect the sufficiency of the proceedings for the
redemption of any other Bonds.
Section 3.3 Payment of Bonds Called for Redemption. Notice having been
given in the manner provided in Section 3.2 hereof, the Bonds (and portions of
Bonds) so called for redemption shall become due and payable on the redemption
date at the redemption price, plus interest accrued to the redemption date;
and, upon presentation and surrender thereof, at the place or places specified
in such notice, such Bonds (and portions of Bonds) shall be paid at the
redemption price plus interest accrued and unpaid to the redemption date. If,
on the redemption date, moneys for the redemption of all such Bonds (and
portions of Bonds) to be redeemed, together with interest to the redemption
date, are held by the Trustee so as to be available there for on said date and
if notice of redemption shall have been given as aforesaid, then, from and
after the redemption date such Bonds (and portions of Bonds) so called for
redemption shall cease to bear interest and said Bonds (and portions of Bonds)
shall no longer be considered as outstanding hereunder. If said moneys shall
not be so available on the redemption date, such Bonds (and portions of Bonds)
shall continue to bear interest until paid at the same rate as they would have
borne had they not been called for redemption.
ARTICLE IV FUNDS AND REVENUES
Section 4.1 Bond Fund. A Bond Fund is hereby established with the Trustee.
From the proceeds of each issuance and delivery of Bonds there shall be
deposited in the Bond Fund a sum equal to the accrued interest paid by the
purchasers of the Bonds. The moneys in the Bond Fund and any Investments held
as part of such Fund shall, except as otherwise provided in section 6.1, be
applied by the Trustee solely to the payment or redemption on the dates when
the same are respectively due of the principal of, premium, if any, and
interest on the Bonds and charges and disbursements of the Trustee. Moneys
deposited in the Bond Fund, including but not limited to moneys deposited as
permitted by Section 5.5 of the Loan Agreement shall be so applied within
thirteen (13) months after the same shall have been deposited. Interest on
Investments held as a part of such Fund shall be so applied within twelve (12)
months after the same shall have been received.
Section 4.2 Deposits and Payments. Deposits in the Bond Fund shall be made
solely from Pledged Receipts except as provided in Section 4.1. All payments
by the Trustee under this Trust Agreement shall be made solely from the
Trust Estate.
Section 4.3 Investment of Moneys in Bond Fund. Moneys in the Bond Fund held
by the Trustee hereunder shall be invested by the Trustee at the direction of
the Company in Investments with maturities at or before the time when such
moneys are required to be available. Any such Investments shall be held by the
Trustee as a part of such Fund. Any interest realized on any such Investment
and any profit or loss realized upon the sale or other disposition thereof
shall be credited or charged to such Fund. Investments shall be valued at
cost, face amount or market value, whichever is less. No investment shall
mature in any event later than twelve (12) months from the date of deposit in
such Fund of the moneys applied to the making of the Investment. No Investment
shall be made which would cause the Bonds to be constituted arbitrage bonds
under Section 148(a) of the Code and regulations then prescribed thereunder
and the Trustee shall be entitled to obtain an opinion from nationally
recognized bond counsel that the making of any Investment will not have such
result. The Trustee shall have no responsibility with respect to the price at
which an Investment is bought or sold.
Section 4.4 Moneys to be Held in Trust. All moneys deposited with the Trustee
hereunder shall be held by the Trustee in trust but need not be segregated
from other funds except as required by law.
ARTICLE V
REPRESENTATIONS AND COVENANTS OF THE AGENCY
Section 5.1 Representations.
A. The Agency is a body politic and corporate and a public instrumentality
of The Commonwealth of Massachusetts established under Chapter 23A of the
Massachusetts General Laws, with the powers under and pursuant to the Enabling
Act, to execute and deliver this Trust Agreement, the Bond Purchase Agreement
and the Loan Agreement, to perform its obligations under each thereof and to
issue and sell the 1993 Series Bonds;
B. The Agency has taken all necessary action and has complied with all
provisions of the Constitution of The Commonwealth of Massachusetts and the
Enabling Act (including but not limited to the making of the findings required
by Section 12 and 22 of Chapter 40D of the Massachusetts General Laws, to the
extent applicable to the 1993 Series Bonds) required to make this Trust
Agreement, the Bond Purchase Agreement, the Loan Agreement and the 1993
Series Bonds the valid obligations of the Agency that they purport to
be; and, when executed and delivered by the parties thereto, this Trust
Agreement and the Loan Agreement will constitute valid and binding agreements
of the Agency and be enforceable in accordance with their respective terms,
except as enforceability may be subject to the exercise of judicial discretion
in accordance with general equitable principles and to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws for the relief of
debtors heretofore or hereafter enacted to the extent that the same may be
constitutionally applied;
C. The Agency shall not take any action, or knowingly omit to take any
action within its control, which, if taken or omitted, would violate its
obligation under the non-arbitrage certificate delivered upon the issuance of
the 1993 Series Bonds.
D. When delivered to and paid for by the Purchasers in accordance with
the terms of the Bond Purchase Agreement and the Trust Agreement, the 1993
Series Bonds will constitute valid and binding special obligations of the
Agency enforceable in accordance with their terms, except as enforceability
may be subject to the exercise of judicial discretion in accordance with
general equitable principles and to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors
heretofore or hereafter enacted to the extent that the same may be
constitutionally applied, and will be entitled to the benefits of the Trust
Agreement.
E. The Agency makes no representation or warranty that the 1993 Series
Bonds and any income derived therefrom is or will be exempt from federal or
state taxation.
Section 5.2 Covenant as to Payment: Faith and Credit of Commonwealth Not
Pledged. The Agency covenants that it will promptly pay or cause to be paid
the principal of, interest, premium, if any, and other charges, if any, on
the Bonds at the place, on the dates and in the manner provided herein
and in the Bonds, provided, however, that the Bonds secured hereby do
not now and shall never constitute a general obligation of the Agency
or a pledge of the faith and credit of the Agency or a debt or pledge of the
faith and credit or the taxing power of The Commonwealth of Massachusetts or
any political subdivision thereof, and all covenants and undertakings by the
Agency hereunder and under the Bonds to make payments are special obligations
of the Agency payable solely from the Trust Estate.
Section 5.3 Issuance of Refunding Bonds. The Agency may issue, and the Agency
expressly reserves the right to issue, to the extent permitted by law,
refunding bonds under this Trust Agreement or another trust agreement to
refund all or any principal amount of any series of Bonds.
ARTICLE VI
DEFEASANCE
Section 6.1 Defeasance. When the Agency has paid or has caused to be paid to
the holders of the Bonds the principal, premium, if any, and interest due or
to become due thereon at the times and in the manner stipulated therein and
herein and all fees and expenses of the Trustee, of the Agency and of any
Paying Agent and all other amounts required to be paid under this Trust
Agreement, the Loan Agreement and the Bond Purchase Agreement have been paid
or provided for to the satisfaction of the Agency, of the Trustee and of any
Paying Agent, the lien of this Trust Agreement on the Trust Estate shall
terminate, and the Trustee shall promptly execute and deliver to the Company
and the Agency an appropriate discharge hereof and the Trustee and any Paying
Agent shall assign and deliver to the Company any property at the time subject
to the lien of this Trust Agreement which may then be in its possession,
except amounts held by the Trustee for the payment of the principal of,
premium, if any, and interest on the Bonds.
All Outstanding Bonds of a series or of a maturity within a series shall be
deemed to have been paid within the meaning of this Section when there shall
have been deposited with the Trustee, in trust for and irrevocably committed
thereto, sufficient cash or obligations defined in clause (i) of the
definition of Investments with maturities and interest rates adequate to
produce sufficient cash, (1) to pay, at their maturities or redemption dates,
any principal, premium, if any, and interest on such Bonds as they come due;
and (2) to pay or prepay all fees and expenses of the Agency, the Trustee and
any Paying Agent and all other amounts required to be paid under this Trust
Agreement, under the Loan Agreement and under the Bond Purchase Agreement.
Notwithstanding the termination of the lien hereof, if the Trustee is then
holding any funds for payment to any Bondholder, it shall continue to hold and
make payment of such funds in accordance herewith, and all other rights and
obligations hereunder which by their nature cannot be satisfied or performed
prior to the termination of the lien hereof shall survive until their
subsequent satisfaction or performance. Any amounts remaining in the Bond Fund
after all of the Outstanding Bonds shall be deemed to have been paid, and
after all other amounts required to be paid under this Trust Agreement, under
the Loan Agreement and under the Bond Purchase Agreement shall have been paid
or provided for to the satisfaction of the Agency and of the Trustee, shall be
paid to the Company.
Section 6.2 Nonpresentment of Bonds. If a Bond is not presented for payment
when the Outstanding Principal Amount thereof becomes due, either at maturity
or at the date fixed for redemption thereof or otherwise, and if funds
sufficient to pay all amounts due with respect to such Bond have been
deposited with the Trustee and irrevocably committed thereto, all liability of
the Agency to the holder thereof for the payment of such Bond shall forthwith
cease, and thereupon the Trustee shall hold such funds, without liability
for interest thereon, for the benefit of the holder of such Bond who shall
thereafter be restricted exclusively to such funds for any claim of whatever
nature on his part under this Trust Agreement or on, or with respect to, such
Bond. If such Bond is not presented to the Trustee for payment on or before
the fourth anniversary of said payment or redemption date, the Trustee shall
then pay to or upon the order of the Company the funds then so held by the
Trustee and thereafter the holder of such Bond shall look to the Company with
respect to such claim and the Trustee shall be discharged therefrom.
Section 6.3 Right of Company to Purchase Bonds for Cancellation. The Company
may purchase Bonds from holders thereof and deliver such Bonds to the Trustee
for cancellation.
ARTICLE VII
DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS
Section 7.1 Defaults: Events of Default. If any of the following events occur,
it is hereby defined as and declared to be and to constitute an "event of
default" hereunder:
(1) Failure to pay the principal of, any premium on or interest on the
Bonds when the same is due; or
(2) Any "event of default" or default under the Loan Agreement or the
Bond Purchase Agreement; or
(3) The Agency is rendered incapable of fulfilling its obligations under
this Trust Agreement or under the Enabling Act, as it relates hereto.
Section 7.2 Acceleration. Upon the occurrence and continuance of any event of
default, the Trustee shall, upon and only upon the written request of the
holders of not less than 33% in aggregate principal amount of the Outstanding
Bonds, by written notice to the Agency and the Company, declare the
Outstanding Principal Amount of all Bonds (if not then due and payable) and
the interest accrued thereon to be due and payable immediately, and, upon said
declaration, such principal and interest shall become and be immediately due
and payable. Pursuant to such declaration, interest on the Bonds shall accrue
to the date determined by the Trustee for the tender of payment to the
holders of all Outstanding Bonds pursuant to such declaration.
If, at any time after such principal and interest shall have been so declared
due and payable and prior to the first to occur of (a) the ninetieth (9Oth)
day after such declaration, (b) the entry of a judgment in a court of law or
equity for enforcement hereunder or (c) the appointment, and the confirmation
thereof, of a receiver after an opportunity for hearing by the Agency and the
Company, all sums at the time payable under this Trust Agreement except the
principal of, and interest accrued after the next preceding interest payment
date on, the Bonds which have not reached their stated maturity dates and
which are due and payable solely by reason of said declaration shall have been
duly paid or provided for by deposit with the Trustee and all existing
defaults shall have been made good, then such payment or provision for payment
shall ipso facto constitute a waiver of such default and its consequences and
an automatic rescission and annulment of such declaration under the
above paragraph, but no such waiver or rescission shall extend to or affect
any subsequent event of default or impair any rights consequent thereon.
Section 7.3 Other Remedies: Rights of Bondholders. Upon the occurrence and
continuance of any event of default, the Trustee may pursue any available
remedy to enforce the payment of principal of, premium, if any, and interest
on the Bonds.
Upon any event of default and if requested so to do by holders of a majority
in aggregate principal amount of the Bonds then Outstanding and being
indemnified as provided in Section 8.2 of the Loan Agreement, the Trustee
shall exercise such of the rights and powers conferred by this Section and by
Section 7.2 as the Trustee, being advised by counsel, shall deem most
effective, or shall be directed by such request, to enforce and protect
the interests of the holders of the Bonds.
No remedy under this Trust Agreement or the Loan Agreement is intended to be
exclusive of any other remedy, but all remedies shall be cumulative and each
shall be in addition to any other remedy given to the Trustee or to the holder
of a Bond hereunder or thereunder or now or hereafter existing.
No delay or omission to exercise any right or power accruing upon any event of
default shall impair any such right or power or shall be construed to be a
waiver of any such event of default or acquiescence therein; and every
such right and power may be exercised from time to time and as often as may be
deemed expedient.
No waiver of any event of default hereunder or under the Loan Agreement,
whether by the Trustee or by the holder of a Bond, shall extend to or shall
affect any subsequent event of default or shall impair any rights or remedies
consequent thereon.
Section 7.4 Right of Bondholders to Direct Proceedings. Anything in this Trust
Agreement to the contrary notwithstanding but subject to the provisions of
Section 7.3, the holders of a majority in aggregate principal amount of Bonds
then Outstanding shall have the right at any time, by an instrument or
instruments in writing executed and delivered to the Trustee, to direct the
method and place of conducting all proceedings to be taken in connection with
the enforcement of the terms and conditions of this Trust Agreement, or for
any other proceedings hereunder; provided, that such direction shall not be
otherwise than in accordance with the provisions of law and of this Trust
Agreement, and provided that the Trustee shall be indemnified as provided in
Section 8.2 of the Loan Agreement.
Section 7.5 Application of Moneys. Upon the occurrence and continuance of any
event of default all moneys received by the Trustee pursuant to any right
given or action taken under the provisions of this Article shall, subject to
any provisions made pursuant to Section 6.1, be deposited in the Bond Fund;
and all moneys in the Bond Fund (except funds for which provision has been
made under Section 6.2) shall, after payment of all Additional Payments (as
defined in the Loan Agreement) and other charges of the Agency, the Trustee
and any Paying Agent in accordance with this Trust Agreement and the Loan
Agreement, be applied first to the payment of interest, including interest on
overdue principal, then due or overdue on the Bonds without regard to the
order in which the same became due; and second to the payment of the principal
then due or overdue on the bonds without regard to the order in which the same
became due; or in such other order as may be determined by the Trustee
with the written consent of the holders of all Outstanding Bonds and, if the
Agency is affected thereby, with the written consent of the Agency. Payments
shall be made pro rata among holders of Bonds entitled to receive the payment
being made. Any moneys remaining in the Bond Fund after all of the Outstanding
Bonds shall be deemed to have been paid and all other amounts required to have
been paid under this Trust Agreement shall have been paid, shall be applied as
provided in Section 6.1.
Section 7.6 Remedies Vested in Trustee. All rights of action (including the
right to file proofs of claim) under this Trust Agreement or under any of the
Bonds may be enforced by the Trustee without the possession of any of the
Bonds or the production thereof in any trial or other proceeding relating
thereto; and any such suit or proceeding instituted by the Trustee shall be
brought in its name, as Trustee, without the necessity of joining as
plaintiffs or defendants any holders of the Bonds; and any recovery of
judgment shall be for the benefit of the holders of the Bonds subject,
however, to the provisions of this Trust Agreement.
Section 7.7 Rights and Remedies of Bondholders. No holder of a Bond shall have
any right to institute any suit, action or proceeding for the enforcement of
this Trust Agreement or for the execution of any trust hereof or for the
appointment of a receiver or any other remedy hereunder, unless an event of
default has occurred and is continuing of or in connection with which the
Trustee has been directed pursuant to Section 7.4 or notified as provided in
subsection 8.1.4, or of which by said subsection 8.1.4 it is deemed to have
notice, and the holders of at least 33% in aggregate principal amount of
Outstanding Bonds shall have made written request to the Trustee and shall
have afforded the Trustee reasonable opportunity to proceed to exercise the
powers herein before granted or to institute such action, suit or proceeding
in its own name, and have offered to the Trustee indemnity as provided in
Section 8.2 of the Loan Agreement, and the Trustee shall thereafter fail or
refuse to exercise the powers herein before granted or to institute such
action, suit or proceeding in its own name; and such notification or
direction, request and offer of indemnity are hereby declared in every case at
the option of the Trustee to the conditions precedent to the execution of the
powers and trusts of this Trust Agreement, and to any action or cause of
action for the enforcement of this Trust Agreement, or for the appointment of
a receiver or for any other remedy hereunder; it being understood and intended
that no one or more holders of the Bonds shall have any right in any manner
whatsoever to affect, disturb or prejudice the lien of this Trust Agreement by
its or their action or to enforce any right hereunder except in the manner
herein provided and that proceedings shall be instituted and maintained in the
manner herein provided and for the benefit of the holders of all Outstanding
Bonds. If the holder of a Bond shall act pursuant to the preceding sentence,
such holder shall have and may exercise with respect to such action all of the
powers, rights and remedies and be subject to all of the obligations of the
Trustee hereunder. Subject to the foregoing, each holder of a Bond shall have
a right of action to enforce the payment of the principal of and interest on
any Bond held by it at and after the maturity thereof at the place, from the
sources and in the manner in said Bond expressed.
Section 7.8 Waivers of Events of Default. At any time the Trustee shall waive
any event of default hereunder and under the Loan Agreement and their
consequences and rescind any declaration of maturity of principal resulting
therefrom upon the written request of the holders of (1) at least a majority
in aggregate principal amount of all the Bonds then Outstanding in respect of
which an event of default in the payment of principal, premium, if any, or
interest on the Bonds exists, or (2) at least a majority in aggregate
principal amount of all Bonds then Outstanding in case of any other event of
default; provided, however, that there shall not be waived any event of
default described in paragraph (1) of Section 7.1 of the Loan Agreement
or any such declaration in connection therewith rescinded, unless at the time
of such waiver or rescission payments of the amounts provided in Section 7.2
hereof for waiver and automatic rescission in connection with acceleration of
maturity have been made or provided for. In case of any such waiver or
rescission, or in case any proceeding taken by the Trustee on account of any
such event of default shall have been discontinued or abandoned or determined
adversely, then and in every such case the Agency, the Trustee and the
Bondholders shall be restored to their former positions and rights hereunder
respectively; but no such waiver or rescission shall extend to any
subsequent or other event of default, or impair any right consequent thereon.
ARTICLE VIII
THE TRUSTEE
Section 8.1 Acceptance of the Trusts. The Trustee hereby accepts the Trust
Estate and the trusts imposed upon it by this Trust Agreement and agrees to
perform said trusts and any duties required to be performed by it under the
terms of this Trust Agreement but only upon and subject to the terms and
conditions contained herein and in Section 8.2 of the Loan Agreement:
8.1.1 Except during the continuance of an event of default described in
Section 7.1, the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Trust Agreement and the Loan
Agreement, and no implied covenants or obligations shall be read into this
Trust Agreement. In case such an event of default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Trust Agreement, and use the same degree of care and skill in their
exercise, as an ordinarily prudent trustee under a corporate mortgage would
use and exercise.
8.1.2 The Trustee may execute any of the trusts or powers hereof and
perform any of its duties by or through attorneys, agents, receivers or
employees but shall be answerable for the conduct of the same in accordance
with the standards specified in subsection 8.1.1 except that with respect to
attorneys, agents or receivers it shall be answerable only for lack of due
care in appointing the same, and shall be entitled to advice of counsel
concerning all matters of trust hereof and the duties hereunder, and may in
all cases pay, and be reimbursed for, such reasonable compensation to all such
attorneys, agents, receivers, employees and counsel as may reasonably be
employed in connection with the trusts hereof.
8.1.3 Any action taken by the Trustee pursuant to this Trust Agreement
upon the request or authority or consent of any person who at the time of
making such request or giving such authority or consent is the holder of any
Bond shall be conclusive and binding upon all future holders of the same Bond
and upon Bonds issued in exchange there for or in place thereof.
8.1.4 The Trustee shall not be required to take notice or be deemed to
have notice of any default hereunder, except events of default described in
clause (1) of Section 7.1, unless the Trustee shall be specifically notified
by writing delivered to it of such default by the Agency or by the holders of
at least 33 % in aggregate principal amount of the Outstanding Bonds and in
the absence of such notice so delivered the Trustee may conclusively assume
there is no default except as aforesaid.
8.1.5 The Trustee shall not be required to give any bond or surety.
8.1.6 Except as otherwise expressly provided herein or therein, whenever
the consent of the Trustee is required to give effect to any amendment,
supplement, modification, cancellation or termination of any of this Trust
Agreement, the Loan Agreement or any payment of the Bonds, and whenever the
consent, waiver or approval of or determination or acknowledgement of
satisfaction by the Trustee is necessary with respect to any action to be
taken under any thereof, the Trustee shall consent to such amendment,
supplement, modification, cancellation or termination, or give or make such
consent, waiver, approval, determination or acknowledgement of satisfaction,
with (but only with) the prior written consent of the holders of not less than
a majority in aggregate principal amount of the Outstanding Bonds.
Section 8.2 Fees. Charges and Expenses of Trustee and Paving Agents. The
Trustee and any Paying Agent shall be entitled to payment or reimbursement for
reasonable fees, charges and expenses for its services as trustee, bond
registrar and/or paying agent rendered hereunder and for all advances, costs,
counsel fees and other expenses and liabilities reasonably made or incurred by
the Trustee or any Paying Agent in connection with such services or in
satisfaction of any obligations of the Agency or of the Company satisfied by
the Trustee or any Paying Agent as provided herein and for interest as
provided in Section 8.2 of the Loan Agreement. Such payment and reimbursement
shall be made from the Additional Payments by the Company pursuant to the Loan
Agreement or, if not made therefrom, from any moneys received or held by the
Trustee or any Paying Agent hereunder.
Section 8.3 Notice to Bondholders if Default or Event of Default Occurs.
If a default occurs of which the Trustee is by subsection 8.1.4 required to
take notice or if notice of default be given as in subsection 8.1.4 provided,
the Trustee shall, within five (5) business days after notice of such default
or knowledge of such event of default, give written notice thereof by
registered or certified mail to the Agency, the Company and the holders of all
Outstanding Bonds.
Section 8.4 Successor Trustee. Any corporation or association into which
the Trustee may be converted or merged, or with which it may be consolidated,
or to which it may sell or transfer its corporate trust business and assets
as a whole or substantially as a whole, and any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to
which it is a party, ipso facto, shall be and become successor Trustee
hereunder and vested with all the trusts, powers, discretions, immunities,
privileges and all other matters as was its predecessor, without the execution
or filing of any instrument or any further act on the part of the parties
hereto other than as may be required by applicable law to record any
succession in title or interest, anything herein to the contrary
notwithstanding, provided, however, that any such successor Trustee shall be
a trust company or bank in good standing having trust powers and located in
The Commonwealth of Massachusetts.
Section 8.5 Resignation of Trustee: Removal. The Trustee may at any time
resign from the trusts hereby created by giving one hundred twenty (120) days'
written notice to the Agency and the Company and by registered or certified
mail to holders of all Outstanding Bonds, but such resignation shall not take
effect until the appointment of a successor Trustee and acceptance by the
successor Trustee of such trusts. If no successor Trustee has been appointed
and accepted the trusts hereby created within 180 days after the date of the
Trustee's resignation, the Trustee may petition a court of competent
jurisdiction for appointment of a successor Trustee. The Trustee may be
removed at any time by an instrument or concurrent instruments in writing
delivered to the Trustee and to the Agency and signed by the holders of a
majority in aggregate principal amount of the Outstanding Bonds; or by any
court of competent jurisdiction for a breach of trust upon application by
the holders of not less than 33% in aggregate principal amount of the
Outstanding Bonds.
Section 8.6 Appointment of Successor Trustee. In case the Trustee
hereunder shall resign or be removed, or be dissolved, or otherwise become
incapable of acting hereunder, a successor shall be appointed by the Agency at
the direction of the Company. At any time within one year after any such
vacancy shall have occurred, the holders of a majority in aggregate principal
amount of the Outstanding Bonds may appoint a successor Trustee by an
instrument or concurrent instruments in writing signed by or on behalf of
such holders, which appointment shall supersede any Trustee heretofore
appointed by the Agency. Every such successor Trustee appointed pursuant to
the provisions of this Section shall be a trust company or bank in good
standing having trust powers, located in The Commonwealth of Massachusetts,
having a reported capital and surplus of not less than $50,000,000. Any such
successor Trustee shall notify the Company and the Agency and by registered or
certified mail the holders of the Bonds of its acceptance of the appointment
and, upon giving such notice, shall become Trustee, vested with all the
property, rights and powers of the Trustee hereunder, without any further act
or conveyance. Any predecessor Trustee shall from time to time execute,
deliver and record and file such instruments as the Trustee may reasonably
require to confirm or perfect any succession hereunder.
Section 8.7 Dealing in Bonds. The Trustee and any Paying Agent and any of
their respective directors, officers, employees or agents may become the
owners of any or all of the Bonds secured hereby.
Section 8.8 List of Bondholders. The Trustee is hereby designated as bond
registrar for the Bonds and, as such, will keep on file a list of names and
addresses of the holders of all Bonds. The Trustee shall be under no
responsibility with regard to the accuracy of such list, including without
limitation the address of any holder of a Bond. At reasonable times and under
reasonable regulations established by the Trustee, such list may be inspected
and copied by the Company, by the Agency or by holders (or a designated
representative thereof) of 33% or more in principal amount of the Outstanding
Bonds, the ownership of any holder and the authority of any such designated
representative to be evidenced to the satisfaction of the Trustee.
Section 8.9 Designation and Succession of Paving Agents. The Trustee and
any other banks or trust companies designated as Paying Agents in any
supplemental agreement shall be the Paying Agent or Paying Agents for the
Bonds.
Any bank or trust company with or into which any Paying Agent other than
the Trustee may be merged or consolidated, or to which the corporate trust
assets and business of such Paying Agent may be sold, shall be deemed the
successor of such Paying Agent for the purposes of this Trust Agreement. If
the position of such Paying Agent shall become vacant for any reason, the
Trustee shall, within 30 days thereafter, appoint a bank or trust company
located in the same city as such Paying Agent to fill such vacancy.
The Paying Agents shall enjoy the same protective provisions in the
performance of their duties hereunder as are specified in Section 8.1 with
respect to the Trustee, insofar as such provisions may be applicable.
ARTICLE IX
SUPPLEMENTAL AGREEMENTS; AND AMENDMENTS TO LOAN AGREEMENT
Section 9.1 Supplemental Agreements Not Requiring Consent of Bondholders.
The parties hereto may without the consent of, or notice to, any of the
holders of the Bonds, enter into agreements supplemental to this Trust
Agreement and financing statements or other instruments evidencing the
existence of a lien for any one or more of the following purposes, provided
that no such supplemental agreement shall be inconsistent with the terms
and provisions hereof:
(1) To cure any ambiguity, inconsistency or formal defect or omission in
this Trust Agreement;
(2) To grant to or confer upon the Trustee for the benefit of the holders
of the Bonds any additional rights, remedies, powers or authority that may
lawfully be granted to or conferred upon the holders of the Bonds or the
Trustee;
(3) To subject to the lien and pledge of the Trust Agreement additional
revenues, properties or collateral;
(4) To add to the covenants and agreements of the Agency contained in
the Trust Agreement other covenants and agreements thereafter to be observed
for the protection of the holders of the Bonds or to surrender or limit any
right, power, or authority reserved to or conferred upon the Agency or the
Company in this Trust Agreement; and
(5) To evidence any succession to the Agency or to the Company, not
constituting a default, and the assumption by such successor of the covenants
and agreements of the Agency or of the Company, as the case may be, contained
in the Trust Agreement, the Loan Agreement and the Bonds.
Section 9.2 Supplemental Agreements Requiring Consent of Bondholders. etc.
In addition to supplemental agreements permitted by Section 9.1, the holders
of not less than a majority in aggregate principal amount of the Bonds then
Outstanding shall have the right, from time to time, to consent to and
approve, the execution by the parties hereto of such other agreement or
agreements supplemental hereto for the purpose of modifying, altering,
amending, adding to or rescinding, in any particular, any of the terms or
provisions contained in this Trust Agreement or in any supplemental agreement;
except, however, that nothing in this Section contained shall permit (a) an
extension of the stated maturity of the principal of or the interest on any
Bond without the consent of the holder of such Bond; (b) a reduction in the
principal amount of any Bond, the rate of interest thereon or the premium to
be paid upon the redemption thereof prior to maturity without the consent of
the holder of such Bond; (c) the establishment of a privilege or priority of
any Bond or Bonds over any other Bond or Bonds without the consent of the
holders of all Bonds at the time outstanding; (d) a reduction in the aggregate
principal amount of Bonds the holders of which are required to consent to any
such supplemental agreement without the consent of the holders of all the
Bonds at the time outstanding which would be affected by the action to be
taken; or (e) a modification of the rights, duties or immunities of the Agency
or the Trustee without the written consent of the affected party.
If at any time the Company shall request the Agency and the Trustee to
enter into any supplemental agreement pursuant to this Section, the Trustee
shall, upon being satisfactorily indemnified with respect to expenses, cause
notice of the proposed execution of each supplemental agreement to be mailed
in the manner requested by the Company and, in any event, in the same manner
as prescribed in Section 3.2. Such notice shall briefly set forth the nature
of the proposed supplemental agreement and shall state that copies thereof are
on file at the corporate trust office of the Trustee for inspection by all
Bondholders. Except as otherwise provided in this Section 9.2, if, within
sixty days or such longer period (not to exceed two years) as shall be
prescribed by the Agency following the mailing of such notice, the holders of
not less than a majority in aggregate principal amount of the Bonds
Outstanding at the time of the execution of any such supplemental agreement
shall have consented to and approved the execution thereof, no holder of any
Bond shall have any right to object to any of the terms and provisions
contained therein, or the operation thereof, or in any manner to question the
propriety of the execution thereof, or to enjoin or restrain the Trustee or
the Agency from executing the same or from taking any action pursuant to the
provisions thereof. Upon the execution of any such supplemental agreement as
in this Section permitted and provided, this Trust Agreement shall be and be
deemed to be modified and amended in accordance therewith.
Section 9.3 Amendments. etc.. to Loan Agreement. The Agency and the
Trustee may, without the consent of or notice to the Bondholders, consent to
any amendment, change or modification of the Loan Agreement, as may be
required (i) by the provisions of the Loan Agreement or this Trust Agreement,
(ii) to cure any ambiguity, inconsistency, formal defect or omission, or (iii)
to effect any other change therein which, in the judgment of the Trustee, is
not to the prejudice of the Trustee or the holders of the Bonds or to the
Agency.
Neither the Agency nor the Trustee shall consent to any other amendment,
change or modification of the Loan Agreement without notice to the Bondholders
as provided in Section 9.2 hereof and the consent of the holders of not less
than a majority in aggregate principal amount of the Bonds then Outstanding.
Section 9.4 Consent of Company. Anything herein to the contrary
notwithstanding, a supplemental agreement under this Article which affects any
rights or obligations of the Company under the Loan Agreement, or requires a
revision of the Loan Agreement shall not become effective unless and until the
Company shall have consented in writing to the execution and delivery of such
supplemental agreement, and a supplemental agreement under this Article which
affects any rights or obligations of the Trustee shall not become effective
unless and until the Company shall have consented in writing to the execution
and delivery of such supplemental agreement. In this regard, the Trustee shall
cause notice of the proposed execution and delivery of any supplemental
agreement together with a copy of the proposed supplemental agreement to be
mailed as provided in Section 10.6 hereof to the Company at least ten days
before the date of its proposed execution and delivery in the case of a
supplemental agreement referred to in Section 9.1 hereof, and not later than
five days after the mailing of the notice of the proposed execution and
delivery in the case of a supplemental agreement provided for in Section 9.2
hereof
Section 9.5 Opinion of Counsel. The Trustee shall be entitled to receive,
and shall be fully protected in relying upon, the opinion of any counsel
approved by it, who may be counsel for the Company or the Agency, as
conclusive evidence that any such proposed supplemental agreement or amendment
hereto or to the Loan Agreement complies with the provisions of this Trust
Agreement and that it is proper for the Trustee, under the provisions
of this Article, to join in the execution of such supplemental agreement.
Section 9.6 Modif;cation by Unanimous Consent. Notwithstanding anything
contained elsewhere in this Trust Agreement, the rights and obligations of the
Agency and of the holders of the Bonds and the terms and provisions of the
Bonds and this Trust Agreement or any supplemental agreement and the Loan
Agreement, may be modified or altered in any respect with the consent of the
Agency, the Trustee and the holders of all of the Bonds then outstanding and,
if any rights or obligations of the Company, the Agency or the Trustee under
the Loan Agreement are affected thereby, with the consent of the affected
party.
ARTICLE X
MISCELLANEOUS
Section 10.1 Instruments of Further Assurance: Recording and Filing. The
Agency shall from time to time execute and deliver or cause to be executed and
delivered to the Trustee all instruments and documents and take or cause to be
taken all such other and further action as the Trustee may reasonably require
in order to effect and confirm and vest more securely in the Trustee all
security for the payment of all amounts coming due with respect to the Bonds
and all rights contemplated by this Trust Agreement. The Agency shall not,
except as otherwise provided herein or in the Loan Agreement, mortgage,
encumber or alienate any part of the Pledged Receipts or its rights under and
pursuant to the Loan Agreement.
The Trustee shall on behalf of the holders from time to time of the Bonds
cause to be filed any continuation statements or instruments of a similar
character which are required by law in order to fully preserve and protect the
security of such holders.
The undertakings of the Agency contained in this Section 10.1 are subject
to the limitation prescribed in Section 5.2.
Section 10.2 Rights Under Loan Agreement. A duly executed counterpart of
the Loan Agreement has been filed with the Trustee, and reference is hereby
made to the same for a detailed statement of the covenants and obligations of
the Company and the rights of the Agency thereunder. The Trustee may enforce
all rights of the Agency (except those not assigned hereunder) and all
obligations of the Company under the Loan Agreement for and on behalf of the
holders of the Bonds, whether or not the Agency is in default hereunder.
Section 10.3 Consents. etc.. of Bondholders. Any consent, request,
direction, approval, objection or other instrument required by this Trust
Agreement to be signed and executed by holders of Bonds may be in any number
of concurrent writings of similar tenor, and may be signed or executed by such
holders in person or by agent appointed in writing.
Section 10.9 Captions: Table of Contents. The captions or headings in, and
the table of contents for, this Trust Agreement are for convenience only and
in no way define, limit or describe the scope or content of any provision of
this Trust Agreement. A reference to any Section or subsection shall be a
reference to all provisions prior to the next comparable number. Section
10.10 Counterparts. This Trust Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 10.11 Governing Law. This Trust Agreement shall be governed by the
law of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Agency has caused this Trust Agreement to be
executed and delivered in its name and behalf by its Executive Director, its
Deputy Director or its Vice Chairman; and to evidence its acceptance of the
trusts hereby created the Trustee has caused this Trust Agreement to be signed
in its name and behalf by its authorized officer, all as of the 1st day of
July, 1993, but actually on the date indicated below opposite the signature
of each party.
MASSACHUSETTS INDUSTRIAL FINANCE AGENCY Dated: July 22, 1993
By
Executive/Deputy Diretor/Vice Chairman
SHAWMUT BANK, N.A.,
as Trustee Dated: July 22, 1993
By Authorized Officer
EXHIBIT 2.1 FORM OF DTC REPRESENTATION LETTER
Letter of Representations
[To be Completed by Issuer and Agent]
MASSACHUSETTS INDUSTRIAL FINANCE AGENCY
[Name of Issuer]
SHAWMUT BANK N. A.
[Name of Agent]
July 22, 1993 (Date)
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street; 49th Floor
New York, NY 10041-0099
Re: Massachusetts Industrial Finance Agency $40,000,000 Pollution Control
Revenue Refunding Bonds
1993 Series (Eastern Edison Company Project)
(Issue Description)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Bonds"). Agent will act as
trustee, paying agent, fiscal agent, or other agent of Issuer with respect to
the Bonds. The Bonds will be issued pursuant to a trust indenture, bond
reso]ution, or other such document authorizing the issuance of the Bonds dated
July 1, 1993 (the "Document"). Goldman Sachs & Co. and Citicorp,
("Underwriter") Securities Markets, Inc., is distributing the Bonds through
The Depository Trust Company ("DTC").
To induce DTC to accept the Bonds as eligible for deposit at DTC, and to act
in accordance with its Rules with respect to the Bonds, Issuer and Agent, if
any, make the following representations to DTC:
1. Prior to closing on tile Bonds on July 22, l993, there shall be
deposited with DTC one Bond certificate registered in tile name of DTCs
nominee, Cede & Co.. for each stated maturity of the Bonds in the face amounts
set forth on Schedule A hereto, the total of which represents 100% of the
principal amount of such Bonds. If, however, the aggregate principal
amount of Amy maturity exceeds $150 million, one certificate will be issued
with respect to each $150 million of principal amount and an additional
certificate will be issued with respect to any remaining principal amount.
Each $150 million Bond certificate shall bear the folio ing legend:
Unless this certificate is presented by an author.The representative of
The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.
2. In the event of any solicitation of consents from or voting by holders
of the Bonds, Issuer or Agent shall establish a record date for such purposes
(with no provision for revocation of consents or votes by subsequent holders)
and shall, to the extent possible, send notice of such record date to DTC not
less than 15 calendar days in advance of such record date.
3. In the event of a full or partial redemption or an advance refunding
of part of the outstanding Bonds, Issuer or Agent shall send a notice to DTC
specifying: (a) the amount of the redemption or refunding (b) in the case of a
refunding, the maturity date(s) established under the refunding; and (c) the
date such notice is to be mailed to beneficial owners or published (the
"Publication Date"). Such notice shall be sent to DTC by a secure means
(e.g., legible telecopy, registered or certified mail, overnight delivery) in
a timely manner designed to assure that such notice is in DTC's possession no
later than the close of business on the business day before the Publication
Date. Issuer or Agent shall forward such notice either in a separate secure
transmission for each CUSIP number or in a secure transmission for multiple
CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP
submitted in that transmission. (The party sending such notice shall have a
method to verify subsequently the use of such means and the timeliness of such
notice.) The Publication Date shall be not less than 30 days nor more than 60
days prior to the redemption date or, in the case of an advance refunding the
date that the proceeds are deposited in escrow.
4. In the event of an invitation to tender the Bonds, notice by Issuer or
Agent to Bondholders specifying the terms of the tender and the Publication
Date of such notice shall be sent to DTC by a secure means in the manner set
forth in the preceding Paragraph.
5. All notices and payment ad vices sent to DTC shall contain the CUSIP
number of the Bonds.
6. Notices to DTC pursuant to Paragraph 2 by telecopy shall be sent to
DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and
receipt of such notices shall be confirmed by telephoning (212) 709-6870.
Notices to DTC pursuant to Paragraph 2 by mail or by any other means shall be
sent to:
Supervisor; Proxy
Reorganization Department
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
7. Notices to DTC pursuant to Paragraph 3 by telecopy shall be sent to
DTCs Call Notification Department at (516) 227-4164 or (516) 227-4190. If the
party, sending the notice does not receive a telecopy receipt from DTC
confirming that the notice has been received, such party shall telephone
(516) 227-4070. Notices to DTC pursuant to Paragraph 3 by mail or by any
other means shall be sent to:
Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City,NY 11530-4719
8. Notices to DTC pursuant to Paragraph 4 and notices of other actions
(including mandatory tenders, exchanges, and capital changes) by telecopy
shall be sent to DTC's Reorganization Department at (212) 709-1093 or (212)
709-1094, and receipt of such notices shall be confirmed by telephoning (212)
709-6884. Notices to DTC pursuant to the above by mail or by any other means
shall be sent to:
Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
9. Transactions in the Bonds shall be eligible for next-day funds
settlement in DTC's Next-Day Funds Settlement ("NDFS") system.
A. Interest payments shall be received by Cede & Co., as nominee of DTC,
or its registered assigns in next-day funds on each payment date (or
the equivalent in accordance with existing arrangements between Issuer
or Agent and DTC). Such payments shall be made payable to the order of
Cede & Co. Absent any other existing arrangements such payments shall
be addressed as follows:
Manager; Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York NY 10004-2695
B. Principal payments shall be received by Cede & Co., as nominee of DTC
or its registered assigns in next-day funds on each payment date (or
the equivalent in accordance with existing arrangements between Issuer
or Agent and DTC). Such pa,yments shall be made payable to the order
of Cede & Co., and shall be addressed as follows:
NDFS Redemption Department
The Depository Trust Company
55 Water Street; 50th Floor
New York NY 10041-0099
10. DTC may direct Issuer or Agent to use any other telephone number or
address as the number or address to which notices or payments of interest or
principal may be sent.
11. In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or Agent's
invitation) necessitating a reduction in the aggregate principal amount
of Bonds outstanding or an advance refunding of part of the Bonds outstanding,
DTC, in its discretion: (a) may request Issuer or Agent to issue and
authenticate a new Bond certificate, or (b) may make an appropriate notation
on the Bond certificate indicating the date and amount of such reduction in
principal except in the case of final maturity, in Which case the certificate
will be presented to Issuer or Agent prior to payment if required
12. In the event that Issuer determines that beneficial owners of Bonds
shall be able to obtain certificdted Bonds, Issuer or Agent shall notify DTC
of the availability of Bond certificates. In such event, Issuer or Agent shall
issue, transfer, and exchange Bond certificates in appropriate amounts, as
required by DTC and others.
13. DTC may discontinue providing its services as securities depository
with respect to the Bonds at any time by giving reasonable notice to Issuer or
Agent (at which time DTC will confirm with Issuer or Agent the aggregate
principal amount of Bonds outstanding). Under such circumstances, at DTC's
request Issuer and Agent shall cooperate fully with DTC by taking appropriate
action to make available one or more separate certificates evidencing Bonds to
any DTC Participant having Bonds credited to its DTC accounts.
14. Nothing herein shall be deemed to require Agent to advance funds on
behalf of Issuer.
Notes:
A. If there is an Agent (as defined in this Letter of Representations),
Agent as well as Issuer must sign this Letter. If there is no Agent,
in signing this letter Issuer itself undertakes to perform all of the
obligations set forth herein.
B. Under Rules of the Municipal Securities Rulemaking Board relating to
"good delivery", a municipal securities dealer must be able to
determine the date that a notice of a partial call or of an advance
refunding of a part of an issue is published (the "publication date").
The establishment of such a publication date is addressed in Paragraph
3 of the Letter.
C. Schedule B contains statements that DTC believes accurately describe
DTC, the method of effecting book-entry transfers of securities
distributed through DTC, and certain related matters.
Very truly yours,
Massachusetts Industrial Finance Agency (Issuer)
by: Authorized Officer's Signature
Shawmut Bank, N.A. (Agent)
by: Authorized Officer's Signature
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
by: Authorized Officer
cc: Underwriter Goldman Sachs & Co and Citibank Securities Markets, Inc.
Underwriter's Counsel Ropes & Gray
SCHEDULE A
(Describe Issue)
<TABLE>
<S> <C> <C> <C>
CUSIP Principal Amount Maturity Date Interest Rate
575856bdo $40,000,000 July 1, 1998 5 7/8%
</TABLE>
SCHEDULE B
SAMPLE OFFICIAL STATEMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
(Prepared by DTC--bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC~), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities
will be issued as fully-registered securities registered in the name of
Cede & Co. (DTC's partnership nominee). One fully-registered Security
certificate will be issued for [each issue of] the Securities, [each] in the
aggregate principal amount of such issue, and will be deposited with DTC.
[If, however, the aggregate principal amount of [any] issue exceeds $150
million, one certificate will be issued with respect to each $150 million of
principal amount and an additional certificate will be issued with respect to
any remaining principal amount of such issue.]
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organizations" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporations"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. DTC holds securities that its participants
"Participants" deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly w indirectly "Indirect Participants").
The Rules applicable to DTC and its Participants are on file with the
Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of each Security
("Beneficial Owners") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmation's providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Securities are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Securities, except in the event that use of the book-entry system
for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registration In the name of DTC's partnership
nominee, Cede & Co. The deposit of Securities with DTC and their registration
in the name of Cede & Co. effect no change in beneficial ownership. DTC has
no knowledge of the actual Beneficial Owners of the Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
[6. Redemption notices shall be sent to Cede & Co. If less than all of
the Securities within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such
issue to be redeemed.]
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the
Issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
8. Principal and interest payments on the Securities will be made to DTC.
DTC's practice is to credit Direct Participants accounts on payable date in
accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name" and
will be the responsibility of such Participant and not of DTC, the Agent, or
the Issuer, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest to DTC's the
responsibility of the Issuer or the Agent, disbursement of such payments to
Direct Participants shall be the responsibility of DTC, and disbursement of
such payments to the Beneficial Owners shall be the responsibility of Direct
and Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to the [Tender/Remarketing]
Agent, and shall effect delivery of such Securities by causing the Direct
Participant to transfer the Participant's interest in the Securities, on DTC's
records, to the [Tender/Remarketing] Agent. The requirement for physical
delivery of Securities in connection with a demand for purchase or a mandatory
purchase will be deemed satisfied when the ownership rights in the Securities
are transferred by Direct Participants on DTC's records.]
10.DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to the
Issuer or the Agent. Under such circumstances, in the event that a successor
securities depository is not obtained, Security certificates are required to
be printed and delivered.
11. The Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Issuer believes to be reliable,
but the Issuer takes no responsibility for the accuracy thereof.
EXHIBIT 10.2.08
LOAN AGREEMENT
Between
MASSACHUSETTS INDUSTRIAL FINANCE AGENCY
and
EASTERN EDISON COMPANY
Dated as of July 1, 1993
Financed by the Issue of
$40,000,000
Massachusetts Industrial Finance Agency
5 7/8% Pollution Control Revenue Refunding Bonds, 1993 Series
(Eastern Edison Company Project)
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS ......................................
ARTICLE II - REPRESENTATIONS BY THE COMPANY ......................3
Section 2.1 Existence and Subsidiaries.........................3
Section 2.2 Authority..........................................3
Section 2.3 Binding Agreement. ................................3
Section 2.4 Regulatory Approvals...............................3
Section 2.5 No Event of Default. ..............................4
Section 2.6 Useful Life of Project. ...........................4
Section 2.7 Use of Loan Proceeds...............................4
Section 2.8 No Untrue or Omitted Statements....................4
Section 2.9 Inducement.........................................4
Section 2.10 Commencement and Use....... .......................4
Section 2.11 Project is a "Project". ...........................5
Section 2.12 Use of 1983 Loan Proceeds..........................5
Section 2.13 Completion of Project..............................5
ARTICLE III - REPRESENTATIONS OF THE AGENCY ......................5
Section 3.1 Existence..........................................5
Section 3.2 Authority..........................................5
Section 3.3 Binding Special Obligations........................6
Section 3.4 Disclaimer as to Tax-Exempt
Status of 1993 Series Bonds.........................6
ARTICLE IV - ISSUANCE OF BONDS ....................................6
ARTICLE V
LOAN PAYMENTS AND ADDITIONAL PAYMENTS...............7
Section 5.1 Loan Payments...............................7
Section 5.2 Additional Payments.........................7
Section 5.3 Assignment of Rights; Place of Payments.....8
Section 5.4 Obligations Unconditional...................8
Section 5.5 Prepayment of Loan Payments and
Additional Payments; Other Payments...........8
Section 5.6 Redemption of Bonds.........................9
ARTICLE VI - COVENANTS OF THE COMPANY ............................9
Section 6.1 Affirmative Covenants.......................9
Section 6.2 Negative Covenant as to Tax Exempt
Status of Bond Interest. .....................10
ARTICLE VII - DEFAULT PROVISIONS AND REMEDIES OF
THE AGENCY AND TRUSTEE ............................10
Section 7.1 Defaults; Events of Default.................10
Section 7.2 Remedies on Default.........................11
Section 7.3 Agreement to Pay Costs of Collection. ......12
Section 7.4 Waiver. ....................................12
ARTICLE VIII - MISCELLANEOUS .....................................12
Section 8.1 Indemnification....................................12
Section 8.2 Limitations on Liability of the Agency,
the Trustee and any Paying Agent.............................13
Section 8.3 Avoidance of Arbitrage.............................14
Section 8.4 Assignment of Agreement by the Agency..............14
Section 8.5 Termination........................................15
Section 8.6 Notices............................................15
Section 8.6 Binding Effect.....................................15
Section 8.7 Severability.......................................15
Section 8.8 Amendments, Changes and Modifications..............15
Section 8.9 Captions; Table of Contents........................15
Section 8.10 Counterparts.................................16
Section 8.11 Governing Law................................16
EXHIBIT A ...........................................................1
LOAN AGREEMENT
THIS LOAN AGREEMENT made as of the 1st day of July, 1993, by and between
Massachusetts Industrial Finance Agency (the "Agency") and Eastern Edison
Company, a Massachusetts corporation (the "Company"),
WITNESSETH
That, in consideration of the respective representations and agreements
hereinafter contained, the parties hereto agree as follows; provided, that any
financial obligation of the Agency created by or arising out of this Agreement
shall not constitute a general obligation of the Agency or a pledge of the
faith and credit of the Agency or a debt or pledge of the faith and credit or
the taxing power of The Commonwealth of Massachusetts or any political
subdivision thereof but shall be payable solely out of the Pledged Receipts
(as defined in the Trust Agreement hereinafter referred to) and other moneys
as therein provided:
ARTICLE I
DEFINITIONS
In addition to the words and terms defined in the Trust Agreement or elsewhere
in this Agreement, the following words and terms as used in this Agreement and
in any certificate or other document executed by any party in connection
therewith shall have the following meanings unless the context or use
indicates another or different meaning or intent.
"Additional Payments" means the amounts required to be paid by the provisions
of Section 5.2 hereof.
"Bond Purchase Agreement" means the agreement dated July 14, 1993 between the
Agency and the Purchasers.
"Bonds" means the 1993 Series Bonds, any Bond or Bonds issued in exchange
therefor or replacement thereof pursuant to Sections 2.5, 2.6, 2.7, 2.8 and
2.9 of the Trust Agreement and any Additional Bonds.
"Code" means the Internal Revenue Code of 1954, as amended from time to time,
and such provisions of the Internal Revenue Code of 1986, as amended from time
to time, as may be applicable to the 1993 Series Bonds.
"Enabling Act" means Massachusetts General Laws Chapters 23A and 40D, each as
amended.
"Inducement Letter" means the letter dated July 14, 1993 from the Company to
the Agency and the Purchasers relating to the Bonds.
"Loan" means the loan by the Agency to the Company made pursuant to Section
4.1 hereof of the proceeds from the sale of the 1993 Series Bonds initially
issued to the Purchaser.
"Loan Payments" means the amounts required to be paid by the provisions of
Section 5.1 hereof.
"Loan Payment Date" means the business day before each Bond Payment Date and
before each Interest Payment Date which is not a Bond Payment Date.
"Montaup" means Montaup Electric Company, a Massachusetts corporation and a
wholly-owned subsidiary of the Company.
"1993 Series Bonds" means the bonds initially issued by the Agency pursuant to
Section 2.1 of the Trust Agreement.
"Officer" when used in connection with the Company or Montaup means any
officer designated by a certificate signed on behalf of the Company by the
Chairman, Vice- Chairman, President, any Vice-President, the Treasurer or
Assistant Treasurer or the clerk or any assistant clerk of the Company.
"Paying Agent" means any bank or trust company designated as paying agent for
the Bonds (and may include the Trustee) and its successor or successors
hereafter appointed in the manner provided in the Trust Agreement.
"Plant" means the electrical generating facilities of Montaup located in
Somerset, Massachusetts.
"Project" means the pollution control facilities described in Exhibit A
attached hereto.
"Purchasers" means Goldman, Sachs & Co. and Citicorp Securities Markets, Inc.,
as initial purchasers of the 1993 Series Bonds.
"Tax Compliance Certificate" means a tax compliance certificate or similar or
related certificates dated the Closing Date (as defined in the Bond Purchase
Agreement) and signed by the Company as to certain tax matters relating to the
1993 Series Bonds.
"Trust Agreement" means the Trust Agreement of even date herewith between the
Agency and Shawmut Bank, N.A., as Trustee, securing the 1993 Series Bonds, and
all agreements amendatory thereof or supplemental thereto.
"Trustee" means the trustee at the time serving as such under the Trust
Agreement.
ARTICLE II
REPRESENTATIONS BY THE COMPANY
The Company makes the following representations:
Section2.1 Existence and Subsidiaries. The Company is a corporation duly
organized and validly existing under the laws of Massachusetts and has all
requisite corporate power and authority to own and operate its properties and
to conduct its business as now being conducted and proposed to be conducted.
The Company has all requisite corporate power and authority to enter into and
perform this Agreement and the Inducement Letter. The Company is not required
to be qualified to do business as a foreign corporation in any jurisdiction.
The Company's only subsidiary is Montaup. Montaup is duly qualified to do
business as a foreign corporation in each jurisdiction in which such
qualification is required.
Section 2.2 Authority. The execution and performance of this Agreement and the
Inducement Letter have been duly authorized on the part of the Company by all
necessary action and will not violate or constitute a default under the
Company's charter documents or by-laws or any agreement or instrument binding
upon it or its assets or any applicable law or regulation of any governmental
authority.
Section 2.3 Binding Agreement. This Agreement and the Inducement Letter are
the valid and binding obligations of the Company, enforceable in accordance
with their respective terms.
Section 2.4 Regulatorv Approvals. The Massachusetts Department of Public
Utilities and the United States Securities and Exchange Commission have
approved all matters relating to the Company's participation in the
transactions contemplated by this Agreement, the Trust Agreement, the Bond
Purchase Agreement and the Inducement Letter which require said approval. With
respect to other consents, approvals, authorizations or other orders of any
regulatory body or administrative agency or other governmental body legally
required for the Company's participation therein, except such as have been
obtained or may be required under state securities laws, the Company expects
in good faith that all such consents, approvals, authorizations or orders not
completed or obtained as of the date of execution of this Agreement will be
forthcoming on or prior to the Closing Date.
Section 2.5 No Event of Default. No event has occurred and is continuing and
no condition exists which constitutes or, after notice or lapse of time or
both, would constitute a default or event of default by the Company hereunder.
Section 2.6 Useful Life of Project. Upon the redemption of the Agency's
Pollution Control Revenue Bonds, 1983 Series (Eastern Edison Company Project)
(the "1983 Series Bonds"), on or prior to April 1, 1994, the term of the 1993
Series Bonds, when added to the term of the 1983 Series Bonds, is not greater
than 120% of the original useful life of the Project.
Section 2.7 Use of Loan Proceeds. The proceeds of the Bonds will be used to
refund the $40,000,000 aggregate principal amount of the 1983 Series Bonds.
Section 2.8 No Untrue or Omitted Statements. No one of this Agreement, the
Bond Purchase Agreement, or the Inducement Letter or any other document,
certificate or statement prepared by or on behalf of or furnished by or on
behalf of the Company to the Agency or to the Purchasers in connection with
this Agreement, or the Bond Purchase Agreement or the Inducement Letter or
relating to the issue and sale by the Agency or the purchase by the Purchasers
of the Bonds contains any untrue statement of a material fact concerning the
Company or omits to state a material fact necessary in order to make the
statements contained herein and therein with respect to the Company not
misleading. There is no fact (other than facts relating to general economic
conditions) since December 31, 1992 which materially adversely affects the
business, operations, affairs, conditions, properties or assets of the Company
which has not been set forth in a document, certificate or statement furnished
to the Purchasers by or on behalf of the Company prior to or on the date of
delivery hereof.
Section 2.9 Inducement. The Project was, at the time of its acquisition,
construction and installation, and is at the present time, necessary for the
prevention, avoidance, reduction, control, abatement or elimination of
pollution which may be effected by the operation of the Plant; and the Company
presently intends to continue to cause Montaup to operate the Project.
Section 2.10 Commencement and Use. Acquisition, construction and installation
of the Project did not commence prior to November S, 1981; the properties
constituting the Project are land or property of a character subject to the
allowance for depreciation provided for in the Code; and the Commissioner of
the Massachusetts Department of Environmental Quality Engineering (now known
as the Department of Environmental Protection) certified that the Project, as
designed, is in furtherance of the purpose of abating or controlling
pollution.
Section 2.11 Project is a "Project". The Project is, and was at the time of
the issuance of the 1983 Series Bonds, a "project" within the definition of
such term in the Enabling Act.
Section 2.12 Use of 1983 Loan Proceeds. Substantially all of the proceeds from
the sale of the 1983 Series Bonds (being at least 90% of such proceeds after
deducting expenses of issuing the 1983 Series Bonds), were used for the
acquisition, construction, reconstruction, improvement and/or installation of
the Project, and all of such proceeds were used to pay "costs of the Project"
as defined in Section 1(e) of Chapter 40D of the General Laws of
Massachusetts.
Section 2.13 Completion of Project. The Company has completed the Project in
accordance with all material laws and regulations and in accordance with the
requirements of Article IV of the Loan Agreement dated as of August 1, 1983
(the "1983 Loan Agreement") between the Agency and the Company, and has taken,
and shall take, no action which would affect the qualification of the Project
as a "project," as defined in the Enabling Act, or would affect in any
material respect the description of the Project approved by the Agency.
ARTICLE III
REPRESENTATIONS OF THE AGENCY
The Agency makes the following representations:
3.1 Existence. The Agency is a body politic and corporate and a public
instrumentality of The Commonwealth of Massachusetts established under Chapter
23A of the General Laws of Massachusetts, with the powers under and pursuant
to the Enabling Act to execute and deliver this Agreement, the Trust Agreement
and the Bond Purchase Agreement, to perform its obligations under each thereof
and to issue and sell the 1993 Series Bonds in order to refund the 1983 Series
Bonds pursuant hereto and pursuant to the Trust Agreement.
3.2 Authority. The Agency has taken all necessary action and has complied with
all provisions of the Constitution of The Commonwealth of Massachusetts and
the Enabling Act (including but not limited to the making of the findings
required by Sections 12 and 22 of Chapter 40D, to the extent applicable to the
1993 Series Bonds) required to make this Agreement, the Trust Agreement, the
Bond Purchase Agreement and the 1993 Series Bonds the valid obligations of the
Agency that they purport to be; and, when executed and delivered by the
parties thereto, the Trust Agreement and this Agreement will constitute
valid and binding agreements of the Agency and be enforceable in accordance
with their respective terms, except as enforceability may be subject to the
exercise of judicial discretion in accordance with general equitable
principles and to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws for the relief of debtors heretofore or hereafter
enacted to the extent that the same may be constitutionally applied.
3.3 Binding Special Obligations. When delivered to and paid for by the
Underwriters in accordance with the terms of the Bond Purchase Agreement and
the Trust Agreement, the 1993 Series Bonds will constitute valid and binding
special obligations of the Agency enforceable in accordance with their terms,
except as enforceability may be subject to the exercise of judicial discretion
in accordance with general equitable principles and to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws for the relief of
debtors heretofore or hereafter enacted to the extent that the same may be
constitutionally applied, and will be entitled to the benefits of the Trust
Agreement.
3.4 Disclaimer as to Tax-Exempt Status of 1993 Series Bonds. The Agency makes
no representation or warranty that the 1993 Series Bonds and any income
derived therefrom is or will be exempt from federal or state taxation.
ARTICLE IV
ISSUANCE OF BONDS
Section 4.1 Issuance of 1993 Series Bonds: Deposit of 1993 Series Bond
Proceeds Constitutes Loan. In order to provide funds to make the Loan and
thereby refund the 1983 Series Bonds, the Agency shall, pursuant to the Bond
Purchase Agreement, issue and sell the 1993 Series Bonds to the Purchasers and
deposit the proceeds of the 1993 Series Bonds (excluding accrued interest) in
the Bond Fund created under the Trust Agreement between the Agency and State
Street Bank and Trust Company as Trustee dated as of August 1, 1983. Such
deposit shall constitute the Loan to the Company of the proceeds of sale of
the 1993 Series Bonds. All accrued interest included in the purchase price of
the 1993 Series Bonds shall be deposited in the Bond Fund established pursuant
to Section 4.1 of the Trust Agreement.
The proceeds of such sale deposited in the Bond Fund established under the
1983 Loan Agreement shall be applied immediately by the Agency to the
outstanding principal balance of the Loan made by the Agency to the Company
pursuant to such Loan Agreement (the "1983 Loan"). The Company shall pay to
the Agency any accrued but unpaid interest and premium, if any, on the 1983
Loan.
ARTICLE V
LOAN PAYMENTS AND ADDITIONAL PAYMENTS
Section 5.1 Loan Payments. On or before each Loan Payment Date the Company
shall pay or cause to be paid to the Trustee, a sum, for deposit in the Bond
Fund, as a Loan Payment hereunder and for the repayment of the Loan, in funds
available on the Loan Payment Date, in an amount which, when added to the
balance then in the Bond Fund and available for such purpose, shall be equal
to the amount payable as principal of (whether at stated maturity, or at
maturity as the same may be accelerated pursuant to any mandatory redemption
requirements) and premium, if any, and interest, on the Bonds on the next
Interest Payment Date or Bond Payment Date, as the case may be.
In any event the sum of the Loan Payments payable under this Section for the
repayment of the Loan shall be sufficient to pay the total amount due with
respect to principal of and interest, including but not limited to interest
payable pursuant to the Trust Agreement on any overdue amount, and any premium
on the Bonds as and when due, and if at any time when said payments on or in
respect of the Bonds are due, whether by acceleration, redemption or
otherwise, the balance in the Bond Fund available for said purpose is
insufficient to make such payments, the Company shall forthwith pay a Loan
Payment to the Trustee in an amount equal to the deficiency. If at any time
all the Outstanding Bonds are paid within the meaning of the third paragraph
of Section 6.1 of the Trust Agreement, the Company shall not be obligated to
make any further Loan Payments under the provisions of this Section.
Section 5.2 Additional Pavments. The Company shall make Additional Payments
as follows:
(1) To the Agency on demand, as reimbursement for any and all costs,
expenses and liabilities paid or incurred by the Agency, including reasonable
fees of counsel and disbursements thereof, in satisfaction of any obligations
of the Company hereunder or under the Bond Purchase Agreement, the Trust
Agreement or the Inducement Letter not performed by the Company in accordance
with the terms hereof or thereof;
(2) To the Agency on demand, as reimbursement for or prepayment of any
and all costs, expenses and liabilities, paid or incurred or to be paid or
incurred by the Agency or any of its directors, officials, officers, employees
and agents, including reasonable fees of counsel and disbursements thereof,
whether requested by the Company, otherwise required by or reasonably incurred
pursuant to this Agreement, the Trust Agreement, the Bond Purchase Agreement,
the Inducement Letter or the Enabling Act, or relating to the approval,
authorization or issuance of the Bonds, any Additional Bonds or matters
relating thereto, including but not limited to charges or fees of the Agency
required to be paid in respect of the Bonds and Additional Bonds; and
(3) To the Trustee, the reasonable fees, charges and expenses of the
Trustee as trustee, bond registrar and paying agent, including the reasonable
fees, charges and expenses of its attorneys and agents and the amounts payable
to the Trustee pursuant to Sections 8.1.2 and 8.2 of the Trust Agreement, and
of any other paying agent on the Bonds under the Trust Agreement all as
provided in the Trust Agreement, as and when the same become due, and as
reimbursement for any and all costs, expenses and liabilities paid or incurred
by the Trustee in satisfaction of any obligations of the Company hereunder or
under the Trust Agreement, the Bond Purchase Agreement or the Inducement
Letter not performed in accordance with the terms hereof or thereof by the
Company.
Section 5.3 Assignment of Rights: Place of Pavments. It is understood and
agreed that all rights and interest of the Agency under this Agreement,
including the right to the Pledged Receipts but excluding the right to receive
payments under Sections 5.2(1) and (2) and Section 8.1, will be pledged and
assigned to the Trustee pursuant to the Trust Agreement concurrently with the
issuance of the 1993 Series Bonds. The Agency hereby authorizes and directs
the Company, and the Company hereby agrees to pay all Loan Payments, or cause
Loan Payments to be paid, directly to the Trustee at its corporate trust
office for the account of the Agency. Such Loan Payments shall be deposited in
the Bond Fund. Additional Payments shall be made directly to the person or
entity to whom or to which they are due.
Section 5.4 Ohligations Unconditional. The obligations of the Company to make
Loan Payments and Additional Payments, or to cause such Payments to be made,
and to perform and observe the other agreements on its part contained herein
shall be absolute and unconditional and shall not be subject to any right of
recoupment or set-off. Until such time as all conditions provided in the Trust
Agreement for its defeasance are met, the Company shall not (i) suspend or
discontinue payment of any Loan Payments or Additional Payments or (ii) fail
to perform and observe any of its other agreements contained in this Agreement
for any cause or reason including but not limited to the occurrence of any
acts or circumstances that may constitute failure of consideration,
destruction of or damage to the Project, commercial frustration of purpose,
any change in the tax or other laws or administrative rulings of or
administrative actions by or under authority of the United States of America
or of the Commonwealth of Massachusetts or any failure of the Agency to
perform and observe any agreement, whether expressed or implied.
Section 5.5 Prepayment of Loan Pavments and Additional Pavments: Other
Payments. The Company is authorized and permitted at any time it may choose,
subject to the provisions of Section 6.2, to prepay all or any part of the
Loan Payments, or any Additional Payments, without penalty or premium of any
kind and the Agency agrees that the Trustee shall accept such prepayment of
Loan Payments or of any Additional Payments. All Loan Payments or Additional
Payments so prepaid shall be credited against the Loan Payments or Additional
Payments, as the case may be, in the order in which they are payable.
The Company may also, at any time it may choose, deliver to the Trustee moneys
in addition to the Loan Payments payable on the next Loan Payment Date and in
addition to any other moneys then contained in or payable to the Bond Fund
with instructions to the Trustee to use such moneys for the purpose of
purchasing or of calling for redemption any Bond or portion thereof in
accordance with the provisions of the Trust Agreement for optional redemption
of Bonds. Any moneys so delivered to the Trustee shall be held in a separate
account in the Bond Fund and shall not operate to abate the payment of Loan
Payrnents required by this Agreement.
Section 5.6 Redemption of Bonds. The Agency, at the written request and
expense of the Company at any time, shall forthwith take all steps as may be
specified by the Company under the applicable redemption provisions of the
Trust Agreement to effect redemption of any Bond or portion thereof on the
earliest date on which such redemption may be made under such applicable
provisions.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Affirmative Covenants. Until performance of all obligations of the
Company hereunder and until no Bond shall be Outstanding under the Trust
Agreement, the Company will:
6.1.1. Tax Exempt Status of Bond lnterest. Take, or require to be taken,
such action as may be reasonably within its ability and as may, from time to
time, be required under applicable law or regulations to continue to exclude
interest on the 1993 Series Bonds from gross income for federal income tax
purposes and exempt interest on the 1993 Series Bonds from Massachusetts
income taxation, including, without limitation, the preparation and filing of
any statements required to be filed by it in order to maintain such tax-exempt
status.
6.1.2 Indemnitv Against Fees. Indemnify the Agency, the Trustee and any
Paying Agent and each of them against and hold them and each of them harmless
from any claim by any person for a commission or fee in connection with this
Agreement, the Bond Purchase Agreement, the Inducement Letter or the purchase
of the 1993 Series Bonds by the Purchasers.
Section 6.2 Negative Covenant as to Tax Exempt Status of Bond Interest. Until
performance of all obligations of the Company hereunder and until no 1993
Series Bond shall be Outstanding under the Trust Agreement the Company will
not take, or permit to be taken on its behalf, any action which would
adversely affect the exclusion of interest from gross income for federal
income tax purposes and the exemption from Massachusetts income taxation of
the interest paid on the 1993 Series Bonds.
Section 6.3 Tax Compliance Certificate. The Company covenants that it will
comply fully with its representations, warranties and covenants set forth and
contained in the Tax Compliance Certificate.
ARTICLE VII
DEFAULT PROVISIONS AND REMEDIES OF THE AGENCY AND TRUSTEE
Section 7.1 Defaults: Events of Default. If any of the following events occur,
it is hereby defined as and declared to be and to constitute an "event of
default" hereunder:
(1) Failure to make any Loan Payment when the same is due hereunder;
(2) Any default under the Bond Purchase Agreement or the Inducement
Letter;
(3) Failure by the Company to perform or observe any other covenant,
agreement or condition on its part contained in this Agreement other than as
referred to in paragraph (1) of this Section 7.1, which failure shall have
continued for a period of ninety (90) days after written notice given by the
Trustee to the Company specifying the failure and requiring the same to be
remedied; or
(4) The Company shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or a court or
governmental agency of competent jurisdiction shall enter an order, judgment
or decree appointing, without the consent of the Company, a receiver or
trustee of the Company or of the whole or any substantial part of its
property, or approving a petition filed against it seeking reorganization or
arrangement of the Company under the federal bankruptcy laws or any other
applicable law, and such order, judgment or decree shall not be vacated or set
aside or stayed within 60 days from the date of entry thereof; or the Company
shall take any corporate action to authorize any of the actions set forth
above in this subsection; or
(5) A default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company or under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any indebtedness for money borrowed by the Company
(other than this Agreement), whether such indebtedness now exists or shall
hereafter be created, which default shall constitute a failure to pay in
excess of $2,000,000 of the principal or interest of such indebtedness when
due and payable after the expiration of any applicable grace period with
respect thereto or shall have resulted in such indebtedness in an amount in
excess of $2,000,000 becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable, without such
indebtedness having been discharged, or such acceleration having been
rescinded or annulled within a period of 90 days after the date on which
it was declared to be due and payable.
Section 7.2 Remedies on Default. Whenever any event of default under Section
7.1 of this Agreement shall have happened, and shall be continuing, any one or
more of the following remedies may be exercised, none being exclusive of any
other, provided that in no event shall the Agency be obligated to take any
step which in its opinion will or might cause it to expend time or money or
otherwise incur liability unless and until an indemnity bond satisfactory to
the Agency has been furnished to it:
(1) The Agency may with the prior written consent, and shall at the written
request, of the Trustee, or the Trustee as the assignee of the Agency may, if
acceleration is declared pursuant to Section 7.2 of the Trust Agreement,
declare all Loan Payments payable hereunder for the remainder of the term of
this Agreement and applicable to the payment of unpaid principal of and
interest accrued on the Bonds to be immediately due and payable, whereupon the
same shall become immediately due and payable;
(2) The Agency and the Trustee may have access to and inspect, examine
and make copies of the books and records and any and all accounts, data and
income tax and other tax returns of the Company and Montaup; and
(3) The Agency may with the prior written consent, and shall at the written
request, of the Trustee, or the Trustee as the assignee of the Agency may,
take whatever action at law or in equity may appear necessary or desirable to
collect the Loan Payments and Additional Payments then due and thereafter to
become due, or to enforce performance and observance of any obligation,
agreement or covenant of the Company under this Agreement.
Any amounts collected as Loan Payments or applicable to Loan Payments pursuant
to action taken under this Section shall be paid into the Bond Fund and
applied in accordance with the provisions of the Tmst Agreement or, if the
Outstanding Bonds have been paid and discharged in accordance with the
provisions of the Trust Agreement, shall be paid as provided in Section 6.1 of
the Trust Agreement for transfers of remaining amounts in the Bond Fund.
Section 7.3 Agreement to Pay Costs of Collection. If any event of default
provided for in Section 7.1 should occur and the Agency or the Trustee should
incur any costs for the collection of the Bonds or of any payment provided for
herein or the enforcement of performance or observance of any obligation or
agreement on the part of the Company or the Agency contained in this
Agreement, the Bonds, the Trust Agreement or any other agreement related to
the Bonds, the Company agrees that it will on demand therefor reimburse the
costs so incurred to the Agency or the Trustee, as the case may be. Such
costs shall include all attorneys' reasonable fees and out-of-pocket expenses
incurred by attorneys of the Agency or the Trustee, and all costs and expenses
associated with travel on behalf of the Agency or the Trustee, which costs and
expenses are directly related to their respective efforts to collect or
enforce the Bonds as aforesaid, or any of their respective rights, remedies,
powers, privileges or discretions against or in respect of the Company or
the Agency (whether or not suit is instituted in connection with any of the
foregoing).
Section 7.4 Waiver. No event of default hereunder shall be deemed to have
occurred if such event of default is waived pursuant to the provisions of
Sections 7.2 or 7.8 of the Trust Agreement. Such waiver shall be limited to
the particular event of default so waived and shall not be deemed to waive any
other event of default hereunder.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Indemnification. The Company shall indemnify and save harmless the
Agency, the Trustee and any Paying Agent and their respective directors,
officers, officials, employees and agents against and from (a) any and all
claims by or on behalf of any person arising out of (i) any condition of the
Project, or (ii) the construction, reconstruction, improvement, use,
occupancy, conduct or management of or any work or anything whatsoever done or
omitted to be done in or about the Project, or (iii) any accident, injury
or damage to any person occurring in or about the Project, or (iv) any breach
or default by the Company of or in any of its obligations hereunder, under the
Trust Agreement, the Bond Purchase Agreement or the Inducement Letter, or (v)
any act or omission of the Company or Montaup or any of their agents,
contractors, servants, employees, or licensees, or (vi) the offering,
issuance, sale or resale of the 1993 Series Bonds, but only to the extent
permitted by law, and (b) any and all costs, counsel fees, expenses or
liabilities reasonably incurred in connection with any such claim or action or
proceeding brought thereon; any indemnification of the Trustee or any Paying
Agent or their respective directors, officers, officials, employees and agents
shall not he effective against any claim (1) caused by the willful dishonesty
or intentional violation of law by the party seeking indemnification or (2) in
connection with the issuance of the 1993 Series Bonds, based upon information
furnished by the Purchasers under the caption "Underwriting", or in the
statements on the cover page with respect to the initial public offering price
and terms of offering, contained in the Official Statement used in connection
with the sale of the 1993 Series Bonds and, in connection with the issuance of
any Additional Bonds, based upon information furnished by the Purchasers in
writing specifically for use in any official statement or prospectus used in
connection with the sale of such Additional Bonds. In case any action or
proceeding is brought against the Agency, the Trustee or any Paying Agent (or
any such director, officer, official, employee or agent) by reason of such
claim, the Company, upon notice from the affected party, shall resist or
defend (or cause Montaup to resist or defend) such action or proceeding,
including the employment of counsel and the payment of all expenses in
connection with such defense, and shall have the right to negotiate and
consent to settlement. Any indemnified party shall have the right to employ
separate counsel in any such action against it and to participate in the
defense thereof, but the fees and expenses of such counsel incurred after the
Company or Montaup has assumed the defense of such action shall be at the
expense of such indemnified party unless the employment of such counsel and
the assumption by the Company or Montaup of the fees and expenses thereof
shall have been specifically authorized in writing by the Company. The Company
shall not be liable for any settlement of any such action effected without its
consent; but if any such action is settled with the consent of the Company or
if there be a final judgment for the plaintiff in any such action (of which
the Company shall have been notified), the Company shall indemnify and hold
harmless each indemnified party from and against any losses, costs, claims,
damages, actions, liabilities or expenses incurred or suffered by reason of
such settlement or judgment. Subject to the foregoing, the Agency, the Trustee
and any Paying Agent shall cooperate and join with the Company, at the expense
of the Company, as may be required in connection with any action taken or
defended by the Company.
Section 8.2 Limitations on Liahility of the Agency. the Trustee and any Paying
Agent. The Agency, the Trustee and any Paying Agent, and their respective
directors, officers, officials, employees and agents, shall be entitled to the
advice of counsel (who may also be counsel for the Company or any Bondholder)
and shall be wholly protected as to action taken or omitted to be taken in
good faith in reliance on such advice. They may rely conclusively on any
communication or other document furnished to them hereunder or under the Trust
Agreement, the Bond Purchase Agreement or the Inducement Letter and reasonably
believed by them to be genuine. They shall not be liable for any action (a)
taken by them in good faith and reasonably believed by them to be within the
discretion or powers conferred upon them, or (b) in good faith omitted to be
taken by them because reasonably believed to be beyond the discretion or
powers conferred upon them, or (c) taken by them pursuant to any direction or
instruction by which they are governed hereby or by the Trust Agreement, the
Bond Purchase Agreement or the Inducement Letter, or (d) omitted to be
taken by them by reason of the lack of any direction or instuction required
for such action hereby or by the Trust Agreement, the Bond Purchase Agreement
or the Inducement Letter; nor shall they be responsible for the consequences
of any error of judgment reasonably made by them. The Agency, the Trustee and
any Paying Agent shall in no event be liable for the application or
misapplication of funds, or for other acts or defaults, by any person, except
their own directors, officers, officials or employees. When any consent or
other action by them is called for hereby or by the Trust Agreement, they may
defer such action pending such investigation or inquiry or receipt of such
evidence (if any) as they may require in support thereof They shall not be
required to take any remedial action (other than the giving of notice) unless
indemnity reasonably satisfactory to them is furnished for any expense or
liability to be incurred thereby. They shall be entitled to reimbursement from
the Company for expenses reasonably incurred or advances reasonably made, with
interest, in the exercise of their rights or the performance of their
obligations hereunder or under the Trust Agreement, the Bond Purchase
Agreement, or the Inducement Letter, to the extent that they act without
previously obtaining indemnity. No permissive right or power to act which they
may have shall be construed as a requirement to act; and no delay in the
exercise of a right or power shall affect the subsequent exercise of that
right or power. The Agency shall not be required to take notice of any breach
or default by the Company herein or in the Trust Agreement, the Bond Purchase
Agreement or the Inducement Letter, except when given notice thereof by the
Trustee. No recourse shall be had by the Company, the Purchasers, the Trustee,
any Paying Agent or any Bondholder for any claim based on this Agreement, the
Trust Agreement, the Bond Purchase Agreement, the Inducement Letter or the
Bonds against any director, officer, official, employee or agent of the Agency
alleging personal liability on the part of such person unless such claim is
based upon the willful dishonesty or intentional violation of law by such
person.
Section 8.3 Avoidance of Arbitrage. The Company agrees to restrict the use of
the proceeds of the 1993 Series Bonds in such manner and to such extent as
necessary to assure that the 1993 Series Bonds will not constitute arbitrage
bonds under Section 148 of the Code. Any officer of the Agency having
responsibility with respect to the issuance of the 1993 Series Bonds is
authorized and directed to give an appropriate certificate on behalf of
the Agency, for inclusion in the transcript of proceedings for the 1993 Series
Bonds, setting forth the facts, estimates and circumstances and reasonable
expectations pertaining to Section 148 of the Code. Without limiting the
generality of the foregoing, the Company covenants that it will take all
action necessary to comply with Section 148 of the Code including the payment
when due of all amounts payable to the United States thereunder, and shall
refrain from taking any action contrary to the applicable provisions of the
Code.
Section 8.4 Assignment of Agreement by the Agency. The Agency may assign all
or any part of its interest in this Agreement and pledge the Loan Payments and
all or any of the Additional Payments to the Trustee pursuant to the Trust
Agreement and not otherwise as security for payment of the principal of,
premium, if any, and interest on the Bonds.
Section 8.5 Termination. This Agreement shall terminate at any time when the
Outstanding principal amount of the Bonds has been paid and discharged in
accordance with the provisions of the Trust Agreement, or when the Trust
Agreement has been defeased pursuant to Section 6.1 thereof and sufficient
moneys are on deposit with the Trustee or the Agency, or both, to meet all
Additional Payments due or to become due through the date on which the final
payment on account of the Outstanding Principal Amount is scheduled
to be paid or, with respect to Additional Payments to become due, provisions
satisfactory to the Trustee and the Agency are made for paying such amounts as
they come due.
Section 8.6 Notices. All notices, certificates or other communications
hereunder shall be sufficiently given and shall be deemed given when mailed by
registered or certified mail, postage prepaid, or sent by overnight courier,
addressed as follows: if to the Agency, at 75 Federal Street, Boston, MA
02110, Attn: Executive Director; if to the Company, at P.O. Box 2333, Boston,
MA 02107, Attn: Treasurer; if to the Trustee, at One Federal Street, Boston,
Massachusetts 02211, Attn: Corporate Trust Department; and if to any holder of
a Bond, at its address appearing on the list kept by the Trustee under Section
8.8 of the Trust Agreement. A duplicate copy of each notice, certificate or
other communication given hereunder by any party to any other party shall also
be given to the others. Any party may, by notice given hereunder, designate
any further or different address to which subsequent notices, certificates or
other communications shall be sent.
Section 8.6 Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon the Agency, the Company and their respective successors
and assigns, subject, however, to the specific provisions hereof, and subject
to the further limitation that any obligation of the Agency created by or
arising out of this Agreement shall not be a general obligation of the Agency
or a pledge of the faith and credit of The Commonwealth of Massachusetts but
shall be payable solely from Pledged Receipts.
Section 8.7 Severability. In the event that any provision of this Agreement
shall be held to be invalid in any circumstance, such invalidity shall not
affect any other provision or circumstances.
Section 8.8 Amendments. Changes and Modifications. Except as otherwise
provided in this Agreement or in the Trust Agreement, subsequent to the
initial issuance of the Bonds and prior to payment in full of the Bonds (or
provision for the payment thereof having been made in accordance with the
provisions of the Trust Agreement), the parties may not effectively amend,
change, modify, alter or terminate this Agreement except in accordance with
Section 9.3 of the Trust Agreement without the concurring written consent of
the Trustee and the holders of not less than a majority in aggregate principal
amount of the Outstanding Bonds.
Section 8.9 Captions: Tahle of Contents. The captions or headings in, and the
table of contents for, this Agreement are for convenience only and in no way
define, limit or describe the scope or intent of any provision of this
Agreement. A reference to any Section or subsection shall be a reference to
all provisions prior to the next comparable number.
Section 8.10 Counterparts. This Agreement may be executed simultaneously in
several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
Section 8.11 Governing Law. This Agreement shall be governed by the law of The
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Agency has caused this Agreement to be executed
and delivered in its name and behalf by its Executive Director, its Deputy
Director or its Vice Chairman and the Company has caused this Agreement to be
signed in its name and behalf by its authorized officer, all as of the 1st day
of July, 1993, but actually on another and secular day.
MASSACHUSETTS INDUSTRIAL FINANCE
By
Executive/Deputy/Director/Vice
Chairman
EASTERN EDISON COMPANY
By
Vice President
The undersigned hereby joins in this Agreement and agrees and consents to the
provisions of this Agreement which are applicable to it and is entitled to the
benefits hereof
SHAWMUT BANK, N.A.,
as trustee
By
Authorized Officer
EXHIBIT A
I. WASTE WATER TREATMENT SYSTEM MODIFICATIONS/ADDITIONS
A. Wastewater Treatment and Sludge Dewatering
The wastewater treatment system of Montaup (the "WWTS") was modified at
the time of the issuance of the 1983 Series Bonds to expand its capacity and
enable it to treat the additional liquid wastes resulting from coal conversion
in compliance with imposed Best Available Technology ("BAT') effluent
limitations. Precise pH control, suspended solids removal, and trace metals
removal were achieved. A system capable of continuous metals removal
resulted from adding a treatment system to the existing WWTS comprised of
a mixer, flocculater, gravity settler, and filter system. Chemical feed
control and equipment for automatic pH adjustment, sludge dewatering
equipment, and sludge storage facilities were be included in the packaged
system design. This system is located in Montaup's coal preparation building.
B. Bottom Ash Hanclling
The bottom ash handling system transports and stores the bottom ash
generated by boilers 7 and 8. Ash from these units is washed to a clinker
grinder at each boiler and onto jet pumps, which transfer ash-laden sluice
water to dewatering bins.
Two dewatering bins receive the sluice water. Heavier ash particles settle in
the dewatering bins. The overflow of the dewatering bin flows by gravity to
a clarifier, which in turn discharges to a surge tank for subsequent reuse.
The dewatered ash is discharged by gravity to a truck positioned below the bin
and transported offsite for disposal. Ash carried over to the clarifier and
surge tank is flushed to the center of their conical bottoms where it is
pumped via sludge pumps back to the dewatering bins.
To control ash sluicewater spills and losses during truck loading, concrete
sumps are located beneath each dewatering bin, and the collected drainage
is returned to the surge tank. The surge tank supplies sluicewater to the
bottom ash handling system, with additional makeup obtained from the
existing station service water system, supplied by the Coles River, as needed.
C. Coal Pile Runoff Collection and Storage System
The coal pile runoff collection and storage facilities are sized to collect
and contain all of the incident precipitation from the 10-year, 24-hour
rainfall storm event. A coal pile liner prevents coal pile drainage from
leaching into sub-surface soils and flowing to the river. The coal pile liner
is constructed of a 4-inch thick layer of hydraulic asphaltic concrete
pavement which completely seals the base of the coal pile. To assure that
liner integrity is maintained, the liner is installed on a 6-inch thick bed of
dense, graded, crushed stone.
Runoff flows by gravity to a concrete collection sump and is pumped to the
collection pond.
The coal pile runoff pond is an asphalt-lined earthen basin. The depth allows
for storage of over 85,000 cu ft of runoff and a solids accumulation of 1.5
ft. Coal pile runoff is stored in the runoff pond and discharged at a
controlled rate by gravity to the waste treatment plant.
D. Building Alterations and Demolition
The additions to the wastewater treatment system are housed in the original
coal preparation plant building. The building was altered in order to
accommodate the new wastewater treatment system components. Alterations
consisted of the following: removal of existing building contents
(pulverizers, tanks, motors, piping, etc.); flood proofing; regrading floor
slab; and the addition of heating and lighting.
The construction of the bottom ash handling system required the demolition
and relocation of the hydrogen storage shed and the demolition of Warehouse
No. 1 in order to provide sufficient space for the hydrobins, clarifier, and
surge tank.
II. BOILER PARTICULATE EMISSIONS CONTROL SYSTEM
Electrostatic Precipitators
The two new precipitators (one per boiler) financed with the proceeds of the
1983 Series Bonds are located in the roadway behind boiler 7 and immediately
to the north of boiler 8. The design conditions for the precipitators are
945,000 Ib/hr of flue gas at 350 degrees F for boiler 7 and 1,500,000 Ib/hr
of flue gas at 355 degrees F for boiler 8 when burning coal with an anticipated
maximum cash content of 12 percent (80 percent of which is considered to be
flying ash) and minimum fuel heating value of 12,500 Btu/lb.
Each boiler's precipitator installation includes a redundant electrical field,
hopper heaters, hopper aeration system and weather enclosure around the
hoppers.
The electrostatic precipitators are guaranteed to control boiler emissions to
0.08 lb particulate matter per million Btus input to the boiler.
B. Ductwork
The ductwork on boilers 7 and 8 was modified as required to accommodate
the new electrostatic precipitators. Additional ductwork was added from the
outlets of the air preheaters to the inlet of the electrostatic precipitators
and from the outlets of the electrostatic precipitators to the existing
ductwork at the mechanical collector outlets/draft fan inlets.
C. Fly Ash Handling System
The fly ash handling system was extended to handle the additional precipitator
hoppers and additional flue gas duct hoppers. The existing control panel was
modified to accommodate the additional ash valves. Hoppers associated with
the mechanical dust collectors were disconnected from the system. The
existing mechanical vacuum producers were refurbished and later replaced to
ensure reliable operation and design capacity performance.
A precipitator hopper aeration system was provided with each precipitator to
aid in ash removal. This system includes a low pressure blower, heat, pipe
and aeration pads mounted in the base of the precipitator hoppers.
The fly ash handling system was upgraded by the addition of new multibag
baghouses, one per fly ash train, to replace the existing single bag units.
III. COAL HANDLING EMISSIONS CONTROL SYSTEM
A. Dust Suppression System (Excluding Coal Pile Wetting)
A dust collection system was added to the coal handling system. The traveling
coal unloading tower was equipped with a spray ring in the hopper, which is
activated by the bucket release and timed to minimize the escape of coal dust.
The coal is sprayed at the feeder under the hopper and then again just at the
discharge onto conveyor A. The coal to be stacked out on the stacker
conveyor is sprayed upon leaving the sample house. The coal is also sprayed
at the discharge of the reclaim hoppers and at the entrance and discharge of
the Bradford breaker before going to the tripper gallery and bunkers.
IV. BURNERS AND RELATED CONTROLS SYSTEMS
A. & B. Oil Burners, Steam Atomizers, and Spark Ignitors
Twelve steam atomized burner assemblies were installed in each Boiler 7 and
Boiler 8. The burners are suitable for boiler warm-up and coal flame light
off. Each burner unit is complete with steam atomized oil gun, high energy
spark ignitor, ignitor retract cylinder, power pack and wiring harness,
stationary union, flexible fuel oil and atomizing steam supplies, and mounting
plate.
C. & D. Oxygen Trim Controls and Draft System Controls
A new combustion control system was added to each of boilers No. 7 and 8.
The system includes oxygen trim and draft system controls.
A new oxygen analyzer was added and the existing manually operated air
dampers were converted to automatic pneumatically controlled damper. The
oxygen analyzer supplies a signal to the new draft system controls which
automatically adjusts the air register damper to provide the proper air/fuel
mixture. An air conditioned room houses these instruments and controls.
V. ENVIRONMENTAL MONITORING
A. Continuous Emissions, Ambient Air Quality, and Meteorological Monitoring
Systems
The KVB Inc. Continuous Emission Monitoring System monitors SO2 and O2
emissions from Boiler 7 and Boiler 8. The sample flue gas is filtered,
transported to the analyzer cabinet by heat-traced lines, cooled, dried, and
delivered to an ultraviolet photometer for SO, analysis. The output is
converted to pounds of sulfur per million BTU and recorded by strip chart
recorders.
VI. COAL SPILL APRON
A coal spill apron was added to coal unloading tower No. 2 to prevent coal
from being dropped into the river during unloading. The apron is
approximately 15 feet long by 24 feet wide and is fabricated out of 3/8 inch
thick steel with stiffness.
EXHIBIT 10.3.08
AMENDMENT NO. 1
TO
POWER PURCHASE AGREEMENT
THIS AMENDMENT NUMBER ONE, dated as of February 4, 1994, to
the Power Purchase Agreement (hereinafter referred to as the
"Agreement") entered into as of September 20, 1993 by and between
Meridian Middleboro Limited Partnership (a/k/a Meridian
Middleboro, L.P.), a Massachusetts limited partnership, having
its principal place of business at 101 Federal Street, Suite
1900, Boston, Massachusetts 02110 (hereinafter referred to as
"Seller") and Eastern Edison Company, a Massachusetts
corporation, having its principal place of business at 110
Mulberry Street, Brockton, Massachusetts 02043 (hereinafter
referred to as "Company").
WHEREAS, Seller has asked that the Agreement be amended to
permit Seller to secure the Contract Deposit with a cash escrow
account or an irrevocable letter of credit, selected at the
option of Seller; and
WHEREAS, Company will be fully secured for payment of the
Contract Deposit by accepting either a cash escrow account or an
irrevocable letter of credit; and
WHEREAS, it is deemed by the parties to be in their mutual
interest to amend the Agreement to permit Seller to furnish
either a cash escrow account or an irrevocable letter of credit
to secure the Contract DePosit.
NOW, THEREFORE, in consideration of the premises set forth
above and other good and valuable consideration, the parties do
hereby agree and bind themselves as follows:
Article 7 of the Agreement is amended by deleting section
7(a) in its entirety and substituting in its place the following
new section 7(a):
Article 7. Contract DePosit
(a) Without limiting the damages or remedies available to
Company in accordance with this Agreement, Seller shall
be liable to pay Company the Contract Deposit amounts
(as shown in Appendix C) in accordance with Articles
5(d), 7(b), (c), (e), and (f) for Cancellation of the
Facility.
To secure such payment of the Contract Deposit, Seller
shall furnish Company either an irrevocable letter of
credit or a cash escrow account, selected at the option
of Seller, as set forth below.
If Seller elects to furnish an irrevocable letter of
credit, Seller shall deliver to Company, no later than
thirty (30) days after the Effective Date of this
Agreement (hereinafter referred to as Contract Deposit
Delivery Date), and thereafter no later than each
anniversary date of said contract Deposit Delivery
date, up to the Commencement Date of Operation or
termination of this Agreement, whichever may first
occur, an irrevocable letter of credit in favor of
Company as described hereinafter in this Article. Each
letter of credit shall be for a term of one (1) year
and will be equal to the maximum potential liability
that Seller will be required to pay under this Article
7 for Cancellation of the Facility during said year, as
calculated pursuant to Articles 5(d), 7(b), (c), (e),
and (f), including accumulated interest, and as shown
in Appendix C. The accumulated interest shall be
calculated based on one million three hundred-eight
thousand dollars ($1,308,000), beginning on the
Execution Date of this Agreement. Thereafter, interest
shall be compounded monthly on the first day of the
month following the Execution Date, at the monthly
interest rate of seven hundred eighty two thousandths
of one percent (0.782%). Such irrevocable letter of
credit shall include a provision for a forty-five (45)
day advance notice to Company and Seller of any
expiration of the letter of credit, and shall designate
Company as beneficiary with authority to draw drafts on
the letter of credit for amounts due Company in
accordance with Articles 5(d), 7(b), (c), (e), and (f).
In the event Company receives notice from the bank or
financial institution that issued the letter of credit
that said letter of credit will lapse or will otherwise
not be in force, Company may exercise its rights under
said letter of credit granted to Company by Seller and
also terminate this Agreement; provided, however, that
Company must first give written notice, of any such
action and permit Seller five (5) business days to
extend the term of said letter of credit, or to secure
a replacement letter of credit that is satisfactory to
Company.
If Seller elects to furnish a cash escrow account,
Seller shall establish by no later than one (1)
business day following the receipt of a fully executed
escrow agreement an interest bearing escrow account
(hereinafter referred to as "Escrow Account") with a
banking institution reasonably acceptable to Company
and shall have deposited therein funds in an amount no
less than one hundred thirty-five thousand five hundred
eighteen dollars ($135,518.00). The Escrow Account shall be
established for the benefit of Company in the event of
Cancellation of the Facility. At least five (5) business
days prior to the first day of each month, beginning five
(5) business days prior to March 1, 1994, Seller shall
maintain on deposit in the Escrow Account an amount equal to
the maximum potential liability that Seller will be required
to pay under this Article 7 for Cancellation of the Facility
during the following month, as calculated pursuant to
Articles 5(d), 7(b), (c), (e) and (f), including accumulated
interest, as shown in Appendix C. Seller may, at any time
and from time to time, withdraw from the Escrow Account any
amounts in excess of the Contract Deposit.
Seller may at any time elect to substitute a letter of
credit for an Escrow Account or an Escrow Account for a letter of
credit to secure the Contract Deposit, provided that Company
shall receive notice of such substitution at least five (5)
business days in advance thereof and provided further that at no
point in time shall Seller fail to fully secure the Contract
Deposit. Upon the substitution of a letter of credit for the
Escrow Account, Company shall promptly release all funds in the
Escrow Account to Seller.
Except as expressly amended, the terms of the Agreement are
unchanged and the Agreement is in all other respects ratified and
confirmed.
This Amendment and the Agreement shall be binding upon the
parties hereto, their successors and assigns.
Unless specifically stated otherwise, the terms used herein
shall have the same meaning as set forth in the Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first written above.
EASTERN EDISON COMPANY ("Company"):
By: Date: February 14, 1994
John D. Carney, President
Meridian Middleboro Limited Partnership
("SELLER")
By: Date: February 4, 1994
William F. Quinn, President
Meridian Middleboro Corporation
General Partner
ESCROW AGREEMENT
AGREEMENT made this 4 day of February, 1994, by and among
Meridian Middleboro Limited Partnership (a/k/a Meridian
Middleboro, L.P.), of 101 Federal Street, Boston, Massachusetts
02110 ("Meridian"), Eastern Edison Company, of 110 Mulberry
Street, Brockton, Massachusetts 02043 ("EECO"), and Shawmut
Bank, N.A. of One Federal Street, Boston, Massachusetts 02110
(the "Bank" or "Escrow Agent").
WHEREAS, pursuant to a Power Purchase Agreement, dated
September 30, 1993 between Meridian and EECO, as amended (the
"Purchase Agreement"), Meridian has agreed to construct and
operate a cogeneration facility and to sell the electricity
generated at the facility to EECO; and
WHEREAS, it is a condition of the Purchase Agreement that
collateral security be provided by Meridian to EECO to secure the
payment of the Contract Deposit (as defined in the Purchase
Agreement) and EECO has agreed that such collateral may be
provided by Meridian by the payment of cash into an escrow
account as provided herein; and
WHEREAS, Meridian and EECO wish to establish a method for
disbursement of the escrowed funds to the parties entitled
thereto; and
WHEREAS, the Bank hereby agrees to act as Escrow Agent to
receive and pay said funds as is hereinafter provided.
NOW T~EREFORE, it is agreed by the parties hereto that the
Bank will act as Escrow Agent in connection with said Purchase
Agreement upon the following terms and conditions:
1. The Bank hereby agrees to receive and hold all funds
deposited with the Bank pursuant hereto including, without limi-
tation, interest earned thereon until distributed by the Bank as
set forth below (the "Escrowed Funds") in accordance with the
terms and conditions hereof, and to deliver said funds upon the
performance of the conditions hereinafter set forth. Meridian
and EECO confirm that the initial deposit in the Escrow Account
shall be $135,518 and that incremental deposits shall be made to
the Escrow Account by Meridian in accordance with the terms of
the Purchase Agreement in the amounts set forth on the column (H)
of the Appendix C to the Purchase Agreement which is attached
hereto.
2. The Bank shall deposit the Escrowed Funds in a segre-
gated interest bearing account at the Bank (the "Account"). The
Escrowed Funds shall be held in trust by the Bank, as agent for,
and for the benefit of Meridian and EECO, subject to the terms of
this Agreement.
3. Unless otherwise directed by the written instructions of
Meridian, the Escrow Agent shall invest the Escrow Funds only in
direct, short term obligations of the United States Government,
or negotiable certificates of deposits of the Bank. The income
of the Escrowed Funds during the term of this Agreement shall be
attributable to Meridian for tax purposes for each year and shall
be distributed by the Escrow Agent to Meridian periodically on
written request to the Bank, copied to EECO, provided that at no
time shall any such distribution result in the amount of Escrowed
Funds being less than the amount required for such period as set
forth in column (H) to the Appendix C to the Purchase Agreement
attached hereto.
4. The Bank shall pay all or a portion of the Escrowed
Funds to EECO upon receipt of the following:
(a) A Letter of Demand dated the date of the request
signed by an Officer of EECO or Montaup Electric
Company in the form of Attachment I hereto, and
(b) A copy of a letter informing Meridian of EECO's
intent to make a claim under this Escrow Agreement
and showing the amount due and owing of such claim
addressed as follows: Meridian Middleboro Limited
Partnership, 101 Federal Street, Suite l900,
Boston, MA 02110, along with a copy of the receipt
evidencing receipt of such letter by Meridian at
least two (2) business days prior to the date of
receipt by Bank of the Letter of Demand.
5. In the event that no demand is made by EECO or Montaup
Electric Company in accordance with Section 4 above, the Bank
shall pay all or such portion of the Escrowed Funds to EECO
and/or Meridian upon receipt of joint written instructions of
EECO and Meridian that such funds may be paid or upon the receipt
of a final order, decree or judgment of a court of competent
jurisdiction, the time for perfection of an appeal of such order,
decree or judgment having expired. Such instructions or order
shall specify the amount to be paid to each party, as well as the
method of payment. Upon distribution of all of the Escrowed
Funds in accordance herewith, this Agreement and the parties'
obligations hereunder (except as set forth in Section 9 below)
shall terminate.
6. The Bank shall not be required to take notice of any
terms of any other agreement or any rights claimed with respect
to the Escrowed Funds unless expressly stated in writing herein.
7. Meridian agrees to pay the Bank a $500 Escrow Agent fee
upon signing of this Agreement. In addition, Meridian agrees to
pay the Bank a $500 annual administration fee on each anniversary
of the date hereof. Any legal fees incurred by the Bank in
connection with the resolution of any claim by any party
hereunder shall be billed to and paid by Meridian, which legal
fees are in addition to the escrow and administration fees
described above. All fees of the Bank for its services hereunder
and for legal services shall be payable promptly by Meridian in
accordance with this Section 7.
8. In performing any of its duties hereunder the Bank shall
not incur any liability to anyone for any damages, losses, or
expenses except for Bank's gross negligence or wilful misconduct
and Bank shall accordingly not incur any such liability with
respect to (i) any action taken or omitted in good faith upon
advice of its counsel given with respect to any question relating
to the duties and responsibilities of the Bank under this
Agreement, or (ii) any action taken or omitted in reliance upon
any instrument, including the written advice provided for herein,
not only as to such instrument's due execution and the validity
and effectiveness of such instrument's provisions but also as to
the truth and accuracy of any information contained therein,
which the Bank shall, in good faith, believe to be genuine, to
have been signed or presented by a proper person or persons and
to conform with the provisions of this Agreement.
9. Meridian hereby agrees to indemnify and hold harmless
the Bank against any and all losses, claims, damages, liabilities
and expenses, including reasonable counsel fees and
disbursements, which may be imposed upon the Bank or incurred by
the Bank in connection with its acceptance of appointment as
Escrow Agent hereunder or the performance of its duties
hereunder, including any litigation arising from this Agreement
or involving the subject matter hereof or the funds deposited
hereunder. Such indemnification shall survive the termination of
this Agreement or the resignation of the Escrow Agent.
10. The Bank may at any time resign as Escrow Agent here-
under by giving thirty (30) days prior written notice of resig-
nation to EECO and Meridian. Prior to the effective date of the
resignation of Escrow Agent as specified in such notice, EECO and
Meridian will issue to the Bank a written instruction authorizing
redelivery of the Escrowed Funds to a bank or trust company that
they select. Such bank or trust company shall have a principal
office in Boston, Massachusetts, and shall have capital, surplus
and undivided profits in excess of $50,000,000. If no successor
Escrow Agent is named by EECO and Meridian, the Bank may appoint
a successor Escrow Agent satisfying the foregoing conditions or
apply to a court of competent jurisdiction for appointment of a
successor Escrow Agent provided that any successor Escrow Agent
shall be subject to the terms of this Agreement.
- -- 5 --
11. It is understood and agreed that should any dispute
arise with respect to the delivery, ownership, right of
possession, and/or disposition of the Escrowed Funds, or should
any claim be made upon the Escrowed Funds by a third party, upon
the Bank's receipt of written notice of such dispute or claim by
one of the parties hereto or by a third party, the Bank is
authorized and directed to retain in its possession as custodian
without liability to anyone the remaining principal balance of
the Escrowed Funds until such dispute shall have been settled
either by the mutual written agreement of the parties involved or
by a final order, decree or judgment of a court of competent
jurisdiction, the time for perfection of an appeal of such order,
decree or judgment having expired; provided, however, that
notwithstanding the foregoing the Bank shall honor a request by
EECO or Montaup Electric Company under Section 4 hereof and shall
be fully protected in doing so as provided in this Agreement.
The Bank may, but shall be under no duty whatsoever to, institute
or defend any legal proceedings which relate to the Escrowed
Funds.
12. Any notice permitted or required hereunder shall be in
writing and shall be deemed to have been duly given or made when
delivered by certified or registered mail, postage prepaid,
return receipt requested, to the parties at their respective
addresses set forth below or to such other address as they may
hereafter designate:
If to EECO: Eastern Edison Company
Attention: c/o EUA Service Company
750 West Center Street
P.O. Box 543
West Bridgewater, MA 02379
If to Meridian: Meridian Middleboro Limited Partnership
101 Federal Street, Suite 1900
Boston, MA 02110
Attention: President
If to the Bank: Shawmut Bank, N.A.
One Federal Street
Boston, MA 02110
Attention: Charles Dooley,
Vice President
13. This Agreement may not be altered or modified without
the express written consent of the parties hereto. No course
of conduct shall constitute a waiver of any of the terms and
conditions of this Agreement, unless such waiver is specified
in writing by the party making such waiver, and then only to
the extent so specified. A waiver of any of the terms and
conditions of this Agreement on one occasion shall not consti-
tute a waiver of the other terms of this Agreement, or of such
terms and conditions on any other occasion.
14. This Agreement shall be binding upon the respective
parties hereto and their successors and assigns.
15. This Agreement shall be governed by and construed
under the laws of the Commonwealth of Massachusetts.
16. The Bank shall have no tax reporting duty with respect
to the Escrow Agreement. Meridian agrees to supply the Bank
with the name, address, and social security number or taxpayer
identification number for itself and to provide to the Bank a
statement as to whether it is subject to back-up withholding.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
EASTERN EDISON COMPANY
By
MERIDIAN MIDDLEBORO LIMITED PARTNERSHIP
By: Meridian Middleboro
Corporation
general partner
By
SHAWMUT BANK, N.A., as Escrow Agent
By:
ATTACHMENT I
Letter of Demand Format
(Date)
Shawmut Bank, N.A.
One Federal Street
Boston MA 02110
RE: Escrow Agreement Dated February _, 1994 for Escrow
Account No.
Meridian Middleboro, L.P. is liable to Eastern Edison Company
or Montaup Electric Company for ($ amount), US$
which represents the Contract Deposit and/or accumulated
interest computed pursuant to the Power Purchase Agreement
between Meridian Middleboro Limited Partnership and Eastern
Edison Company dated September 20, 1993, as amended (the
"Purchase Agreement").
A demand for payment of the amount due and owing under the
Agreement has been sent to Meridian Middleboro Limited
Partnership, 101 Federal Street, Suite 1900, Boston, MA 02110,
Attn: President, by telegram, recognized overnight courier
service, or certified mail return receipt requested, and more
than two (2) business days have passed after receipt by
Meridian Middleboro Limited Partnership of such demand.
Meridian Middleboro Limited Partnership has not previously paid
Eastern Edison Company or Montaup Electric Company the amount
set forth above.
The condition that has occurred as set forth in the referenced
Article of the Purchase Agreement is (state the applicable
conditions):
As a result of the foregoing condition, we hereby demand
payment of (state $ amount), US$ under the Escrow
Agreement dated February _, 1994.
For and on behalf of:
Eastern Edison Company or Montaup Electric Company
By:
Its:
Title: (Authorized Officer of Eastern Edison Company
or Montaup Electric Company)
- - 10 -
SCHEDULE Of CONTRACT DEPOSIT BALANCE AND ACCRUED INTEREST APPENDIX
Page 1
POWER PURCHASE AGREEMENT BETWEEN MERIDIAN MIDDLEBORO, L.P.
AND EASTERN EDISON COMPANY
20 Year Contract Term-Commencement: 01/01/01 thru 01/01/03
Proposed Unit In-Service Date: 01-01-01
- See note (a) Execution Date: 09-20-93
See note (b) Contract Deposit Delivery Date:
30 days after Effective Date
Interest Rate: 9.80% Annual
Contract Deposit: $1,308,000
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(A) (B) (C) (D) (E) (F) (G) (H)
Project # Days between # Days Cumulative Total Draw-
Cancellation/ Monthly 9-20-93 and between Principal Interest ing Available
Missed Mile- Interest Interest Cancel./Missed 9-20-93 and entitled Entitled Under Letter
Note stone Date Rate Earned End Bal. Milestone Date 1-1-01 to to of Credit _
09-20-93 0.782% $0 $1,308,000 $O $0 $0
10-01-93 0.782% $3,751 $1,311,751 11 2660 $5,409 $3,751 $9,160
11-01-93 0.782% $10 260 $1 322 011 42 2660 $20,653 $14,011 $34,663
12-01-93 0.782% $10 340 $1 332 351 72 2660 $35,405 $24,351 $59,755
01-01-94 0.782% $10,421 $1,342,771 103 2660 $50,648 $34,771 $85,419
02-01-94 0.782% $10,502 $1,353,273 134 2660 $65,892 $45,273 $111,165
03-01-94 0.782% $10,584 $1,363,858 162 2660 $79,660 $55,858 $135,518
04-01-94 0.782% $10,667 $1,374,525 193 2660 $94,904 $66,525 $161,429
05-01-94 0.782% $10,751 $1,385,275 223 2660 $109,656 $77,275 $186,931
06-01-94 0.782% $10,835 $1,396,110 254 2660 $124,899 $88,110 $213,009
07-01-94 0.782% $10,919 $1,407,029 284 2660 $139,651 $99,029 $238,681
08-01-94 0.782% $11,005 $1,418,034 315 2660 $154,895 $110,034 $264,929
09-01-94 0.782% $11,091 $1,429,125 346 2660 $170,138 $121,125 $291,263
10-01-94 0.782% $11,178 $1,440,303 376 2660 $184,890 $132,303 $317,193
11-01-94 0.782% $11,265 $1,451,568 407 2660 $200,134 $143,568 $343,702
12-01-94 0.782% $11,353 $1,462,921 437 2660 $214,886 $154,921 $369,807
01-O1-95 0.782% $11,442 $1,474,363 468 2660 $230,129 $166,363 $396,492
02-01-95 0.782% $11,531 $1,485,894 499 2660 $245,373 $177,894 $423,267
03-01-95 0.782% $11,622 $1,497,516 527 2660 $259,141 $189,516 $448,657
04-01-95 0.782% $11,713 $1,509,228 558 2660 $274,385 $201,228 $475,613
05-01-95 0.782% $11,804 $1,521,032 588 2660 $289,137 $213,032 $502,169
06-01-95 0.782% $11,896 $1,532,929 619 2660 $304,380 $224,929 $529,309
07-01-95 0.782% $11,989 $1,544,918 649 2660 $319,132 $236,918 $S56,051
08-01-95 0.782% $12,083 $1,557,002 680 2660 $334,376 $249,002 $583,378
09-01-95 0.782% $12,178 $1,569,179 711 2660 $349,620 $261,179 $610,799
10-01-95 0.782% $12,273 $1,581,452 741 2660 $364,371 $273,452 $637,824
11-01-95 0.782% $12,369 $1,593,821 772 2660 $379,615 $285,821 $665,436
12-01-95 0.782% $12,466 $1,606,287 802 2660 $394,367 $298,287 $692,654
01-01-96 0.782% $12,563 $1,618,850 833 2660 $409,611 $310,850 $720,461
02-01-96 0.782% $12,661 $1,631,512 864 2660 $424,854 $323,512 $748,366
03-01-96 0.782% $12,761 $1,644,272 893 2660 $439,114 $336,272 $775,387
04-01-96 0.782% $12,860 $1,657,133 924 2560 $454,358 $349,133 $803,491
05-01-96 0.782% $12,961 $1,670,094 954 2660 $469,110 $362,094 $831,203
06-01-96 0.782% $13,062 $1,683,156 985 2660 $484,353 $375,156 $859,509
07-01-96 0.782% $13,164 $1,696,320 1015 2660 $499,105 $388,320 $887,426
08-01-96 0.782% $13,267 $1,709,588 1046 2660 $S14,349 $401,588 $915,937
09-01-96 0.782% $13,371 $1,722,959 1077 2660 $529,592 $414,959 $944,551
10-01-96 0.782% $13,476 $1,736,435 1107 2660 $544,344 $428,435 $972,779
11-01-96 0.782% $13,581 $1,750,016 1138 2660 $559,588 $442,016 $1,001,604
12-01-96 0.782% $13,687 $1,763,703 1168 2660 $574,340 $455,703 $1,030,043
Page 2
(A) (B) (C) (D) (E) (F) (G) (H)
Project # Days between # Days Cumulative Total Draw-
Cancellation/ Monthly 9-20-93 and between Principal Interest ing Available
Missed Mile- Interest Interest Cancel./Missed 9-20-93 and entitled Entitled Under Letter
Note stone Date Rate Earned End Bal. Milestone Date 1-1-01 to to of Credit _
01-01-97 0.782% $13,794 $1,777,498 1199 2660 $589,583 $469,498 $1,059,081
02-01-97 0.782% $13,502 $1,791,400 1230 2660 $604,827 $483,400 $l,088,227
03-01-97 0.782% $14,011 $1,805,411 1258 2660 $618,595 $497,411 $1,116,007
04-01-97 0.782% $14,121 $1,819,532 1289 2660 $633,839 $511,532 $1,145,371
05-01-97 0.782% $14,231 $1,833,763 1319 2660 $648,591 $525,763 $1,174,354
06-01-97 0.782% $14,342 $1,848,105 1350 2660 $663,835 $540,105 $1,203,940
07-01-97 0.782% $14,455 $1,862,560 1380 2660 $678,586 $554,560 $1,233,146
08-01-97 0.782% $14,568 $1,877,127 1411 2660 $693,830 $569,127 $1,262,957
09-01-97 0.782% $14,682 $1,391,309 1442 2660 $709,074 $583,809 $1,292,883
10-01-97 0.782% $14,796 $1,906,605 1472 2660 $723,826 $598,605 $1,322,431
11-01-97 0.782% $14,912 $1,921,517 1503 2660 $739,069 $613,517 $1,352,587
12-01-97 0.782% $15,029 $1,936,546 1533 2660 $753,821 $628,546 $1,382,367
01-01-98 0.782% $15,146 $1,951,692 1564 2660 $769,065 $643,692 $1,412,757
02-01-98 0.782% $15,265 $1,966,957 1595 2660 $784,308 $658,957 $1,443,265
03-01-98 0.782% $15,384 $1,982,341 1623 2660 $798,077 $674,341 $1,472,418
04-01-98 0.782% $15,504 $1,997,846 1654 2660 $813,320 $689,846 $1,503,166
05-01-98 0.782% $15,626 $2,013,472 1684 2660 $828,072 $705,472 $1,553,544
06-01-98 0.782% $15,748 $2,029,219 1715 2660 $843,316 $721,219 $1,564,535
07-01-98 0.782% $15,371 $2,045,091 1745 2660 $858,068 $737,091 $1,595,158
08-01-98 0.782% $15,795 $2,061,086 1776 2660 $873,311 $753,086 $1,626,397
09-01-98 0.782% $16,120 $2,077,206 1807 2660 $888,555 $769,206 $1,657,761
10-01-98 0.782% $16,246 $2,093,453 1837 2660 $903,307 $785,453 $1,688,759
11-01-98 0.782% $16,373 $2,109,826 1868 2660 $918,550 $801,826 $1,720,376
12-01-98 0.782% $16,502 $2,126,328 1898 2660 $933,302 $818,328 $1,751,630
01-01-99 0.782% $16,631 $2,142,958 1929 2660 $948,546 $834,958 $1,783,504
0Z-01-99 0.782% $16,761 $2,159,719 1960 2660 $963,789 $851,719 $1,815,508
03-01-99 0.782% $16,892 $2,176,611 1988 2660 $977,558 $868,611 $1,846,169
04-01-99 0.782% $17,024 $2,193,635 2019 2660 $992,802 $885,635 $1,878,436
05-01-99 0.782% $17,157 $2,210,792 2049 2660 $1,007,553 $902,792 $1,910,345
06-01-99 0.782% $17,291 $2,228,083 2080 2660 $1,022,797 $920,083 $1,942,880
07-01-99 0.782% $17,426 $2,245,509 2110 2660 $1,037,549 $937,509 $1,975,058
08-01-99 0.732% $17,563 $2,263,072 2141 2660 $1,052,792 $955,072 $2,007,865
09-01-99 0.782% $17,700 $2,280,772 2172 2660 $1,068,036 $972,772 $2,040,308
10-01-99 0.782% $17,839 $2,298,611 2202 2660 $1,082,788 $990,611 $2,073,399
11-01-99 0.782% $17,978 $2,316,589 2233 2660 $1,098,032 $1,008,589 $2,106,621
12-01-99 0.782% $18,119 $2,334,708 2263 2660 $1,112,783 $1,026,708 $2,139,491
(1-a) 01-01-00 0.782% $18,260 $2,352,968 2294 2660 $1,128,027 $l,044,968 $2,172,995
02-01-00 0.782% $18,403 $2,371,371 2325 2660 $1,143,271 $1,063,371 $2,706,642
03-01-00 0.782% $18,547 $2,389,919 2354 2660 $1,157,531 $1,081,919 $2,239,449
04-01-00 0.782% $18,692 $2,408,611 2385 2660 $1,172,774 $1,100,611 $2,273,385
05-01-00 0.782% $18,838 $2,427,449 2415 2660 $1,187,526 $1,119,449 $2,306,976
(1-b) 06-01-00 0.782% $18,986 $2,446,435 2446 2660 $1,202,770 $1,138,435 $2,341,205
07-01-00 0.782% $19,134 $2,465,569 2476 2660 $1,217,522 $1,157,569 $2,375,091
08-01-00 0.782% $19,284 $2,484,853 2507 2660 $1,232,765 $1,176,853 $2,409,619
09-01-00 0.782% $19,435 $2,504,288 2538 2660 $1,248,009 $1,196,288 $2,444,Z97
10-01-00 0.782% $19,587 $2,523,875 2568 2660 $1,262,761 $1,215,875 $2,478,636
11-01-00 0.782% $19,740 $2,543,615 2599 2660 $1,278,005 $1,235,615 $2,513,619
12-01-00 0.782% $19,894 $2,563,509 2629 2660 $l,292,756 $l,255,509 $2,548,266
Page 3
(A) (B) (C) (D) (E) (F) (G) (H)
Project # Days between # Days Cumulative Total Draw-
Cancellation/ Monthly 9-20-93 and between Principal Interest ing Available
Missed Mile- Interest Interest Cancel./Missed 9-20-93 and entitled Entitled Under Letter
Note stone Date Rate Earned End Bal. Milestone Date 1-1-01 to to of Credit _
(1-c),(3) 01-01-01 0.782% $20,050 $2,583,559 2660 2660 $1,308,000 $1,275,559 $2,583,559
(2) 02-01-01 0.782% $20,207 $2,603,766 2691 2660 $1,308,000 $1,295,766 $2,603,766
03-01-01 0.782% $20,365 $2,624,131 2719 2660 $1,308,000 $1,316,131 $2,624,131
04-01-01 0.782% $20,524 $2,644,655 2750 2660 $1,308,000 $1,336,655 $2,644,655
05-01-01 0.782% $20,685 $2,665,339 2780 2660 $1,308,000 $1,357,339 $2,665,339
06-01-01 0.782% $2O,846 $2,686,186 2811 2660 $1,308,000 $1,378,186 $2,686,186
07-01-01 0.782%. $21,009 $2,707,195 2841 2660 $1,308,000 $1,399,195 $2,707,195
08-01-01 0.782% $21,174 $2,728,369 2872 2660 $1,308,000 $1,420,369 $2,728,369
09-01-01 0.782% $21,339 $2,749,708 2903 2660 $1,308,000 $1,441,708 $2,749,708
10-01-01 0.782% $21,506 $2,771,215 2933 2660 $1,308,000 $1,463,215 $2,771,215
11-01-01 0.782% S21,674 $2,792,889 2964 2660 $1,308,000 $1,484,889 $2,792,889
12-01-01 0.782% $21,844 $2,814,733 2994 2660 $1,308,000 $1,506,733 $2,814,733
(1-d),(4)01-01-02 0.782% $22,015 $2,836,748 3025 2660 $1,308,000 $1,528,748 $2,836,748
02-01-02 0.782% $22,187 S2,858,935 3056 2660 $1,308,000 $1,550,935 $2,858,935
03-01-02 0.782% $22,361 $2,881,295 3084 2660 $1,308,000 $1,573,295 $2,881,295
04-01-02 0.782% $22,535 $2,903,831 3115 2660 $1,308,000 $1,595,831 $2,903,831
05-01-02 0.782% $22,712 $2,926,543 3145 2660 $1,308,000 $1,618,543 $2,926,543
06-01-02 0.782% $22,289 $2,949,432 3176 2660 $1,308,000 $1,641,432 $2,949,432
07-01-02 0.782% $23,068 $2,972,500 3206 2660 $1,308,000 $1,664,500 $2,972l500
08-01-02 0.782% $23,249 $2,995,749 3237 2660 $1,308,000 $1,687,749 $2,995,749
09-01-02 0.782% $23,431 $3,019,180 3268 2660 $1,308,000 $1,711,180 $3,019,180
10-01-02 0 782% $23,614 $3,042,794 3298 2660 $1,308,000 $1,734,794 $3,042,794
11-01-02 0.782% $23,799 $3,066,592 3329 2660 $1,308,000 $1,758,592 $3,066,592
12-01-02 0.782% $23,985 $3,090,577 3359 2660 $1,308,000 $1,782,577 $3,090,577
(1-e),(5)01-01-03 0.782% $24,172 $3,114,749 3390 2660 $1,308,000 $1,806,749 $3,114,749
</TABLE>
Note (a) Interest begins to accrue as of the Execution Date.
Note (b) Effective Date is the date the contract is approved by M.D.P.U.
DEFINITIONS OF COLUMNS:
(A) ((1+ 9.8%) to the 1/12 power) minus 1. 9.8% is agreed upon rate between the
parties.
Compounding of interest begins on the Execution Date.
(3) Prior period ending balance (Col.C) x Current period Col. A.
(C) Prior period Col. C + Current period Col. 3.
(D) This assumes cancellation or missed milestone date occurs on the first day
of the month.
Must be recalculated based on actual cancellation or missed milestone date.
(E) Total Time between Execution Date and Proposed In-Service Date.
(F) $1,308,000 x (ratio of Col. D to Col. E)
(G) Cumulative Col. 3
(H) Col. F l Col. G
MERIDIAN MIDDLEBORO LIMITED PARTNERSHIP
101 FEDERAL STREET
BOSTON, MA 02110
Eastern Edison Company
110 Mulberry Street
Brockton, MA 02043
February 4 , 1994
Re: Power Purchase Agreement, dated September 20, 1993, as
amended (the "Purchase Agreement")
Gentlemen:
This letter is to advise you of and to confirm your consent,
in accordance with Article 16(d) of the Purchase Agreement, to
the grant by Meridian Middleboro Limited Partnership (a/k/a
Meridian Middleboro, L.P.) ("Seller") to Genesis Energy
Financial, Inc. of Needham, Massachusetts ("Genesis") of a
security interest in and collateral assignment of its interest in
the Purchase Agreement and that certain Escrow Agreement, of even
date, among Seller, Shawmut Bank, N.A. and you. This action is
necessary for Seller to obtain development financing for the
Facility from Genesis. Please acknowledge your consent by
countersigning this letter and returning it to the undersigned.
Thank you.
Sincerely,
MERIDIAN MIDDLEBORO
LIMITED PARTNERSHIP
By:
William Quinn, President
Meridian Middleboro Corporation,
general partner
Acknowledged:
EASTERN EDISON COMPANY
By
EXHIBIT 10.4.08
INDUCEMENT LETTER
July 14, 1993
Massachusetts Industrial Finance Agency
75 Federal Street
Boston, Massachusetts 02110
Goldman, Sachs & Co., for itself
and as representative of the
Underwriters
85 Broad Street - 24th Floor
New York, New York
10004
Ladies and Gentlemen:
To induce the Massachusetts Industrial Finance Agency (the "Agency") to issue
and sell, and to induce Goldman, Sachs & Co. and Citicorp Securities Markets,
Inc. (each individually an "Underwriter" and together the "Underwriters") to
purchase, pursuant to the terms of a Bond Purchase Agreement (the "Bond
Purchase Agreement") dated July 14, 1993, $40,000,000 aggregate principal
amount of the Agency's 57/8% Pollution Control Revenue Refunding Bonds, 1993
Series (Eastern Edison Company Project) (the "1993 Series Bonds"), the
proceeds of which are to be used to provide funds for the purpose of refunding
$40,000,000 of the Agency's 10 1/8% Pollution Control Revenue Bonds, 1983
Series (Eastern Edison Company Project) (the "1983 Series Bonds"), with full
realization and appreciation of the fact that the market value of the 1993
Series Bonds and the ability of the Underwriters to resell the 1993 Series
Bonds at the contemplated public offering price or prices are in part
dependent upon the financial condition of Eastern Edison Company (the
"Company"), and in consideration of the foregoing and the execution and
delivery of the Bond Purchase Agreement, the Company represents, warrants, and
covenants to and with the Agency and the Underwriters as follows:
(a) The Company confirms to the Agency and the Underwriters the
representations made by it in Article II of the Loan Agreement hereinafter
mentioned, which representations are hereby incorporated in and made a part of
this Inducement Letter.
(b) The financial statements of the Company incorporated by reference into
Appendix A to the Official Statement dated July 14, 1993 (the Official
Statement including the cover page and the Appendices thereto, the
documents incorporated by reference therein (the "Incorporated
Documents"), and any and all supplements and amendments thereto, are
hereinafter referred to collectively as the "Official Statement") present
fairly the financial position of the Company as of the respective dates
indicated and the results of its operations for the respective periods
specified. Since the date of the most recent of such financial
statements, there has been no material decrease in the capital stock and no
material increase in the funded debt or short-term debt of the Company, and
there has been no material adverse change in the financial position or
results of operations of the Company except as disclosed in the Official
Statement. Such financial statements have been prepared in conformity with
generally accepted accounting principles consistently applied in all
material respects with respect to the period involved, except as may be noted
therein.
(c) The descriptions and information contained or incorporated in the
Preliminary Official Statement dated June 10, 1993 and in the Official
Statement, including without limitation the information relating to the 1993
Series Bonds, the Company, the Company's participation in the transactions
contemplated by the Loan Agreement dated as of July 1, 1993 between the Agency
and the Company (the "Loan Agreement"), and the Trust Agreement dated as of
July 1, 1993 (the "Trust Agreement") between the Agency and the Trustee
thereunder (the "Trustee): (i) were, as of the date of the Preliminary
Official Statement; (ii) are as of the date of the Official Statement, and
(iii) at the Closing Time (as defined in the Bond Purchase Agreement) will be,
true and correct in all material respects and did not, do not and will not
contain, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading and you are hereby authorized to include such
information in the Official Statement; provided, however, that none of
the representations and warranties in this Inducement Letter shall
apply to statements in or omissions from the Preliminary Official Statement or
Official Statement contained under the captions "The Agency", "Book-Entry-
Only", "Litigation" or in the statements on the cover page
with respect to the initial public offering price of the 1993 Series
Bonds and the Underwriters' ability to effect transactions which stabilize or
maintain the market price of the 1993 Series Bonds. The Company has authorized
the use of the Preliminary Official Statement and the Official Statement by
the Underwriters, and deems the Preliminary Official Statement to be "final,"
and the Official Statement to be "complete" for purposes of Rule 15c2-12 of
the Securities Exchange Act of 1934, as amended (no representation being made
however with respect to the Agency).
(d) From and after the date hereof (i) the Company will not adopt or
approve any amendment or supplement to the Official Statement to which the
Representative shall reasonably object in writing and (ii) if during
the period ending not to exceed 25 days following the End of the
Underwriting Period (as hereinafter defined) as the Representative
believes delivery of the Official Statement is necessary or desirable in
connection with sales of the 1993 Series Bonds by the Underwriters or
any dealer, the Company becomes aware of any fact, including any change
in the business, properties, financial condition or results of operations, or
event which might or would cause the Official Statement (including the
Incorporated Documents), as then supplemented or amended, to contain any
untrue statement of a material fact or to omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading, it shall notify the Representative, and if in the opinion of the
Representative such fact or event requires the preparation and publication
of a supplement or amendment to the Official Statement the Company will
supplement or amend the Official Statement, or prepare and file with the
Commission any filings under the Securities Exchange Act of 1934, as amended,
in a form and in a manner approved by the Representative, and furnish to the
Representative (A) a reasonable number of copies of the supplement or
amendment, or Incorporated Document, and (B) if such notification shall be
subsequent to the Closing, such legal opinions, certificates, instruments and
other documents as the Representative may deem necessary to evidence the
truth and accuracy of such supplement or amendment to the Official Statement
or Incorporated Document. Any expenses incurred pursuant to this paragraph (d)
within nine months after the date of the Official Statement shall be paid by
the Company, and if incurred thereafter (other than with respect to an
Incorporated Document) shall be paid by the Underwriters, except that if the
only event occasioning the revision is a change in the underwriting or
distribution arrangements, such expenses whenever incurred shall be
paid by the Underwriters. For the purposes of this paragraph (d), the
Company will furnish such information with respect to itself as the
Agency or the Underwriters may from time to time request, and any one or
more of said parties at its or their own expense may visit any of the
properties of the Company and inspect its books of account at any
reasonable time. For the period from the date hereof until twenty-five
days after the End of the Underwriting Period for the 1993 Series
Bonds, the Company will provide the Underwriters with a copy of all documents
to be filed by the Company pursuant to Section 13, 14 or 15(d) of the
Securities Exchange Act of 1934 prior to such filing.
For purpose of this Inducement Letter, the "End of the Underwriting
Period" for the 1993 Series Bonds shall mean the date on which the End of the
Underwriting Period for the 1993 Series Bonds has occurred under Rule 15c2-12;
provided, however, that the Company shall be entitled to treat as the End of
the Underwriting Period for the 1993 Series Bonds the date specified in a
notice from the Representative stating the date which is the End of the
Underwriting Period.
The Company may request from the representative from time to time, and
the Representative shall provide to the Company upon such request, such
information as may be reasonably required by the Company in order to determine
whether the End of the Underwriting Period for the 1993 Series Bonds has
occurred under Rule 15c2-12 with respect to the unsold balances of 1993 Series
Bonds that were originally sold to the Underwriters for resale to the public
and which are held by the Underwriters for resale to the public.
If in the opinion of the Representative, for purposes of Rule 15c2-12,
no Underwriter retains for sale to the public any unsold balance of 1993
Series Bonds originally sold to the Underwriters pursuant to the Bond Purchase
Agreement, then the Representative shall promptly notify the Company in
writing that, in its opinion, the End of the Underwriting Period for the 1993
Series Bonds under Rule 15c2-12 has occurred on a date which shall be
set forth in such notification.
(e) The Company will not take or omit to take any action the taking or
omission of which will in any way cause the proceeds from the sale of the 1993
Series Bonds to be applied, or result in such proceeds being applied, in a
manner other than as provided in the Loan Agreement and the Trust Agreement.
(f) The Company will refrain from taking any action, and will not permit
to be taken any action which is within the Company's power to prevent, that in
either case would result in the loss of the exclusion from gross income for
federal tax purposes of interest on the 1993 Series Bonds.
(g) The representations and warranties made by the Company in the Loan
Agreement are correct and complete in all material respects.
(h) The Company is not in material default under any indenture or other
agreement or instrument governing outstanding debt for borrowed money issued
by the Company, nor has any event occurred which with notice or the passage of
time or both would constitute a default under any such document.
(i) Other than as to the matters in litigation or pending before
governmental regulatory bodies specifically disclosed in the Official
Statement, there is no action, suit, proceeding, formal investigation at law
or in equity or before or by any governmental regulatory or administrative
agency pending or to the knowledge of the Company threatened against the
Company which would have a material adverse effect on the transactions
contemplated by the Bond Purchase Agreement or the Official Statement or have
a material adverse effect on the validity or enforceability of the 1983 Series
Bonds, the Loan Agreement, the Trust Agreement, this Inducement Letter or the
Bond Purchase Agreement.
(j) The execution and delivery of this Inducement Letter and the Loan
Agreement and the performance by the Company of its obligations thereunder do
not and will not violate the Articles of Organization or By-laws of the
Company, each as amended, or any court order by which the Company is bound,
and such actions do not and will not constitute a default under any agreement,
indenture, mortgage, lease, note or other obligation or instrument to which
the Company is a party, and no approval or other action by any governmental
authority or agency is required in connection therewith other than
approvals or actions heretofore obtained or to be obtained prior to the
issuance of the 1993 Series Bonds except for approvals required under the
securities or "Blue Sky" laws of various jurisdictions.
(k) (i) The Company agrees to indemnify and hold harmless the Agency,
each director, officer, employee or agent of the Agency, the Underwriters, and
each person, if any, who controls either of the Underwriters within the
meaning of Section 15 of the Securities Act of 1933, as amended (the "Act"),
against any and all losses, costs, claims, damages, actions, liabilities and
expenses whatsoever arising out of:
(A) any untrue statement or alleged untrue statement of a material
fact contained in the Official Statement or arising out of any
omission or alleged omission to state therein a material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of any such untrue statement
or omission or alleged untrue statement or omission under the
captions "The Agency" or "Litigation", or (as to the
Underwriters only), under the caption "Book-Entry-Only" or in
the statements on the cover page with respect to the initial
public offering price of the 1993 Series Bonds and the
Underwriters' ability to effect transactions which stabilize or
maintain the market price of the 1993 Series Bonds, or
(B) an allegation or determination that the 1993 Series Bonds should
have been registered under the Act or the Trust Agreement should
have been qualified under the Trust Indenture Act of 1939, as
amended.
(ii) The Underwriters agree to indemnify and hold harmless the Company,
its directors, officers, employees, agents and each person, if any, who
controls the Company within the meaning of Section 15 of the Act, the Agency
and each director, official, officer, employee or agent of the Agency,
against any and all losses, costs, claims, damages, actions, liabilities and
expenses whatsoever arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Official Statement, or any
omission or alleged omission to state therein any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they are made, not misleading, but in either case only with
respect to the statements on the cover page with respect to the initial
public offering price of the 1993 Series Bonds and the Underwriters'
ability to effect transactions which stabilize or maintain the market
price of the 1993 Series Bonds.
(iii) The Company agrees with respect to any action against it, any of
its directors or officers or any person controlling it as aforesaid, and the
Under writers agree with respect to any action against either of them or any
person controlling either of them as aforesaid, in respect of which indemnity
may be sought hereunder, that it will give written notice of the commencement
of such action to the party or parties against whom indemnity shall be
sought within a reasonable time after the indemnified party is made a party to
such action; but omission to so notify any indemnifying party will not
relieve such indemnifying party from any liability which it may have to
the indemnified party otherwise than under this paragraph (h) except to
the extent that the indemnifying party sustains its burden of proving
that it has suffered actual prejudice from the absence of such notice, nor
shall such omission affect any rights such indemnifying party may have
otherwise than under this paragraph (h) to participate in or assume the
defense of any action brought against such indemnified party. Upon
receipt of any such notice, such indemnifying party shall assume the defense
of such action, including the employment of counsel and the payment of all
expenses in connection with such defense, and shall have the right to
negotiate and consent to settlement. Any indemnified party shall have
the right to employ separate counsel in any such action against it and
to participate in the defense thereof, but the fees and expenses of such
counsel incurred after the indemnifying party has assumed the defense
of such action shall be at the expense of such indemnified party unless
(A) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (B) the indemnifying party
shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after
notice of commencement of the action, (C) the indemnified party shall
have reasonably concluded (upon advice of its counsel) that there may
be defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party (in
which case the indemnified party shall have the right to select separate
counsel to assert such legal defenses and to otherwise participate in the
defense of such action on behalf of the indemnified party), or (D) a
conflict or potential conflict exists between the indemnified party and
the indemnifying party (in which case the indemnifying party shall not have
the right to direct the defense of such action on behalf of the indemnified
party), and all such fees, disbursement, expenses and other charges of counsel
for the indemnified party shall be reimbursed by the indemnifying party
promptly as they are incurred. It is understood that the indemnifying
party or parties shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable legal fees,
disbursements and other charges of more than one firm admitted to practice in
such jurisdiction at any one time for any such indemnified party or parties.
No indemnifying party shall be liable for any settlement of any such action
effected without its consent; but if any such action is settled with the
consent of any indemnifying party or if there be a final judgment for the
plaintiff in any such action (of which an indemnifying party shall have been
notified), such indemnifying party shall indemnify and hold harmless each
indemnified party from and against any losses, costs, claims, damages,
actions, liabilities or expenses incurred or suffered by reason of such
settlement or judgment.
(iv) If the indemnification provided for in this paragraph (h) is
unavailable under subparagraph (i) or (ii) above to a party that would have
been an indemnified party under subparagraph (i) or (ii) above ("indemnified
party") in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each party that would have been
an indemnifying party thereunder ("indemnifying party") shall in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by such indemnifying
party on the one hand and such indemnified party on the other from the
offering of the 1993 Series Bonds. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of such
indemnifying party on the one hand and such indemnified party on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits
received by each such indemnifying party on the one hand and each such
indemnified party on the other shall be deemed to be in the same
proportion as the amounts received by them, respectively, as a result of the
offering and sale of the 1993 Series Bonds, which shall be, in the case
of the Company, the amount borrowed under the Loan Agreement (net of
all expenses paid by the Company); and in the case of the Underwriters,
the Underwriters' compensation provided for in the Bond Purchase
Agreement. The relative fault shall be determined by reference to, among other
things, the identity of the party which supplied the untrue or alleged
untrue statement of a material fact or the omission or alleged omission
to state a material fact and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the parties accepting this Inducement Letter agree
that it would not be just and equitable if contribution pursuant to
this subparagraph (iv) were determined by pro rat a allocation or by
any other method of allocation which does not take account of the
equitable considerations referred to above in this subparagraph (iv). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred
to above in this subparagraph (iv) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim (which
shall be limited as provided in subparagraph (iii) above if the
indemnifying party has assumed the defense of any such action in
accordance with the provisions thereof). Notwithstanding the provisions
of this subparagraph (iv), the Underwriters shall not be required, pursuant to
this subparagraph (iv), to contribute any amount in excess of the
amount by which the total price at which the 1993 Series Bonds
underwritten by it and distributed to the public or otherwise sold were
offered to the public or otherwise sold exceeds the amount of any damages
which the Underwriters have otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section l5(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The obligations of the Underwriters in
this subparagraph (iv) to contribute are several in proportion to their
respective underwriting obligations and not joint.
(1) The Company will deliver or cause to be delivered all opinions,
certificates and other documents as provided for in the Bond Purchase
Agreement, including, but not limited to, the opinions of McDermott, Will &
Emery dated as of the Closing Date substantially in the form of Exhibits A and
B to the Bond Purchase Agreement.
(m) The Company acknowledges and accepts as if set forth herein the
terms and conditions of the Bond Purchase Agreement as they relate to the
Company and its participation in the transactions contemplated thereby
(including without limitation the obligation to deliver copies of the Official
Statement contained in 3(d) of the Bond Purchase Agreement applicable to it)
and, subject to the terms and conditions of the Bond Purchase Agreement,
agrees to pay the expenses set forth in Section 7 of the Bond Purchase
Agreement.
(n) The Company hereby directs the Agency to redeem the 1983 Series
Bonds on September 1, 1993, and hereby agrees to cause the Trustee to mail
notice of the call for such redemption to the holders of the 1983 Series Bonds
on or before the Closing Date as defined in the Bond Purchase Agreement.
The representations, warranties, covenants and indemnities contained in
this Inducement Letter shall survive the closing under the Bond Purchase
Agreement, the sale by the Agency to the Underwriters and the resale by the
Underwriters of the 1993 Series Bonds, and any investigation by the Agency or
either of the Underwriters of any matters described in or related to the
transactions covered by this Inducement Letter, the Bond Purchase Agreement,
the Loan Agreement, the Trust Agreement or the Official Statement.
This Inducement Letter is given solely for the benefit of the Agency,
the Underwriters and the other indemnified parties referred to herein and
their respective successors, assigns, executors and administrators and no
other person, including any holder of the 1993 Series Bonds as such, shall
acquire or have any right under or by virtue of this Inducement Letter. No
purchaser of the 1993 Series Bonds from the Underwriters shall be deemed a
"successor" or "assign" merely because of such purchase.
The validity, interpretation and performance of this Inducement Letter
shall be governed by the laws of Massachusetts.
This Inducement Letter may be simultaneously executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument; provided, however, that should any
executed counterpart fail in any particular to conform to the executed
counterpart which is delivered to the Agency, the provisions of the executed
counterpart so delivered shall prevail.
Very truly yours,
EASTERN EDISON COMPANY
By \s\ C. Hebert
Treasurer
Accepted and agreed to as of the date first above written:
MASSACHUSETTS INDUSTRIAL GOLDMAN, SACHS & CO.,
FINANCE AGENCY for itself and as
By representative of the
Underwriters
By: Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
This Inducement Letter may be simultaneously executed in several counterparts,
each of which shall be an original and all of which shall constitute but one
and the same instrument; provided, however, that should any executed
counterpart fail in any particular to conform to the executed counterpart
which is delivered to the Agency, the provisions of the executed counterpart
so delivered shall prevail.
Very truly yours,
EASTERN EDISON COMPANY
By \s\ C. Hebert
Treasurer
Accepted and agreed to as of the date first above written:
MASSACHUSETTS INDUSTRIAL GOLDMAN, SACHS & CO.,
FINANCE AGENCY for itself and as
By representative of the
Underwriters
By: Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
EXHIBIT 10.39.05
MEMORANDUM OF UNDERSTANDING
BY AND BETWEEN CANAL ELECTRIC COMPANY
AND MONTAUP ELECTRIC COMPANY
MEMORANDUM OF UNDERSTANDING dated this 23rd day of September, 1993 by and
between Canal Electric Company, a Massachusetts corporation with a principal
place of business at One Main Street, Cambridge, Massachusetts 02142 (referred
to herein as 'Canal'), and Montaup Electric Company, a Massachusetts
corporation with a principal place of business at 1606 Riverside Avenue,
Somerset, MA 02726, (referred to herein as 'Montaup').
WHEREAS, Canal and Montaup are joint owners, pursuant to the terms of the
'Agreement for Joint Ownership' executed by Canal and Montaup dated October
27, 1970 (referred to herein as 'the Agreement'), of the electric generating
property known as 'Unit 2' at the Canal Plant facility located on Freezer
Road, in Sandwich, Massachusetts (referred to herein as 'the Unit'); and
WHEREAS, the parties are evaluating options for fuel for the Unit, in order
that the Unit may continue to be operated in a cost-effective manner and
consistent with all government laws, regulations, orders, permits, and all
terms and conditions of the Agreement; and
WHEREAS, in furtherance of the goals referenced in the immediately preceding
paragraph, the parties desire to install facilities for the utilization of
natural gas as fuel for the Unit; and
WHEREAS, there presently exist no facilities for the transportation of natural
gas to the Unit, nor for the burning of natural gas as fuel for the Unit; and
WHEREAS, certain regulatory and market circumstances indicate that there
presently exist opportunities for securing the supply and transportation of
natural gas for the Unit; and
WHEREAS, Canal has conducted preliminary discussions with certain potential
gas suppliers in order to evaluate such opportunities; and
WHEREAS, discussions have also been conducted with Algonquin Gas Transmission
Company (referred to herein as 'Algonquin') concerning the provision of gas
service to the plant by Algonquin and certain of its affiliated entities, and
concerning the construction of a pipeline by Algonquin which would serve the
Unit from existing Algonquin facilities to facilities which would be
constructed on behalf of Canal and Montaup;
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Canal and Montaup agree as follows:
1. GAS TRANSPORTATION AGREEMENTS
Canal and Montaup shall enter into the following agreements: (i) with
Algonquin for the siting (including acquisition of necessary real
property rights), construction and operation of new facilities and the
improvement of existing facilities, for the transportation of natural gas
supplies to the Unit; (ii) with Algonquin and certain of its affiliated
entities for the transportation of gas to the Unit by Algonquin and
certain of its affiliated entities; and (iii) with parties other than
Algonquin and its affiliated entities for the transportation of gas to
the Unit (collectively referred to herein as the 'Gas Transportation
Agreements').
2. UNIT MODIFICATION AGREEMENTS
Canal and Montaup shall further enter into agreements for: (i) the siting
and construction of pipeline facilities for transporting natural gas from
the Algonquin facilities to the Unit; and (ii) the performance of certain
modifications to the Unit to enable the burning of natural gas as fuel
for the Unit (referred to herein as the 'Unit Modification Agreements').
Such agreements shall include (i) a project plan with provisions for an
oversight team to monitor the progress of construction, (ii) a schedule
of significant milestones, and (iii) a provision for distribution to both
parties of all correspondence, reports and studies related to
construction. The oversight team shall consist of at least one
representative each from Canal and Montaup. In the event that the
construction risks or costs associated with this project significantly
exceed initial expectations, then the parties shall meet to determine the
appropriate course of action. If the parties cannot agree with respect
to such course of action then either party may seek to invoke arbitration
in accordance with the provisions of paragraph "15. Arbitration."
3. GAS PURCHASE AGREEMENTS
Canal and Montaup shall enter into certain agreements with suppliers of
natural gas for the purchase of natural gas as fuel for the Unit
(referred to herein as the 'Gas Purchase Agreements').
4. GOVERNMENTAL AUTHORIZATIONS
Canal and Montaup further agree that an evaluation of the following
issues will be conducted on their behalf: (i) the federal, state and
local regulatory issues, and Canadian regulatory issues, associated with
procurement of natural gas for the Unit; (ii) the federal, state and
local regulatory issues associated with the transportation of natural gas
to the Unit, including without limitation, such issues relating to the
construction of new pipeline facilities and/or improvement of existing
facilities; and (iii) the federal, state and local regulatory issues, and
Canadian regulatory issues, associated with the utilization of natural
gas as fuel for the Unit, including without limitation, air emissions and
other environmental issues associated with modifications to the Unit.
Each Gas Transportation Agreement and Gas Purchase Agreement shall
contain conditions precedent which include a requirement for the
acquisition of all governmental and regulatory authorizations or
exemptions prior to the incurrence of charges by or on behalf of the
purchaser(s) thereunder. Further, Canal and Montaup agree that
construction of any of the facilities described herein shall not commence
unless all governmental and regulatory authorizations or exemptions
pertaining to such construction have first been obtained.
5. PRE-CONSTRUCTION ACTIVITIES
The parties agree that the following activities will be performed (or
will continue to be performed) on their behalf, with results satisfactory
to Canal and Montaup, and prior to the construction of any of the
facilities described herein or acquisition of property as referenced
herein:
a. A further evaluation of the natural gas supplies in the United
States and Canada (including offshore supplies) which may be potentially
available for use as fuel for the Unit. This evaluation may include
direct contact with and the solicitation of proposals from natural gas
suppliers, pipelines, and local (gas) distribution companies.
b. A further evaluation of any transportation requirements, including
consideration of the construction of new facilities and the improvement
of existing facilities, for the transportation of natural gas supplies to
the Unit. This evaluation may include direct contact with and the
solicitation of proposals from natural gas pipeline companies (and
potentially local distribution companies).
c. An analysis of the property rights which would have to be obtained
in order to transport gas to the Unit.
d. The preparation of an environmental report, in a form which would
satisfy the requirements of applicable federal, state and local laws,
regulations, ordinances and bylaws, for the siting, construction,
improvement and operation of pipeline facilities associated with the
transportation of natural gas to the Unit, and for the utilization of
natural gas as fuel for the Unit.
6. AUTHORITY TO EXECUTE AGREEMENTS, ISSUE REPORTS, ETC.
The parties agree that all agreements and reports referenced herein shall
be in a form acceptable to Montaup and Canal. Notwithstanding anything
set forth herein to the contrary, Canal and Montaup may elect to
designate an agent (which may be either of them) to represent their
interests in the matters referenced herein. Such (agency) delegation may
include authority to execute agreements on behalf of either or both of
the parties with respect to the matters reference herein. In the event
of such delegation, and provided a party has granted its approval of such
agreements as set forth above, that shall be fully bound by the terms of
each such agreement to the same extent as if that party had executed such
agreement as a party thereto. In the event of such delegation and upon
request, Canal and Montaup each agree to provide written evidence of such
delegation of authority. Provided; however, despite such delegation of
authority, to the extent a party to such agreements requires Canal and
Montaup's execution of such agreements, Canal and Montaup agree to sign
such documents provided the same are in a form acceptable to each of
them.
7. WAIVER AND RELEASE - PARTY ACTING AS AGENT
In the event either party hereto is designated to act as agent (the
"party-agent") for the other party hereto pursuant to the immediately
preceding paragraph, provided the party-agent satisfies its obligation to
present any and all agreements to the other party for the other party's
approval as specified above, the other party agrees to waive and release
any claim, suit, loss, damage, expense or cause of action of every nature
it may have against the party-agent which arise from or relating to any
act or omission by the party-agent in the party-agent's good faith
performance of its duties as party-agent.
8. PROPERTY RIGHTS
The parties agree that each party shall own as a tenant in common an
undivided one-half interest in any and all real property rights acquired
for the location of the facilities which will be constructed by Canal to
connect with the Algonquin facilities referenced in paragraph 1 hereof,
as well as any and all pipeline facilities and improvements to the Unit
as referenced in paragraph 2 hereof. None of said real property rights
or pipeline facilities and improvements constructed by Canal, or the gas
transported to the Unit, shall be used to serve any other generating
unit, now in existence or to be constructed, without the written, mutual
consent of the parties hereto. The parties agree that each party shall
own as a tenant in common an undivided one-half interest in any and all
information, documents and data arising from or relating to the
performance of the tasks referenced in paragraph 5 hereof. The parties
further agree that each party shall own one-half of all air emissions
allowances and credits that may be available for or through the operation
of the Unit and that each owner may at its sole option retain, sell, or
otherwise use its one-half share of any such emissions allowances or
credits that are not needed for the operation of the Unit.
9. JOINT OWNERSHIP AGREEMENT
Except as otherwise provided herein, the parties agree their respective
rights and obligations (including without limitation responsibility for
costs incurred pursuant to the various agreements referenced herein)
pertaining to the subject matter of this Memorandum shall be determined
according to the terms of the "Agreement For Joint Ownership" between the
parties dated October 27, 1970.
10. LEASE OF CANAL PROPERTY
Canal agrees to execute a lease substantially in the form of the
"Agreement of Lease" between the parties dated June 1, 1972 to the extent
real property owned by Canal would be utilized for the siting of
facilities referenced herein.
11. CONFIDENTIALITY
The parties each agree to keep this agreement and any and all
information, documents and data arising from or relating to the
performance of the tasks reference above (collectively referred to herein
as 'confidential information') confidential, and not to disclose the same
to any third party without first obtaining the written permission of the
other party hereto. Further the parties each agree to limit the
disclosure of confidential information to the persons within their
respective entities on a need-to-know basis. The provisions relating to
confidential information herein shall not pertain to any information that
was already known to a party (free of any obligation regarding
confidentiality), or was or becomes publicly known through no fault of a
party. In the event that a party hereto receives a subpoena or other
request for confidential information in a judicial or administrative
process, such party shall give prompt notice of the same to the other
party, and shall comply with its legal obligations while seeking such
protective arrangements as may be available to limit as strictly as
possible the disclosure of the confidential information.
12. ASSIGNMENT
This Memorandum shall not be assignable by either party without the
advance written consent of the other. This Memorandum shall be binding
on, and inure to the benefit of, the successors and assigns (as approved)
of the parties hereto.
13. APPLICABLE LAW
This Memorandum and the construction and enforceability hereof shall be
interpreted under the laws of the Commonwealth of Massachusetts.
14. REMEDIES
In the event of default by either party in any obligation pursuant to
this Memorandum, the other party shall be free to invoke such remedies at
law or in equity as may be deemed appropriate, subject to the arbitration
provision set forth in paragraph "15. Arbitration."
Failure of a party to complain of any act or omission on the part of the
other party, no matter how long the same may continue, shall not be
deemed to be a waiver by said party of any of its rights hereunder. No
waiver at any time, express or implied, of any breach of any provision of
this Memorandum shall be deemed a waiver of a breach of any other
provision of this Memorandum or a consent to any subsequent breach of the
same or any other provision. No acceptance of any partial payment shall
constitute an accord or satisfaction, but shall only be deemed a part
payment on account.
15. ARBITRATION
Any dispute between the parties with respect to this Memorandum shall be
submitted to arbitration on the request of either party. A copy of any
such request shall be served on the other party and it shall specify the
issue or issues in dispute and summarize the party's claim with respect
thereto. Within ten (10) days after receipt of such a request,
authorized representatives of both parties shall meet and attempt to
agree upon appointment of a single arbitrator who shall be qualified in
electric utility practice. If such agreement is not accomplished within
15 days, either party may request the American Arbitration Association to
appoint an arbitrator in accordance with its Commercial Arbitration
Rules, which shall govern the conduct of the arbitration in the absence
of contrary agreement by the parties. The arbitrator shall conduct a
hearing, and within thirty (30) days thereafter, unless such time is
extended by agreement of the parties, shall notify the parties in writing
of his decision. The arbitrator shall not have power to amend or add to
this Memorandum and the arbitrator's decision shall be consistent with
the rights and obligations of the parties under this Memorandum, the Gas
Transportation Agreements, the Unit Modification Agreements, and the Gas
Purchase Agreements. Subject to such limitation, the decision of the
arbitrator shall be final and binding on the parties and shall be
enforceable in any court of competent jurisdiction. The decision of the
arbitrator shall include the determination of and specify how the
expenses of the arbitration shall be allocated between the parties.
16. SEVERABILITY
In the event that any clause or provision of this Memorandum or any part
hereof shall be declared invalid, void or unenforceable by any court
having jurisdiction, such invalidity shall not affect the validity or
enforceability of the remaining portions of this Memorandum unless the
result would be manifestly inequitable or unconscionable.
17. COMPLETE AGREEMENT
The recitals and representations appearing first above are hereby
incorporated in and made a part of this Memorandum. This Memorandum
supersedes all prior agreements, communications, or proposals of the
parties regarding the subject matter hereof. This Memorandum shall
constitute the entire agreement between and among the parties and may not
be amended, modified or superseded except by written agreement signed by
the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Memorandum of
Understanding to be executed by the authorized representatives of the parties
hereto as of the date first above-written.
CANAL ELECTRIC COMPANY MONTAUP ELECTRIC COMPANY
By: ____________________________ By: __________________________
EXHIBIT 10.40.05
ANCILLARY AGREEMENT
Algonquin Gas Transmission Company ("Algonquin"), on the one hand, and
Canal Electric Company ("CEC") and Montaup Electric Company ("MEC"), on the
other hand (CEC and MEC are collectively referred to herein as "Customer"),
have this date executed a Precedent Agreement with respect to the construction
of pipeline facilities by Algonquin (referred to as the "Canal Lateral"), the
construction of certain plant facilities by Customer and the provision of firm
natural gas transportation service by Algonquin for Customer over the Canal
Lateral (the "Project"). By this Ancillary Agreement, Algonquin , Texas
Eastern Transmission Corporation, Trunkline Gas Company, and Panhandle Eastern
Pipe Line Company (individually referred to herein as "PEC pipeline" or
collectively as the "PEC pipelines") and Customer set forth certain additional
agreements relating to the Project, as follows;
A. Canal Facilities
Algonquin shall operate and maintain the Canal Lateral and all
appurtenant facilities that it constructs pursuant to the Precedent Agreement.
Customer shall operate and maintain all facilities that it constructs pursuant
to the Precedent Agreement. All facilities, whether operated and maintained
by Algonquin or Customer, shall be operated and maintained in accordance with
all applicable federal, state and local requirements.
Customer's responsibility for the capital costs of the Canal Lateral to
be constructed by Algonquin, upon which the capital cost portion of
Algonquin's rate for service over the Canal Lateral will be based, shall be
computed based on the following:
Cost of Construction Fraction Cost Responsibility
of Customer
$7,500,000 or less 100% $7,500,000
Next $500,000 80% $ 400,000
Next $500,000 60% $ 300,000
Next $500,000 40% $ 200,000
Next $500,000 20% $ 100,000
Greater than 9,500,000 0% $ 0
Maximum cost responsibility for Canal Lateral $8,500,000
B. Interruptible Transportation Services and Rates
Customer and each PEC pipeline shall enter into service agreements under
each pipeline's open access rate schedule for interruptible transportation
service for a maximum daily quantity of not less than 75,000 MMBtu and a term
of not less than 20 years (collectively the "IT Service Agreements"). The IT
Service Agreements, in combination, shall provide for the receipt of gas at
various receipt points on the systems of the PEC pipelines to be designated by
Customer and the ultimate delivery of gas to or for the benefit of Customer at
a delivery point on the Algonquin system, which shall be the inlet of the
Canal Lateral; provided, however, that in the event Customer elects to
terminate the Service Agreement pursuant to the provisions of Article IX of
the Service Agreement to be entered into pursuant to the terms of the
Precedent Agreement, and thereby pay Algonquin for the net book value of the
Canal Lateral, Customer and Algonquin agree to amend their IT Service
Agreement to provide for a delivery point at the interconnection between the
Canal Lateral and the facilities owned by Customer. Algonquin and Customer
shall enter into such other interruptible transportation service agreements
under Rate Schedule AIT-1 as may be required to transport quantities in excess
of 75,000 MMBtu per day, with the delivery point for such agreements being the
interconnect between the Canal Lateral and Customer's plant extension, and the
rate provisions of this Agreement shall not apply to such other service
agreements.
The rates for interruptible transportation services provided by one or
more of the PEC pipelines to Customer under the IT Service Agreements shall be
as may be negotiated from time to time by the parties, but shall never be
greater than the maximum tariff rates nor less than the minimum tariff rates,
and shall be subject to the following two conditions:
(1) Unless Customer agrees otherwise, for transportation under the
IT Service Agreements from a production area directly accessible to more than
one PEC pipeline on a path through the PEC pipelines for use at the electric
generating station in Sandwich, Massachusetts ("Canal Plant"), the combined
rates of the transporting PEC pipelines and any other necessary pipeline
transporters shall not exceed the sum of the individual maximum interruptible
transportation rates on the lowest cost transportation path on the PEC
pipelines from the same production area to the delivery point.
(2) The rate for transportation of gas under the IT Service
Agreement on Algonquin's system for deliveries to the inlet of the Canal
Lateral for use at the Canal Plant shall not be determined in a manner which
would disadvantage Customer because Customer elects to ship quantities of such
gas on pipelines upstream of Algonquin other than a PEC pipeline.
Specifically, when the PEC pipelines offer a transportation rate for
deliveries to the delivery point, the separate components to be charged will
be provided to Customer. The portion of the rate quoted attributable to
transportation on Algonquin will be available whether or not transportation
upstream of Algonquin is on a PEC pipe line.
C. Term
The interruptible transportation pricing agreement set forth in Part B of
this Ancillary Agreement shall become effective as of the Commencement Date
for firm transportation service by Algonquin through the Canal Lateral, as
determined in accordance with the Service Agreement, and shall continue in
effect for a period of twenty years from the Commencement Date, and year to
year thereafter until terminated by either party upon twelve months prior
written notice.
D. Miscellaneous
The PEC pipelines may from time to time designate one of them to exercise
rights or perform duties under this Ancillary Agreement on behalf of all the
PEC pipelines, provided that (1) written notice of such designation shall be
given to Canal and (2) each of the PEC pipelines will provide transportation
service only under its individual tariff and no partnership between the PEC
pipelines is created hereby.
CEC and MEC may from time to time designate one of them to exercise
rights or perform duties under this Ancillary Agreement on behalf of both CEC
and MEC, provided that (1) written notice of such designation shall be given
to the PEC Pipelines and (2) no partnership between CEC and MEC is created
hereby.
In the event of an inconsistency between this Ancillary Agreement and the
Precedent Agreement, the terms of the Precedent Agreement shall control.
No modification of this Ancillary Agreement shall be made except by the
further written agreement of the parties.
Any company which shall succeed by purchase, merger, consolidation, or
otherwise to the properties, substantially as an entirety, of any of the PEC
pipelines or CEC or MEC, or to CEC's or MEC's interest in Unit 2 of the Canal
Plant, shall be entitled to the rights and shall be subject to the obligations
of its predecessor under this Ancillary Agreement. Any party may, without
relieving itself of its obligations under this Ancillary Agreement, assign any
of its rights hereunder to a company or companies with which it is affiliated,
but otherwise no assignment of this Ancillary Agreement or any of the rights
or obligations hereunder shall be made unless there first shall have been
obtained the consent thereto in writing of the other party, which consent
shall not be unreasonably withheld.
The interpretation and performance of this Ancillary Agreement shall be
in accordance with the laws of the Commonwealth of Massachusetts.
Except as herein otherwise provided, any notice, request, or demand
provided for in this Ancillary Agreement, or any other written communication
which either party may desire to give to the other, shall be in writing and
shall be considered as duly delivered when mailed by registered or certified
mail to the address of the parties hereto, as follows:
The PEC pipelines: Algonquin Gas Transmission Company
1284 Soldiers Field Road
Boston, Massachusetts 02135
Attention: Vice President, Marketing
Customer: Canal Electric Company
2421 Cranberry Highway
Wareham, Massachusetts 02871
Attention: Vice President,
Power Supply and Transmission
Montaup Electric Company
750 West Center Street
P. O. Box 543
West Bridgewater, MA 02379
Attention: Director of Integrated Resource Management
or at such other address as either party shall designate by formal written
notice.
Agreed and Accepted this 8th day of October, 1993:
ALGONQUIN GAS TRANSMISSION COMPANY
By: John J. Mullaney
Title: Vice President
TEXAS EASTERN TRANSMISSION CORPORATION
By: Richard A. Perkins
Title: Sr. Vice President
PANHANDLE EASTERN PIPE LINE COMPANY
By: William W. Grygar
Title: Vice President
TRUNKLINE GAS COMPANY
By: Gopal M. Rana
Title: Vice President
CANAL ELECTRIC COMPANY
By: James J. Keane
Title: Vice President, Power Supply & Transmission
MONTAUP ELECTRIC COMPANY
By: Arthur A. Hatch
Title: Executive Vice President
c:\gmk\algonqui\misc\canal-8.agr
