UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-5139
CENTRAL MAINE POWER COMPANY
(Exact name of registrant as specified in its charter)
Maine 01-0042740
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
83 Edison Drive, Augusta, Maine 04336
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:(207) 623-3521
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Preferred Stock, 7 7/8% Series New York Stock Exchange
Common Stock, $5 Par Value New York Stock Exchange
Common Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
6% Preferred Stock, $100 Par Value (Voting, Noncallable)
(Title of class)
Dividend Series Preferred Stock, $100 Par Value (Callable)
(Title of class)<PAGE>
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K __.
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value of
the voting stock held by non-affiliates of the Company was
$441,093,597 on March 15, 1995 (based, in the case of the common
stock of the Company, on the last reported sale price thereof on
the New York Stock Exchange on March 15, 1995).
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date. The number of shares of the Company's Common
Stock, $5 par value (being the only class of common stock of the
Company), outstanding on March 15, 1995, was 32,442,752 shares.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by
reference and the Part of the Form 10-K (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) Any annual
report to security holders; (2) Any proxy or information
statement; and (3) Any prospectus filed pursuant to Rule 424(b)
or (c) under the Securities Act of 1933.
Portions of the Company's Annual Report to Shareholders for
the year ended December 31, 1994 are incorporated by reference in
Part I and Part II hereof.
Portions of the definitive proxy statement for the Company's
1995 Annual Meeting of Shareholders are incorporated by reference
in Part III hereof.<PAGE>
CENTRAL MAINE POWER COMPANY
INFORMATION REQUIRED IN FORM 10-K
Item Number Page
Part I
Item 1. Business . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . 14
Item 3. Legal Proceedings . . . . . . . . . . . . . 21
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . 22
Item 4.1.Executive Officers of the Registrant . . . . 22
Part II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . 24
Item 6. Selected Financial Data . . . . . . . . . . 24
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . 26
Item 8. Financial Statements and Supplementary
Data . . . . . . . . . . . . . . . . . . . 26
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . 26
Part III
Item 10. Directors and Executive Officers of
the Registrant . . . . . . . . . . . . . . 27
Item 11. Executive Compensation . . . . . . . . . . 27
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . 27
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . 27
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . 28
Signatures . . . . . . . . . . . . . . . . . . . . . 30<PAGE>
PART I
Item 1. BUSINESS.
Introduction
General. Central Maine Power Company (the "Company") is an
investor-owned Maine public utility incorporated in 1905. The
Company is primarily engaged in the business of generating,
purchasing, transmitting, distributing and selling electric
energy for the benefit of retail customers in southern and
central Maine and wholesale customers, principally other
utilities. Its principal executive offices are located at 83
Edison Drive, Augusta, Maine 04336, where its general telephone
number is (207) 623-3521.
The Company has more customers and greater revenues than any
other electric utility in Maine, serving approximately 510,000
customers in its 11,000 square-mile service area in southern and
central Maine and having $905 million in consolidated electric
operating revenues in 1994 (reflecting consolidation of financial
statements with a majority-owned subsidiary, Maine Electric Power
Company, Inc. ("MEPCO")). The Company's service area contains
the bulk of Maine's industrial and commercial centers, including
Portland (the state's largest city), South Portland, Westbrook,
Lewiston, Auburn, Rumford, Bath, Biddeford, Saco, Sanford,
Kittery, Augusta (the state's capital), Waterville, Fairfield,
Skowhegan and Rockland, and approximately 936,000 people,
representing about 77 percent of the total population of the
state. The Company's industrial and commercial customers include
major producers of pulp and paper products, producers of
chemicals, plastics, electronic components, processed food, and
footwear, and shipbuilders. Large pulp-and-paper industry
customers account for approximately 65 percent of the Company's
industrial sales and approximately 26 percent of total service-
area sales.
In March 1995, Maine Yankee Atomic Power Company, a 38-
percent-owned subsidiary of the Company, detected increased
degradation of the steam generator tubes at its Wiscasset, Maine,
nuclear generating plant, which it reported could lead to an
extended shutdown of the plant. For a more complete discussion
of this matter and its significant effects on the Company, see
"Maine Yankee Atomic Power Company," below.
1994 Results. The Company generated a net loss of $23.3
million in 1994, compared to net income of $61.3 million in 1993.
The loss applicable to common stock was $33.8 million, or $1.04
per share in 1994, compared to earnings applicable to common
stock of $52.5 million, or $1.65 per share, in 1993. The loss
reflects the write-off of approximately $100 million ($60 million
after taxes) of deferred balances in accordance with the Maine
Public Utilities Commission ("MPUC" or "PUC") order in the
proceeding involving the Company's new Alternative Rate Plan
("ARP") discussed more fully under "Regulation and Rates", below.
The write-off reduced earnings per share by $1.85; without the
write-off, earnings per share for 1994 would have been $0.81.
Electric operating revenues increased by $11.3 million, or 1.3
percent, to $904.9 million in 1994. Total service-area sales
decreased by 0.5 percent in 1994, with residential sales
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decreasing by 0.9 percent, commercial sales increasing by 2.2
percent, industrial sales decreasing by 1.9 percent, and the
small wholesale and lighting category decreasing by 3.5 percent.
The principal reasons for the kilowatt-hour sales decrease in
1994 were the loss of a major industrial customer, Madison Paper
Industries, in September 1994 in connection with the loss of a
wholesale customer to a competitor, rising electricity prices,
energy management, and the loss of sales due to conversions from
electricity to other fuels for such purposes as space and water
heating, along with a low rate of growth in the local economy.
In order to compete effectively in an increasingly competitive
electric utility industry, the Company adopted a strategy based
on stabilizing its price of electricity, in real terms, over the
ensuing five-year period. To accomplish that goal, the Company
has concentrated its efforts in three major areas: (1)
controlling internal costs, (2) reducing its costs of non-utility
generation, and (3) seeking regulatory reform. Significant
progress was made in each area, especially regulatory reform,
with the adoption effective January 1, 1995, of the ARP, which
contains inflation-based price caps, additional pricing
flexibility, and efficiency incentives. In addition, as a result
of the ARP the Company was able to enter into five-year reduced-
price contracts with a number of its largest customers designed
to ensure that those customers would remain on the Company's
system over that period.
The ARP and the other significant developments are discussed
in succeeding sections of this report. In some cases more
complete information has been incorporated in the succeeding
sections by reference to the Notes to Consolidated Financial
Statements in the Company's Annual Report to Shareholders for the
year ended December 31, 1994, which appear in Exhibit 13-1 to
this report. In those cases the incorporated Notes should be
read in conjunction with the sections below for a full discussion
of the subjects covered in that manner.
The following topics are discussed under the general heading
of Business. Where applicable, the discussions make reference to
the various other Items of this Report. In addition, for further
discussion of information required to be furnished in response to
this Item, see pages 1 through 48 of Exhibit 13-1 hereto (the
Company's Annual Report to Shareholders for the year ended
December 31, 1994), which pages are hereby incorporated herein by
reference.
Topic Page
Regulation and Rates . . . . . . . 3
Competition . . . . . . . . . . . 5
Non-utility Generation . . . . . . 7
Maine Yankee Atomic Power Company . 8
Financing and Related
Considerations . . . . . . . . . 9
Environmental Matters . . . . . . 12
Water Quality Control . . . . . 12
Air Quality Control . . . . . . 12
Hazardous Waste Regulations . . 13
Electromagnetic Fields . . . . 13
Capital Expenditures . . . . . 13
Employee Information . . . . . . 13
-2-<PAGE>
Regulation and Rates
General. The Company is subject to the regulatory authority
of the MPUC as to retail rates, accounting, service standards,
territory served, the issuance of securities maturing more than
one year after the date of issuance, certification of generation
and transmission projects and various other matters. The Company
is also subject as to some phases of its business, including
licensing of its hydroelectric stations, accounting, rates
relating to wholesale sales and to interstate transmission and
sales of energy and certain other matters, to the jurisdiction of
the Federal Energy Regulatory Commission ("FERC") under Parts I,
II and III of the Federal Power Act. Other activities of the
Company from time to time are subject to the jurisdiction of
various other state and federal regulatory agencies.
The Maine Yankee Atomic Power Company ("Maine Yankee") nuclear
generating plant (the "Maine Yankee Plant") and the other nuclear
facilities in which the Company has an interest are subject to
extensive regulation by the federal Nuclear Regulatory Commission
("NRC"). The NRC is empowered to authorize the siting,
construction and operation of nuclear reactors after
consideration of public health, safety, environmental and
antitrust matters. Under its continuing jurisdiction, the NRC
may, after appropriate proceedings, require modification of units
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 unit cease or
that the level of operation of a unit be temporarily or
permanently reduced.
The United States Environmental Protection Agency ("EPA")
administers programs which affect the Company's thermal
generating facilities as well as the nuclear facilities in which
it has an interest. The EPA has broad authority in administering
these programs, including the ability to require installation of
pollution-control and mitigation devices. The Company is also
subject to regulation by various state and local authorities with
regard to environmental matters and land use. For further
discussion of environmental considerations as they affect the
Company, see "Environmental Matters", below.
Under the Federal Power Act, the Company's hydroelectric
projects (including storage reservoirs) on navigable waters of
the United States are required to be licensed by the FERC. The
Company is a licensee, either by itself or in some cases with
other parties, for 26 FERC-licensed projects, some of which
include more than one generating unit. Thirteen licenses expired
in 1993, one expires in 1997, and thirteen after 2000. The
Company has filed all applications for relicensing the projects
whose licenses were scheduled to expire in 1993 and has been
authorized to continue to operate those projects pending action
on relicensing by the FERC. Of the thirteen projects which
expired in 1993, eleven are operating under annual licenses, one
project is operating under a new license issued in 1993 and one
was allowed to expire. New licenses may contain conditions that
reduce operating flexibility and require substantial additional
investment by the Company.
The United States has the right upon or after expiration of a
license to take over and thereafter maintain and operate a
-3-<PAGE>
project upon payment to the licensee of the lesser of its "net
investment" or the fair value of the property taken, and any
severance damages, less certain amounts earned by the licensee in
excess of specified rates of return. If the United States does
not exercise its statutory right, the FERC is authorized to issue
a new license to the original licensee, or to a new licensee upon
payment to the original licensee of the amount the United States
would have been obligated to pay had it taken over the project.
The United States has not asserted such a right with respect to
any of the Company's licensed projects.
Rate Regulation. Effective January 1, 1995, rate regulation
for the Company underwent a fundamental change with the
implementation of the ARP, which replaced traditional regulation.
Instead of rate changes based on the level of costs incurred and
capital investments, the ARP provides for one annual adjustment
of an inflation-based cap on each of the Company's rates, with no
separate reconciliation and recovery of fuel and purchased-power
costs. Under the ARP, the MPUC will continue to regulate the
Company's operations and prices, provide for continued recovery
of deferred costs, and specify a range for its rate of return.
The MPUC confirmed in its order approving the ARP that the ARP is
intended to comply with the provisions of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation."
In addition to predictability of prices for the Company's
customers, the ARP provides the Company with the flexibility to
set prices quickly to meet the competitive options available to
many of its customers. In response to growing competitive
pressures, the Company used the pricing flexibility provisions of
the ARP to enter into five-year service contracts, effective
January 1, 1995, that ensure continued purchases of electricity
from the Company by eighteen of its largest customers. Those
contracts incorporate a tariff reduction of fifteen percent for
the years 1995 through 1997, with an additional one percent in
1998 and another two percent in 1999, and exempt those customers
signing the contracts from the price increases contemplated by
the ARP. The revenue reductions that would be expected under the
contracts will be largely offset by reductions in the cost of
purchased-power expense under several NUG contracts in which the
prices paid by the Company to the NUGs are directly related to
the Company's retail price of electricity.
As previously reported, the Company agreed in connection with
the adoption of the ARP to record charges of approximately $100
million ($60 million, net of tax) against earnings in 1994. For
a detailed explanation of those write-offs, as well as a thorough
discussion of the ARP and the regulatory proceedings that
resulted in its adoption, see Note 3 of Notes to Consolidated
Financial Statements, "Regulatory Matters" - "Alternative Rate
Plan", which is incorporated herein and made a part hereof. For
a detailed discussion of other significant MPUC proceedings
involving the Company's electric rates and related matters,
including a terminated MPUC investigation of the prudence of the
Company's administration of certain of its NUG contracts and a
terminated incentive-regulation program, see Note 3 of Notes to
Consolidated Financial Statements, "Regulatory Matters" - "Other
Regulatory Decisions", and "Incentive Regulation", which are
incorporated herein and made a part hereof.
-4-<PAGE>
On March 15, 1995, the Company submitted its first compliance
filing under the ARP to the PUC, documenting a price-cap increase
of 2.43 percent, effective July 1, 1995, under the price-cap
formula in the ARP. The filing was based on an inflation-index
component of 2.92 percent, reduced by a productivity offset of
0.50 percent, and increased by 0.01 percent for flow-through
items and mandated costs. The Company believes that the filing
complies with the provisions of the ARP.
The ARP is an unprecedented ratemaking mechanism for electric
utilities and is therefore untested in actual practice. Its
provisions were negotiated by the Company with regulators and
intervenors whose interests and objectives were sometimes at odds
with those of the Company. It is possible that controversies
will arise over interpretations of the provisions of the ARP,
including whether certain unforeseen costs are subject to the
price cap or may be passed through as flow-through items or
mandated costs, and it is likely that the Company's revenues and
costs will vary from projected levels. The ARP offers new
opportunities for the Company to be rewarded for efficiency
gains, but also clearly presents the risk of reduced rates of
return if costs are not controlled, or if revenues from sales
decline or prove inadequate to fund costs and provide fair
returns on invested capital. Therefore the Company cannot
predict the financial performance it will achieve under the ARP,
but believes that implementing the ARP in the form approved by
the MPUC effective January 1, 1995, places the Company in a more
favorable position to meet its anticipated competitive challenges
and that the ARP is in the best long-term interest of the
Company.
Competition
General. In October 1992 the United States Congress enacted
the Energy Policy Act of 1992 (the "Policy Act"). The Policy Act
was designed to encourage competition among electric utility
companies, improve energy resource planning by utility companies,
and encourage the development of alternative fuels and sources of
energy. The Policy Act provides for, among other things, (1)
enhanced access to electric transmission to promote competition
for wholesale purchasers and sellers, (2) statutory reforms to
encourage utility participation in the formation of exempt
wholesale generators, (3) tax credits for electricity generation
from renewable energy sources, (4) tax incentives for the use of
alternative fuels, and (5) required fleet vehicle conversion to
alternative fuels. The Policy Act has combined with trends
developing in the electric utility industry to create new areas
of competition for the Company, resulting in more options for its
wholesale and retail customers. Even though the Company's
customers are generally unable to seek direct service from
another utility, some can curtail usage, switch fuels, install
their own generation, cancel plans to expand their operations, or
even leave the Company's service territory. In response to those
threats, the Company has initiated several countermeasures,
including the implementation of special rates to maintain or
increase employment at specific large customers' plants and
incremental-energy rates to avoid losing sawmill and ski-resort
business to other energy sources. On a smaller scale, the
Company has devised residential rate options to bolster the
appeal of electric water heating, as well as thermal storage for
off-peak electric space-heating customers.
-5-<PAGE>
For a detailed discussion of the loss of a wholesale customer,
Madison Electric Works, to a competing supplier and of five-year
rate-discount agreements entered into by the Company and several
of its largest customers in connection with the adoption of the
ARP, see Note 4 of Notes to Consolidated Financial Statements,
"Commitments and Contingencies" - "Competition", which is
incorporated herein and made a part hereof.
Municipalization. As a result of the Company's rising
electric rates over several years prior to the adoption of the
ARP, residents of several towns in the Company's service
territory publicly expressed interest in organizing local
electric utility districts for the purpose of providing their own
electric service with power purchased from a selected supplier.
Four Maine communities voted on November 8, 1994, on questions
proposing the creation of municipal electric districts. In three
of the towns, Westbrook, Norway, and Old Orchard Beach, the
proposals were defeated. The fourth town, Jay, voted to create a
district, and, in March 1995, obtained MPUC approval to form a
municipal power district. Additional regulatory approvals,
however, are required before Jay would be authorized to furnish
electric utility service. The Company believes that the creation
of any such districts within its service territory is not in the
best interests of either its customers or its investors, and will
strongly oppose such action. The Company further believes that
major obstacles will be encountered by Jay or any other group in
attempting to implement the formation of such districts,
including obtaining the required legal findings by the MPUC and
economically acquiring or constructing the necessary facilities
for a local utility system. The Company cannot, however, predict
the ultimate results of such initiatives.
Stranded Costs. The enactment of the Policy Act and the
current surplus of electric energy in the New England wholesale
market have combined to enhance the opportunities for some
electric utility customers to bypass their traditional utilities
and obtain service from other suppliers. The Company has been
affected by this in its recent experiences with Madison Electric
Works and the four local municipalization referenda discussed
above. Such bypassing can have negative consequences for a
utility and its customers that continue to take service from it,
since the utility is likely to have incurred costs that have not
been fully recovered in meeting its obligation to serve all
customers within its service area. The unrecovered costs
incurred for the benefit of a customer leaving the utility's
system in favor of another wholesale supplier would be "stranded"
unless recovered through higher rates from the customers
remaining on the utility's system, in the absence of a mechanism
to provide for direct recovery of those costs.
On May 25, 1994, the MPUC initiated a rulemaking proceeding on
the issue of stranded costs by requesting comments from
interested persons, including the Company, on a number of related
questions. After considering the comments submitted, the MPUC on
February 27, 1995, issued a proposed rule, which it stated was
"intended to help smooth the transition to a more competitive
environment by establishing principles and procedures for the
determination and recovery of stranded costs in specified
circumstances."
The proposed rule, which is expressly limited in its
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application to costs incurred to serve retail customers,
recognizes that not only can excess generation be stranded or
under-utilized, but also such items as long-term purchased power
obligations and regulatory assets. The proposal specifies an
"exit fee" as the means for recovery of stranded costs, but also
includes a "mitigation factor" that would reduce the recoverable
amount by 50 percent. The Company expressed serious concern with
the mitigation factor and other features of the proposed rule
that would limit recovery of its stranded costs at an MPUC
hearing on March 27, 1995, and is planning to submit written
comments on the proposed rule in late April, in accordance with
the MPUC's schedule. The Company cannot predict what form the
final rule will take or to what extent it will affect the
Company, but intends to vigorously advocate adoption of a final
rule that will provide for full recovery of its stranded costs in
all appropriate situations.
Non-utility Generation
After enactment of the federal Public Utility Regulatory
Policies Act of 1978 ("PURPA") and companion legislation in
Maine, the Company became an industry leader in developing
supplies of energy from non-utility generators ("NUGs"),
including cogeneration plants and small power producers. These
sources supplied 4.1 billion kilowatt-hours of electricity to the
Company in 1994, representing 37 percent of total generation, a
decrease from 40 percent in 1993, and the Company expects to
obtain approximately 40 percent of its energy from these sources
in 1995. The Company's contracts with non-utility generators,
however, which were entered into pursuant to the mandates of
PURPA and vigorous state implementation thereof, have contributed
the largest part of the Company's increased costs and the
resulting rate increases in recent years.
PURPA provided substantial economic incentives to NUGs by
allowing cogenerators and small power producers to sell their
entire electrical output to an electric utility at the utility's
avoided-cost rate, which has often been substantially higher than
market rates, while purchasing their own electric energy
requirements at the utility's established rate for that customer
class. Thus the Company in a number of cases has been required
to pay a higher price for energy to a NUG than the NUG, which in
some cases is a large customer of the Company, has paid the
Company for the NUG's energy requirements. In addition, with the
current surplus of relatively low-cost power in the New England
market, prices paid by the Company under NUG contracts are often
well above current wholesale market prices.
The Company's NUG contracts generally have terms of five to 30
years and require the Company to purchase the energy at specified
prices per kilowatt-hour. As of December 31, 1994, facilities
having 574 megawatts of capacity covered by these contracts were
in service. The costs of purchases under all of these contracts
amounted to $373.5 million in 1994, $360.7 million in 1993, and
$341.5 million in 1992. For a discussion of a buyout of a
significant high-cost NUG contract, see Note 3 of Notes to
Consolidated Financial Statements, "Regulatory Matters" - "Non-
Utility Generators", which is incorporated herein and made a part
hereof.
Because of the upward price pressure resulting in large part
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from costs associated with its NUG contracts, the Company has
been actively seeking to reduce those costs. During 1994, the
Company reached agreement with 26 NUGs to buy out contracts or to
give the Company options to restructure their contracts through
lump-sum or periodic payments. These restructurings represent
205 megawatts of capacity, which should result in net savings of
approximately $172 million over the next five years. In
accordance with prior MPUC policy and the ARP, $136.2 million of
buyout or restructuring costs since January 1992 was included in
Deferred Charges and Other Assets on the Company's balance sheet
and will be amortized over their respective fuel savings periods.
These costs result from restructuring 34 contracts representing
281 megawatts of capacity, which the Company expects to result in
approximately $246 million in fuel savings over the next five
years. The Company will continue to seek opportunities to reduce
its NUG costs, but cannot predict what level of additional
savings it will be able to achieve.
Maine Yankee Atomic Power Company
The Company owns a 38 percent stock interest in Maine Yankee
Atomic Power Company ("Maine Yankee"), which owns and operates a
nuclear generating plant in Wiscasset, Maine (the "Maine Yankee
Plant") and is entitled under a cost-based power contract to an
approximately equal percentage of the Maine Yankee Plant's
output. The Maine Yankee Plant has been in commercial operation
since 1972 and has consistently produced power at a cost among
the lowest in the country for nuclear plants. In 1994 the Maine
Yankee Plant produced 6.6 billion kilowatt-hours of electric
power, its second highest total ever, at an average cost of 2.6
cents per kilowatt-hour. The average capacity factor for the
Maine Yankee Plant in 1994 was 88 percent and for its operating
life was 73 percent at the end of 1994, compared with an industry
average of approximately 68 percent.
As previously reported, the Maine Yankee Plant, like other
pressurized water reactors, has been experiencing degradation of
its steam generator tubes, principally in the form of
circumferential cracking, which, until early 1995, was believed
to be limited to a relatively small number of tubes. In the past
the detection of defects has resulted in plugging the degraded
tubes to prevent their subsequent use.
During the refueling-and-maintenance shutdown that commenced
in early February of 1995 and is continuing, Maine Yankee
detected through new inspection methods and procedures increased
degradation of the steam generator tubes well above its
expectations and is assessing the extent of degradation and
evaluating available courses of action to address the matter.
The detection of a significantly larger number of degraded tubes
would adversely affect the operation of the Maine Yankee Plant
and result in substantial additional costs to Maine Yankee, with
the Company being responsible for its pro-rata share of non-
capital costs under its power contract with Maine Yankee. In
addition, the Company would incur substantial costs for
replacement power, the amount of which would depend on the length
of time the Maine Yankee Plant is out of service and the prices
paid for the replacement power.
With the termination of the reconcilable fuel-and-purchased-
power adjustment under the ARP that became effective on January
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1, 1995, the cost of replacement power during a Maine Yankee
outage would in general be treated like other Company expenses,
would not be deferred and collected through a specific fuel-rate
adjustment as it would have been under the regulatory mechanisms
in place prior to January 1, 1995, and recovery of such cost
would be limited by the ARP's price-index mechanism. Under the
ARP no additional price increase beyond the currently pending
increase associated with the price index will take effect in 1995
as a result of the Maine Yankee outage. Although the ARP
contains provisions that could result in a rate adjustment based
on low earnings or the incurring of extraordinary costs by the
Company, neither provision would affect prices in 1995. The
result is that costs associated with replacement power during an
extended Maine Yankee Plant outage would have an adverse impact
on Central Maine's 1995 financial results.
If repair technologies do not prove to be feasible,
substantial capital expenditures could be required to restore the
Maine Yankee Plant to service, especially if it is determined
that the Maine Yankee Plant's three steam generators should be
replaced. The cost of replacement generators would depend to a
large extent on whether suitable generators were already
available from a previously canceled plant or otherwise, and, if
such generators are available, the Maine Yankee Plant could be
out of service for up to 12 to 18 months. If it were necessary
to manufacture and install new generators, the Maine Yankee Plant
could be out of service for a substantially longer period. If
the generators are replaced, Maine Yankee might request equity
contributions from its common stockholders, including the
Company, under its capital funds agreements with them, and the
stockholders would be required to contribute their pro-rata
shares, subject in some cases to regulatory approvals.
The Company cannot now predict what action Maine Yankee will
adopt, to what extent the operation of the Maine Yankee Plant
will be affected, or what costs will ultimately be borne by the
Company, but such costs could have a material impact on the
future results of operations of the Company.
For further discussion of Maine Yankee, see Item 2,
Properties, "Existing Facilities".
Financing and Related Considerations
Financing and Refinancing in 1994: In April 1994, the Company
issued $25 million of Series U 7.54% (Adjustable Rate) General
and Refunding Mortgage Bonds, Due 1998, through a private
placement. The Series U Bonds do not have a sinking-fund
requirement and are redeemable at the option of the Company under
certain circumstances.
In June 1994, the Company entered into an agreement with a
large institutional investor under which the investor agreed to
purchase from the Company up to $25 million of additional General
and Refunding Mortgage Bonds on or before April 15, 1995, subject
to certain terms and conditions. Bonds issued pursuant to the
agreement must be due on or before April 15, 1998. The Company
has no plans to issue those bonds.
During 1994 the Company issued $32 million of notes under its
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$150-million Medium-Term Note program at an average interest rate
of 6.8 percent and an average life of 1.8 years. Notes in the
amount of $43.0 million matured during the year, decreasing the
total outstanding notes at the end of 1994 to $135 million, from
$146 million at the end of 1993. During 1994 the Company also
reduced the level of outstanding short-term borrowings by $25.5
million.
On October 26, 1994, the Company issued a note in the amount
of $66.4 million to the Finance Authority of Maine ("FAME") in
connection with a $79.3 million note issued by FAME, a state
agency, under a 1994 Maine law designed to assist electric
utilities in buying out or restructuring high-cost NUG contracts.
For a complete discussion of this transaction, see Note 3 of
Notes to Consolidated Financial Statements, "Regulatory Matters"
- "Non-Utility Generators", which is incorporated herein and made
a part hereof.
The proceeds of those financings were used for general
corporate purposes that included financing construction and
energy-management projects, retiring or refunding outstanding
securities, repaying short-term debt, and buying out purchased-
power contracts.
On November 9, 1994, the Company entered into a Competitive
Advance and Revolving Credit Facility (revolving-credit
facility), with several banks and Chemical Bank, as agent for the
lenders, to provide up to $80 million of short-term revolving-
credit loans. The revolving-credit facility supplements the
existing $50-million revolving-credit agreement and replaces the
Company's $73 million of individual bank lines of credit.
Rating Agency Actions. In 1993 and early 1994, the three
major securities rating agencies lowered their ratings on the
Company's outstanding debt and preferred stock. The rating
agencies explained that their downgrades primarily reflected the
MPUC's "unsupportive" November 1993 base-rate decision, which in
their opinion did not allow the Company's financial parameters,
adjusted for off-balance-sheet obligations, to remain at
acceptable levels for a utility with a "below-average" business
position. In addition, the rating agencies expressed the belief
that the Company's business position also reflected a depressed
Maine economy, a large industrial-customer base, significant
purchased-power obligations, relatively high production costs,
increasing rate pressures, and a high dividend payout. In early
1995, this pressure began to ease when in February, the actions
taken during 1994 with respect to cost control, NUG cost
reductions, regulatory reform under the ARP, and the competitive
pricing agreements with large customers were recognized by
Moody's Investors Service ("Moody's"), which upgraded the
Company's ratings on preferred stock and commercial paper, and
Duff & Phelps Credit Rating Co. ("Duff & Phelps"), which upgraded
its preferred stock rating. Standard & Poor's Corp. ("S&P")
affirmed the Company's ratings, including the rating of its
senior secured debt at "BB+", the lowest of the three rating
agencies, but raised the Company's outlook from "stable" to
"positive".
On March 27, 1995, in response to the Company's report that a
large number of degraded steam generator tubes had been detected
at the Maine Yankee Plant (see "Maine Yankee Atomic Power
-10-<PAGE>
Company," above), Duff & Phelps placed the ratings of the
Company's fixed-income securities on "Rating Watch-Down." At the
same time, Moody's and S&P indicated that they were reviewing
their ratings of the Company's securities.
Shareholder Rights Plan. On September 28, 1994, the Board of
Directors of the Company adopted a shareholder-rights plan and
declared a dividend of one common-share purchase right for each
outstanding share of common stock of the Company. The dividend
was distributed to the shareholders of record as of the close of
business on October 17, 1994.
Each right entitles the registered holder, upon the occurrence
of certain events, to purchase from the Company one share of
common stock at an initial purchase price of $40 per common
share, subject to adjustment. The rights become exercisable or
transferrable apart from the common shares ten business days
following the earlier to occur of a public announcement that a
person or group has acquired beneficial ownership of, or
commences or intends to commence a tender or exchange offer for,
20 percent or more of the outstanding common shares. The holder
of each right not owned by the acquiring person would be entitled
to purchase common shares having a market value equal to two
times the exercise price of the right (i.e., at a 50 percent
discount). The purchase price payable and the number of common
shares issuable upon exercise of the rights are subject to
adjustment from time to time and under certain circumstances. If
the Company is acquired in a merger or similar transaction, the
rights may be exercised to purchase common stock of the surviving
company having a market value of two times the exercise price.
The rights will expire on the earliest of (i) the close of
business on October 31, 2004, (ii) the time at which the rights
are redeemed by the Company or (iii) the time at which the rights
are exchanged for common shares at an exchange ratio of one
common share per right, as adjusted by the Company, which
exchange must occur prior to a person becoming the beneficial
owner of 50 percent or more of the outstanding common stock. At
any time prior to a person or group acquiring 20 percent or more
of the outstanding common stock, the Board of Directors of the
Company may redeem the then outstanding rights in whole, but not
in part, at a price of $.01 per right, subject to adjustment.
The redemption of the rights may be made effective at such time,
on such basis and with such conditions as the Board of Directors
in its sole discretion may establish. Immediately upon any
redemption of the rights, the right to exercise the rights will
terminate and the holders of rights will be entitled only to
receive the redemption price.
The terms of the rights may be amended by the Board of
Directors of the Company without the consent of the holders of
the rights, including an amendment to lower the threshold for an
acquiring person from 20 percent to not less than the greater of
(i) any percentage greater than the largest percentage of the
outstanding common shares then known by the Company to be
beneficially owned by any person and (ii) 10 percent.
The Plan is designed to protect shareholders against
unsolicited attempts to acquire control of the Company that do
not offer what the Company believes to be an adequate price to
all shareholders. The Plan could also have the effect of
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delaying, deferring or preventing a takeover or change in control
of the Company that has not been approved by the Board of
Directors.
For further discussion of financing considerations affecting
the Company, including a complete tabulation of its securities
ratings, see the information incorporated by reference in Item 7,
Management's Discussion and Analysis of Financial Condition and
Results of Operations, below.
Environmental Matters
In connection with the operation and construction of its
facilities, various federal, state and local authorities regulate
the Company regarding air and water quality, hazardous wastes,
land use, and other environmental considerations.
Such regulation sometimes requires review, certification or
issuance of permits by various regulatory authorities. In
addition, implementation of measures to achieve environmental
standards may hinder the ability of the Company to conduct
day-to-day operations, or prevent or substantially increase the
cost of construction of generating plants, and may require
substantial investment in new equipment at existing generating
plants. Although no substantial investment is presently
necessary, the Company is unable to predict whether such
investment may be required in the future.
Water Quality Control. The federal Clean Water Act provides
that every "point source" discharger of pollutants into navigable
waters must obtain a National Pollutant Discharge Elimination
System ("NPDES") permit specifying the allowable quantity and
characteristics of its effluent. Maine law contains similar
permit requirements and authorizes the state to impose more
stringent requirements. The Company holds all permits required
for its plants by the Clean Water Act, but such permits may be
reopened at any time to reflect more stringent requirements
promulgated by the EPA or the Maine Department of Environmental
Protection ("DEP"). Compliance with NPDES and state requirements
has necessitated substantial expenditures and may require further
substantial expenditures in the future.
Air Quality Control. Under the federal Clean Air Act, as
amended, the EPA has promulgated national ambient air quality
standards for certain air pollutants, including sulfur oxides,
particulate matter and nitrogen oxides. The EPA has approved a
Maine implementation plan prepared by the DEP for the achievement
and maintenance of these standards. The Company believes that it
is in compliance with the requirements of the Maine plan. The
Clean Air Act also imposes stringent emission standards on new
and modified sources of air pollutants. Maintaining compliance
with more stringent standards, if they should be adopted, could
require substantial expenditures by the Company. Although 1990
amendments to the Clean Air Act require, among other things, an
aggregate reduction of sulfur dioxide emissions by United States
electric utilities by the year 2000, the Company believes that
the amendments will not have a material adverse effect on the
Company's operations.
In addition, a state regulation restricts the sulfur content
-12-<PAGE>
of the fuel oil burned in Maine to 2.0 percent. However, all oil
burned at William F. Wyman Unit No. 4 in Yarmouth, Maine, is
required by license to have a sulfur content not exceeding 0.7
percent, and the other three units at Wyman Station are required
to have a sulfur content not exceeding 1.5 percent when Wyman
Unit No. 4 is in operation. The Company believes that it will
continue to be able to obtain a sufficient supply of oil with the
required sulfur contents, subject to unforeseen events and the
factors influencing the availability of oil discussed under Item
2, Properties, "Fuel Supply", below.
Hazardous Waste Regulations. Under the federal Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the
generation, transportation, treatment, storage and disposal of
hazardous wastes are subject to EPA regulations. Maine has
adopted state regulations that parallel RCRA regulations, but in
some cases are more stringent. The notifications and
applications required by the present regulations have been made.
The procedures by which the Company handles, stores, treats, and
disposes of hazardous waste products have been revised, where
necessary, to comply with these regulations and with more
stringent requirements on hazardous waste handling imposed by
amendments to RCRA enacted in 1984.
For a discussion of a matter in which the Company has been
named a potentially responsible party by the EPA with respect to
the disposal of certain toxic substances, see Item 3, Legal
Proceedings, under the caption "PCB Disposal", below.
Electromagnetic Fields. Public concern has arisen in recent
years as to whether electromagnetic fields associated with
electric transmission and distribution facilities and appliances
and wiring in buildings ("EMF") contribute to certain public
health problems. This concern has resulted in some areas in
opposition to existing or proposed utility facilities, requests
for new legislative and regulatory standards, and litigation. On
the basis of the scientific studies to date, the Company believes
that no persuasive evidence exists that would prove a causal
relationship or justify substantial capital outlays to mitigate
the perceived risks. Although the Company has suffered no
material effect as a result of this concern, the Company supports
further research on this subject and since 1988 has been
compiling and disseminating through a regular periodic
publication information on all related studies and published
materials as a central clearing house for such information, as
well as providing such information to its customers. The Company
intends to continue to monitor all significant developments in
this field.
Capital Expenditures. The Company estimates that its capital
expenditures for environmental purposes for the five years from
1990 through 1994 totaled approximately $25.1 million. The
Company cannot presently predict the amount of such expenditures
in the future, as such estimates are subject to change in
accordance with changes in applicable environmental regulations.
Employee Information
A local union affiliated with the International Brotherhood of
Electrical Workers (AFL-CIO) represents operating and maintenance
employees in each of the Company's operating divisions, and
-13-<PAGE>
certain office and clerical employees. At December 31, 1994, the
Company had 1,860 full-time employees, of whom approximately 44
percent are represented by the union. At the end of 1990 the
Company had 2,322 full-time employees. The reduction in the
number of full-time employees from 1991 through 1994 was due
largely to the implementation of an early retirement program and
other efficiency measures in 1991 and 1992 and further staff
reductions in the first quarter of 1994 in connection with the
Company's restructuring and cost-reduction program.
In 1989 the Company and its employees represented by the union
agreed to a three-year contract, which was to expire on May 1,
1992. In November 1991, however, the Company and the union
agreed to a three-year extension of the contract providing for
annual wage increases of 3 percent, 3 percent, and 3.5 percent
for each of the three years ending on May 1, 1995, respectively.
Negotiations for a new contract are in progress.
Item 2. PROPERTIES.
Existing Facilities
The electric properties of the Company form a single
integrated system which is connected at 345 kilovolts and 115
kilovolts with the lines of Public Service Company of New
Hampshire at the southerly end and at 115 kilovolts with Bangor
Hydro-Electric Company at the northerly end of the Company's
system. The Company's system is also connected with the system
of The New Brunswick Power Corporation and with Bangor
Hydro-Electric Company, in each case through the 345-kilovolt
interconnection constructed by MEPCO, a 78 percent-owned
subsidiary of the Company. At December 31, 1994, the Company had
approximately 2,296 circuit-miles of overhead transmission lines,
18,770 pole-miles of overhead distribution lines and 1,212 miles
of underground and submarine cable. The maximum one-hour firm
system net peak load experienced by the Company during the winter
of 1994-1995 was approximately 1,307 megawatts on January 11,
1995. At the time of the peak, the Company's net capability was
1,855 megawatts.
The Company operates 29 hydroelectric generating stations with
an estimated net capability of 368 megawatts and purchases an
additional 75 megawatts of hydroelectric generation in Maine. It
is currently re-evaluating some of its older hydroelectric plants
in conjunction with efforts to obtain new federal operating
licenses, with the objective of increasing their output and
extending their usefulness. The Company also operates one
oil-fired steam-electric generating station, William F. Wyman
Station in Yarmouth, Maine, after retiring its Mason Station in
Wiscasset, Maine, in 1994. The Company's share of William F.
Wyman Station has an estimated net capability of 589 megawatts.
The oil-fired station is located on tidewater, permitting
waterborne delivery of fuel. The Company also has three internal
combustion generating facilities with an estimated aggregate net
capability of 41 megawatts.
The Company has ownership interests in five nuclear generating
plants in New England. The largest is a 38-percent interest in
Maine Yankee, which generates power at its plant in Wiscasset,
Maine. In addition, the Company owns a 9.5 percent interest in
Yankee Atomic Electric Company ("Yankee Atomic"), which has
-14-<PAGE>
permanently shut down its plant located in Rowe, Massachusetts, a
6 percent interest in Connecticut Yankee Atomic Power Company
("Connecticut Yankee"), with an operating plant in Haddam,
Connecticut, and a 4 percent interest in Vermont Yankee Nuclear
Power Corporation ("Vermont Yankee"), which owns an operating
plant in Vernon, Vermont (collectively, with Maine Yankee, the
"Yankee Companies"). In addition, pursuant to a joint ownership
agreement, the Company has a 2.5 percent direct ownership
interest in the Millstone 3 nuclear unit ("Millstone 3") in
Waterford, Connecticut.
In February 1992, the Board of Directors of Yankee Atomic,
after concluding that it would be uneconomic to continue to
operate, decided to permanently discontinue power operation at
the Yankee Atomic plant and to decommission that facility. The
Company had relied on Yankee Atomic for less than one percent of
the Company's system capacity. Its 9.5-percent equity investment
in Yankee Atomic is approximately $2.3 million. Currently,
purchased-power costs billed to the Company, which include the
estimated cost of the ultimate decommissioning of the unit, are
collected by the Company from its customers through the Company's
rates.
In March 1993 the FERC approved a settlement agreement
regarding the decommissioning plan, recovery of plant investment,
and all issues with respect to the prudence of the decision to
discontinue operation. The Company has estimated its remaining
share of the cost of Yankee Atomic's continued compliance with
regulatory requirements, recovery of its plant investments,
decommissioning and closing the plant, to be approximately $38.8
million. This estimate, which is subject to ongoing review and
revision, has been recorded by the Company as a regulatory asset
and a liability on the Company's balance sheet. As part of the
MPUC's decision in the Company's 1993 base-rate case, the
Company's current share of costs related to the deactivation of
Yankee Atomic is being recovered through rates.
The Company's share of the capacity of the four operating
nuclear generating plants amounted to the following:
Maine Yankee . . . . 330 MW Connecticut Yankee . . 35 MW
Vermont Yankee . . . 19 MW Millstone 3 . . . . . 29 MW
The Company is obligated to pay its proportionate share of the
operating expenses, including depreciation and a return on
invested capital, of each of the Yankee Companies referred to
above for periods expiring at various dates to 2012. Pursuant to
the joint ownership agreement for Millstone 3, the Company is
similarly obligated to pay its proportionate share of the
operating costs of Millstone 3. The Company is also required to
pay its share of the estimated decommissioning costs of each of
the Yankee Companies and Millstone 3. The estimated
decommissioning costs are paid as a cost of energy in the amounts
allowed in rates by the FERC.
MEPCO owns and operates a 345-kilovolt transmission
interconnection, completed in 1971, extending from the Company's
substation at Wiscasset to the Canadian border where it connects
with a line of The New Brunswick Power Corporation ("NB Power")
under a 25-year interconnection agreement. MEPCO transmits power
between NB Power and various New England utilities under separate
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agreements. In 1990 MEPCO transferred to a newly formed
partnership, of which a subsidiary of the Company is a 50-percent
general partner, approximately $29 million of construction work
in progress and an equal amount of deferred credits related to
the construction of certain static var compensator facilities
used for stabilization purposes in connection with the NEPOOL
Hydro-Quebec purchase discussed in the succeeding paragraph.
NEPOOL, of which the Company is a member, contracted in
connection with its Hydro-Quebec projects to purchase power from
Hydro-Quebec. The contracts entitle the Company to 85.9
megawatts of capacity credit in the winter and 127.25 megawatts
of capacity credit during the summer. The Company also entered
into facilities-support agreements for its share of the related
transmission facilities, with its share of the support
responsibility and of associated benefits being approximately 7
percent of the totals. The Company is making facilities-support
payments on approximately $31.6 million, its share of the
construction cost for the transmission facilities incurred
through December 31, 1994.
Maine Yankee Decommissioning. Effective in 1988 Maine Yankee
began collecting $9.1 million annually for decommissioning, based
on a FERC-approved funding level of $167 million. In 1994, Maine
Yankee, pursuant to FERC authorization, increased its annual
collection to $14.9 million and reduced its return on common
equity to 10.65 percent, for a total increase in rates of
approximately $3.4 million. The increase in decommissioning
collection is based on the estimated cost of decommissioning the
Maine Yankee Plant, assuming dismantlement and removal, of $317
million (in 1993 dollars) based on a 1993 external engineering
study. The estimated cost of decommissioning nuclear plants is
subject to change due to the evolving technology of
decommissioning and the possibility of new legal requirements.
Maine Yankee's accumulated decommissioning funds were $108.7
million as of December 31, 1994.
Maine Yankee Low-Level Waste Disposal. The federal Low-Level
Radioactive Waste Policy Amendments Act (the "Waste Act"),
enacted in 1986, required operating disposal facilities to accept
low-level nuclear waste from other states until December 31,
1992. The Waste Act also set limits on the volume of waste each
disposal facility must accept from each state, established
milestones for the nonsited states to establish facilities within
their states or regions (pursuant to regional compacts) and
authorized increasing surcharges on waste disposal until 1992.
After 1992 the states in which there are operating disposal sites
are permitted to refuse to accept waste generated outside their
states or compact regions. In 1987 the Maine Legislature created
the Maine Low-Level Radioactive Waste Authority (the "Maine
Authority") to provide for such a facility if Maine is unable to
secure continued access to out-of-state facilities after 1992,
and the Maine Authority engaged in a search for a qualified
disposal site in Maine. Maine Yankee volunteered its site at the
Plant for that purpose, but progress toward establishing a
definitive site in Maine, as in other states, was difficult
because of the complex technical nature of the search process and
the political sensitivities associated with it. As a result,
Maine did not satisfy its milestone obligation under the Waste
Act requiring submission of a site license application by the end
of 1991, and is therefore subject to surcharges on its waste and
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has not had access to regulated disposal facilities since the end
of 1992. Thus, Maine Yankee now stores all waste generated at an
on-site storage facility.
At the same time, the State of Maine was pursuing discussions
with the State of Texas concerning participation in a compact
with that state and Vermont. In May 1993, the Texas Legislature
approved a compact with the states of Maine and Vermont. The
Maine Legislature in June 1993 ratified the compact and submitted
it to ratification by Maine voters in a referendum held in
November 1993, in which the compact was ratified by a margin of
approximately 73% to 27%. The ratification bill is before the
United States Congress for consideration at its 1995 session.
The compact provides for Texas to take Maine's low-level waste
over a 30-year period for disposal at a planned facility in west
Texas. In return Maine would be required to pay $25 million,
assessed to Maine Yankee by the State of Maine, payable in two
equal installments, the first after ratification by Congress and
the second upon commencement of operation of the Texas facility.
In addition, Maine Yankee would be assessed a total of $2.5
million for the benefit of the Texas county in which the facility
would be located and would also be responsible for its pro-rata
share of the Texas governing commission's operating expenses.
The Maine Authority suspended its search for a suitable disposal
site in Maine and, as of June 30, 1994, ceased operations.
In the event the required ratification by Congress is not
obtained, subject to continued NRC approval, Maine Yankee can
continue to utilize its capacity to store approximately ten to
twelve years' production of low-level waste in its facility at
the Maine Yankee Plant site, which it started in January 1993.
Subject to obtaining necessary regulatory approval, Maine Yankee
could also build a second facility on the Plant site. Maine
Yankee believes it is probable that it will have adequate storage
capacity for such low-level waste available on-site, if needed,
through the current licensed operating life of the Maine Yankee
Plant.
The Company cannot predict whether the final required
ratification of the Texas compact or other regulatory approvals
required for on-site storage will be obtained, but Maine Yankee
has stated that it intends to utilize its on-site storage
facility in the interim and continue to cooperate with the State
of Maine in pursuing all appropriate options.
Nuclear Insurance. The Price-Anderson Act is a federal
statute providing, among other things, a limit on the maximum
liability for damages resulting from a nuclear incident.
Coverage for the liability is provided for by existing private
insurance and retrospective assessments for costs in excess of
those covered by insurance, up to $75.5 million for each reactor
owned, with a maximum assessment of $10 million per reactor in
any year. Based on the Company's stock ownership in four nuclear
generating facilities and its 2.5 percent direct ownership
interest in the Millstone 3 nuclear unit, the Company's
retrospective premium could be as high as $6 million in any year,
for a cumulative total of $45.3 million, exclusive of the effect
of inflation indexing and a 5-percent surcharge in the event that
total public liability claims from a nuclear incident should
exceed the funds available to pay such claims.
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In addition to the insurance required by the Price-Anderson
Act, the nuclear generating facilities mentioned above carry
additional nuclear property-damage insurance. This additional
insurance is provided from commercial sources and from the
nuclear electric utility industry's insurance company through a
combination of current premiums and retrospective premium
adjustments. Based on current premiums and the Company's
indirect and direct ownership in nuclear generating facilities,
this adjustment could range up to approximately $6.3 million
annually.
For a discussion of issues relating to Maine Yankee's spent
nuclear fuel disposal, see "Fuel Supply" - "Nuclear", below.
Construction Program
The Company's plans for improvements and expansion of
generating, transmission and distribution facilities and power-
supply sources are under continuing review. Actual construction
expenditures depend on the availability of capital and other
resources, load forecasts, customer growth, and general business
conditions. Recent economic and regulatory considerations have
led the Company to hold its planned 1995 capital investment
outlays, including deferred demand-side management expenditures,
to minimum levels. During the five-year period ended
December 31, 1994, the Company's construction and acquisition
expenditures amounted to $352.9 million (including investment in
jointly-owned projects and excluding MEPCO), including an
Allowance for Funds Used During Construction ("AFC") of $11.6
million. The program is currently estimated at approximately $56
million for 1995 and $253 million for 1996 through 1999,
including AFC estimated for the period 1995 through 1999 at $3
million.
The following table sets forth the Company's estimated capital
expenditures as discussed above:
1995 1996-99 1995-99
Type of Facilities (Dollars in Millions)
Generating Projects $ 9 $ 41 $ 50
Transmission 5 23 28
Distribution 23 106 129
Facilities and Other 19 83 102
Total $56 $253 $309
Demand-side Management
The Company's demand-side-management initiatives have included
programs aimed at residential, commercial and industrial
customers. Among the residential efforts have been programs that
offer energy audits, low-cost insulation and weatherization
packages, water heater wraps, energy-efficient light bulbs, and
water heater cycling credits. Among the commercial and
industrial efforts have been programs that offer rebates for
efficient lighting systems and motors, energy-management loans,
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grants to customers who make efficiency improvements, and shared
savings arrangements with customers who undertake qualifying
conservation and load management programs.
Actual demand-side management expenditures depend on such
factors as availability of capital and other resources, load
forecasts, customer growth, and general business conditions.
Because of budget constraints, the Company is seeking to
concentrate its efforts where the need and cost-effectiveness are
the greatest, while continuing to honor contractual commitments.
NEPOOL
The Company is a member of NEPOOL, which is open to all
investor-owned, municipal and cooperative electric utilities in
New England under an agreement in effect since 1971 that provides
for coordinated planning and operation of approximately 99
percent of the electric power production, purchases and
transmission in New England. The NEPOOL Agreement imposes
obligations concerning generating capacity reserve and the use of
major transmission lines, and provides for central dispatch of
the region's facilities.
Fuel Supply
The Company's total kilowatt-hour production by energy source
for each of the last two years and as estimated for 1995
(assuming normal operation of Maine Yankee) is shown below:
Actual Estimated
Source 1993 1994 1995
Nuclear (principally from 28% 29% 28%
Maine Yankee)
Hydro 14 13 17
Oil 16 12 14
Non-utility 40 37 40
Other purchases 2 9 1
100% 100% 100%
The 1995 estimated kilowatt-hour output from oil and purchased
power may vary depending upon the relative costs of
Company-generated power and power purchased through NEPOOL and
independent producers.
Oil. The Company's William F. Wyman Station in Yarmouth,
Maine, and its internal combustion electric generating units are
oil-fired. The Company's last contract for the supply of fuel
oil requirements at market prices was allowed to expire in 1993.
Since then the Company has been purchasing its fuel-oil
requirements on the open market.
The average cost per barrel of fuel oil purchased by the
Company during the five calendar years commencing with 1990 was
$17.33, $12.87, $14.02, $13.12 and $12.93, respectively. A
substantial portion of the fuel oil burned by the Company and the
other member utilities of NEPOOL is imported. The availability
and cost of oil to the Company, both under contract and in the
open market, could be adversely affected by policies and events
in oil-producing nations and other factors affecting world
supplies and domestic governmental action.
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Nuclear. As described above, the Company has interests in a
number of nuclear generating units. The cycle of production and
utilization of nuclear fuel for such units consists of (1) the
mining and milling of uranium ore, (2) the conversion of the
resulting concentrate to uranium hexafluoride, (3) the enrichment
of the uranium hexafluoride, (4) the fabrication of fuel
assemblies, (5) the utilization of the nuclear fuel, and (6) the
disposal of spent fuel.
Maine Yankee has entered into a contract with the United
States Department of Energy ("DOE") for disposal of its spent
nuclear fuel, as required by the Nuclear Waste Policy Act of
1982, pursuant to which a fee of one dollar per megawatt-hour is
currently assessed against net generation of electricity and paid
to the DOE quarterly. Under this Act, the DOE has assumed the
responsibility for disposal of spent nuclear fuel produced in
private nuclear reactors. In addition, Maine Yankee is obligated
to make a payment with respect to generation prior to April 7,
1983 (the date current DOE assessments began). Maine Yankee has
elected under terms of this contract to make a single payment of
this obligation prior to the first delivery of spent fuel to DOE,
scheduled to begin no earlier than 1998. The payment will
consist of $50.4 million (all of which Maine Yankee has
previously collected from its customers, but for which a reserve
was not funded), which is the approximate one-time fee charge,
plus interest accrued at the 13-week Treasury Bill rate
compounded on a quarterly basis from April 7, 1983, through the
date of the actual payment. Current costs incurred by Maine
Yankee under this contract are recoverable under the terms of its
Power Contracts with its sponsoring utilities, including the
Company. Maine Yankee has accrued and billed $57.4 million of
interest cost for the period April 7, 1983, through December 31,
1994.
Maine Yankee has formed a trust to provide for payment of its
long-term spent fuel obligation, and is funding the trust with
deposits at least semiannually which began in 1985, with
currently projected semiannual deposits of approximately $1.3
million through December 1997. Deposits are expected to total
approximately $70.4 million, with the total liability, including
interest due at the time of disposal, estimated to be
approximately $123.6 million at January 31, 1998. Maine Yankee
estimates that trust fund deposits plus estimated earnings will
meet this total liability if funding continues without material
changes.
Under the terms of a license amendment approved by the NRC in
1984, the present storage capacity of the spent fuel pool at the
Maine Yankee Plant will be reached in 1999 and after 1996 the
available capacity of the pool will not accommodate a full-core
removal. After consideration of available technologies, Maine
Yankee elected to provide additional capacity by replacing the
fuel racks in the spent fuel pool at the Maine Yankee Plant for
more compact storage and, on January 25, 1993, filed with the NRC
seeking authorization to implement the plan. On March 15, 1994,
the NRC granted the authorization and installation of the new
racks is scheduled for 1995. Maine Yankee believes that the
replacement of the fuel racks will provide adequate storage
capacity through the Maine Yankee Plant's licensed operating
life. Maine Yankee has stated that it cannot predict with
certainty whether or to what extent the storage capacity
-20-<PAGE>
limitation at the plant will affect the operation of the plant or
the future cost of disposal.
Federal legislation enacted in December 1987 directed the DOE
to proceed with the studies necessary to develop and operate a
permanent high-level waste (spent fuel) disposal site at Yucca
Mountain, Nevada. The legislation also provides for the possible
development of a Monitored Retrievable Storage ("MRS") facility
and abandons plans to identify and select a second permanent
disposal site. An MRS facility would provide temporary storage
for high-level waste prior to eventual permanent disposal. In
late 1989 the DOE announced that the permanent disposal site is
not expected to open before 2010, although originally scheduled
to open in 1998. Additional delays due to political and
technical problems are probable.
The Company has been advised by the companies operating
nuclear generating stations in which the Company has an interest
that each of those companies has contracted for certain segments
of the nuclear fuel production and utilization cycle through
various dates. Contracts for other segments of the fuel cycle
will be required in the future, but their availability, prices
and terms cannot now be predicted. Those companies have also
advised the Company that they are assessing options generally
similar to those described above with respect to Maine Yankee in
connection with disposal of spent nuclear fuel.
Item 3. LEGAL PROCEEDINGS.
Material proceedings before the Maine PUC involving the
Company are discussed above in Item 1, Business.
PCB Disposal
The Company is a party in legal and administrative
proceedings that arise in the normal course of business. In
connection with one such proceeding, the Company has been named
as a potentially responsible party and has been incurring costs
to determine the best method of cleaning up an Augusta, Maine,
site formerly owned by a salvage company and identified by the
Environmental Protection Agency (EPA) as containing soil
contaminated by polychlorinated biphenyls (PCBs) from equipment
originally owned by the Company.
In July 1994, the EPA approved changes to the remedy it had
previously selected, the principal change being to adjust the
soil cleanup standard to 10 parts per million from the one part
per million established in the EPA's 1989 Record of Decision, on
the part of the site where PCBs were found in their highest
concentration. The EPA stated that the purpose of adjusting the
standard of cleanup was to accommodate the selected technology's
current inability to reduce PCBs and other chemical components on
the site to the original standard.
Initial tests on the site have been completed and more complex
technological studies are still in progress. The Company
believes that its share of the remaining costs of the cleanup
will total between $10 million and $15 million, depending on the
level of cleanup ultimately required and other variable factors.
Such estimate is net of an agreed partial insurance recovery and
includes the 1993 court-ordered contribution of 41 percent from
-21-<PAGE>
Westinghouse Electric Co., but excludes contributions from the
other insurance carriers the Company has sued,or any other third
parties. As a result, the Company has recorded an estimated
liability of $10 million and an equal regulatory asset,
reflecting the anticipated ratemaking recovery of such costs when
ultimately paid.
In September 1994, in connection with the 12.5-percent court-
ordered contribution from the former owners, the Company agreed
to a settlement of all claims against the former owners and
received $15,000 as their 12.5-percent share of the cleanup
costs. The excess of their share above the $15,000 will be
subject to the cost-sharing agreement between the Company and the
insurance company.
The Company cannot predict with certainty the level and timing
of the cleanup costs, the extent they will be covered by
insurance, or the ratemaking treatment of such costs, but
believes it should recover substantially all of such costs
through insurance and rates. The Company also believes that the
ultimate resolution of the legal and environmental proceedings in
which it is currently involved will not have a material adverse
effect on its financial condition.
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS.
Not applicable.
Item 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following are the present executive officers of the
Company with all positions and offices held. There are no family
relationships between any of them, nor are there any arrangements
or understandings pursuant to which any were selected as
officers.
Name, Age, and Year
First Became Officer Office
Carlton D. Reed, Jr., 64, 1991 Chairman of the Board of
Directors
David T. Flanagan, 47, 1984 President and Chief
Executive Officer, and
Director
Arthur W. Adelberg, 43, 1985 Vice President, Law and
Power Supply
Richard A. Crabtree, 48, 1978 Vice President, Retail
Operations
David E. Marsh, 47, 1986 Vice President, Corporate
Services, and Chief
Financial Officer
Curtis A. Mildner, 41, 1994 Vice President, Marketing
-22-<PAGE>
Gerald C. Poulin, 53, 1984 Vice President, Generation
and Technical Support
Douglas Stevenson, 46, 1984 Treasurer
Robert S. Howe, 55, 1975 Comptroller
William M. Finn, 58, 1984 Secretary and Clerk
Each of the executive officers, except Mr. Mildner, has for
the past five years been an officer or employee of the Company.
Curtis A. Mildner joined the Company as Vice President,
Marketing, on February 7, 1994. Prior to his employment by the
Company, he had been employed since 1987 by Hussey Seating
Company of Berwick, Maine, as Vice President, Marketing, and in
related capacities.
-23-<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is traded on the New York Stock
Exchange. As of March 15, 1995, there were 32,813 holders of
record of the Company's common stock.
Price Range of and Dividends on Common Stock
Market Price Dividends
High Low Declared
1994
First Quarter $15 $12 $0.225
Second Quarter 12 3/4 10 5/8 0.225
Third Quarter 12 1/8 10 7/8 0.225
Fourth Quarter 13 3/4 10 3/4 0.225
1993
First Quarter $24 1/2 $21 3/4 $0.39
Second Quarter 24 3/8 21 0.39
Third Quarter 24 21 7/8 0.39
Fourth Quarter 22 1/4 14 3/8 0.225
Under the most restrictive terms of the indenture securing the
Company's General and Refunding Mortgage Bonds and of the
Company's Articles of Incorporation, no dividend may be paid on
the common stock of the Company if such dividend would reduce
retained earnings below $29.6 million. At December 31, 1994, the
Company's retained earnings were $53.5 million, of which $23.9
million was not so restricted. Future dividend decisions will be
subject to future earnings levels and the financial condition of
the Company and will reflect the evaluation by the Company's
Board of Directors of then existing circumstances.
Item 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated financial
data of the Company for the five years ended December 31, 1990
through 1994. This information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial
statements and related notes thereto included elsewhere herein.
The selected consolidated financial data for the years ended
December 31, 1990 through 1994 are derived from the audited
consolidated financial statements of the Company.
-24-<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Selected Consolidated Financial Data
(Dollars in Thousands, Except Per Share Amounts)
1994 1993 1992 1991 1990
Electric operating
revenue $ 904,883 $ 893,577 $ 877,695 $ 866,539$ 780,821
Net income (loss) (23,265) 61,302 63,583 59,134 48,795
Long-term
obligations 638,841 581,844 499,029 518,625 495,716
Redeemable preferred
stock 80,000 80,000 40,750 43,500 44,875
Total assets 2,046,007 2,004,862 1,690,005 1,574,501 1,456,072
Earnings (loss) per
common share $(1.04) $ 1.65 $1.85 $1.82 $1.68
Dividends declared
per common share $0.90 $1.395 $1.56 $1.56 $1.56
</TABLE>
-25-<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information required to be furnished in response to this
Item is submitted as pages 1 to 16 of Exhibit 13-1 hereto (the
Company's Annual Report to Shareholders for the year ended
December 31, 1994), which pages are hereby incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA.
The information required to be furnished in response to this
Item is submitted as pages 17 through 48 of Exhibit 13-1 hereto
(the Company's Annual Report to Shareholders for the year ended
December 31, 1994), which pages are hereby incorporated herein by
reference. For ease of reference, the following is a listing of
financial information incorporated by reference to Exhibit 13-1
hereto, which shows the page number or numbers of said Exhibit on
which such information is presented.
Financial Information Page(s) of Exhibit 13-1
Management report on responsibility
for financial reporting 48
Consolidated statement of earnings for
the three years ended December 31,
1994, 1993 and 1992 17
Consolidated balance sheet as of
December 31, 1994 and 1993 18-19
Consolidated statement of cash flows for
the three years ended December 31, 1994,
1993 and 1992 20
Consolidated statement of capitalization
and interim financing as of
December 31, 1994 and 1993 21
Consolidated statement of changes
in common stock investment for the
three years ended December 31, 1994,
1993 and 1992 22
Notes to consolidated financial statements 23-47
Supplementary quarterly financial
data (unaudited) 46
Item 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
-26-<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT.
See the information under the heading "Election of Directors"
in the registrant's definitive proxy material for its annual
meeting of shareholders to be held on May 24, 1995, and Item 4.1,
Executive Officers of the Registrant, above, both of which are
hereby incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION.
See the information under the heading "Board Committees,
Meetings and Compensation" and the heading "Executive
Compensation" in the registrant's definitive proxy material for
its annual meeting of shareholders to be held on May 24, 1995,
which is hereby incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
See the information under the heading "Security Ownership" in
the registrant's definitive proxy material for its annual meeting
of shareholders to be held on May 24, 1995, which is hereby
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See the information under the heading, "Board Committees,
Meetings and Compensation" in the registrant's definitive proxy
material for its annual meeting of shareholders to be held on
May 24, 1995, which is hereby incorporated herein by reference.
-27-<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.
(a) Listing of Exhibits. The exhibits which are filed with
this Form 10-K or are incorporated herein by reference are set
forth in the Exhibit Index, which immediately precedes the
exhibits to this report.
(b) Reports on Form 8-K. The Company filed the following
reports on Form 8-K during the last quarter of 1994 and
thereafter to date:
Date of Report Items Reported
October 14, 1994 Item 5
On October 14, 1994, the Company filed with the Maine Public
Utilities Commission for its approval a stipulation approved by
most of the parties to an ongoing proceeding on an Alternative
Rate Plan.
Date of Report Items Reported
October 17, 1994 Item 5
On September 28, 1994, the Board of Directors of the Company
adopted a shareholder rights plan and declared a dividend of one
common share of common stock, payable to shareholders of record
as of the close of business on October 17, 1994.
Date of Report Items Reported
November 22, 1994 Item 5
On November 22, 1994, the Company filed with the PUC revised rate
schedules for two rate classes of large customers reflecting
five-year rate-discount agreements, subject to approval of the
ARP by the PUC and other contingencies, then being negotiated by
the Company with a number of its large customers.
Date of Report Items Reported
December 20, 1994 Item 5
On December 20, 1994, the PUC voted unanimously to adopt the
five-year ARP filed by the Company on October 14, 1994.
Date of Report Items Reported
January 27, 1995 Item 5
On January 27, 1995, the Company announced its financial results
for 1994. As a result of the charges to earnings required by the
ARP, the Company reported a loss of $33.8 million ($1.04 per
share) for the year.
Date of Report Items Reported
March 23, 1995 Item 5
-28-<PAGE>
The Company reported that during the refueling-and-maintenance
shutdown that commenced in early February of 1995, Maine Yankee
had detected increased degradation of the Maine Yankee Plant's
steam generator tubes well above its expectations and was
assessing the extent of degradation and evaluating courses of
action to address the matter.
-29-<PAGE>
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, in the City of Augusta, and State of
Maine on the 30th day of March, 1995.
CENTRAL MAINE POWER COMPANY
By /s/
David E. Marsh
Vice President, Corporate Services
and Chief Financial Officer
-30-<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
in the capacities and on the dates indicated.
Signature Title Date
/s/ President and March 30, 1995
David T. Flanagan Chief Executive
(Principal Executive Officer; Director
Officer)
/s/ Vice President, March 30, 1995
David E. Marsh Corporate Services,
(Principal Financial and Chief Financial
Officer) Officer
/s/ Comptroller March 30, 1995
Robert S. Howe
(Principal Accounting
Officer)
/s/ Chairman of the March 30, 1995
Carlton D. Reed, Jr. Board of Directors
/s/ Director March 30, 1995
Charles H. Abbott
Director March , 1995
Charleen M. Chase
/s/ Director March 30, 1995
E. James Dufour
/s/ Director March 30, 1995
Robert H. Gardiner
/s/ Director March 30, 1995
David M. Jagger
/s/ Director March 30, 1995
Charles E. Monty
/s/ Director March 30, 1995
Robert H. Reny
/s/ Director March 30, 1995
Kathryn M. Weare
-31-<PAGE>
The following report and consent and financial schedules of
Central Maine Power Company are filed herewith and included in
response to Item 14(a).
Page
Reports of independent public
accountants F-2, F-3
Consents of independent public
accountants F-4, F-5
Schedule VIII - Valuation and Qualifying
Accounts F-6 to F-8
Any and all other schedules are omitted because the required
information is inapplicable or the information is presented in
the financial statements or related notes.
-32-<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholders
Central Maine Power Company
We have audited the consolidated financial statements and the
financial statement schedule of Central Maine Power Company and
subsidiary listed in Item 8 and Item 14(a) of this Form 10-K
as of and for the year ended December 31, 1994. These
consolidated financial statements and financial statement
schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these
consolidated financial statements and financial statement
schedule based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the 1994 consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Central Maine Power Company
and subsidiary as of December 31, 1994, and the consolidated
results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included
therein.
Coopers & Lybrand L.L.P.
Portland, Maine
January 26, 1995, except
for Note 9 for which the
date is March 23, 1995
F-2
-33-<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Central Maine Power Company:
We have audited the accompanying consolidated balance sheet and
the consolidated statement of capitalization and interim
financing of Central Maine Power Company (a Maine corporation)
and subsidiaries as of December 31, 1993, and the related
consolidated statements of earnings, changes in common
stockholders' investment and cash flows for each of the two years
in the period ended December 31, 1993. These financial
statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and
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 a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Central Maine Power Company and subsidiaries as of December
31, 1993, and the results of their operations and their cash
flows for each of the two years in the period ended December 31,
1993, in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules
listed on the accompanying index of schedules included in
response to Item 14(a) of this Form 10-K are presented for
purposes of complying with the Securities and Exchange
Commission's rules and are not a required part of the basic
financial statements. The schedules for 1993 and 1992 have been
subjected to the auditing procedures applied in our audit of the
basic financial statements and, in our opinion, are fairly
stated, in all material respects, in relation to the basic
financial statements taken as a whole.
As discussed in Notes 2 and 5 to the consolidated financial
statements, effective January 1, 1993, the Company changed its
method of accounting for income taxes and other postretirement
benefits.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 4, 1994
F-3
-34-<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Central Maine Power Company on Forms S-3 (File Nos.
33-36679, 33-39826, 33-44754, 33-51611 and 33-56939) of our
report dated January 26, 1995, except for Note 9, for which
the date is March 23, 1995, on our audit of the consolidated
financial statements and financial statement schedule of Central
Maine Power Company and subsidiary as of December 31, 1994 and
for the year then ended which report is included in this annual
report on Form 10-K.
Coopers & Lybrand L.L.P.
Portland, Maine
March 30, 1995
F-4
-35-<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included and incorporated by
reference in this Form 10-K, into the Company's previously filed
Registration Statements File No. 33-36679, File No. 33-39826,
File No. 33-44754, File No. 33-56939 and File No. 33-51611.
Arthur Andersen LLP
Boston, Massachusetts
March 30, 1995
F-5
-36-<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Central Maine Power Company
Form 10-K - 1994
Schedule VIII
Page 1 of 3
Central Maine Power Company
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1994
(Dollars in Thousands)
Additions
Balance Charged Charged to Balance
at to costs other at end
beginning and accounts-Deductions- of
Description of period expenses describe describe period
Reserves deducted from
assets to which they apply:
Uncollectible accounts $ 2,704 $4,924 $ $4,327(A) $ 3,301
Reserves not applied
against assets:
Casualty and insurance $ 1,075 $2,492 $ 548(B) $2,840(C) $ 1,275
Workers' compensation 6,400 6,400
Hazardous material
clean-up 6,828 5,730(D) 2,558(E) 10,000
Postemployment benefits 1,045 1,045
Compensation 181 1,283 1,108(D) 228(B) 2,344
Interest on IRS issues 1,000 1,000
Total $14,484 $5,820 $7,386 $5,626 $22,064
Notes: (A) Amounts charged off as uncollectible after deducting customers'
deposits and recoveries of accounts previously charged off.
(B) Amounts charged to capital accounts.
(C) Principally payments for various injuries and damages and expenses
in connection therewith.
(D) Amounts charged to regulatory asset account.
(E) Amounts paid, charged against the reserve.
F-6
-37-<PAGE>
Central Maine Power Company
Form 10-K - 1994
Schedule VIII
Page 2 of 3
Central Maine Power Company
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1993
(Dollars in Thousands)
Additions
Balance Charged Charged to Balance
at to costs other at end
beginning and accounts- Deductions- of
Description of period expenses describe describe period
Reserves deducted from
assets to which they apply:
Uncollectible accounts $ 2,250 $5,548 $ $ 5,094(A) $ 2,704
Reserves not applied
against assets:
Casualty and insurance $ 1,077 $1,123 $ 272(B) $ 1,397(C) $ 1,075
Workers'compensation 6,400 6,400
Hazardous material
clean-up 2,981 5,019(D) 1,172(E) 6,828
Millstone III sales tax 423 423(F)
Obsolete inventory 250 250(G)
Revenue adjustment of
tax flowback 9,990 9,990(H)
Compensation 499 483 46(D) 847(B) 181
Total $21,620 $1,606 $5,337 $14,079 $14,484
Notes: (A) Amounts charged off as uncollectible after deducting customers'
deposits and recoveries of accounts previously charged off.
(B) Amounts charged to capital accounts.
(C) Principally payments for various injuries and damages and expenses
in connection therewith.
(D) Amounts charged to regulatory asset account.
(E) Amounts paid, charged against the reserve.
(F) Amounts reversed, charged to nuclear operating expenses.
(G) Amounts charged off as Distribution Expense.
(H) Refer to Note 3 of Notes to Consolidated Financial Statements in
the 1993 Annual Report.
F-7
-38-<PAGE>
Central Maine Power Company
Form 10-K - 1994
Schedule VIII
Page 3 of 3
Central Maine Power Company
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1992
(Dollars in Thousands)
Additions
Balance Charged Charged to Balance
at to costs other at end
beginning and accounts- Deductions- of
Description of period expenses describe describe period
Reserves deducted from assets to
which they apply:
Uncollectible accounts $ 2,336 $ 5,576 $ $5,662(A) $ 2,250
Reserves not applied against
assets:
Casualty and insurance $ 1,075 $ 1,524 $393(B) $1,915(C) $ 1,077
Workers' compensation 6,400 6,400
Hazardous material
clean-up 4,500 1,519(D) 2,981
Millstone III sales tax 487 46 110(E) 423
Rate refund 4,500 4,500(F)
Obsolete inventory 250 250
Revenue adjustment of
tax flowback 9,990 9,990
Compensation 332 230 29(D) 92(B) 499
Total $17,294 $12,040 $422 $8,136 $21,620
Notes: (A) Amounts charged off as uncollectible after deducting customers'
deposits and recoveries of accounts previously charged off.
(B) Amounts charged to capital accounts.
(C) Principally payments for various injuries and damages and expenses
in connection therewith.
(D) Amounts paid, charged against the reserve net of estimated insurance
recoveries.
(E) Amounts paid to Northeast Utilities related to Millstone Unit 3
Sales and Use Tax settlement agreement dated June 12, 1992.
(F) Amount of refund paid per Federal Energy Regulatory Commission
stipulation of $2,076 and reversal of prior year reserve accrual of
$2,424.
F-8
</TABLE>
-39-<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1994
CENTRAL MAINE POWER COMPANY
File No. 1-5139
(Exact name of Registrant as specified in charter)
EXHIBITS
-40-<PAGE>
EXHIBIT INDEX
The following designated exhibits, as indicated below, are either
filed herewith or have heretofore been filed with the Securities and Exchange
Commission under the Securities Act of 1933, the Securities Exchange Act of
1934 or the Public Utility Holding Company Act of 1935 and are incorporated
herein by reference to such filings. Reference is made to Item 8 of this
Form 10-K for a listing of certain financial information and statements
incorporated by reference herein.
<TABLE>
<C> <S> <C> <S> <C>
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
EXHIBIT 2: PLAN OF ACQUISITION,
REORGANIZATION, ARRANGEMENT,
LIQUIDATION OR SUCCESSION
Not Applicable.
EXHIBIT 3: ARTICLES OF INCORPORATION AND BY-
LAWS
Incorporated herein by reference:
3-1 Articles of Incorporation, as Annual Report on 3.1
amended. Form 10-K for year
ended December 31,
1992
3-2 Bylaws, as amended. Annual Report on 3.2
Form 10-K for the
year ended
December 31, 1990
EXHIBIT 4: INSTRUMENTS DEFINING THE RIGHTS OF
SECURITY HOLDERS
Incorporated herein by reference:
4-1 General and Refunding Mortgage 2-58251 2.18
between the Company and The First
National Bank of Boston, as
Trustee, dated as of April 15,
1976, relating to the Series A
Bonds.
4-2 First Supplemental Indenture dated 2-60786 2.19
as of March 15, 1977 to the
General and Refunding Mortgage.
4-3 Supplemental Indenture to the Annual Report on A
General and Refunding Mortgage Form 10-K for the
Indenture dated as of October 1, year ended
1978 relating to the Series B December 31, 1978
Bonds.
4-4 Supplemental Indenture to the Quarterly Report on A
General and Refunding Mortgage for the quarter
Indenture dated as of October 1, ended September 30,
1979, relating to the Series C 1979
Bonds.
-41-<PAGE>
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
4.10 Supplemental Indenture to the 33-9232 4.16
General and Refunding Mortgage
Indenture dated as of December 1,
1986, relating to the Series I
Bonds.
4.14 Indenture, dated as of August 1, 33-29626 4.1
1989, between the Company and The
Bank of New York, Trustee,
relating to the Medium-Term Notes.
4.15 First Supplemental Indenture, Current Report on 4.15
dated as of August 7, 1989, Form 8-K dated
relating to the Medium-Term Notes, August 16, 1989
Series A, and supplementing the
Indenture relating to the Medium-
Term Notes.
4.15.1 Second Supplemental Indenture, Current Report on 4.1
dated as of January 10, 1992, Form 8-K dated
relating to the Medium-Term Notes, January 28, 1992
Series B, and supplementing the
Indenture relating to the Medium-
Term Notes.
4.15.2 Third Supplemental Indenture, Filed herewith
dated as of December 15, 1994,
relating to the Medium-Term Notes,
Series C, and supplementing the
Indenture relating to the Medium-
Term Notes.
4.17 Supplemental Indenture to the Current Report on 4.1
General and Refunding Mortgage Form 8-K dated
Indenture, dated as of September 17, 1991
September 15, 1991, relating to
the Series N Bonds.
4.18 Supplemental Indenture to the Current Report on 1.2
General and Refunding Mortgage Form 8-K dated
Indenture, dated as of December 1, December 10, 1991
1991, relating to the Series O
Bonds.
4.19 Supplemental Indenture to the Annual Report on 4.19
General and Refunding Mortgage Form 10-K for year
Indenture, dated as of ended December 31,
December 15, 1992, relating to the 1992
Series P Bonds.
4.20 Supplemental Indenture to the Current Report on 4.1
General and Refunding Mortgage Form 8-K dated
Indenture, dated as of February March 1, 1993
15, 1993, relating to the Series Q
Bonds.
-42-<PAGE>
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
4.21 Supplemental Indenture to the Current Report on 4.1
General and Refunding Mortgage Form 8-K dated May
Indenture, dated as of May 20, 20, 1993
1993, relating to the Series R
Bonds.
4.22 Supplemental Indenture to the Current Report on 4.1
General and Refunding Mortgage Form 8-K dated
Indenture, dated as of August 15, November 30, 1993
1993, relating to the Series S
Bonds.
4.23 Supplemental Indenture to the Current Report on 4.2
General and Refunding Mortgage Form 8-K dated
Indenture, dated as of November 1, November 30, 1993
1993, relating to the Series T
Bonds.
4.24 Supplemental Indenture to the Filed herewith
General and Refunding Mortgage
Indenture, dated as of April 12,
1994, relating to the Series U
Bonds.
4.25 Rights Agreement, dated as of Current Report on 1
September 30, 1994, between the Form 8-K dated
Company and Chemical Bank, October 17, 1994.
relating to Shareholders Rights
Plan.
EXHIBIT 9: VOTING TRUST AGREEMENT
Not applicable.
EXHIBIT 10: MATERIAL CONTRACTS
Incorporated herein by reference:
10-1 Agreement dated April 1, 1968 2-30554 4.27
between the Company and Northeast
Utilities Service Company relating
to services in connection with the
New England Power Pool and NEPEX.
10-2 Form of New England Power Pool 2-55385 4.8
Agreement dated as of September 1,
1971 as amended to November 1,
1975.
10-3 Agreement setting forth 2-50198 5.10
Supplemental NEPOOL Understandings
dated as of April 2, 1973.
10-4 Sponsor Agreement dated as of 2-32333 4.27
August 1, 1968 among the Company
and the other sponsors of Vermont
Yankee Nuclear Power Corporation.
-43-<PAGE>
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-5 Power Contract dated as of 2-32333 4.28
February 1, 1968 between the
Company and Vermont Yankee Nuclear
Power Corporation.
10-6 Amendment to Exhibit 10.5 dated as 2-46612 13-21
of June 1, 1972.
10-7 Capital Funds Agreement dated as 2-32333 4.29
of February 1, 1968 between the
Company and Vermont Yankee Nuclear
Power Corporation.
10-8 Amendment to Exhibit 10.7 dated as 70-4611 B-3
of March 12, 1968.
10-9 Stockholder Agreement dated as of 2-32333 4.30
May 20, 1968 among the Company and
the other stockholders of Maine
Yankee Atomic Power Company.
10-10 Power Contract dated as of May 20, 2-32333 4.31
1968 between the Company and Maine
Yankee Atomic Power Company.
10-10.1 Amendment No. 1 to Exhibit 10-10 Annual Report on 10-1.1
dated as of March 1, 1984. Form 10-K for the
year ended
December 31, 1985
of Maine Yankee
Atomic Power
company (File No.
1-6554)
10-10.2 Amendment No. 2 to Exhibit 10-10 Annual Report on 10-1.2
dated as of January 1, 1984. Form 10-K for the
year ended
December 31, 1985
of Maine Yankee
Atomic Power
Company (File No.
1-6554)
10-10.3 Amendment No. 3 to Exhibit 10-10 Annual Report on 10-1.3
dated as of October 1, 1984. Form 10-K for the
year ended
December 31, 1985
of Maine Yankee
Atomic Power
Company (File No.
1-6554)
-44-<PAGE>
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-10.4 Additional Power Contract between Annual Report on 10-1.4
the Company and Maine Yankee Form 10-K for the
Atomic Power Company dated year ended
February 1, 1984. December 31, 1985
of Maine Yankee
Atomic Power
Company (File No.
1-6554)
10-11 Capital Funds Agreement dated as 2-32333 4.32
of May 20, 1968 between the
Company and Maine Yankee Atomic
Power Company.
10-11.1 Amendment No. 1 to Exhibit 10-11 Annual Report on 10-2.1
dated as of August 1, 1985. Form 10-K for the
year ended
December 31, 1985
of Maine Yankee
Atomic Power
Company (File No.
1-6554)
10-25 Agreement dated as of May 1, 1973 2-48966 13-57
for Joint Ownership, Construction
and Operation of New Hampshire
Nuclear Units among Public Service
Company of New Hampshire and
certain other utilities, including
the Company.
10-42 Twentieth Amendment to Exhibit 10- Annual Report on 10-42
25 dated as of September 19, 1986. Form 10-K for the
year ended
December 31, 1986
10-46 Participation Agreement, dated 2-35073 4.23.1
June 20, 1969 among Maine Electric
Power Company, Inc., the Company
and certain other utilities.
10-47 Power Purchase and Transmission 2-35073 4.23.2
Agreement dated August 1, 1969,
among Maine Electric Power
Company, Inc., the Company and
certain other utilities, relating
to purchase and transmission of
power from The New Brunswick
Electric Power Commission.
10-48 Agreement amending Exhibit 10-47 2-37987 4.41
dated June 24, 1970.
10-49 Agreement supplementing Exhibit 2-51545 5.7.4
10-47 dated December 1, 1971.
-45-<PAGE>
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-50 Assignment Agreement dated March 2-51545 5.7.5
20, 1972, between Maine Electric
Power Company, Inc., and the New
Brunswick Electric Power
Commission.
10-51 Capital Funds Agreement dated as 2-24123 4.19.1
of September 1, 1964 among
Connecticut Yankee Atomic Power
Company, the Company and certain
other utilities.
10-52 Power Contract dated as of July 1, 2-24123 4.19.2
1964 among Connecticut Yankee
Atomic Power Company, the Company
and certain other utilities.
10-53 Stockholder Agreement dated as of 2-24123 4.19.3
July 1, 1964 among the
stockholders of Connecticut Yankee
Atomic Power Company, including
the Company.
10-54 Connecticut Yankee Transmission 2-24123 4.19.4
Agreement dated as of October 1,
1964 among the stockholders of
Connecticut Yankee Atomic Power
Company, including the Company.
10-55 Agreements with Yankee Atomic
Electric Company each dated
June 30, 1959, as follows:
10-55.1 Stock Agreement. 2-15553 4.17.1
10-55.2 Power Contract. 2-15553 4.17.2
10.55.3 Research Agreement. 2-15553 4.17.3
10-56 Transmission Agreement with 2-15553 4.18
Cambridge Electric Light Company
and other sponsoring stockholders
of Yankee Atomic Electric Company.
10-57 Agreement for Joint Ownership, 2-52900 5.16
Construction and Operation of
Wyman Unit No. 4 dated November 1,
1974 among the Company and certain
utilities.
10-58 Amendment to Exhibit 10-57 dated 2-55458 5.48
as of June 30, 1975.
10-59 Amendment to Exhibit 10-57 dated 2-58251 5.19
as of August 16, 1976.
10-60 Amendment to Exhibit 10-57 dated 2-68184 5.31
as of December 31, 1978.
-46-<PAGE>
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-61 Transmission Agreement dated 2-54449 13-57
November 1, 1974 among the Company
and certain other utilities,
relating to Wyman Unit No. 4.
10-62 Sharing Agreement--1979 2-50142 2.43
Connecticut Nuclear Unit dated
September 1, 1973 among the
Company and certain other
utilities, relating to Millstone
Unit No. 3.
10-63 Amendment to Exhibit 10-62 dated 2-51999 5.16
as of August 1, 1974, relating to
Millstone Unit
No. 3.
10-64 Agreement dated as of February 25, 2-58251 5.24
1977 among the Company, the
Connecticut Light and Power
Company, the Hartford Electric
Light Company and Western
Massachusetts Electric Company,
relating to Millstone Unit No. 3.
10-70 Project Agreement dated Annual Report on 10-69
December 5, 1984 among the Form 10-K for the
Company, the Cities of Lewiston year ended
and Auburn, Maine and certain December 31, 1984
other parties, relating to
development of hydro-electric
plant.
10-73 Trust Indenture dated as of 2-60786 5.27
June 1, 1977 between the Town of
Yarmouth and Casco Bank & Trust
Company, as trustee, relating to
the Town of Yarmouth's 6 3/4%
Pollution Control Revenue Bonds
(Central Maine Power Company, 1977
Series A).
10-74 Installment Sale Agreement dated 2-60786 5.28
as of June 1, 1977 between the
Town of Yarmouth and the Company.
10-75 Agreements Relating to $11,000,000
Floating/Fixed Rate Pollution
Control Revenue Refunding Bonds:
10-75.1 Bond Purchase Agreement dated as Quarterly Report on 28.3
of May 1, 1984. Form 10-Q for the
quarter ended
June 30, 1984
-47-<PAGE>
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-75.2 Loan Agreement dated as of May 1, Quarterly Report on 28.4
1984. Form 10-Q for the
quarter ended
June 30, 1984
10-76 Agreements Relating to $8,500,000
Floating/Fixed Rate Pollution
Control Revenue Bonds:
10-76.1 Bond Purchase Agreement dated Annual Report on 10-77.1
December 28, 1984. Form 10-K for year
ended December 31,
1984
10-76.2 Loan Agreement dated as of Annual Report on 10-77.2
December 1, 1984. Form 10-K for year
ended December 31,
1984
10-77.1 Indenture of Trust dated as of Annual Report on 10-1.4
March 14, 1988 between Maine Form 10-K for year
Yankee Atomic Power Company and ended December 31,
Maine National Bank relating to 1987, of Maine
decommissioning trust funds. Yankee Atomic Power
Company (1-6554)
10-77.1(a) Amended and Restated Indenture of Annual Report on 10-6.1
Trust dated as of January 1, 1993 Form 10-K for year
between Maine Yankee Atomic Power ended December 31,
Company and The Bank of New York 1992, of Maine
relating to decommissioning trust Yankee Atomic Power
funds. Company (1-6554)
10-77.2 Indenture of Trust dated as of Annual Report on 10-7
October 16, 1985 between the Form 10-K for year
Company and Norstar Bank of Maine ended December 31,
relating to the spent fuel 1985, of Maine
disposal funds. Yankee Atomic Power
Company (1-6554)
10-78 Form of Agreement of Purchase and Annual Report on 0.79
Sale dated February 19, 1986 Form 10-K for the
between the Company and Eastern year ended
Utilities Associates, relating to December 31, 1985
the sale of the Company's Seabrook
Project interest.
10-79 Addendum to Agreement of Purchase Quarterly Report on 2.1
and Sale dated June 23, 1986, Form 10-Q for the
among the Company, Eastern quarter ending
Utilities Associates and EUA Power June 30, 1986
Corporation, amending Exhibit 10-
78.
-48-<PAGE>
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-80 Agreement, dated as of October 29, Quarterly Report on 2.1
1986, between the Company and EUA Form 10-Q for the
Power Corporation, relating to the quarter ended
sale of the Company's interest in September 30, 1986
the Seabrook Project.
10-81 Credit Agreement, dated as of Quarterly Report on 2.2
October 15, 1986, among the Form 10-Q for the
Company, various banks and quarter ended
Continental Illinois National Bank September 30, 1986
and Trust Company of Chicago, as
agent, establishing the terms of a
$40 million unsecured credit
facility.
10-86 Labor Agreement dated as of May 1, Annual Report on 10.86
1989 between the Company Form 10-K for the
(Northern, Western and Southern year ended
Division) and Local 1837 of the December 31, 1989
International Brotherhood of
Electrical Workers.
10-86.1 Agreement dated as of November 25, Annual Report on 10.86.1
1991 extending Labor Contract. Form 10-K for year
ended December 31,
1991
10-89 1987 Executive Incentive Plan, as Annual Report on 10.89
amended January 20, 1993.* Form 10-K for year
ended December 31,
1992
10-90 Deferred Compensation Plan for Annual Report on 10.90
Non-Employee Directors, as amended Form 10-K for year
and restated effective February 1, ended December 31,
1992.* 1992
10-91 Retirement Plan for Outside Annual Report on 10.91
Directors, as amended and restated Form 10-K for year
effective April 24, 1991.* ended December 31,
1992
10-92 Employment Agreement between the Annual Report on 10.92
Company and Matthew Hunter dated Form 10-K for year
as of October 20, 1993.* ended December 31,
1993.
10-93 Central Maine Power Company Long- Annual Report on 10.93
Term Incentive Plan.* Form 10-K for year
ended December 31,
1993.
10-94 Central Maine Power Company Annual Report on 10.94
Supplemental Executive Retirement Form 10-K for year
Plan, as amended and restated ended December 31,
effective January 1, 1993.* 1993.
-49-<PAGE>
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-95 Competitive Advance and Revolving Filed herewith
Credit Facility between the
Company and Chemical Bank dated as
of November 7, 1994.
10-96.1 Employment Agreement between the Filed herewith
Company and Arthur W. Adelberg
dated December 9, 1994.*
10-96.2 Employment Agreement between the Filed herewith
Company and Richard A. Crabtree
dated December 9, 1994.*
10-96.3 Employment Agreement between the Filed herewith
Company and Gerald C. Poulin dated
December 9, 1994.*
10-96.4 Employment Agreement between the Filed herewith
Company and David E. Marsh dated
December 9, 1994.*
*Management contract or compensatory plan or arrangement required to be filed
in response to Item 14(c) of Form 10-K.
EXHIBIT 11: STATEMENT RE COMPUTATION OF PER
SHARE EARNINGS
Not Applicable.
EXHIBIT 12: STATEMENTS RE COMPUTATION OF
RATIOS
Not Applicable.
EXHIBIT 13: ANNUAL REPORT TO SECURITY HOLDERS,
FORM 10-Q OR QUARTERLY REPORT TO
SECURITY HOLDERS
13-1 Management's Discussion and Filed herewith
Analysis of Financial Condition
and Results of Operations and
Financial Statements from Annual
Report of Central Maine Power
Company to Shareholders for the
year ended December 31, 1994
(pages 1-48).
EXHIBIT 16: LETTER RE CHANGE IN CERTIFYING Current Report on 16.1
ACCOUNTANT Form 8-K/A dated
January 13, 1994
EXHIBIT 18: LETTER RE CHANGE IN ACCOUNTING
PRINCIPLES
Not Applicable.
EXHIBIT 21: SUBSIDIARIES OF THE REGISTRANT
-50-<PAGE>
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
List of subsidiaries of Filed herewith
registrant.
EXHIBIT 22: PUBLISHED REPORT CONCERNING
MATTERS SUBMITTED TO VOTE OF
SECURITY HOLDERS
Not Applicable.
EXHIBIT 23: CONSENTS OF EXPERTS AND COUNSEL
23-1 Consent of Arthur Andersen & Co. Filed herewith at
to the incorporation by reference page F-5
of their reports included or
incorporated by reference herein
in the Company's Registration
Statements (File Number 33-36679,
33-39826, 33-44754, 33-51611 and
33-56939).
23-2 Consent of Coopers & Lybrand to Filed herewith at
the incorporation by reference of page F-4
their reports included or
incorporated by reference herein
in the Company's Registration
Statements (File Number 33-36679,
33-39826, 33-44754, 33-51611 and
33-56939).
EXHIBIT 24: POWER OF ATTORNEY
Not Applicable.
EXHIBIT 27: FINANCIAL DATA SCHEDULE Filed herewith
EXHIBIT 28: INFORMATION FROM REPORTS FURNISHED
TO STATE INSURANCE REGULATORY
AUTHORITIES
Not Applicable.
EXHIBIT 99: ADDITIONAL EXHIBITS
To be filed under cover of a Form
10-K/A amendment of this Form 10-K
within 180 days after December 31,
1994, pursuant to Rule 15d-21
under the Securities Exchange Act
of 1934:
99-1 and -2 Information, financial statements
and exhibits required by Form 11-K
with respect to certain employee
savings plans maintained by the
Company.
</TABLE>
-51-<PAGE>
Exhibit 4.15.2
CENTRAL MAINE POWER COMPANY
and
THE BANK OF NEW YORK,
As Trustee
_____________________________________
THIRD SUPPLEMENTAL INDENTURE
Dated as of December 15, 1994
Supplementing the Indenture
Dated as of August 1, 1989
____________________________________<PAGE>
THIS THIRD SUPPLEMENTAL INDENTURE, dated as of December
15, 1994, is between CENTRAL MAINE POWER COMPANY, a Maine
corporation (hereinafter called the "Issuer" or the "Company"),
having its principal office at 83 Edison Drive, Augusta, Maine
04336, and THE BANK OF NEW YORK, a New York banking corporation,
as Trustee (hereinafter called the "Trustee"), having its
Corporate Trust Office at 101 Barclay Street, New York, New York
10286.
Recitals of the Issuer
The Issuer and the Trustee have heretofore entered into
an Indenture, dated as of August 1, 1989, as supplemented by the
First Supplemental Indenture, dated as of August 7, 1989 and the
Second Supplemental Indenture, dated as of January 10, 1992 (such
Indenture, as heretofore supplemented and as supplemented by this
supplemental indenture being hereinafter referred to as the
"Indenture"), relating to the issuance at any time or from time
to time of its Securities on terms to be specified at the time of
issuance. As of September 30, 1994, $_____________ in aggregate
principal amount of Medium-Term Notes, Series A have been issued
under the Indenture, of which $________________ is outstanding
and $150,000,000 in aggregate principal amount of Medium-Term
Notes, Series B have been issued under the Indenture of which
$__________ in aggregate principal amount is outstanding. Terms
used and not otherwise defined herein shall (unless the context
otherwise clearly requires) have the respective meanings given to
them in the Indenture.
The Indenture provides in Article Three thereof that,
prior to the issuance of Securities of any series, the form of
such Securities and the terms applicable to such series shall be
established in, or pursuant to, the authority granted in a
resolution of the Board of Directors (delivered to the Trustee in
the form of a Board Resolution) or established in one or more
indentures supplemental thereto. The Issuer desires by this
supplemental indenture, among other things, to establish the form
of the Securities of a series, to be titled "Medium-Term Notes,
Series C" of the Issuer, and to establish the terms applicable to
such series, pursuant to Sections 3.1 and 10.1(e) of the
Indenture. The Issuer has duly authorized the execution and
delivery of this supplemental indenture.
Article Ten of the Indenture provides that the Issuer,
when authorized by a resolution of its Board of Directors, and
the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental thereto for certain purposes
enumerated in Section 10.1 thereof, including the establishment
of the form or terms of Securities of any series as permitted by
Section 3.1 thereof.
The execution and delivery of this supplemental
indenture by the parties hereto are in all respects authorized by
the provisions of the Indenture.<PAGE>
All things necessary have been done to make this
supplemental indenture a valid agreement of the Issuer, in
accordance with its terms.
NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE
WITNESSETH:
For and in consideration of the premises, it is
mutually covenanted and agreed, as follows:
ARTICLE ONE
Establishment of Medium-Term Notes, Series C
Section 1.01. The title of the series of the
Securities established by this supplemental indenture shall be
"Medium-Term Notes, Series C" of the Issuer (hereinafter called
the "Series C Notes"). The Series C Notes shall be substantially
in the form set forth in Exhibit A hereto (which is hereby
incorporated herein and made a part hereof), subject to changes
in the form thereof made by the Issuer and acceptable to the
Trustee.
Section 1.02. The Series C Notes shall be limited to
$150,000,000 in aggregate principal amount at any time
Outstanding, determined in accordance with the definition of
"Outstanding" in Section 1.1 (including the final paragraph
thereof) of the Indenture.
Section 1.03. The Series C Notes may be issued in
whole or in part as one or more Global Securities and The
Depository Trust Company, or a nominee thereof, shall be the
Depository for such Global Security or Global Securities, except
in each case as otherwise provided in an Issuer Order with
respect to any Series C Notes. The Depository for such Global
Security or Global Securities representing Series C Notes may
surrender one or more Global Securities representing Series C
Notes in exchange in whole or in part for individual Series C
Notes on such terms as are acceptable to the Issuer and such
Depository and otherwise subject to the terms of Section 2.4 of
the Indenture.
Section 1.04. The Issuer hereby appoints, or confirms
the appointment of, The Bank of New York as the initial Trustee,
Securities Registrar and Paying Agent, subject to the provisions
of the Indenture with respect to resignation, removal and
succession, and subject, further, to the right of the Issuer to
appoint additional agents (including Paying Agents). An
Authenticating Agent may be appointed for the Series C Notes
under the circumstances set forth in, and subject to the
provisions of, the Indenture.
Section 1.05. If the Trustee shall cease to be
Securities Registrar for the Series C Notes, the Issuer shall,<PAGE>
upon the written request of the Trustee, establish by an
Officers' Certificate the applicable dates for the purpose of
clause (a) of Section 5.1 of the Indenture with respect to any
Series C Notes that do not bear interest.
Section 1.06. The terms of the Series C Notes shall be
as set forth in Exhibit A hereto, and shall include the payment
and other terms reflected on the respective Series C Notes as
actually executed, authenticated and delivered under the
Indenture. Without limiting the generality of the foregoing,
specific terms of particular Series C Notes (including any
interest rate formulas not specified in Exhibit A hereto, any
redemption, sinking fund or other repayment terms that differ
from the provisions of Article Fourteen or Fifteen of the
Indenture and any terms for satisfaction and discharge of the
Indenture that differ from the provisions of Article Twelve of
the Indenture) may be determined in accordance with or pursuant
to the Issuer Order with respect thereto, as referred to in
Section 3.3 of the Indenture.<PAGE>
ARTICLE TWO
Miscellaneous
Section 2.01. The recitals contained herein shall be
taken as the statements of the Issuer, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee
makes no representation as to the validity of this supplemental
indenture. The Indenture, as supplemented by this supplemental
indenture, is in all respects hereby adopted, ratified and
confirmed.
Section 2.02. This supplemental indenture may be
executed in any number of counterparts, and on separate
counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same
instrument.
Section 2.03. If any provision of this supplemental
indenture limits, qualifies or conflicts with the duties imposed
by any of Sections 310 to 317, inclusive, of the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform Act of
1990, through operation of Section 318(c), such imposed duties
shall control.
Section 2.04. The Article headings herein are for
convenience only and shall not affect the interpretation hereof.<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Third Supplemental Indenture to be duly executed, and their
respective corporate seals to be hereunto affixed and attested
(the date of this supplemental indenture being the date of
execution by the Trustee, as indicated in its Acknowledgment).
CENTRAL MAINE POWER COMPANY
By s/D. E. Marsh
Name: D. E. Marsh
Title: Vice President
[Seal]
Attest:
s/William M. Finn
Name: William M. Finn
Title: Secretary
THE BANK OF NEW YORK
By s/Mary Jane Morrissey
Name: Mary Jane Morrissey
Title: Assistant Vice
President
[Seal]
Attest:
s/Vivian Georges
Name: Vivian Georges
Title: Assistant Vice
President<PAGE>
STATE OF MAINE )
) ss.:
COUNTY OF KENNEBEC )
At Augusta, on this 28th day of December, 1994, before
me, a Notary Public in and for the County of Kennebec and State
of Maine, personally appeared D. E. Marsh and William M. Finn,
the Vice President and Secretary, respectively, of Central Maine
Power Company, each to me personally known, who respectively
executed, and affixed and attested the corporate seal on, the
foregoing instrument on behalf of said corporation, and severally
acknowledged the same to be their free act and deed in their said
capacities and the free act and deed of Central Maine Power
Company.
NOTARIAL SEAL
s/Alice D. Richards
Notary Public
My Commission Expires: January 4, 1997
STATE OF NEW YORK )
) ss.:
NEW YORK COUNTY )
At The City of New York, on this 27th day of December,
1994, before me, a Notary Public in and for the County and State
of New York, personally appeared Mary Jane Morrissey and Vivian
Georges, an Assistant Vice President, and an Assistant Vice
President, respectively, of The Bank of New York, to me
personally known, who respectively executed, and affixed and
attested the corporate seal on, the foregoing instrument on
behalf of said corporation, and severally acknowledged the same
to be their free act and deed in their said capacities and the
free act and deed of The Bank of New York, as Trustee.
NOTARIAL SEAL
s/Timothy J. Shea
Notary Public
My Commission Expires: May 5, 1996<PAGE>
Exhibit A
[FORM OF FACE OF NOTE]
Registered
No. C- Registered
CUSIP
If this Note is registered in the name of The
Depository Trust Company (the "Depository") (55 Water Street, New
York, New York) or its nominee, this Note may not be transferred
except as a whole by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such
successor Depository unless and until this Note is presented by
an authorized agent of The Depository Trust Company to the Issuer
or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede &
Co. or such other name as is requested by an authorized
representative of The Depository Trust Company and any payment is
made to Cede & Co. ANY TRANSFER, PLEDGE OR OTHER USE THEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the
registered owner hereof, Cede & Co., has an interest herein.
CENTRAL MAINE POWER COMPANY
MEDIUM-TERM NOTE, SERIES C
If applicable, the "Total Amount of OID",
"Yield to Maturity" and "Initial Accrual
Period OID" (computed under the designated
method) below will be completed solely for
the purposes of applying the Federal income
tax original issue discount ("OID") rules.
Floating Rate Note ______% Fixed Rate Note
Original Issue Date: Principal Amount:
Interest Accrual Date: Issue Price:
Interest Payment Dates:
Maturity Date:
Redemption Date(s): Redemption Price(s):
Repayment Date(s): Repayment Price(s):
Total Amount of OID:
Yield to Maturity: Optional Interest Rate Reset:
Initial Accrual
Period OID: Extendible:
Other Provisions:<PAGE>
Only Applicable if this is a Floating Rate Note:
Initial Interest Rate: Spread (plus or minus):
Index Maturity: Spread Multiplier:
Base Rate: Maximum Interest Rate:
Interest Reset Period: Minimum Interest Rate:
Interest Reset Dates:
Interest Determination Dates:
Interest Payment Period:
Calculation Dates:
Central Maine Power Company, a Maine corporation (the
"Company", which term includes any successor issuer under the
Indenture hereinafter referred to), for value received hereby
promises to pay to _______ ______________ or registered assigns,
the principal sum of _____ ______________ Dollars on the
"Maturity Date", as set forth above, and to pay interest hereon
as described on the reverse hereof.
The principal of (and premium, if any) and interest on
this Note are payable by the Company in such coin or currency of
the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF
THIS NOTE SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER
PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET
FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has
been manually executed by or on behalf of the Trustee under the
Indenture, this Note shall not be entitled to any benefit under
the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, CENTRAL MAINE POWER COMPANY has
caused this instrument to be signed in its corporate name by the
signatures or facsimile signatures of its President or a Vice
President, and its Treasurer or an Assistant Treasurer, and its
corporate seal or a facsimile thereof to be hereon impressed,<PAGE>
engraved or imprinted and attested by such signature or facsimile
signature of its Secretary or an Assistant Secretary.
Dated: CENTRAL MAINE POWER COMPANY
(Seal)
By:___________________________
Vice President
Attest: ____________________
Secretary By:___________________________
Treasurer
Trustee's Certificate of
Authentication
This is one of the
Securities of the series
designated therein
referred to in the within-
mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By: ________________________
Authorized Signatory<PAGE>
[FORM OF REVERSE OF NOTE]
CENTRAL MAINE POWER COMPANY
MEDIUM-TERM NOTE, SERIES C
1. This Note is one of a duly authorized issue of
unsecured debt securities (hereinafter called the "Securities")
of the Company of the series hereinafter specified, all such
Securities issued and to be issued under an Indenture dated as of
August 1, 1989 between the Company and The Bank of New York, as
Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), as amended and
supplemented by the First Supplemental Indenture, dated as of
August 7, 1989, the Second Supplemental Indenture, dated as of
January 10, 1992 and the Third Supplemental Indenture, dated as
of December 15, 1994, and as further amended and supplemented
(herein called the "Indenture"), to which Indenture reference is
hereby made for a statement of the rights and limitations of
rights thereunder of the Holders of the Securities and of the
rights, obligations, duties and immunities of the Trustee and of
the Company, and the terms upon which the Securities are and are
to be authenticated and delivered. As provided in the Indenture,
the Securities may be issued in one or more series which
different series may be issued in various aggregate principal
amounts, may mature at different times, may bear interest, if
any, at different rates, may be subject to different redemption
provisions, if any, may be subject to different sinking, purchase
or analogous funds, if any, may be subject to different covenants
and Events of Default and may otherwise vary as in the Indenture
provided or permitted. This Note is one of a series designated
on the face hereof as Medium-Term Notes, Series C (the "Notes"),
limited to $150,000,000 in aggregate principal amount. The Notes
of this series may be issued at various times with different
maturity dates and different principal repayment provisions, may
bear interest at different rates, and may otherwise vary, all as
provided in the Indenture.
2.A. The record date (the "Regular Record Date") with
respect to any Interest Payment Date (as defined below) shall be
the date fifteen calendar days immediately preceding such
Interest Payment Date, whether or not such date shall be a
Business Day (unless otherwise shown on the face hereof or as
specified below). Interest which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be
paid to the person in whose name the Note is registered at the
close of business on the Regular Record Date next preceding such
Interest Payment Date; provided, however, that the first payment
of interest on any Note with an Original Issue Date between a
Regular Record Date and the succeeding Interest Payment Date will
be made on the Interest Payment Date following the next
succeeding Regular Record Date to the registered owner on such
next succeeding Regular Record Date; and provided, further, that
interest payable at Maturity will be payable to the person to<PAGE>
whom principal shall be payable. "Maturity" means the date on
which the principal amount hereof becomes due and payable,
whether at Stated Maturity or earlier by declaration of
acceleration, call for redemption or otherwise. Notwithstanding
the foregoing, any interest that is payable but not punctually
paid or duly provided for on any Interest Payment Date shall
forthwith cease to be payable to the registered owner hereof on
such Regular Record Date, and may be paid to the person in whose
name such Note is registered on the close of business on a
subsequent record date established by notice given by mail, by or
on behalf of the Company to such Holder not less than fifteen
days preceding such subsequent record date, such record date to
be not less than ten days preceding the date for payment of such
defaulted interest, or may be paid as more fully provided in the
Indenture. "Business Day" means any day, other than a Saturday
or Sunday, that is (a) not a day on which banking institutions
are authorized or required by law or regulation to be closed in
The City of New York and (b) with respect to a LIBOR Note, a
London Banking Day. "London Banking Day" means any day on which
dealings in deposits in U.S. Dollars are transacted in the
London interbank market. In connection with any calculations,
all percentages will be rounded upwards, if necessary, to the
nearest one hundred-thousandth of a percentage point, with five
one-millionths of a percentage point being rounded upwards, and
all dollar amounts used in or resulting from such calculations on
the Notes will be rounded to the nearest one cent (with one-half
cent being rounded upwards).
B. If this is a Fixed Rate Note, the Company promises
to pay interest on the principal amount from its Original Issue
Date at the rate per annum stated on the face hereof until the
principal amount hereof is paid or made available for payment.
Unless otherwise provided on the face hereof, the Company will
pay interest semi-annually each September 1 and March 1 (each an
"Interest Payment Date"), commencing (except as set forth above
in the case of a Note with an Original Issue Date between a
Regular Record Date and an Interest Payment Date) with the
Interest Payment Date immediately following the Original Issue
Date and at Maturity. If any Interest Payment Date would
otherwise be a day that is not a Business Day, such Interest
Payment Date shall be postponed to the next day that is a
Business Day, and no interest shall accrue by reason of such
delayed payment. Each payment of interest in respect of an
Interest Payment Date shall include interest accrued to but
excluding such Interest Payment Date. Interest on Fixed Rate
Notes shall be computed on the basis of a 360-day year of twelve
30-day months.
C. If this is a Floating Rate Note, the Company
promises to pay interest on the principal amount from its
Original Issue Date at a rate or rates determined in accordance
with the provisions below under the headings "Determination of CD
Rate", "Determination of Commercial Paper Rate", "Determination
of Federal Funds Rate", "Determination of LIBOR", "Determination
of Prime Rate", or "Determination of Treasury Rate", depending
upon whether the Base Rate specified on the face hereof is CD<PAGE>
Rate, Commercial Paper Rate, Federal Funds Rate, LIBOR, Prime
Rate or Treasury Rate, respectively, until the principal hereof
is paid or duly made available for payment.
The rate of interest on each Floating Rate Note shall
be reset on the day or days specified on the face hereof (each an
"Interest Reset Date") on a daily, weekly, monthly, quarterly,
semi-annual or annual basis (the "Interest Reset Period") as
specified on the face hereof. If any Interest Reset Date for any
Floating Rate Note is not a Business Day, such Interest Reset
Date shall be postponed to the next day that is a Business Day,
except, (i) if the Base Rate is LIBOR and such Business Day is in
the next succeeding calendar month, such Interest Reset Date
shall be the immediately preceding Business Day or (ii) if the
Base Rate is Treasury Rate and the Interest Reset Date falls on a
date which is an auction date (as described below), the Interest
Reset Date shall be the following day that is a Business Day.
The Company will pay interest monthly, quarterly, semi-
annually or annually or otherwise, in each case as specified on
the face hereof under "Interest Payment Period" commencing with
the first Interest Payment Date specified on the face hereof next
succeeding the Original Issue Date. Unless otherwise specified
on the face hereof, the date or dates on which interest will be
payable (each an "Interest Payment Date") will be, (i) in the
case of Floating Rate Notes with a daily, weekly or monthly
Interest Reset Period, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of
each year, as specified on the face hereof; (ii) in the case of
Floating Rate Notes with a quarterly Interest Reset Period, on
the third Wednesday of March, June, September and December of
each year; (iii) in the case of Floating Rate Notes with a semi-
annual Interest Reset Period, on the third Wednesday of each of
the two months specified on the face hereof; and (iv) in the case
of Floating Rate Notes with an annual Interest Reset Period, on
the third Wednesday of one month of each year specified on the
face hereof and, in each case, at Maturity.
If any Interest Payment Date other than at Maturity for
any Floating Rate Note would otherwise be a day that is not a
Business Day, such Interest Payment Date shall be postponed to
the next day that is a Business Day, except that in the case of a
LIBOR Note, if such Business Day is in the next succeeding
calendar month, such Interest Payment Date shall be the
immediately preceding Business Day. If Maturity for any Floating
Rate Note falls on a day that is not a Business Day, payment of
principal, premium, if any, and interest with respect to such
Note will be made on the next succeeding Business Day with the
same force and effect as if made on the due date, and no interest
shall be payable on the date of payment for the period from and
after the due date.
Unless otherwise indicated on the face hereof, interest
payments on each Interest Payment Date and at Maturity for
Floating Rate Notes will include accrued interest from and
including the Original Issue Date or the next preceding Interest<PAGE>
Payment Date to which interest has been paid or duly provided
for, to but excluding the applicable Interest Payment Date or the
date of Maturity. Accrued interest will be calculated by
multiplying the principal amount of a Floating Rate Note by an
accrued interest factor. This accrued interest factor will be
computed by adding the interest factor calculated for each day in
the period for which accrued interest is being calculated. The
interest factor (expressed as a decimal rounded upwards, if
necessary, to the next higher one hundred-thousandth of a
percentage point) for each such day will be computed by dividing
the interest rate (calculated as set forth below) applicable to
such day by 360 if the Base Rate is the CD Rate, Commercial Paper
Rate, Federal Funds Rate, LIBOR or Prime Rate, or by the actual
number of days in the year, if the Base Rate is Treasury Rate, as
indicated on the face hereof. The interest rate in effect on
each day will be (a) if such day is an Interest Reset Date, the
interest rate with respect to the Interest Determination Date (as
defined below) pertaining to such Interest Reset Date, or (b) if
such day is not an Interest Reset Date, the interest rate with
respect to the Interest Determination Date (as defined below)
pertaining to the next preceding Interest Reset Date, subject in
either case to any Maximum or Minimum Interest Rate limitation
referred to on the face hereof and to any adjustment by a Spread
and/or a Spread Multiplier referred to on the face hereof;
provided, however, that the interest rate in effect for the
period from the Original Issue Date to the first Interest Reset
Date will be the "Initial Interest Rate" set forth on the face
hereof. The interest rate hereon will in no event be higher than
the maximum rate permitted by applicable law.
The interest rate for each Interest Reset Period for a
Floating Rate Note will be the rate determined by the Calculation
Agent on the Calculation Date (as defined below) pertaining to
the Interest Determination Date pertaining to the Interest Reset
Date for such Interest Reset Period. Unless otherwise specified
on the face hereof, the "Interest Determination Date" pertaining
to an Interest Reset Date will be, if the Base Rate is the CD
Rate, Commercial Paper Rate, Federal Funds Rate or Prime Rate,
the second Business Day next preceding such Interest Reset Date.
Unless otherwise specified on the face hereof, the Interest
Determination Date pertaining to an Interest Reset Date will be,
if the Base Rate is LIBOR, the second London Banking Day next
preceding such Interest Reset Date. Unless otherwise specified
on the face hereof, the Interest Determination Date pertaining to
an Interest Reset Date will be, if the Base Rate is Treasury
Rate, the day of the week in which such Interest Reset Date falls
on which direct obligations of the United States ("Treasury
bills") of the Index Maturity specified on the face hereof would
normally be auctioned. Treasury bills are normally sold at
auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is usually held on the
following Tuesday, except that such auction may be held on the
preceding Friday. If, as the result of a legal holiday, an
auction is so held on the preceding Friday, such Friday will be
the Interest Determination Date pertaining to the Interest Reset
Date for any Note the Base Rate for which is the Treasury Rate<PAGE>
occurring in the next succeeding week. If an auction falls on a
day that is an Interest Reset Date for any Note the Base Rate for
which is the Treasury Rate, such Interest Reset Date will be the
first Business Day immediately following such auction date.
Unless otherwise specified on the face hereof, the
"Calculation Date", where applicable, pertaining to an Interest
Determination Date will be the earlier of (i) the tenth calendar
day after such Interest Determination Date or if such day is not
a Business Day, the next succeeding Business Day or (ii) the
Business Day preceding the applicable Interest Payment Date or
Maturity, as the case may be.
Subject to applicable provisions of law and except as
specified herein, on each Interest Reset Date the rate of
interest shall be the rate determined in accordance with the
provisions of the applicable heading below.
Determination of CD Rate. If the Base Rate indicated
on the face hereof is the CD Rate, the interest rate shall equal
the rate on each Interest Determination Date specified on the
face hereof for negotiable certificates of deposit having the
Index Maturity specified on the face hereof, as such rate is
published by the Board of Governors of the Federal Reserve System
in "Statistical Release H.15(519), Selected Interest Rates", or
any successor publication of the Board of Governors of the
Federal Reserve System ("H.15(519)") under the heading "CDs
(Secondary Market)" or, if such rate is not so published by
3:00 P.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the CD Rate for such
Interest Determination Date will be the rate on such Interest
Determination Date for negotiable certificates of deposit of the
specified Index Maturity as published by the Federal Reserve Bank
of New York in its daily statistical release "Composite 3:30 P.M.
Quotations for U.S. Government Securities" or any successor
publication of the Federal Reserve Bank of New York ("Composite
Quotations") under the heading "Certificates of Deposit". If
such rate is not published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, then the CD
Rate for such Interest Determination Date will be calculated by
the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City
time, on such Interest Determination Date, of three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit
in The City of New York selected by the Calculation Agent for
negotiable certificates of deposit of major United States money
center banks of the highest credit standing (in the market for
negotiable certificates of deposit) with a remaining maturity
closest to the specified Index Maturity in a denomination of
$5,000,000. In each of the above cases, the rate shall be
adjusted by the addition or subtraction of the Spread, if any,
specified on the face hereof, or by multiplication by the Spread
Multiplier, if any, specified on the face hereof. If the dealers
selected as aforesaid by the Calculation Agent are not quoting as
set forth above, the CD Rate with respect to such Interest<PAGE>
Determination Date will be the CD Rate in effect on such Interest
Determination Date.
Determination of Commercial Paper Rate. If the Base
Rate indicated on the face hereof is the Commercial Paper Rate,
the interest rate shall equal the Money Market Yield (calculated
as described below) of the rate on each Interest Determination
Date specified on the face hereof for commercial paper having the
Index Maturity specified on the face hereof, as such rate is
published in H.15(519), under the heading "Commercial Paper" or,
if such rate is not published by 3:00 P.M., New York City time,
on the Calculation Date pertaining to such Interest Determination
Date, the Commercial Paper Rate for such Interest Determination
Date will be the Money Market Yield of the rate on such Interest
Determination Date for commercial paper having the specified
Index Maturity as published in Composite Quotations under the
heading "Commercial Paper". If such rate is not published in
either H.15(519) or Composite Quotations by 3:00 P.M., New York
City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate for such
Interest Determination Date shall be calculated by the
Calculation Agent and shall be the Money Market Yield of the
arithmetic mean of the offered rates as of 11:00 A.M., New York
City time, on such Interest Determination Date of three leading
dealers of commercial paper in The City of New York selected by
the Calculation Agent for commercial paper having the specified
Index Maturity, placed for an industrial issuer whose bond rating
is "AA", or the equivalent, from a nationally recognized rating
agency. In each of the above cases, the rate shall be adjusted
by the addition or subtraction of the Spread, if any, specified
on the face hereof, or by multiplication by the Spread
Multiplier, if any, specified on the face hereof. If the dealers
selected as aforesaid by the Calculation Agent are not quoting
offered rates as specified herein, the Commercial Paper Rate with
respect to such Interest Determination Date will be the
Commercial Paper Rate in effect on such Interest Determination
Date.
"Money Market Yield" means a yield (expressed as a
percentage rounded to the nearest one hundred-thousandth of a
percentage point) calculated in accordance with the following
formula:
D X 360
Money Market Yield = X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial
paper quoted on a bank discount basis and expressed as a decimal,
and "M" refers to the actual number of days in the interest
period for which interest is being calculated.
Determination of Federal Funds Rate. If the Base Rate
indicated on the face hereof is the Federal Funds Rate, the
interest rate shall equal the rate on each Interest Determination
Date specified on the face hereof for Federal Funds as published
in H.15(519) under the heading "Federal Funds (Effective)" or, if<PAGE>
such rate is not so published by 3:00 P.M., New York City time,
on the Calculation Date pertaining to such Interest Determination
Date, the Federal Funds Rate for such Interest Determination Date
will then be the rate on such Interest Determination Date as
published in Composite Quotations under the heading "Federal
Funds/ Effective Rate". If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such Interest
Determination Date, then the Federal Funds Rate for such Interest
Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the rates, as of 9:00 A.M.,
New York City time, on such Interest Determination Date, for the
last transaction in overnight Federal Funds arranged by three
leading brokers of Federal Funds transactions in The City of New
York selected by the Calculation Agent. In each of the above
cases the rate shall be adjusted by the addition or subtraction
of the Spread, if any, specified on the face hereof, or by
multiplication by the Spread Multiplier, if any, specified on the
face hereof. If the brokers selected as aforesaid by the
Calculation Agent are not quoting as set forth above, the Federal
Funds Rate with respect to such Interest Determination Date will
be the Federal Funds in effect on such Interest Determination
Date.
Determination of LIBOR. If the Base Rate indicated on
the face hereof is LIBOR, the interest rate with respect to each
Interest Determination Date specified on the face hereof shall be
determined in accordance with the following provisions:
(i) With respect to any such Interest Determination
Date, LIBOR will be either: (a) if "LIBOR Reuters" is
specified on the face hereof, the arithmetic mean of
the offered rates (unless the specified designated
LIBOR Page (as defined below) by its terms provides
only for a single rate, in which case such single rate
shall be used) for deposits in United States dollars
having the Index Maturity designated on the face
hereof, commencing on the second London Banking Day
immediately following the Interest Determination Date,
which appear on the Designated LIBOR Page specified on
the face hereof as of 11:00 A.M., London time, on such
Interest Determination Date, if at least two such
offered rates appear (unless, as aforesaid, only a
single rate is required) on such Designated LIBOR Page,
or (b) if "LIBOR Telerate" is specified on the face
hereof, the rate for deposits in United States dollars
having the Index Maturity specified on the face hereof,
commencing on the second London Banking Day immediately
following such Interest Determination Date, which
appears on the Designated LIBOR Page specified on the
face hereof as of 11:00 A.M., London time, on that
Interest Determination Date. Notwithstanding the
foregoing, if fewer than two offered rates appear on
the Designated LIBOR Page with respect to LIBOR Reuters
(unless the specified Designated LIBOR Page with
respect to LIBOR Reuters by its terms provides only for<PAGE>
a single rate, in which case such single rate shall be
used), or if no rate appears on the Designated LIBOR
Page with respect to LIBOR Telerate, whichever may be
applicable, LIBOR in respect of the related Interest
Determination Date will be determined as if the rate
described in clause (ii) below had been specified.
(ii) With respect to any such Interest Determination
Date on which fewer than two offered rates appear on
the Designated LIBOR Page with respect to LIBOR Reuters
(unless the Designated LIBOR Page by its terms provides
only for a single rate, in which case such single rate
shall be used), or if no rate appears on the Designated
LIBOR page with respect to LIBOR Telerate, as the case
may be, the Calculation Agent will request the
principal London office of each of four major banks in
the London interbank market selected by the Calculation
Agent to provide the Calculation Agent with its offered
rate quotation for deposits in United States dollars
for the period of the Index Maturity specified on the
face hereof, commencing on the second London Banking
Day immediately following such Interest Determination
Date, to prime banks in the London interbank market as
of 11:00 A.M., London time, on such Interest
Determination Date and in a principal amount that is
representative for a single transaction in United
States dollars in such market at such time. If at
least two such quotations are provided, LIBOR
determined on such Interest Determination Date will be
the arithmetic mean of such quotations. If fewer than
two quotations are provided, LIBOR determined on such
Interest Determination Date will be the arithmetic mean
of the rates quoted as of 11:00 A.M. in The City of New
York, on such Interest Determination Date by three
major banks in The City of New York selected by the
Calculation Agent for loans in United States dollars to
leading banks, having the Index Maturity specified on
the face hereof in a principal amount that is
representative for a single transaction in United
States dollars in such market at such time.
In each of the above cases the rate shall be adjusted by the
addition or subtraction of the Spread, if any, specified on the
face hereof, or by multiplication by the Spread Multiplier, if
any, specified on the face hereof. If the banks selected as
aforesaid by the Calculation Agent are not quoting as set forth
above, LIBOR determined on such Interest Determination Date will
be LIBOR in effect on such Interest Determination Date.
"Designated LIBOR Page" means either (a) the
display on the Reuters Monitor Money Rates Service for the
purpose of displaying the London interbank rates of major banks
for United States dollars (if "LIBOR Reuters" is designated on
the face hereof), or (b) the display on the Dow Jones Telerate
Service for the purpose of displaying the London interbank rates
of major banks for United States dollars (if "LIBOR Telerate" is<PAGE>
designated on the face hereof). If neither LIBOR Reuters nor
LIBOR Telerate is specified on the face hereof, LIBOR will be
determined as if LIBOR Telerate (page 3750) had been chosen.
Determination of Prime Rate. If the Base Rate
indicated on the face hereof is the Prime Rate, the interest rate
shall equal the rate on each Interest Determination Date
specified on the face hereof as published in H.15(519) opposite
the caption "Bank Prime Loan". If such rate is not so published
by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Prime Rate
for such Interest Determination Date shall be calculated by the
Calculation Agent and shall be the arithmetic mean of the rates
of interest publicly announced by each bank named on the Reuters
Screen NYMF Page as such bank's prime rate or base lending rate
as in effect for such Interest Determination Date as quoted on
the Reuters Screen NYMF Page on such Interest Determination Date,
or, if fewer than four such rates appear on the Reuters Screen
NYMF Page for such Interest Determination Date, the rate shall be
the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close
of business on such Interest Determination Date by at least two
of the three major money center banks in The City of New York
selected by the Calculation Agent from which quotations are
requested. If fewer than two quotations are quoted as aforesaid,
the Prime Rate for such Interest Determination Date shall be
calculated by the Calculation Agent and shall be the arithmetic
mean of the prime rates quoted in The City of New York on such
date by the appropriate number of substitute banks or trust
companies organized and doing business under the laws of the
United States, or any State thereof, in each case having total
equity capital of at least U.S. $500 million and being subject to
supervision or examination by a Federal or state authority,
selected by the Calculation Agent to quote such rate or rates.
In each of the above cases, the rate shall be adjusted by the
addition or subtraction of the Spread, if any, specified on the
face hereof, or by multiplication by the Spread Multiplier, if
any, specified on the face hereof.
If the Prime Rate is not published in H.15(519) and the
banks or trust companies selected as aforesaid are not quoting as
mentioned in the preceding paragraph, the Prime Rate with respect
to such Interest Determination Date will be the Prime Rate
otherwise in effect on such Interest Determination Date.
"Reuters Screen NYMF Page" means the display designated as page
"NYMF" on the Reuters Monitor Money Rates Service (or such other
page as may replace page NYMF on that service for the purpose of
displaying prime rates or base lending rates of major United
States banks).
Determination of Treasury Rate. If the Base Rate
indicated on the face hereof is the Treasury Rate, the interest
rate shall equal the rate on each Interest Determination Date
specified on the face hereof applicable to the most recent
auction of direct obligations of the United States ("Treasury
bills") having the Index Maturity specified on the face hereof,<PAGE>
as such rate is set forth in H.15(519) under the heading
"Treasury Bills - auction average (Investment)" or, if not so
made available by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date,
the Treasury Rate for such Interest Determination Date will be
the auction average rate (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on
a daily basis) as otherwise announced by the United States
Department of the Treasury. In the event that the results of the
auction of Treasury bills having the specified Index Maturity are
not reported as provided above by 3:00 P.M., New York City time,
on such Calculation Date or if no such auction is held in a
particular week, then the Treasury Rate shall be calculated by
the Calculation Agent and shall be the yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) of the
arithmetic mean of the secondary market bid rates, as of
approximately 3:30 P.M., New York City time, on such Interest
Determination Date, of three leading primary United States
government securities dealers selected by the Calculation Agent
for the issue of Treasury bills with a remaining maturity closest
to the specified Index Maturity. In each of the above cases the
rate shall be adjusted by the addition or subtraction of the
Spread, if any, specified on the face hereof, or by
multiplication by the Spread Multiplier, if any, specified on the
face hereof. If the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this paragraph,
the Treasury Rate for such Interest Determination Date will be
the Treasury Rate with respect to such Interest Determination
Date shall be the Treasury Rate in effect on such date.
Initially, The Bank of New York shall be the
Calculation Agent. The Calculation Agent shall calculate the
interest rate hereon in accordance with the foregoing and will
confirm in writing such calculation to the Trustee and any Paying
Agent immediately after each determination. Neither the Trustee
nor any Paying Agent shall be responsible for any such
calculation. At the request of the Holder hereof the Calculation
Agent will provide to the Holder hereof the interest rate hereon
then in effect and, if determined, the interest rate which will
become effective as of the next Interest Reset Date.
Interest Rate Reset. If specified on the face hereof,
the Company has the option to reset the interest rate, in the
case of a Fixed Rate Note, or to reset the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, on the date or
dates specified on the face hereof (each an "Optional Reset
Date") and on the basis or formula, if any, for such resetting
specified on the face hereof.
The Company may exercise such option by notifying the
Paying Agent of such exercise at least 45 but not more than 60
days prior to an Optional Reset Date for such Note. Not later
than 40 days prior to such Optional Reset Date, the Paying Agent
will mail to the Holder hereof a Notice (the "Reset Notice"),
first class, postage prepaid, setting forth (i) the election of<PAGE>
the Company to reset the interest rate, in the case of a Fixed
Rate Note, or the Spread and/or Spread Multiplier, in the case of
a Floating Rate Note, (ii) such new interest rate or such new
Spread and/or Spread Multiplier, as the case may be, and
(iii) the provisions, if any, for redemption during the period
from such Optional Reset Date to the next Optional Reset Date or,
if there is no such next Optional Reset Date, to the Stated
Maturity of the principal amount of such Note (each period a
"Subsequent Interest Period"), including the date or dates on
which or the period or periods during which and the price or
prices at which such redemption may occur during such Subsequent
Interest Period.
Notwithstanding the foregoing, not later than 20 days
prior to an Optional Reset Date for a Note, the Company may, at
its option, revoke the interest rate, in the case of a Fixed Rate
Note, or the Spread and/or Spread Multiplier, in the case of a
Floating Rate Note, in either case provided for in the Reset
Notice and establish a higher interest rate, in the case of a
Fixed Rate Note, or a new Spread and/or Spread Multiplier which
results in a higher interest rate, in the case of a Floating Rate
Note, for the Subsequent Interest Period commencing on such
Optional Reset Date by mailing or causing the Paying Agent to
mail notice of such higher interest rate or new Spread and/or
Spread Multiplier, as the case may be, first class, postage
prepaid, to the Holder hereof. Such notice shall be irrevocable.
All Notes with respect to which the interest rate or Spread
and/or Spread Multiplier is reset on an Optional Reset Date will
bear such higher interest rate, in the case of a Fixed Rate Note,
or new Spread and/or Spread Multiplier, in the case of a Floating
Rate Note.
If the Company elects to reset the interest rate or the
Spread and/or Spread Multiplier on an Optional Reset Date, the
Holder will have the option to elect repayment by the Company on
such Optional Reset Date at a price equal to the principal amount
thereof plus any accrued interest to such Optional Reset Date.
In order for a Note to be so repaid on an Optional Reset Date on
which the interest rate or the Spread and/or Spread Multiplier is
reset, the Holder must follow the procedures set forth in
paragraph 5 below for optional repayment, except that the period
for delivery of such Note or notification to the Paying Agent
shall be at least 25 but not more than 35 days prior to such
Optional Reset Date and except that a Holder who has tendered a
Note for repayment pursuant to a Reset Notice may, by written
notice to the Paying Agent, revoke any such tender for repayment
until 5:00 p.m. New York City time on the tenth day, whether or
not a Business Day, prior to such Optional Reset Date.
Extendible Notes. If specified on the face hereof, the
interest rate on, or interest rate formula pertaining to, this
Note may be subject to adjustment and this Note may be subject to
repayment at certain times at the option of the Holder or to
redemption at certain times at the option of the Company
("Extendible Notes"). If any such options are applicable to this<PAGE>
Note, the terms and procedures relating thereto will be as set
forth in Exhibit A hereto.
Unless otherwise specified in Exhibit A hereto, the
Extendible Notes will be repayable in whole or in part on the day
immediately following the end of the initial interest period, as
specified in Exhibit A, and on the day immediately following the
end of each Extension Period, at the option of the Holder, at
100% of the principal amount to be repaid, in each case plus
accrued interest, if any, to the repayment date. An "Extension
Period" will be a period of one or more whole calendar periods
(e.g., weeks, months, or years) commencing on the day following
the last day of the initial interest period or any subsequent
Extension Period.
Combination of Provisions. If so specified on the face
hereof, this Note may be subject to all of the provisions, or any
combination of the provisions, described above under "Interest
Rate Reset" and "Extendible Notes".
3. Payments of interest (other than interest payable
at Maturity) will be made by mailing a check to the Holder at the
address of the Holder appearing on the Securities Register on the
applicable Regular Record Date, unless otherwise agreed to by the
Company. The principal amount hereof and any premium and the
interest payable at Maturity will be paid at Maturity against
presentation of this Note at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City
of New York, or as otherwise provided in the Indenture.
4. If specified on the face hereof, this Note may be
redeemed, as a whole or from time to time in part, at the option
of the Company, on not less than 30 nor more than 60 days' prior
notice given as provided in the Indenture, on any Redemption
Date(s) and at the related Redemption Price(s) (expressed as a
percentage of the principal amount hereof) set forth on the face
hereof, together with interest accrued and unpaid hereon to such
Redemption Date. If no such Redemption Date is set forth on the
face hereof, this Note may not be so redeemed prior to the
Maturity Date specified on the face hereof. If fewer than all
the Outstanding Notes of like tenor and terms are to be redeemed,
the particular Notes to be redeemed shall be selected by the
Trustee not more than 60 days prior to the Redemption Date from
the Outstanding Notes of like tenor or terms not previously
called for redemption. Such selection shall be of principal
amounts in increments of $1,000 (provided that any remaining
principal of any Note shall be at least $25,000). Subject to the
immediately preceding sentence, such selection shall be made by
any method as the Trustee deems fair and appropriate. The notice
of such redemption shall specify which Notes are to be redeemed.
In the event of redemption of this Note in part only, a new Note
or Notes of this series of like tenor or terms for the unredeemed
portion hereof will be issued to the Holder hereof upon the
cancellation hereof.<PAGE>
5. If specified on the face hereof, this Note will be
subject to repayment at the option of the Holder hereof on the
Repayment Date(s) and at the related Repayment Price(s)
(expressed as a percentage of the principal amount hereof)
indicated on the face hereof. If no such Repayment Date is set
forth on the face hereof, this Note may not be so repaid prior to
the Maturity Date specified on the face hereof. On each
Repayment Date, if any, this Note shall be repayable in whole or
in part at the option of the Holder hereof at the applicable
Repayment Price set forth on the face hereof, together with
interest accrued and unpaid hereon to such Repayment Date. In
order for this Note to be repaid in whole or in part at the
option of the Holder hereof, the Paying Agent must receive not
less than 30 but not more than 45 days prior to the Repayment
Date (i) the Note with the form entitled "Option to Elect
Repayment" below duly completed or (ii) a telegram, telex,
facsimile transmission or a letter from a member of a national
securities exchange or the National Association of Securities
Dealers, Inc. or a commercial bank or a trust company in the
United States of America setting forth the name of the Holder of
the Note, the principal amount of the Note, the certificate
number of the Note or a description of the Note's tenor or terms,
the principal amount of the Note to be repaid, a statement that
the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid with the form entitled
"Option to Elect Repayment" on the reverse of the Note duly
completed will be received by such Paying Agent no later than
five Business Days after the date of such telegram, telex,
facsimile transmission or letter and such Note and form duly
completed are received by such Paying Agent by such fifth
Business Day. Exercise of such repayment option shall be
irrevocable. Such option may be exercised by the Holder for less
than the entire principal amount provided that the principal
amount remaining outstanding after repayment is an authorized
denomination.
6. If an Event of Default with respect to the Notes
shall occur and be continuing, the principal of all of the Notes
may be declared due and payable in the manner and with the effect
provided in the Indenture. If this is an Original Issue Discount
Note and the principal amount hereof is declared to be due and
payable, the amount of principal due and payable with respect to
this Note shall be limited to the Amortized Face Amount of this
Note as of the date of such declaration. If this Note is an
Original Discount Note that does not bear stated interest, the
"Amortized Face Value" hereof shall be the sum of (i) the
aggregate principal amount of this Note multiplied by the Issue
Price (expressed as a percentage of the aggregate principal
amount) indicated on the face hereof plus (ii) the portion of the
difference between the dollar amount determined pursuant to the
preceding clause (i) and the principal amount of this Note that
has accrued at the Yield to Maturity set forth on the face hereof
(computed in accordance with generally accepted financial
practices in effect on the date of declaration) to such date of
declaration, but in no event shall the Amortized Face Amount of
this Note exceed the principal amount hereof. An Original Issue<PAGE>
Discount Note is a Note, including any Zero-Coupon Note, that has
a stated redemption price at its Maturity Date that exceeds its
Issue Price by at least 0.25% of its principal amount, multiplied
by the number of full years from the Original Issue Date to the
Maturity Date for such Note and any other Note designated by the
Company as issued with original issue discount for United States
federal income tax purposes.
7. The Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the
Holders of the Securities under the Indenture at any time by the
Company with the consent of the Holders of not less than a
majority in principal amount of the Securities at the time
Outstanding of all series to be affected thereby (voting as one
class). The Indenture also contains provisions permitting the
Holders of a majority in principal amount of the Securities of
any series at the time Outstanding, on behalf of the Holders of
all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and past defaults under
the Indenture and their consequences with respect to such series.
In the case of any such waiver, the Holder of this Note shall be
restored to his former position and rights hereunder, such
default shall cease to exist and be deemed to have been cured and
not to have occurred, and any related Event of Default shall be
deemed to have been cured, and not to have occurred for every
purpose of the Indenture; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any
right consequent thereon.
8. No reference herein to the Indenture and no
provision of this Note or of the Indenture shall affect or impair
the obligation of the Company, which is unconditional and
absolute, to pay the principal of and premium, if any, and
interest on this Note at the places, at the times, at the rates,
in the amounts and in the coin or currency as prescribed herein
and in the Indenture.
9. Notes will be issued in denominations of $25,000
and integral multiples of $1,000 in excess thereof.
10. As provided in the Indenture and subject to
certain limitations therein set forth, this Note is transferable
on the Securities Register of the Company, upon surrender of this
Note for registration of transfer at the office or agency of the
Company to be maintained for that purpose in The City of New
York. Every Note presented for registration of transfer shall
(if so required by the Company or the Securities Registrar) be
duly endorsed, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Securities Registrar
duly executed, by the Holder hereof or its attorney duly
authorized in writing, and thereupon one or more new Notes of
like tenor and terms of authorized denominations and for the same
aggregate principal amount will be issued to the designated
transferee or transferees.<PAGE>
The Company shall not be required (i) to issue,
register the transfer of or exchange Notes to be redeemed for a
period of fifteen days preceding the date of the mailing of the
notice of redemption, or (ii) to register the transfer of or to
exchange any such Note or portion thereof selected for
redemption, except the unredeemed portion of any such Note being
redeemed in part.
No service charge shall be made for any such
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Prior to
due presentment of a Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee
may treat the person in whose name a Note is registered as the
owner hereof for all purposes whether or not such Note be overdue
and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
11. Unless otherwise defined herein, all terms used in
this Note which are defined in the Indenture shall have the
meaning assigned to them in the Indenture.
12. The Indenture and this Note shall for all purposes
be governed by, and construed in accordance with, the laws of the
State of Maine, and for all purposes this Indenture shall be
construed in accordance with the laws of said State, except that
the rights and duties of the Trustee shall be governed by the
laws of the State of New York.<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto
______________________________ ____________________________
Please insert social security Please print or typewrite
or other identifying number name and address of assignee
of assignee
_________________________________________________________________
_________________________________________________________________
the within Note of Central Maine Power Company and does hereby
irrevocably constitute and appoint ______________________________
attorney to transfer the said Note on the books of the within-
mentioned Company, with full power of substitution in the
premises.
Dated: _________________ ______________________________
Notice: The signature on this
assignment must correspond
with the name as written upon
the face of the Note in every
particular without alteration
or enlargement or any change
whatsoever.<PAGE>
OPTION TO ELECT REPAYMENT*
The undersigned hereby irrevocably requests and
instructs the Company to repay the within Note (or portion hereof
specified below) pursuant to its terms at a price equal to the
applicable Repayment Price thereof together with interest to the
Repayment Date, to the undersigned at __________________________
________________________________________________________________
Please print or typewrite name and address
of the undersigned
If less than the entire principal amount of the within
Note is to be repaid, specify the portion thereof that the Holder
elects to have repaid _____________________________________ and
specify the denomination or denominations (which shall be in
authorized denominations) of the Notes to be issued to the Holder
for the portion of the within Note not being repaid (in the
absence of any such specification, one such Note will be issued
for the portion not being repaid): ____________________________.
Date: ______________________ _____________________________
Signature
* Note: This option is not available to a holder unless this
Note contains an express provision granting to the
holder hereof an option to elect repayment.<PAGE>
Exhibit 4.24
CENTRAL MAINE POWER COMPANY
TO
THE FIRST NATIONAL BANK OF BOSTON, TRUSTEE
SUPPLEMENTAL INDENTURE
Dated as of April 12, 1994
TO
GENERAL AND REFUNDING MORTGAGE INDENTURE
Dated as of April 15, 1976, as amended
$25,000,000
GENERAL AND REFUNDING MORTGAGE BONDS
SERIES U 7.54% (ADJUSTABLE RATE) DUE 1998<PAGE>
CENTRAL MAINE POWER COMPANY
SUPPLEMENTAL INDENTURE
Dated as of April 12, 1994
TABLE OF CONTENTS
Parties . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . 1
Consideration and Purpose . . . . . . . . . . . . . . 2
Granting Clauses . . . . . . . . . . . . . . . . . . 3
Exceptions . . . . . . . . . . . . . . . . . . . . . 3
Habendum . . . . . . . . . . . . . . . . . . . . . . 4
Grant in Trust . . . . . . . . . . . . . . . . . . . 4
Defeasance . . . . . . . . . . . . . . . . . . . . . 4
General Covenant . . . . . . . . . . . . . . . . . . 4
ARTICLE I
SERIES U BONDS
Section 1.01. Title and Terms of Series U Bonds . . 5
Section 1.02. Redemption of Series U Bonds . . . . . 7
ARTICLE II
MISCELLANEOUS PROVISIONS
Section 2.01. This Instrument Supplemental to
the Indenture . . . . . . . . . . . 10
Section 2.02. Rights and Powers of the Trustee . . . 10
Section 2.03. No Liability for Recitals . . . . . . 11
Section 2.04. Effect of Table of Contents
and Headings . . . . . . . . . . . . 11
Section 2.05. Trust Indenture Act to Control . . . . 11
Section 2.06. Counterparts . . . . . . . . . . . . . 11
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . 12
ACKNOWLEDGMENTS
EXHIBIT A - FORM OF SERIES U BOND
1 Not part of Supplemental Indenture.<PAGE>
THIS SUPPLEMENTAL INDENTURE, dated as of
April 12, 1994, is between CENTRAL MAINE POWER COMPANY, a Maine
corporation, with its principal office at 83 Edison Drive,
Augusta, Maine 04336 (hereinafter generally referred to as the
Company), and THE FIRST NATIONAL BANK OF BOSTON, a national
banking association, with its principal office at 100 Federal
Street, Boston, Massachusetts 02110, as trustee under the General
and Refunding Mortgage Indenture referred to in the first recital
hereof (hereinafter generally referred to as the Trustee).
WHEREAS, the Company has heretofore duly executed and
delivered to the Trustee its General and Refunding Mortgage
Indenture dated as of April 15, 1976 and Supplemental Indentures
thereto dated respectively as of March 15, 1977, May 20, 1977,
March 15, 1978, October 1, 1978, March 15, 1979, October 1, 1979,
March 15, 1980, March 15, 1981, April 15, 1981, September 17,
1981, November 15, 1981, March 15, 1982, March 15, 1983,
April 15, 1983, March 15, 1984, September 1, 1984, March 15,
1985, March 15, 1986, April 15, 1986, October 15, 1986,
December 1, 1986, March 15, 1987, November 15, 1987, January 15,
1988, April 15, 1988, November 15, 1988, April 15, 1989,
April 15, 1990, December 10, 1990, April 15, 1991, September 15,
1991, December 1, 1991, April 15, 1992, December 15, 1992,
February 15, 1993, April 15, 1993, May 20, 1993, August 15, 1993
and November 1, 1993 (said General and Refunding Mortgage
Indenture being hereinafter generally referred to as the Original
Indenture, and the Original Indenture together with all
indentures stated to be supplemental thereto, including this
Supplemental Indenture, being hereinafter generally referred to
as the Indenture), to which this instrument is supplemental,
whereby all the properties of the Company, whether then owned or
thereafter acquired, with certain reservations, exceptions and
exclusions fully set forth in the Indenture, were given, granted,
bargained, sold, transferred, assigned, pledged, mortgaged,
warranted, conveyed and confirmed to the Trustee, its successors
and assigns, in trust upon the terms and conditions set forth
therein, to secure bonds of the Company issued and to be issued
thereunder, and for other purposes more particularly specified
therein; and
WHEREAS, the Company has issued, and there are
outstanding under the Indenture, $22,500,000 in aggregate
principal amount of General and Refunding Mortgage Bonds,
Series N 8.50% Due 2001, $50,000,000 in aggregate principal
amount of General and Refunding Mortgage Bonds, Series O 7 3/8%
Due 1999, $75,000,000 in aggregate principal amount of General
and Refunding Mortgage Bonds, Series P 7.66% Due 2000,
$75,000,000 in aggregate principal amount of General and
Refunding Mortgage Bonds, Series Q 7.05% Due 2008, $50,000,000 in
aggregate principal amount of General and Refunding Mortgage
Bonds, Series R 7 7/8% Due 2023, $60,000,000 in aggregate
principal amount of General and Refunding Mortgage Bonds, Series
S 6.03% Due 1998 and $75,000,000 in aggregate principal amount of
General and Refunding Mortgage Bonds, Series T 6.25% Due 1998;
and<PAGE>
WHEREAS, in Section 6.11 of the Indenture the Company
has covenanted to execute and deliver such further instruments
and do such further acts as may be necessary or proper to carry
out more effectually the purposes of the Indenture, especially to
make subject to the lien thereof any property agreed to be
subjected thereto, or intended so to be; and
WHEREAS, pursuant to Section 17.01 of the Indenture the
Company and the Trustee, from time to time and at any time, may
enter into one or more indentures supplemental to the Indenture
for specified purposes, among them (a) to assign, convey,
mortgage, pledge, transfer and set over further property unto the
Trustee and (b) to provide the terms and conditions of any series
of bonds other than the Series A Bonds, including, without
limitation, terms and conditions contemplated by Section 2.03 of
the Indenture; and
WHEREAS, for its lawful corporate purposes, the Company
by appropriate and sufficient corporate action in conformity with
the provisions of the Indenture has duly authorized the creation
of a twenty-first series of its bonds to be issued under the
Indenture, to be known as "General and Refunding Mortgage Bonds,
Series U 7.54% (Adjustable Rate) Due 1998" (hereinafter generally
referred to as the Series U Bonds or the bonds of Series U); and
WHEREAS, the execution and delivery of this
Supplemental Indenture and the issue and sale of not exceeding
twenty-five million dollars ($25,000,000) in aggregate principal
amount of the Series U Bonds and other necessary actions have
been duly authorized by the Board of Directors of the Company and
have been duly approved to the extent required by law by the
appropriate governmental authorities; and
WHEREAS, all acts and things necessary to make this
Supplemental Indenture when executed and delivered by the Company
and the Trustee, and the Series U Bonds, when executed and
delivered by the Company and authenticated by the Trustee, or by
an authenticating agent on its behalf, and issued as in the
Indenture provided, the valid, binding and legal obligations of
the Company, and to constitute the Indenture a valid mortgage and
deed of trust to secure the payment of the principal of, premium,
if any, and interest on all bonds issued thereunder, have been
done and performed.
NOW, THEREFORE, in consideration of the premises, and
of the acceptance and purchase of the bonds by the holders
thereof and of the sum of one dollar ($1.00) duly paid by the
Trustee to the Company, and of other good and valuable
consideration, the receipt whereof is hereby acknowledged, and in
confirmation of and supplementing the Indenture, and in order to
establish the form and characteristics of the Series U Bonds, and
for the purpose of securing the due and punctual payment of the
principal of and premium, if any, and interest on all bonds
issued and to be issued under the Indenture, and for the purpose<PAGE>
of securing the faithful performance and observance of all
covenants and conditions in the Indenture and in the bonds set
forth, the Company has executed and delivered this instrument and
by these presents does give, grant, bargain, sell, transfer,
assign, pledge, mortgage, warrant, convey and confirm unto the
Trustee, as herein provided, and its successor or successors in
the trust created by the Indenture, and to its or their assigns,
forever, all and singular the plants, rights, permits,
franchises, easements and property, real, personal and mixed, now
owned or hereafter acquired by the Company, together with the
rents, issues and profits thereof, in all cases not specifically
reserved, excepted and excluded, and whether now owned or
hereafter acquired by the Company.
AND TOGETHER WITH, all and singular, the now-existing
and hereafter-acquired rights, privileges, tenements,
hereditaments and appurtenances belonging to or in any wise
appertaining in and to the aforesaid property or any part
thereof, with all reversion and reversions, remainder and
remainders and, subject to the provisions of Article X of the
Indenture, all rents, revenues, earnings, interest, dividends,
royalties, issues, income and profits thereof, and all the
estate, right, title, interest and claims whatsoever, at law as
well as in equity, which the Company now has or may hereafter
acquire, in and to all and every part of the foregoing, it being
the intention to include herein and to subject to the lien of the
Indenture all land, interests in land, real estate, physical
assets, other property and interests in property and franchises,
whether now owned by the Company or which it may hereafter
acquire and wherever situated, as if the same were now owned by
the Company and were specifically described and conveyed hereby,
except as hereinafter specified.
SUBJECT, HOWEVER, (a) to Permitted Liens; and (b) as to
the properties specifically described or referred to in the
Indenture or any schedule thereto, to the liens, charges,
encumbrances, reservations, exceptions, exclusions, restrictions,
conditions, limitations, covenants and interests, if any,
described or referred to in the Indenture or any such schedule,
or in any instrument referred to in the Indenture or any such
schedule.
AND SUBJECT FURTHER, as to all hereafter-acquired
property, to all defects and limitations of title and to all
other liens, charges, encumbrances, reservations, exceptions,
exclusions, restrictions, conditions, limitations, covenants and
interests existing at the time of such acquisition including,
without limitation, the lien of any Underlying Mortgage on
substitutions, replacements, additions, betterments, extensions
and enlargements of the property subject to the lien of such
Underlying Mortgage.
BUT EXPRESSLY RESERVING, EXCEPTING AND EXCLUDING the
properties and interests of the Company (a) expressly reserved,<PAGE>
excepted and excluded by the Indenture or (b) released by the
Trustee or sold or disposed of as permitted by the provisions of
the Indenture.
TO HAVE AND TO HOLD all said plants, rights, permits,
franchises, easements and property hereby conveyed, assigned,
pledged or mortgaged, or intended so to be, unto the Trustee, its
successor or successors in trust, and to its and their assigns
forever.
BUT IN TRUST, NEVERTHELESS, for the equal pro rata
benefit, security and protection of the holders from time to time
of all bonds (and their appurtenant coupons, if any) outstanding
under the Indenture, without any priority of any one bond or
coupon over any other (except as provided in Sections 6.02 and
8.04 of the Indenture and except as any sinking, purchase,
amortization, improvement or other fund established in accordance
therewith may afford additional or special security for the bonds
of any particular series, and except independent security as
provided in Section 2.03 of the Indenture), and upon the trusts
and subject to the conditions therein set forth.
PROVIDED, HOWEVER, and these presents are upon the
condition, that if the Company shall pay or cause to be paid or
make appropriate provisions for the payment unto the holders of
the outstanding bonds and any appurtenant coupons of the
principal, premium, if any, and interest to become due thereon at
the times and in the manner stipulated therein and herein and
shall pay or cause to be paid all other sums payable hereunder by
the Company, then this Supplemental Indenture and the estate and
rights hereby granted shall, pursuant to the provisions of
Article XIII of the Indenture, cease, determine and be void, but
only if the Indenture shall have ceased, determined and become
void, as therein provided, otherwise to be and remain in full
force and effect.
AND IT IS HEREBY COVENANTED, DECLARED AND AGREED, upon
the trusts and for the purposes aforesaid, as follows:
ARTICLE I
SERIES U BONDS
SECTION 1.01. Title and Terms of Series U Bonds.
There shall be a series of bonds designated "General and
Refunding Mortgage Bonds, Series U 7.54% (Adjustable Rate) Due
1998" (hereinafter sometimes called the "Series U Bonds" or the
"bonds of Series U"). The Series U Bonds shall be limited in
aggregate principal amount to twenty-five million dollars
($25,000,000), shall be issuable only as fully registered bonds
without coupons and shall be issued substantially in the form set
forth in Exhibit A hereto. The Series U Bonds shall be issued
pursuant to Section 5.02 of the Indenture, shall mature on April<PAGE>
15, 1998, and may be issued at one or more closings in
denominations of one thousand dollars ($1,000) and any multiple
thereof.
The Series U Bonds shall bear interest (computed on the
basis of a 360-day year of twelve 30-day months), until payment
of the principal thereof has been made or duly provided for, at a
rate per annum equal to (a) at any time prior to the Adjustment
Date, 7.54% (the "Initial Rate") and (b) on and after the
Adjustment Date, 8.04% (the "Adjusted Rate"). Such interest
shall be payable semi-annually on April 15 and October 15 in each
year, commencing October 15, 1994, and, on any overdue principal
or (to the extent legally enforceable) any overdue installment of
interest, (i) at any time the Initial Rate is in effect, at a
rate per annum from time to time equal to the greater of
(x) 8.54% and (y) the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York from time to time in
New York as its Prime Rate; provided, however, that in no event
shall such rate on any overdue principal or installment of
interest exceed 9% and (ii) at any time the Adjusted Rate is in
effect, at 9% per annum.
"Adjustment Date" shall mean the date on which an
Adjustment Event occurs.
"Adjustment Event" shall mean the public announcement
of a rating on the Company's bonds outstanding under the
Indenture, immediately after which such bonds are rated both (i)
below Baa3 by Moody's Investors Service, Inc. or its successor
and (ii) below BBB- by Standard & Poor's Rating Group or its
successor.
Each bond of Series U shall be dated the date of its
authentication, and interest shall be payable on the principal
represented thereby from the interest payment date next preceding
the date thereof to which interest has been paid, unless the date
thereof is an interest payment date to which interest has been
paid, in which case such interest shall be payable from such
date, or unless the date thereof is prior to the first interest
payment date, in which case such interest shall be payable from
the date any Bonds of Series U were first issued.
Interest on any Series U Bond shall be paid to the
person in whose name such bond (or notwithstanding the
cancellation thereof, the bond in exchange or substitution for
which such bond shall have been issued) is registered at the
close of business on the applicable record date; provided,
however, that if the Company shall default in the payment of the
interest due on any interest payment date on the principal
represented by any Series U Bond, such defaulted interest shall
be paid to the person in whose name such bond (or any bond issued
upon registration of transfer or exchange thereof) is registered
on a subsequent record date established by notice given by mail
by or on behalf of the Company to the holders of Series U Bonds<PAGE>
not less than ten (10) days preceding such subsequent record
date. The term "record date" shall mean, with respect to any
semi-annual interest payment date for the Series U Bonds, the
close of business on the first day of April or the first day of
October, as the case may be, next preceding such interest payment
date, or with respect to any payment of defaulted interest, the
close of business on any subsequent record date established as
provided above which shall be at least five (5) business days
prior to the payment date for such defaulted interest.
At the option of the Company, interest on the Series U
Bonds may be paid by check payable to the order of and mailed to
the address of the person entitled thereto as the name and
address of such person shall appear on the bond register
maintained pursuant to Section 2.08 of the Indenture. The
principal of and the premium, if any, and interest on the Series
U Bonds shall be payable in any coin or currency of the United
States of America which, at the time of payment, is legal tender
for the payment of public and private debts, at the principal
corporate trust office of the Trustee in the City of Boston,
Massachusetts, or at the principal corporate trust office of its
successor as Trustee, or, at the option of the holder, (a) at the
principal corporate trust office of the Company's paying agent in
the Borough of Manhattan, City and State of New York, or (b) at
any other office or agency designated by the Company for the
purpose.
Notwithstanding any provision to the contrary in the
bonds of Series U or in the Indenture, including without
limitation any provision to the contrary in Section 8.04 of the
Indenture, Section 5.1 of the Bond Purchase Agreement dated as of
April 15, 1994 pursuant to which the bonds of Series U were
initially issued (hereinafter generally referred to as the Bond
Purchase Agreement) shall govern payments with respect to the
bonds of Series U to the bondholders referred to in said Section.
The Trustee hereby consents to the method of payment described in
the aforesaid Section 5.1. The Trustee also consents to the
provisions of Section 6.3 of said Bond Purchase Agreement and
agrees that if any lost, destroyed, stolen or mutilated bond of
Series U was held by the original holder or an Institutional
Investor, as defined in the Bond Purchase Agreement
("Institutional Investor") of financial responsibility reasonably
satisfactory to the Company, or any nominee for any such original
holder or such Institutional Investor, (a) an agreement of
indemnity reasonably satisfactory to the Company from such
original holder or such Institutional Investor shall constitute
indemnity satisfactory to the Trustee for purposes of Section
2.10 of the Indenture and (b) the Trustee will look only to the
Company for reimbursement of its expenses incurred in connection
with such replacement.
SECTION 1.02. Redemption of Series U Bonds. Section
10.09 of the Indenture provides that certain money held by the<PAGE>
Trustee must, under certain circumstances, be applied by the
Trustee
"to the payment of the principal of outstand-
ing bonds of one or more series, either at
maturity or upon redemption, or to the purch-
ase of outstanding bonds of one or more
series upon tender or in the open market or
at private sales or upon any exchange, or in
any one or more of said ways, as the Company
shall determine, upon receipt by the Trustee
of a resolution of the Board directing the
application pursuant to this Section of
specified moneys, designating an amount of
outstanding bonds to be so paid or purchased
or redeemed and the redemption price, if any,
and, in case such moneys are to be applied to
the purchase of bonds, prescribing the method
of purchase, the price or prices to be paid,
and the maximum principal amount of bonds to
be purchased, and upon deposit with the
Trustee of cash equal to the amount of the
accrued interest and the premium, if any,
required to be paid in connection with any
such redemption or purchase, which cash shall
be held by the Trustee in trust for such
purpose."
Notwithstanding the foregoing, the Company agrees that it will
not designate any bonds of Series U to be redeemed pursuant to
the aforesaid Section 10.09 or any other provision of the
Indenture prior to maturity, except as permitted by the next
succeeding paragraph and except that this provision does not
affect the terms of Section 10.05 of the Indenture which provides
generally that, in the event of any taking, purchase, sale or
conveyance, specified in such Section, of all or substantially
all of the mortgaged and pledged property, the Trustee is
required to declare all of the bonds outstanding under the
Indenture to be forthwith due and payable. Upon any such
declaration, the Series U Bonds shall become and be forthwith due
and payable at a redemption price equal to the principal amount
of the Series U Bonds, without premium, but together with accrued
interest on the principal amount of Series U Bonds being
accelerated.
The Series U Bonds may be redeemed prior to maturity,
at the option of the Company, in whole at any time or in part
from time to time in amounts of at least $1,000,000 (in multiples
of $100,000) in all circumstances other than any redemption
pursuant to Section 10.05 of the Indenture, at a redemption price
equal to the greater of (a) 100% of the principal amount of the
Series U Bonds being redeemed and (b) the Make-Whole Amount, in
each case plus interest accrued thereon to the date fixed for
redemption.<PAGE>
"Make-Whole Amount" shall mean, with respect to any
Series U Bond, an amount equal to the Discounted Value of the
Called Principal of such bond.
"Business Day" shall mean any day other than a
Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed.
"Called Principal" shall mean, with respect to any bond
of Series U, the principal of such bond that is to be redeemed.
"Discounted Value" shall mean, with respect to the
Called Principal of any bond of Series U, the amount obtained by
discounting all Remaining Scheduled Payments with respect to such
Called Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount
factor (applied on a semiannual basis) equal to the Reinvestment
Yield with respect to such Called Principal.
"Reinvestment Yield" shall mean, with respect to the
Called Principal of any Series U Bond, the yield to maturity
implied by (i) the yields reported, as of 10:00 a.m. (New York
City time) on the fifth Business Day next preceding the
Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such
other display as may replace Page 678 on the Telerate Service)
for actively traded U.S. Treasury securities having a maturity
equal to the maturity of such Called Principal as of such
Settlement Date, or if such yields shall not be reported as of
such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields shall have
been so reported as of the fifth Business Day next preceding the
Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the maturity of
such Called Principal as of such Settlement Date. Such implied
yield shall be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance
with accepted financial practice and (b) interpolating linearly
between reported yields.
"Remaining Scheduled Payments" shall mean, with respect
to the Called Principal of any Series U Bond, all payments of
such Called Principal and interest thereon that would be due on
or after the Settlement Date with respect to such Called
Principal if no payments of such Called Principal were made prior
to their scheduled due dates.
"Settlement Date" shall mean, with respect to the
Called Principal of any Series U Bonds, the date on which such
Called Principal is to be redeemed.<PAGE>
In the case of any redemption of bonds of Series U for
which the applicable redemption price will be determined prior to
the date fixed for redemption but subsequent to the date of the
giving of such notice, the notice of such redemption shall
sufficiently specify the applicable redemption price if it shall
state that such redemption price will be calculated as set forth
in the bonds of Series U. The Company, on or prior to the date
fixed for redemption, will deliver or cause to be delivered to
each holder of a bond of Series U called for redemption a written
statement showing the calculation of the redemption price, which
statement shall be accompanied by a certification verifying the
accuracy of the calculations from The Prudential Insurance
Company of America (or any corporate affiliate thereof) as long
as The Prudential Insurance Company of America (or any corporate
affiliate thereof) holds any bond of Series U. Otherwise, said
certification verifying the accuracy of the calculations shall be
prepared by an investment banking firm of national reputation to
be designated by the Company and approved in writing by holders
of at least 25% in principal amount of the bonds of Series U then
outstanding.
Section 9.7 of the Bond Purchase Agreement is a
bondholders' redemption agreement (within the meaning of Section
8.02 of the Indenture) with respect to the Series U Bonds,
satisfactory to and a copy of which is on file with the Trustee,
that provides for the method that shall be followed by the
Trustee in selecting bonds or parts of bonds for redemption in
the event such redemption is a redemption of a part only of the
Series U Bonds. The Series U Bonds provide that, by acceptance
thereof, the holders thereof are deemed to have executed, and are
bound by the terms of, the Bond Purchase Agreement. Section 9.7
thereof provides that the principal amount of any partial
redemption of the Series U Bonds shall be allocated, in units of
$1,000 or integral multiples thereof, among the holders of the
Series U Bonds at the time outstanding, in proportion, as nearly
as practicable, to the respective unpaid principal amount of the
Series U Bonds held thereby, with adjustments, to the extent
practicable, to equalize for any prior redemption not made in
exactly such proportion.
On any redemption of Series U Bonds, the Trustee, in
the name and on behalf of the Company, shall mail, by first class
postage prepaid, a notice of redemption to each registered holder
of a bond to be redeemed (in whole or in part) at the last
address of such holder appearing on the bond register. Such
notice shall be mailed not less than thirty (30) days prior to
the date fixed for redemption and shall conform (subject to the
second preceding paragraph hereof) to the requirements of Section
8.02 of the Indenture.<PAGE>
ARTICLE II
MISCELLANEOUS PROVISIONS
SECTION 2.01. This Instrument Supplemental to the
Indenture. This instrument is expressly made supplemental to the
Original Indenture as heretofore supplemented, and the
conveyances hereby made are subject to all of the conditions,
covenants and warranties in the Indenture contained, and the use
of terms and expressions herein is in accordance with the
definitions and constructions contained in the Indenture. This
Supplemental Indenture shall become void when the Indenture shall
become void.
SECTION 2.02. Rights and Powers of the Trustee. The
Trustee shall be entitled to, may exercise and shall be protected
by, all the rights, powers, privileges, immunities and exemptions
and shall be subject to the duties and liabilities of the Trustee
provided in the Indenture where and to the full extent that the
same are applicable. The remedies and provisions of the
Indenture applicable in case of any default by the Company
thereunder are hereby adopted and made applicable in case of any
such default with respect to the properties included herein.
Without limiting the generality of the foregoing, there are
hereby conferred upon the Trustee the same powers of sale and
other powers over the properties conveyed hereby as are by the
Indenture expressed to be conferred.
SECTION 2.03. No Liability for Recitals. The recitals
in this Supplemental Indenture shall be taken as recitals by the
Company alone, and shall not be considered as made by or as
imposing any obligation or liability upon the Trustee, nor shall
the Trustee be held responsible for the legality or validity of
this Supplemental Indenture, and the Trustee makes no covenants
or representations, and shall not be responsible as to and for
the effect, authorization, execution, delivery or recording of
this Supplemental Indenture, except as expressly set forth in the
Indenture.
SECTION 2.04. Effect of Table of Contents and
Headings. The Table of Contents and headings of the different
Articles and Sections of this Supplemental Indenture are inserted
for convenience of reference, and are not to be taken to be any
part of those provisions, or to control or affect the meaning,
construction or effect of the same.
SECTION 2.05. Trust Indenture Act to Control. If any
provision of this Supplemental Indenture limits, qualifies or
conflicts with the duties imposed by any of Sections 310 to 317,<PAGE>
inclusive, of the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990, through operation of Section
318(c), such imposed duties shall control.
SECTION 2.06. Counterparts. This Supplemental
Indenture may be simultaneously executed in any number of
counterparts and on separate counterparts, each of which shall be
deemed an original; and all said counterparts executed and
delivered, each as an original, shall constitute but one and the
same instrument, which shall for all purposes be sufficiently
evidenced by any such original counterpart.<PAGE>
IN WITNESS WHEREOF, CENTRAL MAINE POWER COMPANY has
caused this instrument to be executed in its name and behalf by
its Treasurer, thereto duly authorized, and its corporate seal to
be hereto affixed and attested by its Secretary, and THE FIRST
NATIONAL BANK OF BOSTON has caused this instrument to be duly
executed in its name and behalf by its Authorized Officer,
thereto duly authorized, and its corporate seal to be hereto
affixed, all as of the day and year first above written.
CENTRAL MAINE POWER COMPANY
By: s/Douglas Stevenson
Douglas Stevenson
Treasurer
[CORPORATE SEAL]
ATTEST:
s/William M. Finn
Secretary
Signed, sealed and
delivered on behalf of
Central Maine Power
Company in the presence of:
s/Brenda L. Robbins
THE FIRST NATIONAL BANK OF
BOSTON, TRUSTEE
[CORPORATE SEAL] By s/Eric J. Donaghey
Eric J. Donaghey
Account Manager
Signed, sealed and
delivered on behalf of The
First National Bank of
Boston in the presence of:
s/Karen Itz <PAGE>
STATE OF MAINE )
) ss.:
KENNEBEC, )
At Augusta, on this 13th day of April, 1994, before me,
a Notary Public in and for the County of Kennebec and State of
Maine, personally appeared Douglas Stevenson, Treasurer, of
Central Maine Power Company, to me personally known, who executed
the foregoing instrument on behalf of said corporation, and
acknowledged the same to be his free act and deed in such
capacity and the free act and deed of Central Maine Power
Company.
(NOTARIAL SEAL)
s/Alice D. Richards
My Commission Expires:
January 4, 1997
COMMONWEALTH OF MASSACHUSETTS )
) ss.:
SUFFOLK, )
At Boston, on this 12th day of April, 1994, before me,
a Notary Public in and for the County of Suffolk and Commonwealth
of Massachusetts, personally appeared Eric J. Donaghey, an
Authorized Officer of The First National Bank of Boston, to me
personally known, who executed the foregoing instrument on behalf
of said national banking association and acknowledged the same to
be the free act and deed of such Authorized Officer in such
capacity and the free act and deed of The First National Bank of
Boston.
(NOTARIAL SEAL)
s/Bernadette L. May
My Commission Expires:
October 31, 1997 <PAGE>
EXHIBIT A
(FORM OF SERIES U BOND)
(1933 Act Legend)
No. UR __________
CENTRAL MAINE POWER COMPANY
General and Refunding Mortgage Bond, Series U 7.54%
(Adjustable Rate) Due 1998
Central Maine Power Company, a Maine corporation
(hereinafter called the Company), for value received, hereby
promises to pay to
or registered assigns, the principal sum of
dollars ($ ) at the principal corporate trust
office of The First National Bank of Boston (hereinafter called
the Trustee, which term shall include its successors in the
trusts hereinafter referred to) in the City of Boston,
Commonwealth of Massachusetts (or at the principal corporate
trust office of its then successor Trustee) or, at the option of
the registered owner hereof, at the principal corporate trust
office of any designated paying agent in the Borough of
Manhattan, City and State of New York, on April 15, 1998 and to
pay interest (computed on the basis of a 360-day year of twelve
30-day months) thereon from the April 15 or October 15, as the
case may be, next preceding the date hereof to which interest has
been paid on this bond, or from the date hereof if such date be
either of said dates, or, in the case of interest payable on
October 15, 1994, from the date any bonds of Series U were first
issued, at a rate per annum equal to (a) at any time prior to the
Adjustment Date, 7.54% (the "Initial Rate") and (b) on and after
the Adjustment Date, 8.04% (the "Adjusted Rate") and, on any
overdue principal or (to the extent legally enforceable) any
overdue installment of interest, (i) at any time the Initial Rate
is in effect, at a rate per annum from time to time equal to the
greater of (x) 8.54% and (y) the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York from time
to time in New York as its Prime Rate; provided, however, that in
no event shall such rate on any overdue principal or installment
of interest exceed 9% and (ii) at any time the Adjusted Rate is
in effect, at 9% per annum.
"Adjustment Date" shall mean the date on which an
Adjustment Event occurs.
"Adjustment Event" shall mean the public announcement
of a rating on the Company's bonds outstanding under the
Indenture, immediately after which such bonds are rated both (i)
below Baa3 by Moody's Investors Services, Inc. or its successor
and (ii) below BBB- by Standard & Poor's Rating Group or its
successor.<PAGE>
Such interest shall be payable on April 15 and October
15 in each year, commencing October 15, 1994, at the principal
corporate trust office of the Trustee or, at the option of the
registered owner hereof, at the principal corporate trust office
of any such paying agent, until the principal hereof shall have
been paid or duly provided for in full; such interest payable on
any April 15 or October 15 shall (subject to certain exceptions
provided in the Indenture referred to in the next paragraph
hereof) be paid to the person in whose name this bond, or the
bond in exchange or substitution for which this bond shall have
been issued, shall have been registered at the close of business
on the April 1 or October 1, as the case may be, next preceding
such April 15 or October 15. At the option of the Company, such
interest may be paid by check payable to the order of and mailed
to the address of the person entitled thereto as the name and
address of such person shall appear on the bond register
maintained pursuant to the Indenture. Principal and premium, if
any, and interest shall be paid in any coin or currency of the
United States of America which, at the time of payment, is legal
tender for public and private debts. Notwithstanding any
provision to the contrary in this bond or in the Indenture
referred to in the next paragraph hereof, Section 5.1 of the Bond
Purchase Agreement dated as of April 15, 1994 pursuant to which
the bonds of Series U were initially issued (hereinafter called
the Bond Purchase Agreement) shall govern payments with respect
to the bonds of Series U to the bondholders referred to in said
Section 5.1, and Section 6.3 of said Bond Purchase Agreement
shall govern the replacement of bonds of Series U to the extent
set forth in said Section 6.3. A conformed counterpart of said
Bond Purchase Agreement is on file at the principal corporate
trust office of the Trustee.
This bond is one of a duly authorized issue of General
and Refunding Mortgage Bonds of the Company, the aggregate
principal amount of which is not limited except as such may be
limited by law, to be issued in series with distinctive
designations, the series of which this bond is one, designated as
Series U, being limited to an aggregate principal amount of
twenty-five million dollars ($25,000,000), all bonds of all
series, including the bonds of Series U, to be issued under and
secured by a certain General and Refunding Mortgage Indenture
dated as of April 15, 1976 by and between the Company and The
First National Bank of Boston, as Trustee (said General and
Refunding Mortgage Indenture being hereinafter generally referred
to as the Original Indenture, and the Original Indenture together
with all indentures stated to be supplemental thereto, including
specifically the Supplemental Indenture dated as of April 12,
1994, being hereinafter generally referred to as the Indenture),
to which reference is hereby made for a description of the
mortgaged and pledged property, the nature and extent of the
security and benefit thereof, the terms and conditions under
which the bonds may be issued and secured, the rights and
remedies under the Indenture of the bondholders and the rights
and obligations under the Indenture of the Company and the
Trustee. An executed counterpart of the Original Indenture and
of each of the indentures supplemental thereto is on file at the
principal corporate trust office of the Trustee.<PAGE>
As stated therein, the Indenture may in certain
respects be modified without the consent of the bondholders and
may, with the consent of holders of not less than sixty-six and
two-thirds percent (66 2/3%) in principal amount of the bonds of
all series then issued and outstanding, be modified in certain
other respects in each case upon the conditions and in the manner
provided in the Indenture, but, among other restrictions, no such
modification shall affect or impair the obligation of the Company
in respect of the principal of and premium, if any, and interest
on this bond.
In the event of certain defaults, the principal of this
bond may be declared or may become due and payable prior to
maturity in the manner and with the effect provided in the
Indenture.
No reference herein to the Indenture and no provision
of this bond or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and premium, if any, and interest on this
bond as herein provided.
Upon compliance with the conditions prescribed in the
Indenture and in the Bond Purchase Agreement and upon surrender
of this bond, accompanied by a written instrument of assignment
in form satisfactory to the Trustee and duly executed by the
registered owner in person or by duly authorized attorney, at the
principal corporate trust office of the Trustee, in the City of
Boston, Commonwealth of Massachusetts, or at the office or agency
to be maintained for the purpose by the Company in the Borough of
Manhattan, City and State of New York, this bond is transferable
on the bond register and thereupon a new bond or bonds of the
same series and for a like aggregate principal amount of
authorized denominations will be issued in the name of the
transferee.
The Company, the Trustee, any authenticating agent, any
paying agent and any registrar may deem and treat the registered
holder hereof as the absolute owner of this bond (whether or not
this bond shall be overdue and notwithstanding any notice of
ownership or writing hereon made by anyone other than the Company
or any registrar), for the purpose of receiving payment hereof or
on account hereof or interest or any premium hereon, (subject to
certain provisions provided in the Indenture) and for all other
purposes, and neither the Company, the Trustee, any
authenticating agent, any paying agent nor any registrar shall be
affected by any notice to the contrary.
The bonds of Series U consist of fully registered bonds
without coupons in the denominations of one thousand dollars
($1,000) and multiples thereof. This bond, singly or with other
bonds of the same series and registered in the same name, may be
exchanged for one or more bonds of the same series and for a like
aggregate principal amount in authorized denominations. All<PAGE>
bonds to be so exchanged shall be surrendered at the principal
corporate trust office of the Trustee, or at the office or agency
to be maintained for the purpose by the Company in the Borough of
Manhattan, City and State of New York, and, if required by the
Trustee, accompanied by written instruments of assignment in form
satisfactory to the Trustee and duly executed by the registered
owner in person or by duly authorized attorney.
The Company agrees that it will not designate any
Series U Bonds to be redeemed pursuant to any provision of the
Indenture prior to maturity, except as permitted by the next
succeeding paragraph and except that this provision does not
affect the terms of Section 10.05 of the Indenture which provides
generally that, in the event of any taking, purchase, sale or
conveyance, specified in such Section, of all or substantially
all of the mortgaged and pledged property, the Trustee is
required to declare all of the bonds outstanding under the
Indenture to be forthwith due and payable. Upon any such
declaration, the Series U Bonds shall become and be forthwith due
and payable at a redemption price equal to the principal amount
of the Series U Bonds, without premium, but together with accrued
interest on the principal amount of Series U Bonds being
accelerated.
The Series U Bonds may be redeemed prior to maturity,
at the option of the Company, in whole at any time or in part
from time to time in amounts of at least $1,000,000 (in multiples
of $100,000) in all circumstances other than any redemption
pursuant to Section 10.05 of the Indenture, at a redemption price
equal to the greater of (a) 100% of the principal amount of the
Series U Bonds being redeemed and (b) the Make-Whole Amount, in
each case plus interest accrued thereon to the date fixed for
redemption.
"Make-Whole Amount" shall mean, with respect to any
Series U Bond, an amount equal to the Discounted Value of the
Called Principal of such bond.
"Business Day" shall mean any day other than a
Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed.
"Called Principal" shall mean, with respect to any bond
of Series U, the principal of such bond that is to be redeemed.
"Discounted Value" shall mean, with respect to the
Called Principal of any bond of Series U, the amount obtained by
discounting all Remaining Scheduled Payments with respect to such
Called Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount
factor (applied on a semiannual basis) equal to the Reinvestment
Yield with respect to such Called Principal.<PAGE>
"Reinvestment Yield" shall mean, with respect to the
Called Principal of any Series U Bond, the yield to maturity
implied by (i) the yields reported, as of 10:00 a.m. (New York
City time) on the fifth Business Day next preceding the
Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such
other display as may replace Page 678 on the Telerate Service)
for actively traded U.S. Treasury securities having a maturity
equal to the maturity of such Called Principal as of such
Settlement Date, or if such yields shall not be reported as of
such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields shall have
been so reported as of the fifth Business Day next preceding the
Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the maturity of
such Called Principal as of such Settlement Date. Such implied
yield shall be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance
with accepted financial practice and (b) interpolating linearly
between reported yields.
"Remaining Scheduled Payments" shall mean, with respect
to the Called Principal of any Series U Bond, all payments of
such Called Principal and interest thereon that would be due on
or after the Settlement Date with respect to such Called
Principal if no payments of such Called Principal were made prior
to their scheduled due dates.
"Settlement Date" shall mean, with respect to the
Called Principal of any Series U Bonds, the date on which such
Called Principal is to be redeemed.
In the case of any redemption of bonds of Series U for
which the applicable redemption price will be determined prior to
the date fixed for redemption but subsequent to the date of the
giving of such notice, the notice of such redemption shall
sufficiently specify the applicable redemption price if it shall
state that such redemption price will be calculated as set forth
in the bonds of Series U. The Company, on or prior to the date
fixed for redemption, will deliver or cause to be delivered to
each holder of a bond of Series U called for redemption a written
statement showing the calculation of the redemption price, which
statement shall be accompanied by a certification verifying the
accuracy of the calculations from The Prudential Insurance
Company of America (or any corporate affiliate thereof) as long
as The Prudential Insurance Company of America (or any corporate
affiliate thereof) holds any bond of Series U. Otherwise, said
certification verifying the accuracy of the calculations shall be
prepared by an investment banking firm of national reputation to
be designated by the Company and approved in writing by holders<PAGE>
of at least 25% in principal amount of the bonds of Series U then
outstanding.
Section 9.7 of the Bond Purchase Agreement is a
bondholders' redemption agreement (within the meaning of Section
8.02 of the Indenture) with respect to the Series U Bonds,
satisfactory to and a copy of which is on file with the Trustee,
that provides for the method that shall be followed by the
Trustee in selecting bonds or parts of bonds for redemption in
the event such redemption is a redemption of a part only of the
Series U Bonds. By acceptance hereof, the holder hereof is
deemed to have executed, and is bound by the terms of, the Bond
Purchase Agreement.
On any redemption of Series U Bonds, the Trustee, in
the name and on behalf of the Company, shall mail, by first class
postage prepaid, a notice of redemption to each registered holder
of a bond to be redeemed (in whole or in part) at the last
address of such holder appearing on the bond register. Such
notice shall be mailed not less than thirty (30) days prior to
the date fixed for redemption and shall conform (subject to the
second preceding paragraph hereof) to the requirements of Section
8.02 of the Indenture.
As more fully provided in the Indenture, no recourse
upon any obligation contained in this bond or in the Indenture or
otherwise shall be had against any incorporator or any officer,
director or stockholder, past, present or future, of the Company
or of any successor corporation, such personal liability of every
kind being expressly waived.
This bond shall not be valid or obligatory for any
purpose or entitled to any security or benefit under the
Indenture until the certificate of authentication hereon shall<PAGE>
have been signed by the Trustee or by any authenticating agent on
its behalf.
IN WITNESS WHEREOF, CENTRAL MAINE POWER COMPANY has
caused this bond to be executed in its name by its President or
one of its Vice Presidents by his signature or a facsimile
thereof, and its corporate seal or a facsimile thereof to be
affixed hereto or imprinted hereon and attested by the signature
or facsimile signature of its Secretary or one of its Assistant
Secretaries.
Dated:
CENTRAL MAINE POWER COMPANY
By ___________________________
(CORPORATE SEAL)
ATTEST:
______________________________<PAGE>
(FORM OF CERTIFICATE OF AUTHENTICATION)
This bond is one of the bonds of Series U referred to
in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF
BOSTON, TRUSTEE
By ___________________________
Authorized Signatory
or
______________________________
as Authenticating Agent
for the Trustee
By ___________________________
Authorized Officer
(FORM OF ASSIGNMENT)
For value received, the undersigned hereby sell(s),
assign(s) and transfer(s) unto
Please Insert Social Security Or Other
Identifying Number Of Assignee
the within bond of Central Maine Power Company and all rights
thereunder, hereby irrevocably constituting and appointing
attorney to transfer said bond on the register of the Company,
with full power of substitution in the premises.
Dated: ______________________________
In the presence of:
NOTICE: The signature(s) to this assignment must correspond with
the name(s) as written upon the face of the within bond in every
particular, without alteration or enlargement or any change
whatever.<PAGE>
Exhibit 10-95
CONFORMED COPY
COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY
$80,000,000
CENTRAL MAINE POWER COMPANY,
as Borrower
CHEMICAL BANK,
as Agent
Dated as of November 7, 1994<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . 13
SECTION 2. AMOUNT AND TERMS OF THE CREDIT FACILITIES . . . . 14
2.1 The Commitments . . . . . . . . . . . . . . . . . . 14
2.2 Procedure for Revolving Credit Borrowing . . . . . 14
2.3 Facility Fee . . . . . . . . . . . . . . . . . . . 15
2.4 Termination or Reduction of Commitments . . . . . . 15
2.5 Repayment of Loans; Evidence of Debt . . . . . . . 15
2.6 Prepayments . . . . . . . . . . . . . . . . . . . . 16
2.7 Conversion and Continuation Options . . . . . . . . 16
2.8 Minimum Amounts and Maximum Number of Tranches . . 17
2.9 The Competitive Loans . . . . . . . . . . . . . . . 17
2.10 Procedure for Competitive Loan Borrowing . . . . . 17
2.11 Interest Rates and Payment Dates . . . . . . . . . 21
2.12 Computation of Interest and Fees . . . . . . . . . 21
2.13 Inability to Determine Interest Rate . . . . . . . 22
2.14 Pro Rata Treatment and Payments . . . . . . . . . 22
2.15 Illegality . . . . . . . . . . . . . . . . . . . . 23
2.16 Requirements of Law . . . . . . . . . . . . . . . 23
2.17 Taxes . . . . . . . . . . . . . . . . . . . . . . 24
2.18 Indemnity . . . . . . . . . . . . . . . . . . . . 25
2.19 Change of Lending Office . . . . . . . . . . . . . 26
2.20 Replacement of Lenders under Certain
Circumstances . . . . . . . . . . . . . . . . . . . 26
SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . 27
3.1 Financial Condition . . . . . . . . . . . . . . . . 27
3.2 No Change . . . . . . . . . . . . . . . . . . . . . 27
3.3 Corporate Existence; Compliance with Law . . . . . 27
3.4 Corporate Power; Authorization; Enforceable
Obligations . . . . . . . . . . . . . . . . . . . . 28
3.5 No Legal Bar . . . . . . . . . . . . . . . . . . . 28
3.6 No Material Litigation . . . . . . . . . . . . . . 28
3.7 No Default . . . . . . . . . . . . . . . . . . . . 28
3.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . 28
3.9 Federal Regulations . . . . . . . . . . . . . . . . 29
3.10 ERISA . . . . . . . . . . . . . . . . . . . . . . 29
3.11 Investment Company Act; Other Regulations . . . . 29
3.12 Purpose of Loans . . . . . . . . . . . . . . . . . 29
3.13 Environmental Matters . . . . . . . . . . . . . . 30
3.14 Accuracy of Information . . . . . . . . . . . . . 31
SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . 31
4.1 Conditions to Effectiveness . . . . . . . . . . . . 31
4.2 Conditions to Each Loan . . . . . . . . . . . . . . 32
SECTION 5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . 33
5.1 Financial Statements . . . . . . . . . . . . . . . 33
5.2 Certificates; Other Information . . . . . . . . . . 34
5.3 Payment of Obligations . . . . . . . . . . . . . . 35<PAGE>
5.4 Conduct of Business and Maintenance of Existence . 35
5.5 Compliance with Requirements of Law . . . . . . . . 35
5.6 Maintenance of Property; Insurance . . . . . . . . 35
5.7 Inspection of Property; Books and Records;
Discussions . . . . . . . . . . . . . . . . . . . . 35
5.8 Environmental Laws . . . . . . . . . . . . . . . . 36
5.9 Notices . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . 37
6.1 Limitation on Indebtedness . . . . . . . . . . . . 37
6.2 Maintenance of Specified Revolving Credit
Agreements . . . . . . . . . . . . . . . . . . . . 37
6.3 Limitation on Liens . . . . . . . . . . . . . . . . 37
6.4 Limitation on Fundamental Changes . . . . . . . . . 37
6.5 Limitation on More Restrictive Terms . . . . . . . 38
6.6 Subsidiaries . . . . . . . . . . . . . . . . . . . 38
6.7 Limitation on Lines of Business . . . . . . . . . . 38
SECTION 7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . 39
SECTION 8. THE AGENT . . . . . . . . . . . . . . . . . . . . 41
8.1 Appointment . . . . . . . . . . . . . . . . . . . . 41
8.2 Delegation of Duties . . . . . . . . . . . . . . . 41
8.3 Exculpatory Provisions . . . . . . . . . . . . . . 41
8.4 Reliance by Agent . . . . . . . . . . . . . . . . . 42
8.5 Notice of Default . . . . . . . . . . . . . . . . . 42
8.6 Non-Reliance on Agent and Other Lenders . . . . . . 42
8.7 Indemnification . . . . . . . . . . . . . . . . . . 43
8.8 Agent in Its Individual Capacity . . . . . . . . . 43
8.9 Successor Agent . . . . . . . . . . . . . . . . . . 43
SECTION 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . 44
9.1 Amendments and Waivers . . . . . . . . . . . . . . 44
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . 44
9.3 No Waiver; Cumulative Remedies . . . . . . . . . . 45
9.4 Survival . . . . . . . . . . . . . . . . . . . . . 45
9.5 Payment of Expenses and Taxes . . . . . . . . . . . 45
9.6 Transfer Provisions . . . . . . . . . . . . . . . . 46
9.7 Adjustments; Set-off . . . . . . . . . . . . . . . 48
9.8 Counterparts . . . . . . . . . . . . . . . . . . . 49
9.9 Severability . . . . . . . . . . . . . . . . . . . 49
9.10 Integration . . . . . . . . . . . . . . . . . . . 49
9.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . 49
9.12 Submission To Jurisdiction; Waivers . . . . . . . 49
9.13 Acknowledgments . . . . . . . . . . . . . . . . . 50
9.14 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . 50
9.15 Confidentiality . . . . . . . . . . . . . . . . . 51
SCHEDULES
Schedule 1.1 Commitments and Addresses of Lenders
Schedule 6.3 Liens
EXHIBITS<PAGE>
Exhibit A-1 Form of Competitive Loan Confirmation
Exhibit A-2 Form of Competitive Loan Offer
Exhibit A-3 Form of Competitive Loan Request
Exhibit B Form of Closing Certificate
Exhibit C Form of Opinion of Counsel
Exhibit D Form of Assignment and Acceptance
Exhibit E-1 Form of Revolving Credit Loan Promissory Note
Exhibit E-2 Form of Competitive Loan Promissory Note<PAGE>
CREDIT AGREEMENT, dated as of November 7, 1994, among
CENTRAL MAINE POWER COMPANY, a Maine corporation (the
"Borrower"), the several banks and other financial institutions
from time to time parties to this Agreement (the "Lenders") and
CHEMICAL BANK, a New York banking corporation, as agent for the
Lenders hereunder.
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Base CD
Rate in effect on such day plus 1% and (c) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. For
purposes hereof: "Prime Rate" shall mean the rate of
interest per annum publicly announced from time to time by
the Agent as its prime rate in effect at its principal
office in New York City (the Prime Rate not being intended
to be the lowest rate of interest charged by Chemical Bank
in connection with extensions of credit to debtors); "Base
CD Rate" shall mean the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) a fraction, the
numerator of which is one and the denominator of which is
one minus the C/D Reserve Percentage and (b) the C/D
Assessment Rate; and "Three-Month Secondary CD Rate" shall
mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board through the public
information telephone line of the Federal Reserve Bank of
New York (which rate will, under the current practices of
the Board, be published in Federal Reserve Statistical
Release H.15(519) during the week following such day), or,
if such rate shall not be so reported on such day or such
next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of
major money center banks in New York City received at
approximately 10:00 A.M., New York City time, on such day
(or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Agent from three New York
City negotiable certificate of deposit dealers of recognized
standing selected by it. Any change in the ABR due to a
change in the Prime Rate, the Three-Month Secondary CD Rate
or the Federal Funds Effective Rate shall be effective as of
the opening of business on the effective day of such change
in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.
"ABR Loans": Revolving Credit Loans the rate of
interest applicable to which is based upon the ABR.<PAGE>
"Affiliate": as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes
of this definition, "control" of a Person means the power,
directly or indirectly, either to (a) vote 10% or more of
the securities having ordinary voting power for the election
of directors of such Person or (b) direct or cause the
direction of the management and policies of such Person,
whether by contract or otherwise.
"Agent": Chemical Bank, together with its Affiliates,
as the arranger of the Commitments and as the agent for the
Lenders under this Agreement.
"Agreement": this Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"Applicable Eurodollar Margin": with respect to each
Eurodollar Loan at any date, the applicable percentage per
annum set forth below based upon the Status on such date:
Applicable Eurodollar
Status Margin
Level I Status 0.875%
Level II Status 1.0%
"Applicable Competitive Index Base Rate": (a) In the
case of any Index Rate Eurodollar Competitive Loan of a
specified maturity, the average (rounded upward, if
necessary, to the nearest 1/16th of 1%) of the respective
rates notified to the Agent by each of the Reference Lenders
as the rate at which such Reference Lender is offered Dollar
deposits at or about 10:00 A.M., New York City time, two
Business Days prior to the Borrowing Date in respect of such
Index Rate Eurodollar Competitive Loan, in the interbank
eurodollar market where the eurodollar and foreign currency
and exchange operations in respect of its Eurodollar Loans
are then being conducted for delivery on such Borrowing Date
with a maturity comparable to the maturity applicable to
such Index Rate Eurodollar Competitive Loan and in an amount
comparable to the amount of such Index Rate Eurodollar
Competitive Loan.
(b) In the case of any Index Rate C/D Competitive
Loan of a specified maturity, the average (rounded upward to
the nearest 1/16th of 1%) of the respective rates notified
to the Agent by each of the Reference Lenders as the average
rate bid at 9:00 A.M., New York City time, or as soon
thereafter as practicable, on the Borrowing Date in respect
of such Index Rate C/D Competitive Loan by a total of three
certificate of deposit dealers of recognized standing
selected by such Reference Lender for the purchase at face
value from such Reference Lender of its certificates of
deposit with a maturity comparable to the maturity
applicable to such Index Rate C/D Competitive Loan and in an<PAGE>
amount comparable to the amount of such Index Rate C/D
Competitive Loan.
"Applicable Competitive Index Rate": (a) In the case
of any Index Rate Eurodollar Competitive Loan, with respect
to each day while such Loan is outstanding, a rate per annum
determined for such day in accordance with the following
formula (rounded upward to the nearest 1/100th of 1%):
Applicable Competitive Index Base Rate
1.00 - Eurocurrency Reserve Requirements
(b) In the case of any Index Rate C/D Competitive
Loan, with respect to each day while such Loan is
outstanding, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Applicable Competitive Index Base Rate + C/D
Assessment Rate
1.00 - C/D Reserve Percentage
"Assignee": as defined in Section 9.6(c).
"Available Commitment": as to any Lender at any time,
an amount equal to the excess, if any, of (a) the amount of
such Lender's Commitment over (b) the aggregate principal
amount of all Revolving Credit Loans made by such Lender
then outstanding.
"Board": the Board of Governors of the Federal Reserve
System (or any successor).
"Bonds": any bond, note, debenture or other evidence
of indebtedness for borrowed money issued by the Borrower or
any of its Subsidiaries.
"Borrowing Date": any Business Day specified in a
notice pursuant to Section 2.2 or 2.10 as a date on which
the Borrower requests Loans to be made hereunder.
"Business Day": a day other than a Saturday, Sunday or
day on which commercial banks in New York City are
authorized or required by law or executive order to close.
"Capital Stock": any and all shares, interests,
participations or other equivalents (however designated) of
capital stock of a corporation, any and all equivalent
ownership interests in a Person (other than a corporation).
"C/D Assessment Rate": for any day as applied to any
ABR Loan or any Index Rate C/D Competitive Loan, the annual
assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund maintained by the Federal
Deposit Insurance Corporation or any successor thereto (the
"FDIC") classified as well-capitalized and within
supervisory subgroup "A" (or a comparable successor<PAGE>
assessment risk classification) within the meaning of 12
C.F.R. ss 327.3(d) (or any successor provision) to the FDIC
for the FDIC's insuring time deposits at offices of such
institution in the United States.
"C/D Reserve Percentage": for any day as applied to
any ABR Loan or any Index Rate C/D Competitive Loan, that
percentage (expressed as a decimal) which is in effect on
such day, as prescribed by the Board, for determining the
maximum reserve requirement for a Depositary Institution (as
defined in Regulation D of the Board) in respect of new
non-personal time deposits in Dollars having a maturity that
is 30 days or more (in the case of ABR Loans) or that is
comparable to the maturity of the relevant Loan (in the case
of Index Rate C/D Competitive Loans).
"Code": the Internal Revenue Code of 1986, as amended
from time to time.
"Commitment": as to any Lender, the obligation of such
Lender to make Revolving Credit Loans in an aggregate
principal amount at any one time outstanding not to exceed
the amount set forth opposite such Lender's name on Schedule
1.1, as such amount may be changed from time to time in
accordance with this Agreement.
"Commitment Percentage": as to any Lender at any time,
the percentage which such Lender's Commitment then
constitutes of the aggregate Commitments (or, at any time
after the Commitments shall have expired or terminated, the
percentage which the aggregate principal amount of such
Lender's Revolving Credit Loans then outstanding constitutes
of the aggregate principal amount of the Revolving Credit
Loans then outstanding).
"Commitment Period": the period from and including the
date hereof to but not including the Termination Date or
such earlier date on which the Commitments shall terminate
as provided herein.
"Commonly Controlled Entity": an entity, whether or
not incorporated, which is under common control with the
Borrower within the meaning of Section 4001 of ERISA or is
part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.
"Competitive Loan": each loan made pursuant to Section
2.9.
"Competitive Loan Borrowing Period": the period from
and including the Effective Date until the earlier of (a)
the date which is 14 days prior to the Termination Date and
(b) the last day of the Commitment Period.
"Competitive Loan Confirmation": each confirmation by
the Borrower of its acceptance of Competitive Loan Offers,
which Competitive Loan Confirmation shall be substantially<PAGE>
in the form of Exhibit A-1 and shall be delivered to the
Agent in writing or by facsimile transmission.
"Competitive Loan Maturity Date": as to any
Competitive Loan, the earlier of (a) the date specified by
the Borrower pursuant to Section 2.10(d)(ii) in its
acceptance of the related Competitive Loan Offer and (b) the
Termination Date.
"Competitive Loan Offer": each offer by a Lender to
make Competitive Loans pursuant to a Competitive Loan
Request, which Competitive Loan Offer shall contain the
information specified in Exhibit A-2 and shall be delivered
to the Agent by telephone, immediately confirmed by
facsimile transmission.
"Competitive Loan Request": each request by the
Borrower for Lenders to submit bids to make Competitive
Loans, which request shall contain the information in
respect of such requested Competitive Loans specified in
Exhibit A-3 and shall be delivered to the Agent in writing
or by facsimile transmission, or by telephone, immediately
confirmed by facsimile transmission.
"Contractual Obligation": as to any Person, any
provision of any security issued by such Person or of any
agreement, instrument or other undertaking to which such
Person is a party or by which it or any of its property is
bound.
"Default": any of the events specified in Section 7,
whether or not any requirement for the giving of notice, the
lapse of time, or both, has been satisfied.
"Dollars" and "$": dollars in lawful currency of the
United States of America.
"Effective Date": the date on which the conditions
precedent set forth in Section 4.1 shall be satisfied.
"Environmental Laws": any and all foreign, Federal,
state, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees, requirements of any
Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of
human health or the environment.
"ERISA": the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as
applied to a Eurodollar Loan or Index Rate Eurodollar
Competitive Loan, the aggregate (without duplication) of the
rates (expressed as a decimal fraction) of reserve
requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency<PAGE>
reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect
thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Board) maintained by a
member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day
during each Interest Period pertaining to a Eurodollar Loan,
the average (rounded upward to the nearest 1/16th of 1%) of
the respective rates notified to the Agent by each of the
Reference Lenders as the rate at which such Reference Lender
is offered Dollar deposits at or about 10:00 A.M., New York
City time, two Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in
respect of its Eurodollar Loans are then being conducted for
delivery on the first day of such Interest Period for the
number of days comprised therein and in an amount comparable
to the amount of its Eurodollar Loan to be outstanding
during such Interest Period.
"Eurodollar Loans": Revolving Credit Loans the rate of
interest applicable to which is based upon the Eurodollar
Rate.
"Eurodollar Rate": with respect to each day during
each Interest Period pertaining to a Eurodollar Loan, a rate
per annum determined for such day in accordance with the
following formula (rounded upward to the nearest 1/100th
of 1%):
Eurodollar Base Rate
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to
Eurodollar Loans the then current Interest Periods with
respect to all of which begin on the same date and end on
the same later date (whether or not such Loans shall
originally have been made on the same day).
"Event of Default": any of the events specified in
Section 7, provided that any requirement for the giving of
notice, the lapse of time, or both, has been satisfied.
"Existing Credit Agreement": the Credit Agreement
dated as of October 15, 1986 among the Borrower, the banks
parties thereto and Continental Illinois National Bank and
Trust Company of Chicago, as agent, as amended, supplemented
or otherwise modified from time to time.
"Facility Fee Rate": for any day, the rate per
annum set forth below opposite the Status in effect on
such day:
Facility Fee
Status Rate <PAGE>
Level I Status 0.375%
Level II Status 0.500%
"Federal Funds Effective Rate": for any day, the
weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for
the day of such transactions received by the Agent from
three federal funds brokers of recognized standing selected
by it.
"Final Date": as defined in Section 2.3.
"Financing Lease": any lease of property, real or
personal, the obligations of the lessee in respect of which
are required in accordance with GAAP to be capitalized on a
balance sheet of the lessee.
"Fixed Rate Competitive Loan Request": any Competitive
Loan Request requesting the Lenders to offer to make Fixed
Rate Competitive Loans.
"Fixed Rate Competitive Loans": Competitive Loans the
rate of interest applicable to which is equal to a fixed
percentage rate per annum specified by the Lender making
such Loan in its Competitive Loan Offer (as opposed to a
rate composed of the Applicable Competitive Index Rate plus
or minus a margin).
"GAAP": generally accepted accounting principles in
the United States of America in effect from time to time, as
and to the extent applicable to the Borrower and its
Subsidiaries.
"Governmental Authority": any nation or government,
any state or other political subdivision thereof and any
entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"Guarantee Obligation": as to any Person (the
"guaranteeing person"), any obligation of such guaranteeing
person that guarantees or in effect guarantees any
Indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly.
The term Guarantee Obligation shall include, by way of
illustration but not limitation, any obligation of the
guaranteeing person, whether or not contingent, (a) to
purchase any primary obligation or any property constituting
direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any primary
obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the<PAGE>
net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the
purpose of assuring the owner of any primary obligation of
the ability of the primary obligor to make payment of such
primary obligation, (d) to reimburse the issuer or other
obligor party under a letter of credit or similar instrument
backing a primary obligation or (e) otherwise to assure or
hold harmless the owner of any primary obligation against
loss in respect thereof; provided, however, that the term
Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course
of business.
"Indebtedness": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which
is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such Person under
Financing Leases, (d) all obligations of such Person in
respect of acceptances issued or created for the account of
such Person, (e) all Guarantee Obligations of such Person
and (f) all liabilities secured by any Lien on any property
owned by such Person even though such Person has not assumed
or otherwise become liable for the payment thereof.
"Index Rate C/D Competitive Loan": any Competitive
Loan bearing interest at a rate based upon the rate
described in paragraph (b) of the definition of "Applicable
Competitive Index Base Rate".
"Index Rate Competitive Loan Request": any Competitive
Loan Request requesting the Lenders to offer to make Index
Rate Competitive Loans.
"Index Rate Competitive Loans": Competitive Loans the
rate of interest applicable to which is equal to the
Applicable Competitive Index Rate plus or minus a margin.
"Index Rate Eurodollar Competitive Loan": any
Competitive Loan bearing interest at a rate based upon the
rate described in paragraph (a) of the definition of
"Applicable Competitive Index Base Rate".
"Insolvency": with respect to any Multiemployer Plan,
the condition that such Plan is insolvent within the meaning
of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Interest Payment Date": (a) as to any ABR Loan, (i)
the first Business Day of each January, April, July and
October (to the extent any such Loans were outstanding
during the three-month period (or portion thereof) ended on
the last day of the immediately preceding month) and (ii)<PAGE>
the Final Date (to the extent any such Loans were
outstanding during the period ended on such date for which
no payment has been received pursuant to clause (i) above),
(b) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period,
(c) as to any Eurodollar Loan having an Interest Period of
six months, the day which is three months after the first
day of such Interest Period, and the last day of such
Interest Period, (d) as to any Fixed Rate Competitive Loan,
each interest payment date specified by the Borrower for
such Loan in the related Competitive Loan Request
(including, in any event, the applicable Competitive Loan
Maturity Date), (e) as to any Index Rate Competitive Loan,
unless otherwise specified in the applicable Competitive
Loan Request, (i) the applicable Competitive Loan Maturity
Date and (ii) any date occurring prior to such Competitive
Loan Maturity Date which is three months or 90 days, as the
case may be, after the Borrowing Date in respect of such
Loan, and (f) as to any Revolving Credit Loan, the date of
any repayment, prepayment or conversion thereof.
"Interest Period": with respect to any Eurodollar
Loan:
(a) initially, the period commencing on the
borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two,
three or six months thereafter, as selected by the
Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect
thereto; and
(b) thereafter, each period commencing on the
last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two,
three or six months thereafter, as selected by the
Borrower by irrevocable notice to the Agent not less
than three Business Days prior to the last day of the
then current Interest Period with respect thereto;
provided that, all of the foregoing provisions relating
to Interest Periods are subject to the following:
(1) if any Interest Period would otherwise end on
a day that is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day
unless the result of such extension would be to carry
such Interest Period into another calendar month in
which event such Interest Period shall end on the
immediately preceding Business Day;
(2) any Interest Period that would otherwise
extend beyond the Termination Date shall end on the
Termination Date; and
(3) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the<PAGE>
calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month.
"Level I Status": the circumstance that the S&P Rating
is BB+ or higher and the Moody's Rating is Baa2 or higher.
"Level II Status": the circumstance that Level I
Status does not exist.
"Lien": any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien
(statutory or other), charge or other security interest or
any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or
other title retention agreement, any sale or other transfer
of Receivables and any Financing Lease, in each case having
substantially the same economic effect as any of the
foregoing).
"Loan": any loan made by any Lender pursuant to this
Agreement.
"Material Adverse Effect": (a) a material adverse
effect on the business, assets or condition (financial or
otherwise) of the Borrower and its Subsidiaries taken as a
whole, (b) a material adverse effect on the ability of the
Borrower to perform its obligations under this Agreement or
(c) a material adverse effect on the validity or
enforceability of this Agreement or the rights or remedies
of the Agent or the Lenders hereunder.
"Material Portion": at any date of determination,
assets representing at least 10% of the consolidated total
assets of the Borrower and its Subsidiaries as of the last
day of the most recent fiscal period for which financial
statements have been delivered pursuant to Section 5.1.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or
petroleum products or any hazardous or toxic substances,
materials or wastes, defined or regulated as such in or
under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde
insulation.
"Moody's": Moody's Investors Service, Inc. and its
successors.
"Moody's Rating": the Borrower's long-term senior
secured debt rating from Moody's.
"Multiemployer Plan": a Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"1935 Act": as defined in Section 3.11(b).<PAGE>
"Non-Excluded Taxes": as defined in Section 2.17.
"Participant": as defined in Section 9.6(b).
"PBGC": the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other
entity of whatever nature.
"Plan": at a particular time, any "employee pension
benefit plan" within the meaning of Section 3(2)(A) of
ERISA, which is covered by ERISA and in respect of which the
Borrower or a Commonly Controlled Entity is (or, if such
plan were terminated at such time, would under Section 4069
of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Rating Agencies": the collective reference to Moody's
and S&P.
"Receivables": the indebtedness and payment
obligations of any Person to the Borrower or any of its
Subsidiaries, including, without limitation, any right to
payment for goods sold or leased or for services rendered.
"Reference Lenders": Chemical Bank, The Bank of New
York and Union Bank of Switzerland.
"Register": as defined in Section 9.6(d).
"Regulation U": Regulation U of the Board as in effect
from time to time.
"Reorganization": with respect to any Multiemployer
Plan, the condition that such plan is in reorganization
within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in
Section 4043(b) of ERISA, other than those events as to
which the thirty day notice period is waived under Sections
.13, .14, .16, .18, .19 or .20 of PBGC Reg. ss 2615.
"Required Lenders": at any date, the holders of 51% of
the aggregate Commitments, or, if the Commitments have been
terminated or for the purposes of determining whether to
accelerate the Loans pursuant to Section 7, of the aggregate
unpaid principal amount of the Loans.
"Requirement of Law": as to any Person, the
Certificate of Incorporation and By-Laws or other
organizational or governing documents of such Person, and
any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any<PAGE>
of its property or to which such Person or any of its
property is subject.
"Responsible Officer": the chief executive officer or
the chief financial officer of the Borrower or, with respect
to financial matters, the chief financial officer or the
treasurer of the Borrower.
"Revolving Credit Loans": as defined in Section 2.1.
"S&P": Standard & Poor's Ratings Group and its
successors.
"S&P Rating": the Borrower's long-term senior secured
debt rating from S&P.
"Short Term Revolving Credit Loans": as defined in
Section 4.2(d).
"Significant Subsidiary": at any date of
determination, any Subsidiary of the Borrower (a) whose
total assets as of the last day (each, a "Test Date") of the
most recent fiscal period for which financial statements
have been delivered pursuant to Section 5.1 were equal to or
greater than 5% of the consolidated total assets of the
Borrower and its Subsidiaries as of such Test Date, (b)
whose net worth as of such Test Date was equal to or greater
than 5% of the consolidated net worth of the Borrower and
its Subsidiaries as of such Test Date or (c) whose gross
revenues for the period of four consecutive fiscal quarters
ending on such Test Date were equal to or greater than 5% of
the consolidated gross revenues of the Borrower and its
Subsidiaries for such period, in each case determined in
accordance with GAAP.
"Single Employer Plan": any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"Specified 1934 Act Reports": the Borrower's Annual
Report on Form 10-K for the fiscal year ended December 31,
1993, Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1994 and June 30, 1994, and Current Reports
on Form 8-K dated January 5, 1994, January 13, 1994 (as
amended by Form 8-K/A dated January 13, 1994), February 3,
1994, April 4, 1994, April 6, 1994, May 16, 1994, July 5,
1994, October 14, 1994 and October 17, 1994, in each case
filed with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended.
"Specified Rating Period": any period during which the
S&P Rating is below BBB- or the Moody's Rating is below Baa3
(or the Borrower's long-term senior secured debt is unrated
by any Rating Agency).
"Specified Revolving Credit Agreement": the Existing
Credit Agreement and any other revolving credit agreement
pursuant to which the lenders thereunder have committed to<PAGE>
make revolving credit loans to the Borrower or any of its
Significant Subsidiaries (excluding this Agreement).
"Specified Unsecured Indebtedness": any indebtedness
of the Borrower or any of its Significant Subsidiaries for
borrowed money (or Guarantee Obligations in respect thereof)
which is not secured by a Lien on any income, Capital Stock,
property or asset of the Borrower or any of its Subsidiaries
(other than (i) term indebtedness (including any
indebtedness supporting taxable or tax-exempt indebtedness
issued by a bonding authority or other Governmental
Authority) having a stated final maturity at least one year
after the date of incurrence thereof, (ii) commercial paper
and (iii) medium-term notes), including, without limitation,
the Loans hereunder and the loans under the Existing Credit
Agreement.
"Status": the existence of Level I Status or Level II
Status, as the case may be.
"Subsidiary": as to any Person, a corporation,
partnership or other entity of which shares of stock or
other ownership interests having ordinary voting power
(other than stock or such other ownership interests having
such power only by reason of the happening of a contingency)
to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity
are at the time owned, directly or indirectly through one or
more intermediaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary
or Subsidiaries of the Borrower.
"Tangible Assets": as to any Person, total assets of
such Person (or, in the case of the Borrower, total assets
of the Borrower and its Subsidiaries) less intangible assets
of such Person (or, in the case of the Borrower, intangible
assets of the Borrower and its Subsidiaries), in each case
determined in accordance with GAAP.
"Termination Date": the earlier of (a) the date which
is 364 days after the Effective Date (or, if such date is
not a Business Day, the next preceding Business Day) and (b)
the date which is 90 days after the date on which the S&P
Rating shall cease to be at least BB+ or the Moody's Rating
shall cease to be at least Baa3, unless on such 90th day
either (i) the circumstance described above in this clause
(b) shall no longer exist or (ii) this Agreement shall have
been amended and restated on such terms, and the obligations
of the Borrower hereunder shall have been secured with such
collateral (if requested by the Lenders), as shall be
satisfactory to each of the Lenders in its sole discretion.
"Transferee": as defined in Section 9.6(f).
"Type": (a) as to any Revolving Credit Loan, its
nature as an ABR Loan or a Eurodollar Loan and (b) as to any<PAGE>
Competitive Loan, its nature as a Fixed Rate Competitive
Loan or an Index Rate Competitive Loan.
"Wholly Owned Subsidiary": as to any Person, any other
Person all of the Capital Stock of which (other than
directors' qualifying shares required by law) is owned by
such Person directly and/or through other Wholly Owned
Subsidiaries.
1.2 Other Definitional Provisions. (a) Unless
otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in any certificate,
instrument or other document made or delivered pursuant hereto.
(b) As used herein, and in any certificate, instrument
or other document made or delivered pursuant hereto, accounting
terms relating to the Borrower and its Subsidiaries not defined
in Section 1.1 and accounting terms partly defined in Section
1.1, to the extent not defined, shall have the respective
meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement, and Section, Schedule and Exhibit references
are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall
be equally applicable to both the singular and plural forms of
such terms.
SECTION 2. AMOUNT AND TERMS OF THE CREDIT FACILITIES
2.1 The Commitments. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving
credit loans ("Revolving Credit Loans") to the Borrower from time
to time during the Commitment Period in an aggregate principal
amount at any one time outstanding not to exceed the amount of
such Lender's Commitment. During the Commitment Period, the
Borrower may use the Commitments by borrowing, prepaying the
Revolving Credit Loans in whole or in part, and reborrowing, all
in accordance with the terms and conditions hereof.
Notwithstanding anything to the contrary in this Agreement, in no
event may Revolving Credit Loans be borrowed under this Section 2
if, after giving effect thereto, the aggregate principal amount
of the Loans then outstanding would exceed the aggregate
Commitments then in effect.
(b) The Revolving Credit Loans may from time to time
be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination
thereof, as determined by the Borrower and notified to the Agent
in accordance with Sections 2.2 and 2.7, provided that no
Revolving Credit Loan shall be made as a Eurodollar Loan after
the day that is one month prior to the Termination Date.<PAGE>
2.2 Procedure for Revolving Credit Borrowing. The
Borrower may borrow under the Commitments during the Commitment
Period on any Business Day, provided that the Borrower shall give
the Agent irrevocable notice (which notice must be received by
the Agent (a) prior to 10:00 A.M., New York City time, three
Business Days prior to the requested Borrowing Date, in the case
of Eurodollar Loans or (b) prior to 10:00 A.M., New York City
time, on the requested Borrowing Date, in the case of ABR Loans).
Each such notice shall specify (i) the amount to be borrowed,
(ii) the requested Borrowing Date, (iii) whether the borrowing is
to be of Eurodollar Loans, ABR Loans or a combination thereof and
(iv) if the borrowing is to include Eurodollar Loans, the
respective amounts of each such Type of Loan and the respective
lengths of the initial Interest Periods therefor. Each borrowing
under the Commitments shall be in an amount equal to (x) in the
case of ABR Loans, $1,000,000 or a whole multiple thereof (or, if
the then Available Commitments are less than $1,000,000, such
lesser amount) and (y) in the case of Eurodollar Loans,
$5,000,000 or a whole multiple of $1,000,000 in excess thereof.
Upon receipt of any such notice from the Borrower, the Agent
shall promptly notify each Lender thereof. Each Lender will make
the amount of its pro rata share of each borrowing available to
the Agent for the account of the Borrower at the office of the
Agent specified in Section 9.2 prior to (i) 11:00 A.M., New York
City time, on the Borrowing Date requested by the Borrower (in
the case of Eurodollar Loans) or (ii) 2:00 P.M., New York City
time, on the Borrowing Date requested by the Borrower (in the
case of ABR Loans), in each case in funds immediately available
to the Agent. Such borrowing will then be made available to the
Borrower by the Agent crediting the account of the Borrower on
the books of such office with the aggregate of the amounts made
available to the Agent by the Lenders and in like funds as
received by the Agent.
2.3 Facility Fee. The Borrower agrees to pay to the
Agent, for the account of the Lenders, a facility fee for each
day from and including the Effective Date to but excluding the
later of (a) the last day of the Commitment Period and (b) the
date on which all of the Loans shall have been paid in full (such
later date, the "Final Date"). Such fee shall be payable
quarterly in arrears on (i) the first Business Day of each
January, April, July and October (for the three-month period (or
portion thereof) ended on the last day of the immediately
preceding month) and (ii) the Final Date (for the period ended on
such date for which no payment has been received pursuant to
clause (i) above) and shall be computed for each day during such
period at a rate per annum equal to the Facility Fee Rate in
effect on such day on the aggregate amount of the Commitments in
effect on such day (or, if the Commitments shall have been
terminated, on the aggregate outstanding principal amount of the
Loans on such day).
2.4 Termination or Reduction of Commitments. The
Borrower may, upon not less than five Business Days' irrevocable
notice to the Agent, terminate or reduce the amount of the
Commitments. Any reduction of the Commitments shall be in an<PAGE>
amount equal to $1,000,000 or a whole multiple thereof and shall
reduce permanently the Commitments then in effect.
2.5 Repayment of Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the Agent for
the account of the relevant Lenders (i) on the Termination Date,
the unpaid principal amount of each Revolving Credit Loan and
(ii) on the applicable Competitive Loan Maturity Date, the unpaid
principal amount of each Competitive Loan (or, in each case, such
earlier date on which the Loans become due and payable pursuant
to Section 7), provided, that, notwithstanding the foregoing,
Short Term Revolving Credit Loans shall in each case be paid in
full on the date which is one month after the Borrowing Date in
respect thereof. The Borrower hereby further agrees to pay
interest on the unpaid principal amount of the Loans from time to
time outstanding from the date thereof until payment in full
thereof at the rates per annum, and on the dates, set forth in
Section 2.11.
(b) Each Lender shall maintain in accordance with its
usual practice an account or accounts evidencing indebtedness of
the Borrower to such Lender resulting from each Loan of such
Lender from time to time, including the amounts of principal and
interest payable and paid to such Lender from time to time under
this Agreement.
(c) The Agent shall maintain the Register pursuant to
Section 9.6(d), and a subaccount therein for each Lender, in
which shall be recorded (i) the amount of each Loan made
hereunder, the Type thereof and, in the case of Eurodollar Loans,
each Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and
payable from the Borrower to each Lender hereunder and (iii) both
the amount of any sum received by the Agent hereunder from the
Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts
of each Lender maintained pursuant to Section 2.5(b) shall, to
the extent permitted by applicable law, be conclusive evidence,
absent manifest error, of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however,
that the failure of any Lender or the Agent to maintain the
Register or any such account, or any error therein, shall not in
any manner affect the obligation of the Borrower to repay (with
applicable interest) the Loans made to the Borrower by such
Lender in accordance with the terms of this Agreement.
2.6 Prepayments. (a) The Borrower may at any time
and from time to time prepay the Revolving Credit Loans, in whole
or in part, without premium or penalty, upon at least four
Business Days' irrevocable notice to the Agent (or, in the case
of Short Term Revolving Credit Loans, five Business Days'
irrevocable notice to the Agent). Each such notice shall specify
the date and amount of prepayment and whether the prepayment is
of Eurodollar Loans, ABR Loans or a combination thereof, and, if
of a combination thereof, the amount allocable to each. Upon
receipt of any such notice the Agent shall promptly notify each<PAGE>
Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date
specified therein, together with any amounts payable pursuant to
Section 2.18. Partial prepayments shall be in an aggregate
principal amount of $1,000,000 or a whole multiple thereof.
(b) If, during a Specified Rating Period, the Borrower
or any of its Subsidiaries shall prepay any loans under the
Existing Credit Agreement (or any successor Specified Revolving
Credit Agreement) on any date on which the aggregate outstanding
principal amount of the Loans exceeds $30,000,000, the Borrower
shall, on such date, prepay the Revolving Credit Loans in an
amount equal to the lesser of (i) the aggregate principal amount
of the loans under the Existing Credit Agreement (or such
successor Specified Revolving Credit Agreement) so prepaid, (ii)
the amount by which the aggregate outstanding principal amount of
the Loans exceeds $30,000,000 and (iii) the aggregate outstanding
principal amount of the Revolving Credit Loans.
2.7 Conversion and Continuation Options. ABR Loans
may, on any Business Day, be converted into Eurodollar Loans, and
Eurodollar Loans may, on the last day of any Interest Period
applicable thereto, be converted into ABR Loans or continued as
Eurodollar Loans, as follows:
(a) In order to continue outstanding Eurodollar Loans
as Eurodollar Loans for another Interest Period, or to convert
ABR Loans to Eurodollar Loans, the Borrower shall give the Agent
irrevocable notice thereof prior to 11:00 A.M., New York City
time, three Business Days before the first day of the Interest
Period to be applicable to such Eurodollar Loans.
(b) Each notice by the Borrower to convert ABR Loans
to Eurodollar Loans, or to continue Eurodollar Loans as such for
another Interest Period, shall specify the length of the Interest
Period requested by the Borrower to be applicable to such Loans.
(c) No Revolving Credit Loan may be converted into, or
continued as, a Eurodollar Loan (i) when any Event of Default has
occurred and is continuing and the Agent has or the Required
Lenders have determined in its or their sole discretion not to
permit such a conversion or continuation or (ii) after the date
that is one month prior to the Termination Date.
(d) If the Borrower fails to give a notice as
described above in this Section 2.7 to continue an outstanding
Eurodollar Loan as such, or if such continuation or conversion is
not permitted pursuant to paragraph (c) above, such Loans shall
be automatically converted to ABR Loans on the last day of the
then expiring Interest Period applicable to such Eurodollar
Loans.
(e) The Agent shall promptly notify each Lender of
each notice received by the Agent from the Borrower pursuant to
this Section 2.7.<PAGE>
(f) No Short Term Revolving Credit Loan may be
converted or continued pursuant to this Section 2.7.
2.8 Minimum Amounts and Maximum Number of Tranches.
All borrowings, prepayments, conversions and continuations of
Revolving Credit Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant
to such elections so that, after giving effect thereto, (a) the
aggregate principal amount of the Revolving Credit Loans
comprising each outstanding Eurodollar Tranche shall be equal to
$5,000,000 or a whole multiple of $1,000,000 in excess thereof
and (b) there shall be no more than eight Eurodollar Tranches
outstanding at any time.
2.9 The Competitive Loans. Subject to the terms and
conditions of this Agreement, the Borrower may borrow Competitive
Loans from time to time during the Competitive Loan Borrowing
Period on any Business Day, provided, that in no event may
Competitive Loans be borrowed hereunder if, after giving effect
thereto, the aggregate principal amount of Loans then outstanding
would exceed the aggregate amount of the Commitments at such
time. Within the limits and on the conditions hereinafter set
forth with respect to Competitive Loans, the Borrower from time
to time may borrow, repay and reborrow Competitive Loans,
provided, that (a) the Borrower shall not have the right to
prepay any principal amount of any Competitive Loan and (b) no
Competitive Loan Request shall be given within three Business
Days of any other Competitive Loan Request pursuant to which the
Borrower has made a borrowing of Competitive Loans.
2.10 Procedure for Competitive Loan Borrowing. (a)
The Borrower shall request Competitive Loans by delivering a
Competitive Loan Request to the Agent, (i) not later than 12:00
Noon (New York City time) four Business Days prior to the
proposed Borrowing Date (in the case of Index Rate Eurodollar
Competitive Loans), (ii) not later than 12:00 Noon (New York City
time) three Business Days prior to the proposed Borrowing Date
(in the case of Index Rate C/D Competitive Loans), and (iii) not
later than 9:00 A.M. (New York City time) on the proposed
Borrowing Date (in the case of Fixed Rate Competitive Loans).
Each Competitive Loan Request may solicit bids for Competitive
Loans in an aggregate principal amount of $2,000,000 or an
integral multiple of $1,000,000 in excess thereof and having not
more than three alternative Competitive Loan Maturity Dates. The
Competitive Loan Maturity Date for each Fixed Rate Competitive
Loan shall be not less than 14 days nor more than 180 days after
the Borrowing Date therefor, the Competitive Loan Maturity Date
for each Index Rate Eurodollar Competitive Loan shall be not less
than one month nor more than six months after the Borrowing Date
therefor and the Competitive Loan Maturity Date for each Index
Rate C/D Competitive Loan shall be not less than 30 days nor more
than 180 days after the Borrowing Date therefor, and in any event
shall be not later than the Termination Date. The Agent shall
notify each Lender promptly by facsimile transmission of the
contents of each Competitive Loan Request received by the Agent. <PAGE>
(b) In the case of an Index Rate Competitive Loan
Request, upon receipt of notice from the Agent of the contents of
such Competitive Loan Request, each Lender may elect, in its sole
discretion, to offer irrevocably, subject to Section 4, to make
one or more Competitive Loans at the Applicable Competitive Index
Rate plus or minus a margin determined by such Lender in its sole
discretion for each such Competitive Loan. Any such irrevocable
offer shall be made by delivering a Competitive Loan Offer to the
Agent, before 10:30 A.M. (New York City time) on the day that is
(x) three Business Days before the proposed Borrowing Date (in
the case of Index Rate Eurodollar Competitive Loans) or (y) two
Business Days before the proposed Borrowing Date (in the case of
Index Rate C/D Competitive Loans), setting forth:
(i) the maximum amount of Competitive Loans for each
Competitive Loan Maturity Date and the aggregate maximum
amount of Competitive Loans for all Competitive Loan
Maturity Dates which such Lender would be willing to make
(which amounts may, subject to Section 2.9, exceed such
Lender's Commitment); and
(ii) the margin above or below the Applicable
Competitive Index Rate at which such Lender is willing to
make each such Competitive Loan.
The Agent shall advise the Borrower before 11:00 A.M. (New York
City time) on the date which is three Business Days (in the case
of Index Rate Eurodollar Competitive Loans) or two Business Days
(in the case of Index Rate C/D Competitive Loans) before the
proposed Borrowing Date of the contents of each such Competitive
Loan Offer received by it. If the Agent, in its capacity as a
Lender, shall elect, in its sole discretion, to make any such
Competitive Loan Offer, it shall advise the Borrower of the
contents of its Competitive Loan Offer before 10:15 A.M. (New
York City time) on the date which is three Business Days (in the
case of Index Rate Eurodollar Competitive Loans) or two Business
Days (in the case of Index Rate C/D Competitive Loans) before the
proposed Borrowing Date.
(c) In the case of a Fixed Rate Competitive Loan
Request, upon receipt of notice from the Agent of the contents of
such Competitive Loan Request, each Lender may elect, in its sole
discretion, to offer irrevocably, subject to Section 4, to make
one or more Competitive Loans at a rate of interest determined by
such Lender in its sole discretion for each such Competitive
Loan. Any such irrevocable offer shall be made by delivering a
Competitive Loan Offer to the Agent before 10:00 A.M. (New York
City time) on the proposed Borrowing Date, setting forth:
(i) the maximum amount of Competitive Loans for each
Competitive Loan Maturity Date, and the aggregate maximum
amount for all Competitive Loan Maturity Dates, which such
Lender would be willing to make (which amounts may, subject
to Section 2.9, exceed such Lender's Commitment); and
(ii) the rate of interest at which such Lender is
willing to make each such Competitive Loan.<PAGE>
The Agent shall promptly advise the Borrower of the contents of
each such Competitive Loan Offer received by it. If the Agent,
in its capacity as a Lender, shall elect, in its sole discretion,
to make any such Competitive Loan Offer, it shall advise the
Borrower of the contents of its Competitive Loan Offer before
9:45 A.M. (New York City time) on the proposed Borrowing Date.
(d) Before 11:30 A.M. (New York City time) three
Business Days before the proposed Borrowing Date (in the case of
Index Rate Eurodollar Competitive Loans), before 11:30 A.M.
(New York City time), two Business Days before the proposed
Borrowing Date (in the case of Index Rate C/D Competitive Loans),
and before 11:00 A.M. (New York City time) on the proposed
Borrowing Date (in the case of Fixed Rate Competitive Loans), the
Borrower, in its absolute discretion, shall:
(i) cancel such Competitive Loan Request by
giving the Agent telephone notice to that effect, or
(ii) by giving telephone notice to the Agent
(immediately confirmed by delivery to the Agent of a
Competitive Loan Confirmation in writing or by
facsimile transmission) (1) subject to the provisions
of Section 2.10(e), accept one or more of the offers
made by any Lender or Lenders pursuant to Section
2.10(b) or Section 2.10(c), as the case may be, of the
amount of Competitive Loans for each relevant
Competitive Loan Maturity Date and (2) reject any
remaining offers made by Lenders pursuant to Section
2.10(b) or Section 2.10(c), as the case may be.
(e) The Borrower's acceptance of Competitive Loans in
response to any Competitive Loan Request shall be subject to the
following limitations:
(i) The amount of Competitive Loans accepted for each
Competitive Loan Maturity Date specified by any Lender in
its Competitive Loan Offer shall not exceed the maximum
amount for such Competitive Loan Maturity Date specified in
such Competitive Loan Offer;
(ii) the aggregate amount of Competitive Loans
accepted for all Competitive Loan Maturity Dates specified
by any Lender in its Competitive Loan Offer shall not exceed
the aggregate maximum amount specified in such Competitive
Loan Offer for all such Competitive Loan Maturity Dates;
(iii) the Borrower may not accept offers for
Competitive Loans for any Competitive Loan Maturity Date in
an aggregate principal amount in excess of the maximum
principal amount requested in the related Competitive Loan
Request; and
(iv) if the Borrower accepts any of such offers, (1)
it must accept such offers based solely upon pricing for
such relevant Competitive Loan Maturity Date and upon no
other criteria whatsoever and (2) if (x) two or more Lenders<PAGE>
submit offers for any Competitive Loan Maturity Date at
identical pricing and the Borrower accepts any of such
offers but does not wish to (or by reason of the limitations
set forth in Section 2.9 or in this Section 2.10, cannot)
borrow the total amount offered by such Lenders with such
identical pricing, the Borrower shall accept offers from all
of such Lenders in amounts allocated among them pro rata
according to the amounts offered by such Lenders (or as
nearly pro rata as shall be practicable after giving effect
to the requirement that Competitive Loans made by a Lender
on a Borrowing Date for each relevant Competitive Loan
Maturity Date shall be in a principal amount of $2,000,000
or an integral multiple of $1,000,000 in excess thereof) or
(y) a Lender submits offers for multiple Competitive Loan
Maturity Dates specifying a maximum aggregate principal
amount for all Competitive Loan Maturity Dates, and the
Borrower accepts offers from such Lender for more than one
Competitive Loan Maturity Date, then the Borrower shall
instruct the Agent how to apportion the Borrower's
acceptances among such offers for different Competitive Loan
Maturity Dates to the extent, if any, necessary to provide
for acceptance of offers from such Lender equal to but not
exceeding such specified maximum aggregate amount.
(f) If the Borrower notifies the Agent that a
Competitive Loan Request is cancelled pursuant to Section
2.10(d)(i), the Agent shall give prompt telephone notice thereof
to the Lenders.
(g) If the Borrower accepts pursuant to Section
2.10(d)(ii) one or more of the offers made by any one or more
Lenders, the Agent promptly shall notify each Lender which has
made such a Competitive Loan Offer of (i) the aggregate amount of
such Competitive Loans to be made on such Borrowing Date for each
Competitive Loan Maturity Date, (ii) the acceptance or rejection
of any offers to make such Competitive Loans made by such Lender
and (iii) in the case of Index Rate Competitive Loans, the
Applicable Competitive Index Rate in respect thereof. Before
12:00 Noon (New York City time) on the Borrowing Date specified
in the applicable Competitive Loan Request (in the case of Index
Rate Competitive Loans) and before 2:00 P.M. (New York City time)
on the Borrowing Date specified in the applicable Competitive
Loan Request (in the case of Fixed Rate Competitive Loans), each
Lender whose Competitive Loan Offer has been accepted shall make
available to the Agent at its office set forth in Section 9.2 the
amount of Competitive Loans to be made by such Lender, in
immediately available funds. The Agent will make such funds
available to the Borrower as soon as practicable on such date at
the Agent's aforesaid address. As soon as practicable after each
Borrowing Date, the Agent shall notify each Lender of the
aggregate amount of Competitive Loans advanced on such Borrowing
Date, the respective Competitive Loan Maturity Dates thereof and
the respective interest rates applicable thereto.
2.11 Interest Rates and Payment Dates. (a) Each
Eurodollar Loan shall bear interest for each day during each
Interest Period with respect thereto at a rate per annum equal to<PAGE>
the Eurodollar Rate determined for such day plus the Applicable
Eurodollar Margin.
(b) Each ABR Loan shall bear interest at a rate per
annum equal to the ABR.
(c) Each Competitive Loan shall bear interest for each
day from the applicable Borrowing Date to (but excluding) the
applicable Competitive Loan Maturity Date at the rate of interest
specified in the Competitive Loan Offer accepted by the Borrower
in connection with such Competitive Loan.
(d) If all or a portion of (i) the principal amount of
any Loan, (ii) any interest payable thereon or (iii) any fee or
other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall bear interest at a rate per annum which
is (x) in the case of overdue principal (except as otherwise
provided in clause (y) below), the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this
Section 2.11 plus 2% or (y) in the case of principal of any
Competitive Loan which remains overdue past the applicable
Competitive Loan Maturity Date, or any overdue interest, fee or
other amount, the rate described in Section 2.11(b) plus 2%, in
each case from the date of such non-payment to (but excluding)
the date on which such amount is paid in full (as well after as
before judgment).
(e) Interest shall be payable in arrears on each
Interest Payment Date, provided that interest accruing pursuant
to paragraph (d) of this Section 2.11 shall be payable from time
to time on demand.
2.12 Computation of Interest and Fees. (a) Facility
fees, interest on Loans and interest payable pursuant to Section
2.11(d) shall be calculated on the basis of a 360-day year for
the actual days elapsed, except that, with respect to interest
payable pursuant to Section 2.11(b) which is calculated on the
basis of the Prime Rate, the interest thereon shall be calculated
on the basis of a 365- (or 366-, as the case may be) day year for
the actual days elapsed. The Agent shall as soon as practicable
notify the Borrower and the Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a Loan
resulting from a change in the ABR, the Eurocurrency Reserve
Requirements, the C/D Assessment Rate or the C/D Reserve
Percentage shall become effective as of the opening of business
on the day on which such change becomes effective. The Agent
shall as soon as practicable notify the Borrower and the Lenders
of the effective date and the amount of each such change in
interest rate.
(b) Each determination of an interest rate by the
Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the
absence of manifest error. The Agent shall deliver to the
Borrower upon request a statement showing the quotations used by<PAGE>
the Agent in determining any interest rate pursuant to Section
2.11(a) or (c).
(c) If any Reference Lender shall for any reason no
longer have a Commitment or any Revolving Credit Loans, such
Reference Lender shall thereupon cease to be a Reference Lender,
and if, as a result, there shall only be one Reference Lender
remaining, the Agent (after consultation with the Borrower and
the Lenders) shall, by notice to the Borrower and the Lenders,
designate another Lender as a Reference Lender so that there
shall at all times be at least two Reference Lenders.
(d) Each Reference Lender shall use its best efforts
to furnish quotations of rates to the Agent as contemplated
hereby. If any of the Reference Lenders shall be unable or shall
otherwise fail to supply such rates to the Agent upon its
request, the rate of interest shall, subject to the provisions of
Section 2.13, be determined on the basis of the quotations of the
remaining Reference Lenders or Reference Lender.
2.13 Inability to Determine Interest Rate. If prior
to the first day of any Interest Period:
(a) the Agent shall have determined (which
determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist
for ascertaining the Eurodollar Rate for such Interest
Period, or
(b) the Agent shall have received notice from the
Required Lenders that the Eurodollar Rate determined or to
be determined for such Interest Period will not adequately
and fairly reflect the cost to such Lenders (as conclusively
certified by such Lenders) of making or maintaining their
affected Revolving Credit Loans during such Interest Period,
the Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurodollar Loans requested to be
made on the first day of such Interest Period shall be made as
ABR Loans, (y) any ABR Loans that were to have been converted on
the first day of such Interest Period to Eurodollar Loans shall
be continued as ABR Loans and (z) any outstanding Eurodollar
Loans shall be converted, on the first day of such Interest
Period, to ABR Loans. The Agent shall notify the Borrower as
soon as practicable after the circumstances giving rise to such
notice cease to exist. Until such notice has been withdrawn by
the Agent, no further Eurodollar Loans shall be made or continued
as such, nor shall the Borrower have the right to convert ABR
Loans to Eurodollar Loans.
2.14 Pro Rata Treatment and Payments. (a) Each
borrowing of Revolving Credit Loans, each payment by the Borrower
on account of any facility fee hereunder and any reduction of the
Commitments of the Lenders shall be made pro rata according to
the respective Commitment Percentages of the Lenders. Each<PAGE>
payment (including each prepayment) by the Borrower on account of
principal of and interest on the Revolving Credit Loans shall be
made pro rata according to the respective outstanding principal
amounts of the Loans then held by the Lenders. All payments
(including prepayments) to be made by the Borrower hereunder,
whether on account of principal, interest, fees or otherwise,
shall be made without set off or counterclaim and shall be made
prior to 12:00 Noon, New York City time, on the due date thereof
to the Agent, for the account of the Lenders, at the Agent's
office specified in Section 9.2, in Dollars and in immediately
available funds. The Agent shall distribute such payments to the
Lenders promptly upon receipt in like funds as received. If any
payment hereunder becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of
principal, interest thereon shall be payable at the then
applicable rate during such extension.
(b) Unless the Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will
not make the amount that would constitute its share of such
borrowing available to the Agent, the Agent may assume that such
Lender is making such amount available to the Agent, and the
Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made
available to the Agent by the required time on the Borrowing Date
therefor, such Lender shall pay to the Agent, on demand, such
amount with interest thereon at a rate equal to the daily average
Federal Funds Effective Rate for the period until such Lender
makes such amount immediately available to the Agent. A
certificate of the Agent submitted to any Lender with respect to
any amounts owing under this Section 2.14 shall be conclusive in
the absence of manifest error. If such Lender's share of such
borrowing is not made available to the Agent by such Lender
within three Business Days of such Borrowing Date, the Agent
shall also be entitled to recover such amount with interest
thereon at the rate per annum applicable to ABR Loans hereunder,
on demand, from the Borrower.
2.15 Illegality. Notwithstanding any other provision
herein, if the adoption of or any change in any Requirement of
Law or in the interpretation or application thereof shall make it
unlawful for any Lender to make or maintain Eurodollar Loans or
Index Rate Eurodollar Competitive Loans as contemplated by this
Agreement, (a) the commitment of such Lender hereunder to make
Eurodollar Loans, continue Eurodollar Loans as such and convert
ABR Loans to Eurodollar Loans shall forthwith be cancelled, (b)
such Lender's Revolving Credit Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to ABR
Loans on the respective last days of the then current Interest
Periods with respect to such Loans or within such earlier period
as required by law and (c) the Borrower shall, with respect to
any Index Rate Eurodollar Competitive Loan of such Lender, take
such action as such Lender may reasonably request.
2.16 Requirements of Law. (a) If the adoption of or
any change in any Requirement of Law or in the interpretation or<PAGE>
application thereof or compliance by any Lender with any request
or directive (whether or not having the force of law) from any
central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement or any Eurodollar
Loan or Index Rate Competitive Loan made by it, or change
the basis of taxation of payments to such Lender in respect
thereof (except for Non-Excluded Taxes covered by Section
2.17 and changes in the rate of tax on the overall net
income of such Lender);
(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar
requirement against assets held by, deposits or other
liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of
funds by, any office of such Lender which is not otherwise
included in the determination of the Eurodollar Rate or the
Applicable Competitive Index Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to
such Lender, by an amount which such Lender deems to be material,
of making, converting into, continuing or maintaining Eurodollar
Loans or Index Rate Competitive Loans or to reduce any amount
receivable hereunder in respect thereof, then, in any such case,
the Borrower shall promptly pay such Lender such additional
amount or amounts as will compensate such Lender for such
increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the
adoption of or any change in any Requirement of Law regarding
capital adequacy or in the interpretation or application thereof
or compliance by such Lender or any corporation controlling such
Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the
effect of reducing the rate of return on such Lender's or such
corporation's capital as a consequence of its obligations
hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to
time, the Borrower shall promptly pay to such Lender such
additional amount or amounts as will compensate such Lender for
such reduction.
(c) If any Lender becomes entitled to claim any
additional amounts pursuant to this Section 2.16, it shall
promptly notify the Borrower (with a copy to the Agent) of the
event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to this
Section 2.16 submitted by such Lender to the Borrower (with a<PAGE>
copy to the Agent) shall be conclusive in the absence of manifest
error.
2.17 Taxes. (a) All payments made by the Borrower
under this Agreement shall be made free and clear of, and without
deduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any
Governmental Authority (excluding net income taxes and franchise
taxes (imposed in lieu of net income taxes) imposed on the Agent
or any Lender as a result of a present or former connection
between the Agent or such Lender and the jurisdiction of the
Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than
any such connection arising solely from the Agent or such Lender
having executed, delivered or performed its obligations or
received a payment under, or enforced, this Agreement)). If any
such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to the Agent or any Lender
hereunder, the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent
or such Lender (after payment of all Non-Excluded Taxes) interest
or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement. Whenever any Non-
Excluded Taxes are payable by the Borrower, as promptly as
possible thereafter the Borrower shall send to the Agent for its
own account or for the account of such Lender, as the case may
be, a certified copy of an original official receipt received by
the Borrower showing payment thereof. If the Borrower fails to
pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Agent the required receipts or
other required documentary evidence, the Borrower shall indemnify
the Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Agent or any Lender as a
result of any such failure.
(b) Each Lender (or Transferee) that is not a citizen
or resident of the United States of America, a corporation,
partnership or other entity created or organized in or under the
laws of the United States of America, or any estate or trust that
is subject to federal income taxation regardless of the source of
its income (a "Non-U.S. Lender") shall deliver to the Borrower
and the Agent (or, in the case of a Participant, to the Lender
from which the related participation shall have been purchased)
two copies of either U.S. Internal Revenue Service Form 1001 or
Form 4224, or, in the case of a Non-U.S. Lender claiming
exemption from U.S. federal withholding tax under Section 871(h)
or 881(c) of the Code with respect to payments of "portfolio
interest", a Form W-8, or any subsequent versions thereof or
successors thereto (and, if such Non-U.S. Lender delivers a Form
W-8, an annual certificate representing that such Non-U.S. Lender
is not a "bank" for purposes of Section 881(c) of the Code, is
not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Borrower and is not a controlled
foreign corporation related to the Borrower (within the meaning<PAGE>
of Section 864(d)(4) of the Code)), properly completed and duly
executed by such Non-U.S. Lender claiming complete exemption
from, or a reduced rate of, U.S. federal withholding tax on all
payments by the Borrower under this Agreement. Such forms shall
be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any
Participant, on or before the date such Participant purchases the
related participation). In addition, each Non-U.S. Lender shall
deliver such forms promptly upon the obsolescence or invalidity
of any form previously delivered by such Non-U.S. Lender. Each
Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any
previously delivered certificate to the Borrower (or any other
form of certification adopted by the U.S. taxing authorities for
such purpose). Notwithstanding any other provision of this
Section 2.17(b), a Non-U.S. Lender shall not be required to
deliver any form pursuant to this Section 2.17(b) that such
Non-U.S. Lender is not legally able to deliver.
2.18 Indemnity. The Borrower agrees to indemnify each
Lender and to hold each Lender harmless from any loss or
reasonable expense which such Lender may sustain or incur as a
consequence of (a) default by the Borrower in making a borrowing
of Eurodollar Loans or Competitive Loans, or in the conversion
into or continuation of Eurodollar Loans, after the Borrower has
given a notice requesting or accepting the same in accordance
with the provisions of this Agreement, (b) default by the
Borrower in making any prepayment after the Borrower has given a
notice thereof in accordance with the provisions of this
Agreement, or (c) the making of a prepayment of Eurodollar Loans
or Competitive Loans on a day which is not the last day of an
Interest Period or the applicable Competitive Loan Maturity Date,
as the case may be, with respect thereto. Such indemnification
may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so
prepaid, or not so borrowed, converted or continued, for the
period from the date of such prepayment or of such failure to
borrow, convert or continue to the last day of the relevant
Interest Period (or proposed Interest Period) or, in the case of
Competitive Loans, the applicable Competitive Loan Maturity Date
(or proposed Competitive Loan Maturity Date), in each case at the
applicable rate of interest for such Loans provided for herein
(excluding, however, the Applicable Eurodollar Margin or any
positive margin applicable to Index Rate Competitive Loans
included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to
such Lender on such amount by placing such amount on deposit for
a comparable period with leading banks in the interbank
eurodollar market.
2.19 Change of Lending Office. Each Lender agrees
that if it makes any demand for payment under Section 2.16 or
2.17(a), or if any adoption or change of the type described in
Section 2.15 shall occur with respect to it, it will use
reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not
be disadvantageous to it, as determined in its sole discretion)<PAGE>
to designate a different lending office if the making of such a
designation would reduce or obviate the need for the Borrower to
make payments under Section 2.16 or 2.17(a), or would eliminate
or reduce the effect of any adoption or change described in
Section 2.15.
2.20 Replacement of Lenders under Certain
Circumstances. The Borrower shall be permitted to replace any
Lender which (a) requests reimbursement for amounts owing
pursuant to Section 2.16 or 2.17 (other than with respect to
Index Rate Competitive Loans), (b) is affected in the manner
described in Section 2.15 (other than with respect to Index Rate
Eurodollar Competitive Loans) and as a result thereof any of the
actions described in said Section is required to be taken or (c)
defaults in its obligation to make Revolving Credit Loans
hereunder, with a replacement bank or other financial
institution; provided that (i) such replacement does not conflict
with any Requirement of Law, (ii) no Event of Default shall have
occurred and be continuing at the time of such replacement, (iii)
the Borrower shall repay (or the replacement bank or institution
shall purchase, at par) all Loans and other amounts owing to such
replaced Lender prior to the date of replacement, (iv) the
Borrower shall be liable to such replaced Lender under Section
2.18 if any Eurodollar Loan owing to such replaced Lender shall
be prepaid (or purchased) other than on the last day of the
Interest Period relating thereto or any Competitive Loan owing to
such replaced Lender shall be paid other than on the relevant
Competitive Loan Maturity Date, (v) the replacement bank or
institution, if not already a Lender, shall be reasonably
satisfactory to the Agent, (vi) the replaced Lender shall be
obligated to make such replacement in accordance with the
provisions of Section 9.6 (provided that the Borrower shall be
obligated to pay the registration and processing fee referred to
therein), (vii) until such time as such replacement shall be
consummated, the Borrower shall pay all additional amounts (if
any) required pursuant to Section 2.16 or 2.17, as the case may
be, and (viii) any such replacement shall not be deemed to be a
waiver of any rights which the Borrower, the Agent or any other
Lender shall have against the replaced Lender.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this
Agreement and to make the Loans, the Borrower hereby represents
and warrants to the Agent and each Lender that:
3.1 Financial Condition. The consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at
December 31, 1993 and the related consolidated statements of
earnings and cash flow for the fiscal year ended on such date,
reported on by Arthur Andersen & Co., copies of which have
heretofore been furnished to each Lender, are complete and
correct in all material respects and present fairly in all
material respects the consolidated financial condition of the
Borrower and its consolidated Subsidiaries as at such date, and
the consolidated results of their operations and their
consolidated cash flows for the fiscal year then ended. The<PAGE>
unaudited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at June 30, 1994 and the related
unaudited consolidated statements of earnings and cash flow for
the six-month period ended on such date, certified by a
Responsible Officer, copies of which have heretofore been
furnished to each Lender, are complete and correct in all
material respects and present fairly in all material respects the
consolidated financial condition of the Borrower and its
consolidated Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for
the six-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the
related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or Responsible
Officer, as the case may be, and as disclosed therein). Neither
the Borrower nor any of its consolidated Subsidiaries had, at the
date of the most recent balance sheet referred to above, any
Guarantee Obligation, contingent liability or liability for
taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or
foreign currency swap or exchange transaction, which is not
reflected in the foregoing statements or in the notes thereto and
which is material to the Borrower and its consolidated
Subsidiaries taken as a whole.
3.2 No Change. Except as disclosed in the Specified
1934 Act Reports, since June 30, 1994 there has been no
development or event which has had or could reasonably be
expected to have a Material Adverse Effect.
3.3 Corporate Existence; Compliance with Law. Each of
the Borrower and each of its active Subsidiaries (a) is duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, (b) has the power and
authority under its Articles of Incorporation or other
organizational or governing documents to own and operate its
property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, and (c) is
in compliance with all Requirements of Law except to the extent
that the failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.4 Corporate Power; Authorization; Enforceable
Obligations. The Borrower has the corporate power and authority
to make, deliver and perform this Agreement and to borrow
hereunder and has taken all necessary corporate action to
authorize the borrowings on the terms and conditions of this
Agreement and to authorize the execution, delivery and
performance of this Agreement. No consent or authorization of,
filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of this
Agreement, except for (a) authorization of the Federal Energy
Regulatory Commission (which authorization has been duly obtained
and is in full force and effect) and (b) routine informational<PAGE>
filings. This Agreement has been duly executed and delivered on
behalf of the Borrower. This Agreement constitutes a legal,
valid and binding obligation of the Borrower enforceable against
the Borrower in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by
proceedings in equity or at law).
3.5 No Legal Bar. The execution, delivery and
performance of this Agreement, the borrowings hereunder and the
use of the proceeds thereof will not violate any Requirement of
Law or Contractual Obligation of the Borrower or of any of its
Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective
properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation.
3.6 No Material Litigation. Except as disclosed in
the Specified 1934 Act Reports, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority
is pending or, to the knowledge of the Borrower, threatened by or
against the Borrower or any of its Subsidiaries or against any of
its or their respective properties or revenues (a) with respect
to this Agreement or any of the transactions contemplated hereby,
or (b) which could reasonably be expected to have a Material
Adverse Effect.
3.7 No Default. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any of its
Contractual Obligations in any respect which could reasonably be
expected to have a Material Adverse Effect. No Default or Event
of Default has occurred and is continuing.
3.8 Taxes. Each of the Borrower and its Subsidiaries
has filed or caused to be filed all tax returns which, to the
knowledge of the Borrower, are required to be filed and has paid
all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its property and all other
material taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any such
taxes, fees or other charges the amount or validity of which are
currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with
GAAP (to the extent required thereby) have been provided on the
books of the Borrower or its Subsidiaries, as the case may be);
no material tax Lien has been filed with respect to any such tax,
fee or other charge; and, to the knowledge of the Borrower, no
claim is being asserted with respect to any such tax, fee or
other charge which could reasonably be expected to have a
Material Adverse Effect.
3.9 Federal Regulations. No part of the proceeds of
any Loans will be used for "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms
under Regulation G or Regulation U of the Board as now and from<PAGE>
time to time hereafter in effect. If requested by any Lender or
the Agent, the Borrower will furnish to the Agent and each Lender
a statement to the foregoing effect in conformity with the
requirements of FR Form G-1 or FR Form U-1 referred to in said
Regulation G or Regulation U, as the case may be.
3.10 ERISA. Neither a Reportable Event nor an
"accumulated funding deficiency" (within the meaning of
Section 412 of the Code or Section 302 of ERISA) has occurred
during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan,
and each Plan has complied in all material respects with the
applicable provisions of ERISA and the Code. No termination of a
Single Employer Plan has occurred, and no Lien in favor of the
PBGC or a Plan has arisen, during such five-year period. The
present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on
which this representation is made or deemed made, exceed the
value of the assets of such Plan allocable to such accrued
benefits. Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any
Multiemployer Plan, and neither the Borrower nor any Commonly
Controlled Entity would become subject to any liability under
ERISA if the Borrower or any such Commonly Controlled Entity were
to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer
Plan is in Reorganization or Insolvent.
3.11 Investment Company Act; Other Regulations. (a)
The Borrower is not an "investment company", or a company
"controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended. The Borrower is
not subject to regulation under any Federal or State statute or
regulation (other than (i) its Articles of Incorporation, (ii)
the Maine Public Utilities Law, the Connecticut Public Utilities
Law and the Federal Power Act (and regulations under each of the
foregoing) and (iii) Regulation X of the Board) which restricts
its incurrence of Indebtedness.
(b) Although the Borrower is a "holding company" for
the purposes of the Public Utility Holding Company Act of 1935,
as amended (the "1935 Act"), by reason of its ownership of the
stock of certain corporations, it is exempt pursuant to Rule 2
promulgated by the Securities and Exchange Commission under the
1935 Act from all of the provisions thereof except Section
9(a)(2) relating to the acquisition of securities of public
utility affiliates.
3.12 Purpose of Loans. The proceeds of the Loans
shall be used by the Borrower for working capital purposes in the
ordinary course of its business.
3.13 Environmental Matters. Each of the following
representations and warranties is true and correct except (i) as
disclosed in the Specified 1934 Act Reports or (ii) to the extent<PAGE>
that the facts and circumstances giving rise to any such failure
to be so true and correct, in the aggregate, could not reasonably
be expected to have a Material Adverse Effect:
(a) Except for Materials of Environmental Concern
stored and used by the Borrower and its Subsidiaries in the
ordinary course of business in accordance with applicable
Environmental Laws, the facilities and properties owned,
leased or operated by the Borrower or any of its
Subsidiaries (the "Properties") do not contain, and have not
previously contained, any Materials of Environmental Concern
in amounts or concentrations which (i) constitute or
constituted a violation of, or (ii) could reasonably be
expected to give rise to liability under, any Environmental
Law.
(b) The Properties and all operations at the
Properties are in compliance, and have in the last five
years been in compliance, with all applicable Environmental
Laws, and there is no contamination at, under or about the
Properties or violation of any Environmental Law with
respect to the Properties or the business operated by the
Borrower or any of its Subsidiaries (the "Business") which
could interfere with the continued operation of the
Properties for electrical utility or industrial purposes.
(c) Neither the Borrower nor any of its
Subsidiaries has received any notice of violation, alleged
violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or
the Business, nor does the Borrower have knowledge or reason
to believe that any such notice will be received or is being
threatened.
(d) Materials of Environmental Concern have not
been transported or disposed of from the Properties in
violation of, or in a manner or to a location which could
reasonably be expected to give rise to liability under, any
Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, stored or disposed of at,
on or under any of the Properties in violation of, or in a
manner that could reasonably be expected to give rise to
liability under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or
administrative action is pending or, to the knowledge of the
Borrower, threatened, under any Environmental Law to which
the Borrower or any Subsidiary is or will be named as a
party with respect to the Properties or the Business, nor
are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under
any Environmental Law with respect to the Properties or the
Business.<PAGE>
(f) There has been no release or threat of
release of Materials of Environmental Concern at or from the
Properties, or arising from or related to the operations of
the Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in
violation of or in amounts or in a manner that could
reasonably be expected to give rise to liability under
Environmental Laws.
3.14 Accuracy of Information. No statement or
information contained in this Agreement or any other document,
certificate or statement furnished to the Agent or the Lenders or
any of them, by or on behalf of the Borrower for use in
connection with the transactions contemplated by this Agreement,
contained as of the date such statement, information, document or
certificate was so furnished any untrue statement of a material
fact or omitted to state a material fact necessary in order to
make the statements contained herein or therein (in light of the
circumstances under which they were made) not misleading. The
projections and pro forma financial information contained in the
materials referenced above are based upon good faith estimates
and assumptions believed by management of the Borrower to be
reasonable at the time made, it being recognized by the Lenders
that such financial information as it relates to future events is
not to be viewed as fact and that actual results during the
period or periods covered by such financial information may
differ from the projected results set forth therein.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Effectiveness. The effectiveness of
this Agreement is subject to the satisfaction of the following
conditions precedent:
(a) Execution of Agreement. This Agreement shall have
been executed and delivered by a duly authorized officer of
each of the Borrower, each Lender listed on Schedule 1.1 and
the Agent.
(b) Closing Certificate. The Agent shall have
received a certificate of the Borrower, dated the Effective
Date, substantially in the form of Exhibit B, executed by
the President or any Vice President and the Secretary or any
Assistant Secretary of the Borrower, and attaching the
documents and containing the certifications referred to in
Section 4.1(c), (d) and (e).
(c) Corporate Proceedings. The Agent shall have
received a copy of the resolutions, in form and substance
satisfactory to the Agent, of the Board of Directors (or its
Executive and Finance Committee) of the Borrower authorizing
(i) the execution, delivery and performance of this
Agreement and (ii) the borrowings contemplated hereunder.
(d) Corporate Documents. The Agent shall
have received a copy of the Articles of Incorporation (in<PAGE>
the form of the Borrower's "Charter Documents and Capital
Stock Provisions") and by-laws of the Borrower.
(e) Consents. The Agent shall have received a
certificate of a Responsible Officer of the Borrower (i)
attaching copies of all consents referred to in Section 3.4
and (ii) stating that such consents are in full force and
effect, and each such consent shall be in form and substance
satisfactory to the Agent.
(f) Legal Opinions. The Agent shall have received (i)
the executed legal opinion of LeBoeuf, Lamb, Greene &
MacRae, L.L.P., counsel to the Borrower and (ii) the
executed legal opinion of William M. Finn, Esq., Corporate
Counsel of the Borrower, each covering certain matters, and
together covering all matters, specified in Exhibit C.
(g) Material Adverse Change. Except as disclosed in
the Specified 1934 Act Reports, since June 30, 1994, there
shall have occurred no change which, in the opinion of the
Lenders, could reasonably be expected to have a Material
Adverse Effect.
(h) Ratings. The Agent shall have received
satisfactory evidence that the S&P Rating is at least BB+
and the Moody's Rating is at least Baa2.
Copies of each document furnished to the Agent pursuant to this
Section 4.1 shall be furnished to the Lenders promptly after the
Effective Date.
4.2 Conditions to Each Loan. The agreement of each
Lender to make any Loan requested to be made by it on any date
(including, without limitation, its initial Loan) is subject to
the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Borrower in or
pursuant to this Agreement shall be true and correct on and
as of such date as if made on and as of such date (other
than the representations and warranties set forth in Section
3.1, which shall have been true and correct on and as of the
Effective Date).
(b) No Default. No Default or Event of Default shall
have occurred and be continuing on such date or after giving
effect to the Loans requested to be made on such date.
(c) Satisfaction of Conditions Under Existing Credit
Agreement. In the case of any borrowing of Revolving Credit
Loans, the conditions precedent to the making of a committed
revolving credit loan (other than those applicable only to
the initial such loan) pursuant to the Existing Credit
Agreement and any successor Specified Revolving Credit
Agreement (other than those requiring (i) that the aggregate
principal amount of such loans be less than or equal to the
then unused commitments thereunder or (ii) the delivery of<PAGE>
borrowing notices and similar certificates) shall have been
satisfied on such Borrowing Date. It is understood that the
conditions precedent referred to above, with respect to the
Existing Credit Agreement as in effect on the date hereof,
consist of the conditions precedent to the making of "Credit
A Loans" set forth in Sections 11.2(a), 11.2(b) and 11.3.1
of the Existing Credit Agreement.
(d) Borrowing Under Existing Credit Agreement. In the
case of any borrowing of Revolving Credit Loans during a
Specified Rating Period, if on the relevant Borrowing Date
the aggregate outstanding principal amount of the Loans,
after giving effect to such borrowing (including the
application of the proceeds thereof), shall exceed
$30,000,000, then, concurrently with such borrowing, the
Borrower shall have borrowed loans under the Existing Credit
Agreement (or any successor Specified Revolving Credit
Agreement) in an aggregate principal amount at least equal
to the aggregate principal amount of the Revolving Credit
Loans being borrowed hereunder on such date (or, if the
aggregate outstanding principal amount of the Loans
immediately prior to such borrowing shall be less than
$30,000,000, the amount by which the aggregate outstanding
principal amount of the Loans shall exceed $30,000,000 after
so giving effect to such borrowing), provided, that in the
event that such Revolving Credit Loans constitute ABR Loans
or Eurodollar Loans having an Interest Period of one month,
the Borrower may, at its option, designate such Revolving
Credit Loans as "Short Term Revolving Credit Loans" by
written notice to the Agent and the Lenders, in which case
(x) the Borrower shall not be required to satisfy the
condition precedent specified in this paragraph (d) in
connection with the making of such Revolving Credit Loans
and (y) such Revolving Credit Loans shall be due and payable
on the date which is one month after the relevant Borrowing
Date. In no event may Short Term Revolving Credit Loans be
incurred within any period of five Business Days before or
after the date of any scheduled repayment of Short Term
Revolving Credit Loans pursuant to Section 2.5(a) or any
prepayment of Short Term Revolving Credit Loans pursuant to
Section 2.6(a).
(e) Ratings. The Borrower shall have an S&P Rating of
at least BB+ and a Moody's Rating of at least Baa3.
Each borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date
thereof that the conditions contained in Sections 4.2(a), (b) and
(e) and, in the case of Revolving Credit Loans, Sections 4.2(c)
and (d), have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the
Commitments remain in effect or any amount is owing to any Lender
or the Agent hereunder, the Borrower shall and (except in the
case of delivery of financial information, reports, certificates<PAGE>
and notices) shall cause each of its Subsidiaries or Significant
Subsidiaries, as the case may be, to:
5.1 Financial Statements. Furnish to each Lender:
(a) as soon as available, but in any event not later
than 95 days after the end of each fiscal year of the
Borrower, a copy of the consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of
such year and the related consolidated statements of
earnings and cash flow for such year, setting forth in each
case in comparative form the figures for the previous year,
reported on without a "going concern" or like qualification
or exception, or qualification arising out of the scope of
the audit, by Coopers & Lybrand or other independent
certified public accountants of nationally recognized
standing; and
(b) as soon as available, but in any event not later
than 50 days after the end of each of the first three
quarterly periods of each fiscal year of the Borrower, the
unaudited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such quarter and
the related unaudited consolidated statements of earnings
and cash flow of the Borrower and its consolidated
Subsidiaries for such quarter and the portion of the fiscal
year through the end of such quarter, setting forth in each
case in comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly stated in
all material respects (subject to normal year-end audit
adjustments);
all such financial statements shall be complete and correct in
all material respects and shall be prepared in reasonable detail
and in accordance with GAAP applied consistently throughout the
periods reflected therein and with prior periods (except as
approved by such accountants or officer, as the case may be, and
disclosed therein).
5.2 Certificates; Other Information. Furnish to each
Lender:
(a) concurrently with the delivery of the financial
statements referred to in Section 5.1(a), a certificate of
the independent certified public accountants reporting on
such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of
any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial
statements referred to in Sections 5.1(a) and (b), a
certificate of a Responsible Officer stating that, to the
best of such Officer's knowledge, the Borrower during such
period has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained
in this Agreement to be observed, performed or satisfied by<PAGE>
it, and that such Officer has obtained no knowledge of any
Default or Event of Default except as specified in such
certificate;
(c) no later than the date which is five Business Days
prior to the effectiveness thereof (or such earlier date as
shall be specified in Section 6.5), notice of the entering
into of any Specified Revolving Credit Agreement and of any
amendment, supplement or other modification thereto,
accompanied by execution copies (or, if such execution
copies are not available, substantially final drafts) of the
documentation relating thereto;
(d) within ten days after the same are sent, copies of
all financial statements and reports which the Borrower
sends to the holders of any class of its equity or debt
securities, and within ten days after the same are filed,
copies of all financial statements and reports which the
Borrower may make to, or file with, the Securities and
Exchange Commission or any successor or analogous
Governmental Authority (other than registration statements
that have not become effective under the Securities Act of
1933, filings and reports with respect to dividend
reinvestment, employee benefits or other similar plans, and
filings and reports pertaining to sales of or other
transactions in securities of the Borrower or any Subsidiary
by Persons other than the Borrower or such Subsidiary); and
(e) promptly, such additional financial and other
information as any Lender may from time to time reasonably
request.
5.3 Payment of Obligations. Pay, discharge or
otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its Indebtedness and trade
liabilities, except (a) where the amount or validity thereof is
currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP (to the extent
required thereby) with respect thereto have been provided on the
books of the Borrower or its Subsidiaries, as the case may be, or
(b) where the failure to do so could not reasonably be expected
to have a Material Adverse Effect.
5.4 Conduct of Business and Maintenance of Existence.
In the case of the Borrower and each Significant Subsidiary,
continue to engage in business of the same general type as now
conducted by it and preserve, renew and keep in full force and
effect its corporate existence and take all reasonable action to
maintain all material rights, privileges and franchises necessary
or desirable in the normal conduct of its business except as
otherwise permitted pursuant to Section 6.4.
5.5 Compliance with Requirements of Law. Comply with
all Requirements of Law (including Environmental Laws), except to
the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse
Effect.<PAGE>
5.6 Maintenance of Property; Insurance. In the case
of the Borrower and each Significant Subsidiary, (a) keep all
material property useful and necessary in its business in good
working order and condition (subject to reasonable allowances for
acts of God, strikes, civil disturbances and other conditions
beyond the control of the Borrower and its Significant
Subsidiaries), provided, that the foregoing shall not be
construed to prevent the Borrower or any of its Significant
Subsidiaries from ceasing to operate any of its plants or other
properties if (i) in the reasonable judgment of the Borrower or
such Significant Subsidiary, as the case may be, it is advisable
to do so and (ii) such cessation could not reasonably be expected
to have a Material Adverse Effect; and (b) maintain with
financially sound and reputable insurance companies insurance on
its property in at least such amounts and against at least such
risks as are usually insured against in the same general area by
companies engaged in the same or a similar business; and furnish
to each Lender, upon written request, full information as to the
insurance carried.
5.7 Inspection of Property; Books and Records;
Discussions. Keep proper books of records and account in which
full, true and correct entries in conformity in all material
respects with GAAP and all Requirements of Law shall be made of
all dealings and transactions in relation to its business and
activities; and permit representatives of the Agent or any Lender
to visit and inspect any of its properties and examine and make
abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other
condition of the Borrower and its Subsidiaries with officers of
the Borrower and with its independent certified public
accountants.
5.8 Environmental Laws. (a) Obtain and comply in all
material respects with and maintain, and ensure that all tenants
and subtenants obtain and comply in all material respects with
and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental
Laws, except to the extent that failure to do so could not be
reasonably expected to have a Material Adverse Effect.
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply in all
material respects with all lawful orders and directives of all
Governmental Authorities regarding Environmental Laws except to
the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings
could not be reasonably expected to have a Material Adverse
Effect.
5.9 Notices. Promptly upon learning of any of the
following, give notice to the Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;<PAGE>
(b) any (i) default or event of default under any
Contractual Obligation of the Borrower or any of its
Subsidiaries or (ii) litigation, investigation or proceeding
which may exist at any time between the Borrower or any of
its Subsidiaries and any Governmental Authority, which in
either case, if not cured or if adversely determined, as the
case may be, could reasonably be expected to have a Material
Adverse Effect;
(c) any litigation or proceeding against the Borrower
or any of its Subsidiaries in which the amount involved not
covered by insurance is $10,000,000 or more or in which
injunctive or similar relief materially adverse to the
interests of the Borrower or any of its Subsidiaries is
sought;
(d) (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan, a failure to make
any required contribution to a Plan, the creation of any
Lien in favor of the PBGC or a Plan or any withdrawal from,
or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or
the taking of any other action by the PBGC or the Borrower
or any Commonly Controlled Entity or any Multiemployer Plan
with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan; and
(e) any development or event which has had or could
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this Section 5.9 shall be accompanied by
a statement of a Responsible Officer setting forth details of the
occurrence referred to therein and stating what action the
Borrower proposes to take with respect thereto.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the
Commitments remain in effect or any amount is owing to any Lender
or the Agent hereunder, the Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly:
6.1 Limitation on Indebtedness. At any time during a
Specified Rating Period, (a) permit the aggregate principal
amount of Specified Unsecured Indebtedness to exceed $130,000,000
at any one time outstanding; (b) permit the aggregate principal
amount of Specified Unsecured Indebtedness (excluding the Loans
hereunder and the loans under the Existing Credit Agreement and
any successor Specified Revolving Credit Agreement (but only to
the extent the commitments under such successor agreement have
replaced the "Commitments" under the Existing Credit Agreement))
to exceed $45,000,000 at any one time outstanding; or (c) permit
the aggregate principal amount of Specified Unsecured
Indebtedness, when added to the aggregate principal amount of
commercial paper issued by the Borrower or any of its Significant
Subsidiaries, to exceed $175,000,000 at any one time outstanding.<PAGE>
6.2 Maintenance of Specified Revolving Credit
Agreements. In the case of the Borrower, fail to be a party at
all times to one or more Specified Revolving Credit Agreements
providing for commitments to lend revolving credit loans to the
Borrower (including the "Commitments" under and as defined in the
Existing Credit Agreement) in an aggregate amount of at least
$50,000,000.
6.3 Limitation on Liens. Create, incur, assume or
suffer to exist (collectively, to "Incur") any Lien (other than
(a) Liens described on Schedule 6.3 and (b) Liens in favor of the
Borrower or any of its Subsidiaries) upon (i) any Receivables
arising from the sale of electrical energy or (ii) any Bonds,
unless, in each case, on or prior to the date of Incurrence of
any such Lien, the obligations of the Borrower hereunder shall
have been secured by a perfected first priority security interest
in such collateral, and on such terms, as shall be satisfactory
to each of the Lenders.
6.4 Limitation on Fundamental Changes. In the case of
the Borrower and each Significant Subsidiary, (i) enter into any
merger, consolidation or amalgamation, or (ii) liquidate, wind up
or dissolve itself (or suffer any liquidation or dissolution), or
(iii) convey, sell, lease, assign, transfer or otherwise dispose
of, in any single transaction or series of related transactions,
assets constituting a Material Portion, or (iv) sell or assign
with or without recourse any Receivables arising from the sale of
electrical energy; provided that, so long as no Material Adverse
Effect would result therefrom:
(a) any Significant Subsidiary may be merged or
consolidated with or into the Borrower (provided that the
Borrower shall be the continuing or surviving corporation)
or with or into any one or more Wholly Owned Significant
Subsidiaries (provided that such Wholly Owned Significant
Subsidiary or Subsidiaries shall be the continuing or
surviving corporation(s));
(b) any Significant Subsidiary may sell, lease,
transfer or otherwise dispose of any or all of its assets
(upon voluntary liquidation or otherwise) to the Borrower or
any Wholly Owned Significant Subsidiary; and
(c) the Borrower and any Significant Subsidiary may
sell Receivables for collection purposes in the ordinary
course of business.
6.5 Limitation on More Restrictive Terms. Enter into
any Specified Revolving Credit Agreement, or enter into any
amendment, supplement or other modification to any Specified
Revolving Credit Agreement, if such Specified Revolving Credit
Agreement, at the time entered into or after giving effect to any
such amendment, supplement or other modification, would contain
any representation and warranty, covenant or event of default
that either (a) covers a matter that is not covered by any
representation and warranty, covenant or event of default set
forth in this Agreement or (b) covers a matter covered by any<PAGE>
representation and warranty, covenant or event of default set
forth in this Agreement but is more restrictive on the Borrower
and its Subsidiaries than the corresponding provisions of this
Agreement, unless (i) the Borrower shall have given the Lenders
at least 30 days' written notice thereof, (ii) concurrently with
the effectiveness thereof, each Lender (an "Exiting Lender")
which so requests shall have become a party to such Specified
Revolving Credit Agreement with a commitment thereunder in an
amount equal to its Commitment hereunder (or such other amount as
shall be acceptable to the Borrower and such Exiting Lender), in
which case such Exiting Lender's Commitment shall be terminated
and such Exiting Lender shall cease to be a Lender hereunder, and
(iii) each Lender that is not an Exiting Lender shall have
consented, in its sole discretion, to the termination of each
such Exiting Lender's Commitment hereunder.
6.6 Subsidiaries. At any time, permit the aggregate
book value of the Tangible Assets of the Subsidiaries of the
Borrower to exceed 10% of the aggregate book value of the
Tangible Assets of the Borrower and its Subsidiaries taken as a
whole.
6.7 Limitation on Lines of Business. In the case of
the Borrower and each Significant Subsidiary, (a) enter into any
business, either directly or through any Subsidiary, except for
(i) those businesses in which the Borrower and its Significant
Subsidiaries are engaged on the date of this Agreement or which
are directly related thereto and (ii) businesses which are
immaterial in relation to the businesses referred to in clause
(i) above, or (b) make any material change in its present method
of conducting business.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be
continuing (each, an "Event of Default"):
(a) The Borrower shall fail to pay any principal of
any Loan when due in accordance with the terms hereof; or
the Borrower shall fail to pay any interest on any Loan, or
any facility fee or other amount payable hereunder, within
five days after any such interest, fee or other amount
becomes due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made
by the Borrower herein or which is contained in any
certificate, document or financial or other statement
furnished by it at any time under or in connection with this
Agreement shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(c) The Borrower shall default in the observance or
performance of any agreement contained in Section 4.2(d) or
6; or<PAGE>
(d) The Borrower shall default in the observance or
performance of any other agreement contained in this
Agreement (other than as provided in paragraphs (a) through
(c) of this Section 7), and such default shall continue
unremedied for a period of 30 days after notice from the
Agent or the Required Lenders; or
(e) (i) The Borrower or any of its Subsidiaries shall
(x) default in making any payment of any principal of any
Indebtedness (including, without limitation, any Guarantee
Obligation, but excluding the Loans) on the scheduled due
date with respect thereto; or (y) default in making any
payment of any interest on any such Indebtedness beyond the
period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created; or (z)
default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or
contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur
or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or
beneficiary of such Indebtedness (or a trustee or agent on
behalf of such holder or beneficiary) to cause, with the
giving of notice if required, such Indebtedness to become
due prior to its stated maturity (or, in the case of any
such Indebtedness constituting a Guarantee Obligation, to
become payable); provided, that a default, event or
condition described in clause (x), (y) or (z) of this clause
(i) shall not at any time constitute an Event of Default
under this Agreement unless, at such time, one or more
defaults, events or conditions of the type described in
clauses (x), (y) and (z) of this clause (i) shall have
occurred and be continuing (and shall not have been cured or
waived in accordance with the documentation governing such
Indebtedness) with respect to Indebtedness the outstanding
principal amount of which exceeds in the aggregate
$5,000,000 or (ii) any breach of the covenant contained in
Section 10.5 of the Existing Credit Agreement as in effect
on the date hereof shall occur; or
(f) (i) The Borrower or any of its Significant
Subsidiaries shall commence any case, proceeding or other
action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with
respect to it or its debts under any such law, or (B)
seeking appointment under any such law of a receiver,
trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or
the Borrower or any of its Significant Subsidiaries shall
make a general assignment for the benefit of its creditors;
or (ii) there shall be commenced against the Borrower or any
of its Significant Subsidiaries any case, proceeding or<PAGE>
other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 45 days; or (iii)
there shall be commenced against the Borrower or any of its
Significant Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of
an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal
within 45 days from the entry thereof; or (iv) the Borrower
or any of its Significant Subsidiaries shall take any action
in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) the Borrower or any of its
Significant Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay
its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan, (ii) any
"accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect
to any Plan or any Lien in favor of the PBGC or a Plan shall
arise on the assets of the Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or
to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan
for purposes of Title IV of ERISA, (iv) any Single Employer
Plan shall terminate for purposes of Title IV of ERISA,
(v) the Borrower or any Commonly Controlled Entity shall, or
in the reasonable opinion of the Required Lenders is likely
to, incur any liability in connection with a withdrawal
from, or the Insolvency or Reorganization of, a
Multiemployer Plan or (vi) any other event or condition
shall occur or exist with respect to a Plan; and in each
case in clauses (i) through (vi) above, such event or
condition, together with all other such events or
conditions, if any, could reasonably be expected to have a
Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered
against the Borrower or any of its Subsidiaries involving in
the aggregate a liability (to the extent not paid or
provided for or covered by insurance) of $10,000,000 or
more, and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within
45 days from the entry thereof;
then, and in any such event, (A) if such event is an Event of
Default specified in clause (i) or (ii) of paragraph (f) of this<PAGE>
Section 7 with respect to the Borrower, automatically the
Commitments shall immediately terminate and the Loans hereunder
(with accrued interest thereon) and all other amounts owing under
this Agreement shall immediately become due and payable, and (B)
if such event is any other Event of Default, either or both of
the following actions may be taken: (i) with the consent of the
Required Lenders, the Agent may, or upon the request of the
Required Lenders, the Agent shall, by notice to the Borrower
declare the Commitments to be terminated forthwith, whereupon the
Commitments shall immediately terminate; and (ii) with the
consent of the Required Lenders, the Agent may, or upon the
request of the Required Lenders, the Agent shall, by notice to
the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement to be
due and payable forthwith, whereupon the same shall immediately
become due and payable. Except as expressly provided above in
this Section 7, presentment, demand, protest and all other
notices of any kind are hereby expressly waived.
SECTION 8. THE AGENT
8.1 Appointment. Each Lender hereby irrevocably
designates and appoints the Agent as the agent of such Lender
under this Agreement, and each such Lender irrevocably authorizes
the Agent, in such capacity, to take such action on its behalf
under the provisions of this Agreement and to exercise such
powers and perform such duties as are expressly delegated to the
Agent by the terms of this Agreement, together with such other
powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary elsewhere in this Agreement, the
Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with
any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be
read into this Agreement or otherwise exist against the Agent.
8.2 Delegation of Duties. The Agent may execute any
of its duties under this Agreement by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any
agents or attorneys in-fact selected by it with reasonable care.
8.3 Exculpatory Provisions. Neither the Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates shall be (i) liable for any action lawfully taken
or omitted to be taken by it or such Person under or in
connection with this Agreement (except for its or such Person's
own gross negligence or willful misconduct) or (ii) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or any officer
thereof contained in this Agreement or in any certificate,
report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this
Agreement or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or for any<PAGE>
failure of the Borrower to perform its obligations hereunder.
The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the
Borrower.
8.4 Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Agent.
The Agent may deem and treat the Lender specified in the Register
with respect to any amount owing hereunder as the owner thereof
for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing
to take any action under this Agreement unless it shall first
receive such advice or concurrence of the Required Lenders as it
deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, under
this Agreement in accordance with a request of the Required
Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.
8.5 Notice of Default. The Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or
Event of Default hereunder unless the Agent has received notice
from a Lender or the Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give notice thereof to
the Lenders. The Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed
by the Required Lenders; provided that unless and until the Agent
shall have received such directions, the Agent may (but shall not
be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders.
8.6 Non-Reliance on Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or
Affiliates has made any representations or warranties to it and
that no act by the Agent hereafter taken, including any review of
the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and
without reliance upon the Agent or any other Lender, and based on<PAGE>
such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business,
operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to
make its Loans hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without
reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and
other condition and creditworthiness of the Borrower. Except for
notices, reports and other documents expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall
not have any duty or responsibility to provide any Lender with
any credit or other information concerning the business,
operations, property, condition (financial or otherwise),
prospects or creditworthiness of the Borrower which may come into
the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
8.7 Indemnification. The Lenders agree to indemnify
the Agent in its capacity as such (to the extent not reimbursed
by the Borrower and without limiting the obligation of the
Borrower to do so), ratably according to their respective
Commitment Percentages in effect on the date on which
indemnification is sought (or, if indemnification is sought after
the date upon which the Commitments shall have terminated and the
Loans shall have been paid in full, ratably in accordance with
their Commitment Percentages immediately prior to such date),
from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment
of the Loans) be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of, the Commitments,
this Agreement, or any documents contemplated by or referred to
herein or the transactions contemplated hereby or any action
taken or omitted by the Agent under or in connection with any of
the foregoing; provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Agent's gross negligence
or willful misconduct.
8.8 Agent in Its Individual Capacity. The Agent and
its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower as
though the Agent were not the Agent hereunder. With respect to
the Loans made by it, the Agent shall have the same rights and
powers under this Agreement as any Lender and may exercise the
same as though it were not the Agent, and the terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.
8.9 Successor Agent. The Agent may resign as Agent
upon 10 days' notice to the Lenders and the Borrower. If the<PAGE>
Agent shall resign as Agent under this Agreement, then the
Required Lenders shall appoint from among the Lenders a successor
agent for the Lenders, which successor agent shall be approved by
the Borrower (which approval shall not be unreasonably withheld),
whereupon such successor agent shall succeed to the rights,
powers and duties of the Agent, and the term "Agent" shall mean
such successor agent effective upon such appointment and
approval, and the former Agent's rights, powers and duties as
Agent shall be terminated, without any other or further act or
deed on the part of such former Agent or any of the parties to
this Agreement or any holders of the Loans. After any retiring
Agent's resignation as Agent, the provisions of this Section 8
shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement,
nor any terms hereof may be amended, supplemented or modified
except in accordance with the provisions of this Section 9.1. The
Required Lenders may, or, with the written consent of the
Required Lenders, the Agent may, from time to time, (a) enter
into with the Borrower written amendments, supplements or
modifications hereto for the purpose of adding any provisions to
this Agreement or changing in any manner the rights of the
Lenders or of the Borrower hereunder or (b) waive, on such terms
and conditions as the Required Lenders or the Agent, as the case
may be, may specify in such instrument, any of the requirements
of this Agreement or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such
amendment, supplement or modification shall (i) reduce the amount
or extend the scheduled date of maturity of any Loan, or reduce
the stated rate of any interest or fee payable hereunder or
extend the scheduled date of any payment thereof or increase the
amount or extend the expiration date of any Lender's Commitment,
in each case without the consent of each Lender directly affected
thereby, or (ii) amend, modify or waive any provision of this
Section 9.1 or any other provision of this Agreement which
specifies which Lenders must consent to a particular matter, or
reduce the percentage specified in the definition of "Required
Lenders", or consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this
Agreement, in each case without the written consent of all the
Lenders, or (iii) amend, modify or waive any provision of Section
8 without the written consent of the then Agent. Any such waiver
and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the
Borrower, the Lenders, the Agent and all future holders of the
Loans. In the case of any waiver, the Borrower, the Lenders and
the Agent shall be restored to their former positions and rights
hereunder, and any Default or Event of Default waived shall be
deemed to be cured and not continuing; no such waiver shall
extend to any subsequent or other Default or Event of Default or
impair any right consequent thereon.<PAGE>
9.2 Notices. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in
writing (including by facsimile transmission), and, unless
otherwise expressly provided herein, shall be deemed to have been
duly given or made when delivered, or three Business Days after
being deposited in the mail, postage prepaid, or, in the case of
telecopy notice, when received, addressed as follows in the case
of the Borrower and the Agent, and as set forth in Schedule 1.1
in the case of the other parties hereto, or to such other address
as may be hereafter notified by the respective parties hereto:
The Borrower: Central Maine Power Company
83 Edison Drive
Augusta, Maine 04336
Attention: Treasurer (with a concurrent copy
to William M. Finn, Esq., Corporate Counsel)
Fax: 207-623-5908
The Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Jaimin Patel
Fax: 212-270-3841
provided that any notice, request or demand to or upon the Agent
or the Lenders pursuant to Section 2.2, 2.4, 2.6, 2.7 or 2.10
shall not be effective until received.
9.3 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Agent or
any Lender, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative
and not exclusive of any rights, remedies, powers and privileges
provided by law.
9.4 Survival. (a) The agreements contained in
Sections 2.16, 2.17(a), 2.18, 8.7 and 9.5 shall survive the
termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
(b) All representations and warranties made hereunder
and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
(c) Nothing herein shall be deemed to require the
Borrower and its Subsidiaries to continue to comply with the
covenants set forth in Sections 5 and 6 at any time after the
Commitments have been terminated and all Loans, interest and
facility fees, together with all other amounts owing hereunder of
which the Borrower shall have received notice, have been paid in
full.<PAGE>
9.5 Payment of Expenses and Taxes. The Borrower
agrees (a) to pay or reimburse the Agent for all its reasonable
out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment,
supplement or modification to, this Agreement and any other
documents prepared in connection herewith, and the consummation
and administration of the transactions contemplated hereby,
including, without limitation, the reasonable fees and
disbursements of counsel to the Agent, (b) to pay or reimburse
the Agent and each Lender for all its costs and expenses incurred
in connection with the enforcement or preservation of any rights
under this Agreement and any such other documents, including,
without limitation, the fees and disbursements of counsel to the
Agent and separate counsel to the Lenders, provided, that the
Borrower shall not be obligated to pay the fees and disbursements
of more than one firm of separate counsel to the Lenders pursuant
to this clause (b), (c) to pay, indemnify, and hold each Lender
and the Agent harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting
from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or
consent under or in respect of, this Agreement and any such other
documents, and (d) to pay, indemnify, and hold each Lender and
the Agent harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement and
any such other documents, including, without limitation, any of
the foregoing relating to the violation of, noncompliance with or
liability under, any Environmental Law applicable to the
operations of the Borrower, any of its Subsidiaries or any of the
Properties (all the foregoing in this clause (d), collectively,
the "indemnified liabilities"), provided, that the Borrower shall
have no obligation hereunder to the Agent or any Lender with
respect to indemnified liabilities arising from the gross
negligence or willful misconduct of the Agent or such Lender, as
the case may be.
9.6 Transfer Provisions. (a) Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lenders, the Agent and their respective
successors and assigns, except that the Borrower may not assign
or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Participations. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at
any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to
such Lender, any Commitment of such Lender or any other interest
of such Lender hereunder. In the event of any such sale by a
Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to<PAGE>
this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall
remain the holder of any such Loan for all purposes under this
Agreement, and the Borrower and the Agent shall continue to deal
solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. In no
event shall any Participant under any such participation have any
right to approve any amendment or waiver of any provision of this
Agreement, or any consent to any departure by the Borrower
therefrom, unless (i) such amendment, waiver or consent would
reduce the principal of, or interest on, any Loans, reduce any
fees payable hereunder, or postpone the date of the final
maturity of any Loans and (ii) such Participant would be directly
affected thereby. The Borrower agrees that if amounts
outstanding under this Agreement are due or unpaid, or shall have
been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the
maximum extent permitted by applicable law, be deemed to have the
right of setoff in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as
a Lender under this Agreement, provided that, in purchasing such
participating interest, such Participant shall be deemed to have
agreed to share with the Lenders the proceeds thereof as provided
in Section 9.7(a) as fully as if it were a Lender hereunder. The
Borrower also agrees that each Participant shall be entitled to
the benefits of Sections 2.16, 2.17 and 2.18 with respect to its
participation in the Commitments and the Loans outstanding from
time to time as if it were a Lender; provided that, in the case
of Section 2.17, such Participant shall have complied with the
requirements of said Section and provided, further, that no
Participant shall be entitled to receive any greater amount
pursuant to any such Section than the transferor Lender would
have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such
Participant had no such transfer occurred.
(c) Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at
any time and from time to time assign to any Lender or any
Affiliate thereof or, with the consent of the Borrower and the
Agent (which in each case shall not be unreasonably withheld), to
an additional bank or financial institution (an "Assignee") all
or any part of its rights and obligations under this Agreement
pursuant to an Assignment and Acceptance, substantially in the
form of Exhibit D, executed by such Assignee, such assigning
Lender (and, in the case of an Assignee that is not then a Lender
or an Affiliate thereof, by the Borrower and the Agent) and
delivered to the Agent for its acceptance and recording in the
Register. Upon such execution, delivery, acceptance and
recording, from and after the effective date determined pursuant
to such Assignment and Acceptance, (i) the Assignee thereunder
shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a
Lender hereunder with a Commitment as set forth therein, and (ii)
the assigning Lender thereunder shall, to the extent provided in
such Assignment and Acceptance, be released from its obligations<PAGE>
under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such
assigning Lender shall cease to be a party hereto).
Notwithstanding anything to the contrary in this Agreement, (i)
the consent of the Borrower shall not be required for any
assignment which occurs at any time when any of the events
described in Section 7(f) with respect to the Borrower shall have
occurred and be continuing and (ii) if an assignment by any
Lender to any Affiliate of any Lender pursuant to this Section
9.6(c) results in increased costs under Section 2.16 or 2.17
which would not be payable absent such assignment ("Excess
Increased Costs"), the Borrower shall not be obligated to pay
such Excess Increased Costs, provided, that the Borrower shall be
obligated to pay any other increased costs of the type described
in said Sections which result from changes occurring after the
date of such assignment.
(d) The Register. The Agent, on behalf of the
Borrower, shall maintain at the address of the Agent referred to
in Section 9.2 a copy of each Assignment and Acceptance delivered
to it and a register (the "Register") for the recordation of the
names and addresses of the Lenders and the Commitment of, and
principal amount of the Loans owing to, each Lender from time to
time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the
Lenders shall treat each Person whose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as
the owner thereof for all purposes of this Agreement,
notwithstanding any notice to the contrary. Any assignment of
any Loan or other obligation hereunder shall be effective only
upon appropriate entries with respect thereto being made in the
Register. The Register shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(e) Recordation. Upon its receipt of an Assignment
and Acceptance executed by an assigning Lender and an Assignee
(and, in the case of an Assignee that is not then a Lender or an
Affiliate thereof, by the Borrower and the Agent) together with
payment to the Agent of a registration and processing fee of
$3,000, the Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) on the effective date determined pursuant
thereto record the information contained therein in the Register
and give notice of such acceptance and recordation to the Lenders
and the Borrower.
(f) Disclosure. The Borrower authorizes each Lender
to disclose to any Participant or Assignee (each, a "Transferee")
and any prospective Transferee, subject to the provisions of
Section 9.15, any and all financial information in such Lender's
possession concerning the Borrower and its Affiliates which has
been delivered to such Lender by or on behalf of the Borrower
pursuant to this Agreement or which has been delivered to such
Lender by or on behalf of the Borrower in connection with such
Lender's credit evaluation of the Borrower and its Affiliates
prior to becoming a party to this Agreement.<PAGE>
(g) Pledges; Notes. For avoidance of doubt, the
parties to this Agreement acknowledge that the provisions of this
Section 9.6 concerning assignments of Loans relate only to
absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan to
any Federal Reserve Bank in accordance with applicable law. In
order to facilitate any such pledge or assignment, the Borrower
hereby agrees that, upon request of any Lender at any time and
from time to time after the Borrower has made its initial
borrowing hereunder, the Borrower shall provide to such Lender,
at the Borrower's own expense, a promissory note, substantially
in the form of Exhibit E-1 or E-2, as the case may be, evidencing
the Revolving Credit Loans or Competitive Loans, as the case may
be, owing to such Lender.
9.7 Adjustments; Set-off. (a) If any Lender (a
"benefitted Lender") shall at any time receive any payment of all
or part of its Loans, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 7(f), or otherwise), in a
greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other
Lender's Loans that are then due and payable, or interest
thereon, such benefitted Lender shall purchase for cash from the
other Lenders a participating interest in such portion of each
such other Lender's Loan, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds
thereof, as shall be necessary to cause such benefitted Lender to
share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, however,
that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the
Lenders provided by law, each Lender shall have the right,
without prior notice to the Borrower, any such notice being
expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special,
time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each
case whether direct or indirect, absolute or contingent, matured
or unmatured, at any time held or owing by such Lender or any
branch or agency thereof to or for the credit or the account of
the Borrower. Each Lender agrees promptly to notify the Borrower
and the Agent after any such set-off and application made by such
Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application.
9.8 Counterparts. This Agreement may be executed by
one or more of the parties to this Agreement on any number of<PAGE>
separate counterparts (including by facsimile transmission), and
all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of
this Agreement signed by all the parties shall be lodged with the
Borrower and the Agent.
9.9 Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
9.10 Integration. This Agreement represents the
agreement of the Borrower, the Agent and the Lenders with respect
to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Agent or any
Lender relative to subject matter hereof not expressly set forth
or referred to herein.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
9.12 Submission To Jurisdiction; Waivers. The
Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement, or for
recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the
United States of America for the Southern District of
New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(c) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar
form of mail), postage prepaid, to the Borrower at its
address set forth in Section 9.2 or at such other address of
which the Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted
by law or shall limit the right to sue in any other
jurisdiction; and<PAGE>
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this Section 9.12 any
special, exemplary, punitive or consequential damages.
9.13 Acknowledgments. The Borrower hereby
acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement;
(b) neither the Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or
in connection with this Agreement, and the relationship
between Agent and Lenders, on one hand, and the Borrower, on
the other hand, in connection herewith is solely that of
debtor and creditor; and
(c) no joint venture is created hereby or otherwise
exists by virtue of the transactions contemplated hereby
among the Lenders or among the Borrower and the Lenders.
9.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.<PAGE>
9.15 Confidentiality. The Lenders shall, with respect
to any and all financial statements or other reports or documents
delivered by the Borrower or any Subsidiary to the Lenders
pursuant to this Agreement, or obtained by the Lenders pursuant
to Section 5.7, to the extent that the Borrower or such
Subsidiary shall have specifically designated any information
contained therein to be treated as confidential and to the extent
that such information therein contained has not theretofore
otherwise been disclosed in such a manner as to render such
information no longer confidential, employ reasonable procedures
designed reasonably to maintain the confidential nature of the
information therein contained; provided, however, that a Lender
may disclose or disseminate such information to: (a) such
Lender's employees, agents, attorneys and accountants who would
ordinarily have access to such information in the normal course
of the performance of their duties; (b) such third parties as
such Lender may, in its discretion, deem reasonably necessary or
desirable in connection with or in response to (i) compliance
with any law, ordinance or governmental order, regulation, rule,
policy, subpoena, investigation or request or (ii) any order,
decree, judgment, subpoena, notice of discovery or similar ruling
or pleading issued, filed, served or purported on its face to be
issued, filed or served (x) by or under authority of any court,
tribunal, arbitration board of any governmental agency,
commission, authority board of similar entity, (y) in connection
with any proceeding, case or matter pending (or on its face
purported to be pending) before any court, tribunal, arbitration
board or any governmental agency, or (z) in connection with the
enforcement of any of the Borrower's obligations hereunder or
under any other document, instrument or agreement executed and
delivered in connection herewith; (c) any prospective Transferee
(including an Affiliate of such Lender) in connection with any
participation or assignment pursuant to Section 9.6; and (d) any
entity utilizing such information to rate or classify such
Lender's or its parent holding company's debt or equity
securities (or other securities which are secured by letters of
credit issued by such Lender) for sale to the public.
Notwithstanding any contrary provision in this Agreement, each
Lender's obligations under this Section 9.15 shall survive the
replacement of such Lender pursuant to any provision of this
Agreement with respect to confidential information received prior
thereto for as long as such information is required to be treated
as confidential pursuant hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
CENTRAL MAINE POWER COMPANY
By: /s/ Douglas Stevenson
Title: Treasurer<PAGE>
CHEMICAL BANK,
as Agent and as a Lender
By: /s/ Beth F. Herman
Title: Vice President
THE BANK OF NEW YORK
By: /s/ John W. Hall
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Michael Kane
Title: Managing Director
FLEET BANK OF MAINE
By: /s/ Tracy L. Hawkins
Title: Vice President
KEY BANK OF MAINE
By: /s/ David Foster
Title: Vice President
SHAWMUT BANK
By: /s/ Robert D. Lanigan
Title: Managing Director<PAGE>
THE TORONTO-DOMINION BANK
By: /s/ David G. Parker
Title: Mgr. Cr. Admin.
UNION BANK OF SWITZERLAND
By: /s/ Christopher W. Criswell
Title: Vice President
By: /s/ Dieter Hoeppli
Title: Assistant Vice President<PAGE>
Exhibit 10-96.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this ninth (9th) day of
December, 1994, by and between Central Maine Power Company, a
Maine corporation with its principal place of business in
Augusta, Maine (hereinafter referred to as the "Company"), and
Arthur W. Adelberg (hereinafter referred to as the "Executive").
WHEREAS, the Company recognizes that the Executive is a
valued officer because of his knowledge of the Company's affairs
and his experience and leadership capabilities, and desires to
encourage his continued employment with the Company to assure
itself of the continuing advantage of that knowledge, experience
and leadership for the benefit of customers and shareholders,
particularly during a period of transition in various aspects of
the Company's business and in the event of a Change of Control of
the Company; and
WHEREAS, the Executive desires to serve in the employ of the
Company on a full-time basis for a period provided in this
Employment Agreement (hereinafter referred to as the "Agreement")
on the terms and conditions hereinafter set forth; and
WHEREAS, to these ends the Company desires to provide the
Executive with certain payments and benefits in the event of the
termination of his employment in certain circumstances; and
WHEREAS, the Company and the Executive wish to set forth the
terms and conditions under which such employment and payments and
benefits will occur.<PAGE>
NOW, THEREFORE, in consideration of the continued offer of
employment by the Company and the continued acceptance of
employment by the Executive, and the mutual promises and
covenants contained herein, the Company and the Executive hereby
agree as follows:
1. Term of Agreement. a. The term of this Agreement
shall begin on December 9, 1994 (hereinafter referred to as the
"Effective Date") and shall expire on December 31, 1997;
provided, however, that on December 31, 1997 and on each December
31 thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year unless not later than the
preceding October 31 either the Company or the Executive shall
have given notice that such party does not wish to extend the
term of this Agreement.
b. If a Change of Control occurs during the original term
of this Agreement or any extension, then the term of this
Agreement shall be automatically extended for a thirty-six (36)
calendar month period beginning on the first day of the month
following the month in which such Change of Control occurs.
c. Notwithstanding anything to the contrary in this
Section 1, this Agreement and all obligations of the Company
hereunder shall terminate on the date of the Executive's death,
or thirty (30) days after the Company gives notice to the
Executive that the Company is terminating the Executive's
employment for reason of Total Disability or Cause.
2. Definitions. The following terms shall have the
meanings set forth below:<PAGE>
"Affiliate" means a person that directly or indirectly
through one or more intermediaries controls, is controlled by, or
is under common control with the Company.
"Board" means the Board of Directors of the Company.
"Cause" means any of the following events or occurrences:
(i) An act of material dishonesty taken by, or
committed at the request of, the Executive.
(ii) Any illegal or unethical conduct which, in the
good faith judgment of the Board, would impair the
Executive's ability to perform his duties under
this Agreement or would impair the business
reputation of the Company.
(iii) Conviction of a felony.
(iv) The continued failure of the Executive to perform
substantially his responsibilities and duties
under this Agreement, after demand for performance
has been delivered in writing to the Executive
specifying the manner in which the Company
believes that the Executive is not performing.
Notwithstanding any contrary provision of this Agreement, the
Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Executive
a certified copy of a resolution duly adopted by the affirmative
vote of two-thirds of the members of the Board who are not
employees of the Company at a meeting of the Board called and
held for such purpose (after reasonable notice to the Executive
and an opportunity for the Executive, together with his counsel,<PAGE>
to be heard before the Board), finding in good faith one of the
events or occurrences set forth in parts (i) through (iv) of the
definition of "Cause" in this Agreement and specifying the
particulars thereof in detail.
"Change of Control" means the occurrence of any of the
following events:
(i) Any "person," as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than
the Company or any Affiliate or any trustee or
other fiduciary holding securities under an
employee benefit plan of the Company or any
Affiliate), is or becomes the beneficial owner, as
defined in Rule 13d-3 under the Exchange Act,
directly or indirectly, of stock of the Company
representing thirty percent (30%) or more of the
combined voting power of the Company's then
outstanding stock eligible to vote.
(ii) During any period of two (2) consecutive years
after the execution of this Agreement, individuals
who at the beginning of such period constitute the
Board, and any new director whose election by the
Board or nomination for election by the Company's
stockholders was approved by a vote of at least
two-thirds of the directors then in office who
either were directors at the beginning of the
period or whose election or nomination for<PAGE>
election was previously so approved, cease for any
reason to constitute at least a majority thereof.
(iii) The stockholders of the Company approve a merger
or consolidation of the Company with any other
corporation, other than a merger or consolidation
which would result in the voting stock of the
Company outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) more than
fifty percent (50%) of the combined voting power
of the outstanding voting stock of the Company or
such surviving entity immediately after such
merger or consolidation; provided, that a merger
or consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove
defined) acquires more than thirty percent (30%)
of the combined voting power of the Company's then
outstanding securities shall not constitute a
Change of Control of the Company.
(iv) The stockholders of the Company approve a plan of
complete liquidation of the Company or an
agreement for the sale, lease, exchange or other
disposition by the Company of all or substantially
all of the Company's assets (or any transaction
having a similar effect).<PAGE>
"Constructive Discharge" means, so long as no Change of
Control has occurred, any reduction in the Executive's
annual base salary in effect as of the Effective Date of
this Agreement, or as the same may be increased from time to
time, other than any across-the-board base salary reduction
for a group or all of the executive officers of the Company,
and also means, on or after a Change of Control,
(i) any reduction in the Executive's annual base
salary in effect as of the Effective Date of this
Agreement, or as the same may be increased from
time to time;
(ii) a failure to increase the Executive's annual base
salary commensurate with any across-the-board
percentage increases in the compensation of other
executive officers of the Company;
(iii) a substantial reduction in the nature or scope of
the Executive's responsibilities, duties or
authority from those described in Section 3.c of
this Agreement;
(iv) a material adverse change in the Executive's title
or position; or
(v) relocation of the Executive's place of employment
from the Company's principal executive offices or
to a place more than twenty-five (25) miles from
Augusta, Maine without the Executive's consent.
"Severance Benefits" means the benefits set forth in Section
5.a or 5.b of this Agreement, as applicable.<PAGE>
"Severance Period" means, in the case of a Change of
Control, the period from the date of termination as determined in
accordance with Section 6 of this Agreement until the third
anniversary of such date.
"Total Disability" means the complete and permanent
inability of the Executive to perform all of his duties under
this Agreement on a full-time basis for a period of at least six
(6) consecutive months, as determined by the Board upon the basis
of such evidence, which may include independent medical reports
and data, as the Board deems appropriate or necessary.
3. Employment. a. The Company hereby agrees to continue
its employment of the Executive in the capacity of Vice
President, Law and Power Supply, and the Executive hereby agrees
to remain in the employ of the Company for the period beginning
on the Effective Date and ending on the date on which the
Executive's employment is terminated in accordance with this
Agreement (the "Employment Period"). This Agreement shall not
restrict in any way the right of the Company to terminate the
Executive's employment at whatever time and for whatever reason
it deems appropriate, nor shall it limit the right of the
Executive to terminate employment at any time for whatever reason
he deems appropriate.
b. The Executive agrees that during the Employment Period
he shall devote substantially all his business attention and time
to the business and affairs of the Company and its Affiliates,
and use his best efforts to perform faithfully and efficiently
the duties and responsibilities of the Executive under this<PAGE>
Agreement. It is expressly understood that (i) the Executive may
devote a reasonable amount of time to such industry associations
and charitable and civic endeavors as shall not materially
interfere with the services that the Executive is required to
render under this Agreement, and (ii) the Executive may serve as
a member of one or more boards of directors of companies that are
not affiliated with the Company and do not compete with the
Company or any of its Affiliates.
c. The following listing of job duties shall represent the
Executive's primary responsibilities. Such responsibilities may
be expanded, and so long as no Change of Control has occurred may
be decreased, as the business needs of the Company require. The
Executive's primary job responsibilities shall include, but not
be limited to:
participation in the development and general oversight of
corporate policies, strategies and business initiatives as a
member of the Company's Executive Committee;
the development and implementation of strategies to control
non-utility generation costs; and
the development, implementation and general oversight of
corporate strategies in legislative and regulatory matters
and wholesale power and transmission marketing issues.
The departments reporting directly to the Executive shall be as
follows: Law; Power Supply; Government Relations; Legislative
Affairs; Community Relations; Internal Audit; and Regulatory
Services.
4. Compensation and Benefits. a. During the Employment
Period, the Executive shall be compensated as follows:
(i) He shall receive an annual base salary, the amount
of which shall be reviewed regularly and<PAGE>
determined from time to time by the Board, but
which shall not be less than $153,450. His salary
shall be payable in accordance with Company
practice.
(ii) He shall be entitled to participate in any and all
plans and programs maintained by the Company from
time to time to provide benefits for its
executives, including without limitation any
short-term or long-term incentive, pension, or
supplemental pension plan or program, in
accordance with the terms and conditions of any
such plan or program or the administrative
guidelines relating thereto, as may be amended
from time to time.
(iii) He shall be entitled to participate in any and all
plans and programs maintained by the Company from
time to time to provide benefits for its salaried
employees generally, including without limitation
any savings and investment, stock purchase or
group medical, dental, life, accident or
disability insurance plan or program, subject to
all eligibility requirements of general
applicability, to the extent that executives are
not excluded from participation therein under the
terms thereof or under the terms of any executive
plan or program or any approval or adoption
thereof.<PAGE>
(iv) He shall be entitled to all fringe benefits
generally provided by the Company at any time to
its full-time salaried employees, including
without limitation paid vacation, holidays and
sick leave but excluding severance pay, in
accordance with generally applicable Company
policies with respect to such benefits.
(v) He shall be entitled to all rights and benefits
under the Split-Dollar Life Insurance Agreement
between the Company and the Executive in effect as
of the Effective Date of this Agreement in
accordance with the terms of such Split-Dollar
Life Insurance Agreement.
b. Notwithstanding any contrary provision of this
Agreement, any compensation or benefits which are vested in the
Executive or which the Executive is otherwise entitled to receive
under any plan or program of the Company or any agreement between
the Company and the Executive before, at or subsequent to the
Executive's termination of employment shall be furnished and paid
in accordance with the terms and provisions of such plan, program
or agreement.
c. All compensation payable under this Section 4 shall be
subject to normal payroll deductions for withholding income
taxes, social security taxes and the like.
5. Severance Benefits. a. If, on or after a Change of
Control, the Executive's employment with the Company is
terminated during the Employment Period (i) by the Company and/or<PAGE>
any successor for any reason other than death, Total Disability
or Cause or (ii) by the Executive within twelve (12) calendar
months of a Constructive Discharge, Severance Benefits shall be
provided as follows:
(i) The Company shall pay the Executive, in one cash
lump sum within sixty (60) days following the date
of termination of employment as determined under
Section 6 of this Agreement, an amount equal to
2.99 times the Executive's base amount, as defined
in Section 280G(b)(3) of the Internal Revenue Code
of 1986, as amended.
(ii) Core coverage for the Executive under the
Company's group medical, life, accident and
disability plans or programs shall continue for
the Severance Period on the same terms and
conditions, as if the Executive's employment had
not terminated. In the event that the Executive's
participation in any such plan or program is
barred, the Company shall arrange at its expense
to provide him during the Severance Period with
core benefits substantially similar to those which
he would otherwise be entitled to receive under
such plans and programs.
(iii) The Severance Period shall count as service for
all purposes (including benefit accrual and
eligibility) under any benefit plan of the Company
applicable to the Executive immediately prior to<PAGE>
the Executive's termination of employment, for
which service with the Company is taken into
account, including without limitation any pension
or supplemental pension plan, and all benefits
under such plans that are subject to vesting shall
vest as of the date of such termination of
employment.
(iv) The Company shall pay a fee to an independent
outplacement firm selected by the Executive for
outplacement services in an amount equal to the
actual fee for such services up to a total of
$10,000.
b. If no Change of Control has occurred and the
Executive's employment with the Company is terminated during the
Employment Period (i) by the Company for any reason other than
death, Total Disability or Cause or (ii) by the Executive within
six (6) calendar months of a Constructive Discharge, the Company
shall pay the Executive, in twelve (12) equal monthly cash
installments beginning not later than sixty (60) days following
the date of termination of employment as determined under Section
6 of this Agreement, Severance Benefits equal to one times the
Executive's annual base salary in effect on the date immediately
preceding the date of termination; provided, however, that each
of the last six (6) monthly cash installments shall be reduced by
an amount equal to any base salary or other base pay or
commissions earned through other employment or any fees earned as
a consultant for the particular month, such that an installment<PAGE>
shall not be paid or payable by the Company for any month for
which such other base salary, base pay, commissions or fees equal
or exceed the amount of the installment.
6. Date of Termination. For purposes of this Agreement,
the date of termination of the Executive's employment shall be
the date written notice is given to the Executive by the Company
and/or any successor or, in the case of a Constructive Discharge,
the date written notice is given to the Company by the Executive,
provided that the Executive gives such notice within twelve (12)
calendar months of the Constructive Discharge in the case of a
Change of Control, and within six (6) calendar months of the
Constructive Discharge in other cases, and specifies therein the
event constituting the Constructive Discharge.
7. Taxes. a. In the event that any portion of the
Severance Benefits is subject to tax under Section 4999 of the
Internal Revenue Code of 1986, as amended, or any successor
provision thereto (the "Excise Tax"), the Company shall pay to
the Executive an additional amount (the "Gross-Up Amount") which,
after payment of all federal and State income taxes thereon
(assuming the Executive is at the highest marginal federal and
applicable State income tax rate in effect on the date of payment
of the Gross-Up Amount) and payment of any Excise Tax on the
Gross-Up Amount, is equal to the Excise Tax payable by the
Executive on such portion of the Severance Benefits. Any Gross-
Up Amount payable hereunder shall be paid by the Company
coincident with the payment of the Severance Benefits described
in Section 5.a(i) of this Agreement.<PAGE>
b. All amounts payable to the Executive under this
Agreement shall be subject to applicable withholding of income,
wage and other taxes.
8. Non-Competition, Confidentiality and Cooperation. The
Executive agrees that:
(i) during the Employment Period and for one (1) year
after the termination of the Executive's
employment with the Company for any reason other
than a Change of Control, the Executive shall not
serve as a director, officer, employee, partner or
consultant or in any other capacity in any
business that is involved in the generation,
transmission or distribution of electric energy
within the New England states, or solicit Company
employees for employment or other participation in
any such business, or take any other action
intended to advance the interests of such
business;
(ii) during and after the Executive's employment with
the Company, he shall not divulge or appropriate
to his own use or the use of others any secret,
proprietary or confidential information or
knowledge pertaining to the business of the
Company, or any of its Affiliates, obtained during
his employment with the Company; and
(iii) during the Employment Period, he shall support the
Company's interests and efforts in all regulatory,<PAGE>
administrative, judicial or other proceedings
affecting the Company and, after the termination
of his employment with the Company, he shall use
best efforts to comply with all reasonable
requests of the Company that he cooperate with the
Company, whether by giving testimony or otherwise,
in regulatory, administrative, judicial or other
proceedings affecting the Company except any
proceeding in which he may be in a position
adverse to that of the Company. After the
termination of employment, the Company shall
reimburse the Executive for his reasonable
expenses and his time, at a reasonable rate to be
determined, for the Executive's cooperation with
the Company in any such proceeding.
The provisions of this Section 8 shall survive the expiration or
termination of this Agreement. The Executive agrees that the
Company shall be entitled to injunctive relief to prevent any
breach or threatened breach of these provisions. In the event of
a failure to comply with part (i), (ii) or (iii) of this Section
8, the Executive agrees that the Company shall have no further
obligation to pay the Executive any Severance Benefits under
Section 5.b of this Agreement. In the event of a failure to
comply with part (i) or (ii) hereof, the Executive agrees that he
shall repay to the Company any such Section 5.b Severance
Benefits paid to him. The Company shall have the right to offset
any amounts payable to the Executive under this Agreement or<PAGE>
otherwise against any Severance Benefits which he is obligated to
repay to the Company.
9. No Mitigation. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement
by seeking other employment.
10. Assignment. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be
binding upon the successors and assigns of the Company. This
Agreement and the rights of the Executive hereunder shall not be
assignable by the Executive, and any assignment by the Executive
shall be null and void.
11. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in Augusta, Maine, in accordance with the rules of
the American Arbitration Association then in effect. The
pendency of any such dispute or controversy shall not affect any
rights or obligations under this Agreement. Judgment may be
entered on the arbitrator's award in any court having
jurisdiction.
12. Waiver; Amendment. The failure of either party to
enforce, or any delay in enforcing, any rights under this
Agreement shall not be deemed to be a waiver of such rights,
unless such waiver is an express written waiver which has been
signed by the waiving party. Waiver of any one breach shall not
be deemed to be a waiver of any other breach of the same or any
other provision hereof. This Agreement can be amended only by a
written instrument signed by each party hereto and no course of<PAGE>
dealing or practice or failure to enforce or delay in enforcing
any rights hereunder may be claimed to have effected an amendment
of this Agreement.
13. Notices. Any notice required or permitted to be given
under this Agreement shall be sufficient if in writing and sent
by first-class, registered or certified mail or hand-delivered to
the Executive at the last residence address he has provided to
the Company or, in the case of the Company, at its principal
executive offices to the attention of the Corporate Secretary.
14. Miscellaneous. This Agreement shall be construed and
enforced in accordance with the laws of the State of Maine. In
the event that any provisions of this Agreement shall be held to
be invalid, the other provisions hereof shall remain in full
force and effect.
15. Entire Agreement. The terms of this Agreement are
intended by the parties to be the final expression of their
agreement with respect to the employment of the Executive by the
Company and may not be contradicted by evidence of any prior or
contemporaneous oral or written agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
WITNESS:
Arthur W. Adelberg
CENTRAL MAINE POWER COMPANY<PAGE>
By:
Carlton D. Reed, Jr.
Chairman of the Board of Directors<PAGE>
Exhibit 10-96.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this ninth (9th) day of
December, 1994, by and between Central Maine Power Company, a
Maine corporation with its principal place of business in
Augusta, Maine (hereinafter referred to as the "Company"), and
Richard A. Crabtree (hereinafter referred to as the "Executive").
WHEREAS, the Company recognizes that the Executive is a
valued officer because of his knowledge of the Company's affairs
and his experience and leadership capabilities, and desires to
encourage his continued employment with the Company to assure
itself of the continuing advantage of that knowledge, experience
and leadership for the benefit of customers and shareholders,
particularly during a period of transition in various aspects of
the Company's business and in the event of a Change of Control of
the Company; and
WHEREAS, the Executive desires to serve in the employ of the
Company on a full-time basis for a period provided in this
Employment Agreement (hereinafter referred to as the "Agreement")
on the terms and conditions hereinafter set forth; and
WHEREAS, to these ends the Company desires to provide the
Executive with certain payments and benefits in the event of the
termination of his employment in certain circumstances; and
WHEREAS, the Company and the Executive wish to set forth the
terms and conditions under which such employment and payments and
benefits will occur.
NOW, THEREFORE, in consideration of the continued offer of
employment by the Company and the continued acceptance of
employment by the Executive, and the mutual promises and
covenants contained herein, the Company and the Executive hereby
agree as follows:<PAGE>
1. Term of Agreement. a. The term of this Agreement
shall begin on December 9, 1994 (hereinafter referred to as the
"Effective Date") and shall expire on December 31, 1997;
provided, however, that on December 31, 1997 and on each
December 31 thereafter, the term of this Agreement shall
automatically be extended for one (1) additional year unless not
later than the preceding October 31 either the Company or the
Executive shall have given notice that such party does not wish
to extend the term of this Agreement.
b. If a Change of Control occurs during the original term
of this Agreement or any extension, then the term of this
Agreement shall be automatically extended for a thirty-six (36)
calendar month period beginning on the first day of the month
following the month in which such Change of Control occurs.
c. Notwithstanding anything to the contrary in this
Section 1, this Agreement and all obligations of the Company
hereunder shall terminate on the date of the Executive's death,
or thirty (30) days after the Company gives notice to the
Executive that the Company is terminating the Executive's
employment for reason of Total Disability or Cause.
2. Definitions. The following terms shall have the
meanings set forth below:
"Affiliate" means a person that directly or indirectly
through one or more intermediaries controls, is controlled by, or
is under common control with the Company.
"Board" means the Board of Directors of the Company.
"Cause" means any of the following events or occurrences:
(i) An act of material dishonesty taken by, or
committed at the request of, the Executive.
(ii) Any illegal or unethical conduct which, in the
good faith judgment of the Board, would impair the
Executive's ability to perform his duties under<PAGE>
this Agreement or would impair the business
reputation of the Company.
(iii) Conviction of a felony.
(iv) The continued failure of the Executive to perform
substantially his responsibilities and duties
under this Agreement, after demand for performance
has been delivered in writing to the Executive
specifying the manner in which the Company
believes that the Executive is not performing.
Notwithstanding any contrary provision of this Agreement, the
Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Executive
a certified copy of a resolution duly adopted by the affirmative
vote of two-thirds of the members of the Board who are not
employees of the Company at a meeting of the Board called and
held for such purpose (after reasonable notice to the Executive
and an opportunity for the Executive, together with his counsel,
to be heard before the Board), finding in good faith one of the
events or occurrences set forth in parts (i) through (iv) of the
definition of "Cause" in this Agreement and specifying the
particulars thereof in detail.
"Change of Control" means the occurrence of any of the
following events:
(i) Any "person," as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than
the Company or any Affiliate or any trustee or
other fiduciary holding securities under an
employee benefit plan of the Company or any
Affiliate), is or becomes the beneficial owner, as
defined in Rule 13d-3 under the Exchange Act,
directly or indirectly, of stock of the Company<PAGE>
representing thirty percent (30%) or more of the
combined voting power of the Company's then
outstanding stock eligible to vote.
(ii) During any period of two (2) consecutive years
after the execution of this Agreement, individuals
who at the beginning of such period constitute the
Board, and any new director whose election by the
Board or nomination for election by the Company's
stockholders was approved by a vote of at least
two-thirds of the directors then in office who
either were directors at the beginning of the
period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute at least a majority thereof.
(iii) The stockholders of the Company approve a merger
or consolidation of the Company with any other
corporation, other than a merger or consolidation
which would result in the voting stock of the
Company outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) more than
fifty percent (50%) of the combined voting power
of the outstanding voting stock of the Company or
such surviving entity immediately after such
merger or consolidation; provided, that a merger
or consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove
defined) acquires more than thirty percent (30%)
of the combined voting power of the Company's then
outstanding securities shall not constitute a<PAGE>
Change of Control of the Company.
(iv) The stockholders of the Company approve a plan of
complete liquidation of the Company or an
agreement for the sale, lease, exchange or other
disposition by the Company of all or substantially
all of the Company's assets (or any transaction
having a similar effect).
"Constructive Discharge" means, so long as no Change of
Control has occurred, any reduction in the Executive's
annual base salary in effect as of the Effective Date of
this Agreement, or as the same may be increased from time to
time, other than any across-the-board base salary reduction
for a group or all of the executive officers of the Company,
and also means, on or after a Change of Control,
(i) any reduction in the Executive's annual base
salary in effect as of the Effective Date of this
Agreement, or as the same may be increased from
time to time;
(ii) a failure to increase the Executive's annual base
salary commensurate with any across-the-board
percentage increases in the compensation of other
executive officers of the Company;
(iii) a substantial reduction in the nature or scope of
the Executive's responsibilities, duties or
authority from those described in Section 3.c of
this Agreement;
(iv) a material adverse change in the Executive's title
or position; or
(v) relocation of the Executive's place of employment
from the Company's principal executive offices or
to a place more than twenty-five (25) miles from
Augusta, Maine without the Executive's consent.<PAGE>
"Severance Benefits" means the benefits set forth in Section
5.a or 5.b of this Agreement, as applicable.
"Severance Period" means, in the case of a Change of
Control, the period from the date of termination as determined in
accordance with Section 6 of this Agreement until the third
anniversary of such date.
"Total Disability" means the complete and permanent
inability of the Executive to perform all of his duties under
this Agreement on a full-time basis for a period of at least six
(6) consecutive months, as determined by the Board upon the basis
of such evidence, which may include independent medical reports
and data, as the Board deems appropriate or necessary.
3. Employment. a. The Company hereby agrees to continue
its employment of the Executive in the capacity of Vice
President, Retail Operations, and the Executive hereby agrees to
remain in the employ of the Company for the period beginning on
the Effective Date and ending on the date on which the
Executive's employment is terminated in accordance with this
Agreement (the "Employment Period"). This Agreement shall not
restrict in any way the right of the Company to terminate the
Executive's employment at whatever time and for whatever reason
it deems appropriate, nor shall it limit the right of the
Executive to terminate employment at any time for whatever reason
he deems appropriate.
b. The Executive agrees that during the Employment Period
he shall devote substantially all his business attention and time
to the business and affairs of the Company and its Affiliates,
and use his best efforts to perform faithfully and efficiently
the duties and responsibilities of the Executive under this
Agreement. It is expressly understood that (i) the Executive may
devote a reasonable amount of time to such industry associations
and charitable and civic endeavors as shall not materially<PAGE>
interfere with the services that the Executive is required to
render under this Agreement, and (ii) the Executive may serve as
a member of one or more boards of directors of companies that are
not affiliated with the Company and do not compete with the
Company or any of its Affiliates.
c. The following listing of job duties shall represent the
Executive's primary responsibilities. Such responsibilities may
be expanded, and so long as no Change of Control has occurred may
be decreased, as the business needs of the Company require. The
Executive's primary job responsibilities shall include, but not
be limited to:
participation in the development and general oversight of
corporate policies, strategies and business initiatives as a
member of the Company's Executive Committee;
the development, implementation and overall management and
oversight of all aspects of the Company's retail operations
policies, strategies, plans, initiatives and activities
including those concerning market share, sales volume,
customer contacts, billing and service, the design,
promotion and sales of energy product and service options,
transmission and distribution, and joint use of distribution
facilities; and
service as Chairman of the Pricing Council.
The departments reporting directly to the Executive shall be as
follows: Distribution Operations; Energy Service and Sales;
Consumer Affairs; Transmission and Distribution Planning;
Substation Operations; and Technical Services.
4. Compensation and Benefits. a. During the Employment
Period, the Executive shall be compensated as follows:
(i) He shall receive an annual base salary, the amount
of which shall be reviewed regularly and
determined from time to time by the Board, but
which shall not be less than $153,400. His salary
shall be payable in accordance with Company
practice.<PAGE>
(ii) He shall be entitled to participate in any and all
plans and programs maintained by the Company from
time to time to provide benefits for its
executives, including without limitation any
short-term or long-term incentive, pension, or
supplemental pension plan or program, in
accordance with the terms and conditions of any
such plan or program or the administrative
guidelines relating thereto, as may be amended
from time to time.
(iii) He shall be entitled to participate in any and all
plans and programs maintained by the Company from
time to time to provide benefits for its salaried
employees generally, including without limitation
any savings and investment, stock purchase or
group medical, dental, life, accident or
disability insurance plan or program, subject to
all eligibility requirements of general
applicability, to the extent that executives are
not excluded from participation therein under the
terms thereof or under the terms of any executive
plan or program or any approval or adoption
thereof.
(iv) He shall be entitled to all fringe benefits
generally provided by the Company at any time to
its full-time salaried employees, including
without limitation paid vacation, holidays and
sick leave but excluding severance pay, in
accordance with generally applicable Company
policies with respect to such benefits.
(v) He shall be entitled to all rights and benefits
under the Split-Dollar Life Insurance Agreement<PAGE>
between the Company and the Executive in effect as
of the Effective Date of this Agreement in
accordance with the terms of such Split-Dollar
Life Insurance Agreement.
b. Notwithstanding any contrary provision of this
Agreement, any compensation or benefits which are vested in the
Executive or which the Executive is otherwise entitled to receive
under any plan or program of the Company or any agreement between
the Company and the Executive before, at or subsequent to the
Executive's termination of employment shall be furnished and paid
in accordance with the terms and provisions of such plan, program
or agreement.
c. All compensation payable under this Section 4 shall be
subject to normal payroll deductions for withholding income
taxes, social security taxes and the like.
5. Severance Benefits. a. If, on or after a Change of
Control, the Executive's employment with the Company is
terminated during the Employment Period (i) by the Company and/or
any successor for any reason other than death, Total Disability
or Cause or (ii) by the Executive within twelve (12) calendar
months of a Constructive Discharge, Severance Benefits shall be
provided as follows:
(i) The Company shall pay the Executive, in one cash
lump sum within sixty (60) days following the date
of termination of employment as determined under
Section 6 of this Agreement, an amount equal to
2.99 times the Executive's base amount, as defined
in Section 280G(b)(3) of the Internal Revenue Code
of 1986, as amended.
(ii) Core coverage for the Executive under the
Company's group medical, life, accident and
disability plans or programs shall continue for<PAGE>
the Severance Period on the same terms and
conditions, as if the Executive's employment had
not terminated. In the event that the Executive's
participation in any such plan or program is
barred, the Company shall arrange at its expense
to provide him during the Severance Period with
core benefits substantially similar to those which
he would otherwise be entitled to receive under
such plans and programs.
(iii) The Severance Period shall count as service for
all purposes (including benefit accrual and
eligibility) under any benefit plan of the Company
applicable to the Executive immediately prior to
the Executive's termination of employment, for
which service with the Company is taken into
account, including without limitation any pension
or supplemental pension plan, and all benefits
under such plans that are subject to vesting shall
vest as of the date of such termination of
employment.
(iv) The Company shall pay a fee to an independent
outplacement firm selected by the Executive for
outplacement services in an amount equal to the
actual fee for such services up to a total of
$10,000.
b. If no Change of Control has occurred and the
Executive's employment with the Company is terminated during the
Employment Period (i) by the Company for any reason other than
death, Total Disability or Cause or (ii) by the Executive within
six (6) calendar months of a Constructive Discharge, the Company
shall pay the Executive, in twelve (12) equal monthly cash
installments beginning not later than sixty (60) days following<PAGE>
the date of termination of employment as determined under Section
6 of this Agreement, Severance Benefits equal to one times the
Executive's annual base salary in effect on the date immediately
preceding the date of termination; provided, however, that each
of the last six (6) monthly cash installments shall be reduced by
an amount equal to any base salary or other base pay or
commissions earned through other employment or any fees earned as
a consultant for the particular month, such that an installment
shall not be paid or payable by the Company for any month for
which such other base salary, base pay, commissions or fees equal
or exceed the amount of the installment.
6. Date of Termination. For purposes of this Agreement,
the date of termination of the Executive's employment shall be
the date written notice is given to the Executive by the Company
and/or any successor or, in the case of a Constructive Discharge,
the date written notice is given to the Company by the Executive,
provided that the Executive gives such notice within twelve (12)
calendar months of the Constructive Discharge in the case of a
Change of Control, and within six (6) calendar months of the
Constructive Discharge in other cases, and specifies therein the
event constituting the Constructive Discharge.
7. Taxes. a. In the event that any portion of the
Severance Benefits is subject to tax under Section 4999 of the
Internal Revenue Code of 1986, as amended, or any successor
provision thereto (the "Excise Tax"), the Company shall pay to
the Executive an additional amount (the "Gross-Up Amount") which,
after payment of all federal and State income taxes thereon
(assuming the Executive is at the highest marginal federal and
applicable State income tax rate in effect on the date of payment
of the Gross-Up Amount) and payment of any Excise Tax on the
Gross-Up Amount, is equal to the Excise Tax payable by the
Executive on such portion of the Severance Benefits. Any Gross-<PAGE>
Up Amount payable hereunder shall be paid by the Company
coincident with the payment of the Severance Benefits described
in Section 5.a(i) of this Agreement.
b. All amounts payable to the Executive under this
Agreement shall be subject to applicable withholding of income,
wage and other taxes.
8. Non-Competition, Confidentiality and Cooperation. The
Executive agrees that:
(i) during the Employment Period and for one (1) year
after the termination of the Executive's
employment with the Company for any reason other
than a Change of Control, the Executive shall not
serve as a director, officer, employee, partner or
consultant or in any other capacity in any
business that is involved in the generation,
transmission or distribution of electric energy
within the New England states, or solicit Company
employees for employment or other participation in
any such business, or take any other action
intended to advance the interests of such
business;
(ii) during and after the Executive's employment with
the Company, he shall not divulge or appropriate
to his own use or the use of others any secret,
proprietary or confidential information or
knowledge pertaining to the business of the
Company, or any of its Affiliates, obtained during
his employment with the Company; and
(iii) during the Employment Period, he shall support the
Company's interests and efforts in all regulatory,
administrative, judicial or other proceedings
affecting the Company and, after the termination<PAGE>
of his employment with the Company, he shall use
best efforts to comply with all reasonable
requests of the Company that he cooperate with the
Company, whether by giving testimony or otherwise,
in regulatory, administrative, judicial or other
proceedings affecting the Company except any
proceeding in which he may be in a position
adverse to that of the Company. After the
termination of employment, the Company shall
reimburse the Executive for his reasonable
expenses and his time, at a reasonable rate to be
determined, for the Executive's cooperation with
the Company in any such proceeding.
The provisions of this Section 8 shall survive the expiration or
termination of this Agreement. The Executive agrees that the
Company shall be entitled to injunctive relief to prevent any
breach or threatened breach of these provisions. In the event of
a failure to comply with part (i), (ii) or (iii) of this Section
8, the Executive agrees that the Company shall have no further
obligation to pay the Executive any Severance Benefits under
Section 5.b of this Agreement. In the event of a failure to
comply with part (i) or (ii) hereof, the Executive agrees that he
shall repay to the Company any such Section 5.b Severance
Benefits paid to him. The Company shall have the right to offset
any amounts payable to the Executive under this Agreement or
otherwise against any Severance Benefits which he is obligated to
repay to the Company.
9. No Mitigation. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement
by seeking other employment.
10. Assignment. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be<PAGE>
binding upon the successors and assigns of the Company. This
Agreement and the rights of the Executive hereunder shall not be
assignable by the Executive, and any assignment by the Executive
shall be null and void.
11. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in Augusta, Maine, in accordance with the rules of
the American Arbitration Association then in effect. The
pendency of any such dispute or controversy shall not affect any
rights or obligations under this Agreement. Judgment may be
entered on the arbitrator's award in any court having
jurisdiction.
12. Waiver; Amendment. The failure of either party to
enforce, or any delay in enforcing, any rights under this
Agreement shall not be deemed to be a waiver of such rights,
unless such waiver is an express written waiver which has been
signed by the waiving party. Waiver of any one breach shall not
be deemed to be a waiver of any other breach of the same or any
other provision hereof. This Agreement can be amended only by a
written instrument signed by each party hereto and no course of
dealing or practice or failure to enforce or delay in enforcing
any rights hereunder may be claimed to have effected an amendment
of this Agreement.
13. Notices. Any notice required or permitted to be given
under this Agreement shall be sufficient if in writing and sent
by first-class, registered or certified mail or hand-delivered to
the Executive at the last residence address he has provided to
the Company or, in the case of the Company, at its principal
executive offices to the attention of the Corporate Secretary.
14. Miscellaneous. This Agreement shall be construed and
enforced in accordance with the laws of the State of Maine. In
the event that any provisions of this Agreement shall be held to<PAGE>
be invalid, the other provisions hereof shall remain in full
force and effect.
15. Entire Agreement. The terms of this Agreement are
intended by the parties to be the final expression of their
agreement with respect to the employment of the Executive by the
Company and may not be contradicted by evidence of any prior or
contemporaneous oral or written agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
WITNESS:
Richard A. Crabtree
CENTRAL MAINE POWER COMPANY
By:
Carlton D. Reed, Jr.
Chairman of the Board of Directors<PAGE>
Exhibit 10-96.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this ninth (9th) day of
December, 1994, by and between Central Maine Power Company, a
Maine corporation with its principal place of business in
Augusta, Maine (hereinafter referred to as the "Company"), and
Gerald C. Poulin (hereinafter referred to as the "Executive").
WHEREAS, the Company recognizes that the Executive is a
valued officer because of his knowledge of the Company's affairs
and his experience and leadership capabilities, and desires to
encourage his continued employment with the Company to assure
itself of the continuing advantage of that knowledge, experience
and leadership for the benefit of customers and shareholders,
particularly during a period of transition in various aspects of
the Company's business and in the event of a Change of Control of
the Company; and
WHEREAS, the Executive desires to serve in the employ of the
Company on a full-time basis for a period provided in this
Employment Agreement (hereinafter referred to as the "Agreement")
on the terms and conditions hereinafter set forth; and
WHEREAS, to these ends the Company desires to provide the
Executive with certain payments and benefits in the event of the
termination of his employment in certain circumstances; and
WHEREAS, the Company and the Executive wish to set forth the
terms and conditions under which such employment and payments and
benefits will occur.
NOW, THEREFORE, in consideration of the continued offer of
employment by the Company and the continued acceptance of
employment by the Executive, and the mutual promises and
covenants contained herein, the Company and the Executive hereby
agree as follows:
1. Term of Agreement. a. The term of this Agreement<PAGE>
shall begin on December 9, 1994 (hereinafter referred to as the
"Effective Date") and shall expire on December 31, 1997;
provided, however, that on December 31, 1997 and on each December
31 thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year unless not later than the
preceding October 31 either the Company or the Executive shall
have given notice that such party does not wish to extend the
term of this Agreement.
b. If a Change of Control occurs during the original term
of this Agreement or any extension, then the term of this
Agreement shall be automatically extended for a thirty-six (36)
calendar month period beginning on the first day of the month
following the month in which such Change of Control occurs.
c. Notwithstanding anything to the contrary in this
Section 1, this Agreement and all obligations of the Company
hereunder shall terminate on the date of the Executive's death,
or thirty (30) days after the Company gives notice to the
Executive that the Company is terminating the Executive's
employment for reason of Total Disability or Cause.
2. Definitions. The following terms shall have the
meanings set forth below:
"Affiliate" means a person that directly or indirectly
through one or more intermediaries controls, is controlled by, or
is under common control with the Company.
"Board" means the Board of Directors of the Company.
"Cause" means any of the following events or occurrences:
(i) An act of material dishonesty taken by, or
committed at the request of, the Executive.
(ii) Any illegal or unethical conduct which, in the
good faith judgment of the Board, would impair the
Executive's ability to perform his duties under
this Agreement or would impair the business<PAGE>
reputation of the Company.
(iii) Conviction of a felony.
(iv) The continued failure of the Executive to perform
substantially his responsibilities and duties
under this Agreement, after demand for performance
has been delivered in writing to the Executive
specifying the manner in which the Company
believes that the Executive is not performing.
Notwithstanding any contrary provision of this Agreement, the
Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Executive
a certified copy of a resolution duly adopted by the affirmative
vote of two-thirds of the members of the Board who are not
employees of the Company at a meeting of the Board called and
held for such purpose (after reasonable notice to the Executive
and an opportunity for the Executive, together with his counsel,
to be heard before the Board), finding in good faith one of the
events or occurrences set forth in parts (i) through (iv) of the
definition of "Cause" in this Agreement and specifying the
particulars thereof in detail.
"Change of Control" means the occurrence of any of the
following events:
(i) Any "person," as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than
the Company or any Affiliate or any trustee or
other fiduciary holding securities under an
employee benefit plan of the Company or any
Affiliate), is or becomes the beneficial owner, as
defined in Rule 13d-3 under the Exchange Act,
directly or indirectly, of stock of the Company
representing thirty percent (30%) or more of the<PAGE>
combined voting power of the Company's then
outstanding stock eligible to vote.
(ii) During any period of two (2) consecutive years
after the execution of this Agreement, individuals
who at the beginning of such period constitute the
Board, and any new director whose election by the
Board or nomination for election by the Company's
stockholders was approved by a vote of at least
two-thirds of the directors then in office who
either were directors at the beginning of the
period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute at least a majority thereof.
(iii) The stockholders of the Company approve a merger
or consolidation of the Company with any other
corporation, other than a merger or consolidation
which would result in the voting stock of the
Company outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) more than
fifty percent (50%) of the combined voting power
of the outstanding voting stock of the Company or
such surviving entity immediately after such
merger or consolidation; provided, that a merger
or consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove
defined) acquires more than thirty percent (30%)
of the combined voting power of the Company's then
outstanding securities shall not constitute a
Change of Control of the Company.<PAGE>
(iv) The stockholders of the Company approve a plan of
complete liquidation of the Company or an
agreement for the sale, lease, exchange or other
disposition by the Company of all or substantially
all of the Company's assets (or any transaction
having a similar effect).
"Constructive Discharge" means, so long as no Change of
Control has occurred, any reduction in the Executive's
annual base salary in effect as of the Effective Date of
this Agreement, or as the same may be increased from time to
time, other than any across-the-board base salary reduction
for a group or all of the executive officers of the Company,
and also means, on or after a Change of Control,
(i) any reduction in the Executive's annual base
salary in effect as of the Effective Date of this
Agreement, or as the same may be increased from
time to time;
(ii) a failure to increase the Executive's annual base
salary commensurate with any across-the-board
percentage increases in the compensation of other
executive officers of the Company;
(iii) a substantial reduction in the nature or scope of
the Executive's responsibilities, duties or
authority from those described in Section 3.c of
this Agreement;
(iv) a material adverse change in the Executive's title
or position; or
(v) relocation of the Executive's place of employment
from the Company's principal executive offices or
to a place more than twenty-five (25) miles from
Augusta, Maine without the Executive's consent.
"Severance Benefits" means the benefits set forth in Section<PAGE>
5.a or 5.b of this Agreement, as applicable.
"Severance Period" means, in the case of a Change of
Control, the period from the date of termination as determined in
accordance with Section 6 of this Agreement until the third
anniversary of such date.
"Total Disability" means the complete and permanent
inability of the Executive to perform all of his duties under
this Agreement on a full-time basis for a period of at least six
(6) consecutive months, as determined by the Board upon the basis
of such evidence, which may include independent medical reports
and data, as the Board deems appropriate or necessary.
3. Employment. a. The Company hereby agrees to continue
its employment of the Executive in the capacity of Vice
President, Generation and Technical Support, and the Executive
hereby agrees to remain in the employ of the Company for the
period beginning on the Effective Date and ending on the date on
which the Executive's employment is terminated in accordance with
this Agreement (the "Employment Period"). This Agreement shall
not restrict in any way the right of the Company to terminate the
Executive's employment at whatever time and for whatever reason
it deems appropriate, nor shall it limit the right of the
Executive to terminate employment at any time for whatever reason
he deems appropriate.
b. The Executive agrees that during the Employment Period
he shall devote substantially all his business attention and time
to the business and affairs of the Company and its Affiliates,
and use his best efforts to perform faithfully and efficiently
the duties and responsibilities of the Executive under this
Agreement. It is expressly understood that (i) the Executive may
devote a reasonable amount of time to such industry associations
and charitable and civic endeavors as shall not materially
interfere with the services that the Executive is required to<PAGE>
render under this Agreement, and (ii) the Executive may serve as
a member of one or more boards of directors of companies that are
not affiliated with the Company and do not compete with the
Company or any of its Affiliates.
c. The following listing of job duties shall represent the
Executive's primary responsibilities. Such responsibilities may
be expanded, and so long as no Change of Control has occurred may
be decreased, as the business needs of the Company require. The
Executive's primary job responsibilities shall include, but not
be limited to:
participation in the development and general oversight of
corporate policies, strategies and business initiatives as a
member of the Company's Executive Committee;
the development, management and oversight of policies, plans
and activities relating to all aspects of generation,
engineering, environmental and subsidiary operations; and
oversight of Company participation in nuclear electric
generating plants.
The departments reporting directly to the Executive shall be as
follows: Fossil Operations; Hydro Operations; Subsidiary
Operations; Technical Support; and Environmental.
4. Compensation and Benefits. a. During the Employment
Period, the Executive shall be compensated as follows:
(i) He shall receive an annual base salary, the amount
of which shall be reviewed regularly and
determined from time to time by the Board, but
which shall not be less than $122,100. His salary
shall be payable in accordance with Company
practice.
(ii) He shall be entitled to participate in any and all
plans and programs maintained by the Company from
time to time to provide benefits for its
executives, including without limitation any
short-term or long-term incentive or pension plan<PAGE>
or program, in accordance with the terms and
conditions of any such plan or program or the
administrative guidelines relating thereto, as may
be amended from time to time.
(iii) He shall be entitled to participate in any and all
plans and programs maintained by the Company from
time to time to provide benefits for its salaried
employees generally, including without limitation
any savings and investment, stock purchase or
group medical, dental, life, accident or
disability insurance plan or program, subject to
all eligibility requirements of general
applicability, to the extent that executives are
not excluded from participation therein under the
terms thereof or under the terms of any executive
plan or program or any approval or adoption
thereof.
(iv) He shall be entitled to all fringe benefits
generally provided by the Company at any time to
its full-time salaried employees, including
without limitation paid vacation, holidays and
sick leave but excluding severance pay, in
accordance with generally applicable Company
policies with respect to such benefits.
b. Notwithstanding any contrary provision of this
Agreement, any compensation or benefits which are vested in the
Executive or which the Executive is otherwise entitled to receive
under any plan or program of the Company or any agreement between
the Company and the Executive before, at or subsequent to the
Executive's termination of employment shall be furnished and paid
in accordance with the terms and provisions of such plan, program
or agreement.<PAGE>
c. All compensation payable under this Section 4 shall be
subject to normal payroll deductions for withholding income
taxes, social security taxes and the like.
5. Severance Benefits. a. If, on or after a Change of
Control, the Executive's employment with the Company is
terminated during the Employment Period (i) by the Company and/or
any successor for any reason other than death, Total Disability
or Cause or (ii) by the Executive within twelve (12) calendar
months of a Constructive Discharge, Severance Benefits shall be
provided as follows:
(i) The Company shall pay the Executive, in one cash
lump sum within sixty (60) days following the date
of termination of employment as determined under
Section 6 of this Agreement, an amount equal to
2.99 times the Executive's base amount, as defined
in Section 280G(b)(3) of the Internal Revenue Code
of 1986, as amended.
(ii) Core coverage for the Executive under the
Company's group medical, life, accident and
disability plans or programs shall continue for
the Severance Period on the same terms and
conditions, as if the Executive's employment had
not terminated. In the event that the Executive's
participation in any such plan or program is
barred, the Company shall arrange at its expense
to provide him during the Severance Period with
core benefits substantially similar to those which
he would otherwise be entitled to receive under
such plans and programs.
(iii) The Severance Period shall count as service for
all purposes (including benefit accrual and
eligibility) under any benefit plan of the Company<PAGE>
applicable to the Executive immediately prior to
the Executive's termination of employment, for
which service with the Company is taken into
account, including without limitation any pension
plan, and all benefits under such plans that are
subject to vesting shall vest as of the date of
such termination of employment.
(iv) The Company shall pay a fee to an independent
outplacement firm selected by the Executive for
outplacement services in an amount equal to the
actual fee for such services up to a total of
$10,000.
b. If no Change of Control has occurred and the
Executive's employment with the Company is terminated during the
Employment Period (i) by the Company for any reason other than
death, Total Disability or Cause or (ii) by the Executive within
six (6) calendar months of a Constructive Discharge, the Company
shall pay the Executive, in twelve (12) equal monthly cash
installments beginning not later than sixty (60) days following
the date of termination of employment as determined under Section
6 of this Agreement, Severance Benefits equal to one times the
Executive's annual base salary in effect on the date immediately
preceding the date of termination; provided, however, that each
of the last six (6) monthly cash installments shall be reduced by
an amount equal to any base salary or other base pay or
commissions earned through other employment or any fees earned as
a consultant for the particular month, such that an installment
shall not be paid or payable by the Company for any month for
which such other base salary, base pay, commissions or fees equal
or exceed the amount of the installment.
6. Date of Termination. For purposes of this Agreement,
the date of termination of the Executive's employment shall be<PAGE>
the date written notice is given to the Executive by the Company
and/or any successor or, in the case of a Constructive Discharge,
the date written notice is given to the Company by the Executive,
provided that the Executive gives such notice within twelve (12)
calendar months of the Constructive Discharge in the case of a
Change of Control, and within six (6) calendar months of the
Constructive Discharge in other cases, and specifies therein the
event constituting the Constructive Discharge.
7. Taxes. a. In the event that any portion of the
Severance Benefits is subject to tax under Section 4999 of the
Internal Revenue Code of 1986, as amended, or any successor
provision thereto (the "Excise Tax"), the Company shall pay to
the Executive an additional amount (the "Gross-Up Amount") which,
after payment of all federal and State income taxes thereon
(assuming the Executive is at the highest marginal federal and
applicable State income tax rate in effect on the date of payment
of the Gross-Up Amount) and payment of any Excise Tax on the
Gross-Up Amount, is equal to the Excise Tax payable by the
Executive on such portion of the Severance Benefits. Any Gross-
Up Amount payable hereunder shall be paid by the Company
coincident with the payment of the Severance Benefits described
in Section 5.a(i) of this Agreement.
b. All amounts payable to the Executive under this
Agreement shall be subject to applicable withholding of income,
wage and other taxes.
8. Non-Competition, Confidentiality and Cooperation. The
Executive agrees that:
(i) during the Employment Period and for one (1) year
after the termination of the Executive's
employment with the Company for any reason other
than a Change of Control, the Executive shall not
serve as a director, officer, employee, partner or<PAGE>
consultant or in any other capacity in any
business that is involved in the generation,
transmission or distribution of electric energy
within the New England states, or solicit Company
employees for employment or other participation in
any such business, or take any other action
intended to advance the interests of such
business;
(ii) during and after the Executive's employment with
the Company, he shall not divulge or appropriate
to his own use or the use of others any secret,
proprietary or confidential information or
knowledge pertaining to the business of the
Company, or any of its Affiliates, obtained during
his employment with the Company; and
(iii) during the Employment Period, he shall support the
Company's interests and efforts in all regulatory,
administrative, judicial or other proceedings
affecting the Company and, after the termination
of his employment with the Company, he shall use
best efforts to comply with all reasonable
requests of the Company that he cooperate with the
Company, whether by giving testimony or otherwise,
in regulatory, administrative, judicial or other
proceedings affecting the Company except any
proceeding in which he may be in a position
adverse to that of the Company. After the
termination of employment, the Company shall
reimburse the Executive for his reasonable
expenses and his time, at a reasonable rate to be
determined, for the Executive's cooperation with
the Company in any such proceeding.<PAGE>
The provisions of this Section 8 shall survive the expiration or
termination of this Agreement. The Executive agrees that the
Company shall be entitled to injunctive relief to prevent any
breach or threatened breach of these provisions. In the event of
a failure to comply with part (i), (ii) or (iii) of this Section
8, the Executive agrees that the Company shall have no further
obligation to pay the Executive any Severance Benefits under
Section 5.b of this Agreement. In the event of a failure to
comply with part (i) or (ii) hereof, the Executive agrees that he
shall repay to the Company any such Section 5.b Severance
Benefits paid to him. The Company shall have the right to offset
any amounts payable to the Executive under this Agreement or
otherwise against any Severance Benefits which he is obligated to
repay to the Company.
9. No Mitigation. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement
by seeking other employment.
10. Assignment. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be
binding upon the successors and assigns of the Company. This
Agreement and the rights of the Executive hereunder shall not be
assignable by the Executive, and any assignment by the Executive
shall be null and void.
11. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in Augusta, Maine, in accordance with the rules of
the American Arbitration Association then in effect. The
pendency of any such dispute or controversy shall not affect any
rights or obligations under this Agreement. Judgment may be
entered on the arbitrator's award in any court having
jurisdiction.
12. Waiver; Amendment. The failure of either party to<PAGE>
enforce, or any delay in enforcing, any rights under this
Agreement shall not be deemed to be a waiver of such rights,
unless such waiver is an express written waiver which has been
signed by the waiving party. Waiver of any one breach shall not
be deemed to be a waiver of any other breach of the same or any
other provision hereof. This Agreement can be amended only by a
written instrument signed by each party hereto and no course of
dealing or practice or failure to enforce or delay in enforcing
any rights hereunder may be claimed to have effected an amendment
of this Agreement.
13. Notices. Any notice required or permitted to be given
under this Agreement shall be sufficient if in writing and sent
by first-class, registered or certified mail or hand-delivered to
the Executive at the last residence address he has provided to
the Company or, in the case of the Company, at its principal
executive offices to the attention of the Corporate Secretary.
14. Miscellaneous. This Agreement shall be construed and
enforced in accordance with the laws of the State of Maine. In
the event that any provisions of this Agreement shall be held to
be invalid, the other provisions hereof shall remain in full
force and effect.
15. Entire Agreement. The terms of this Agreement are
intended by the parties to be the final expression of their
agreement with respect to the employment of the Executive by the
Company and may not be contradicted by evidence of any prior or
contemporaneous oral or written agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
WITNESS:
Gerald C. Poulin<PAGE>
CENTRAL MAINE POWER COMPANY
By:
Carlton D. Reed, Jr.
Chairman of the Board of Directors<PAGE>
Exhibit 10-96.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this ninth (9th) day of
December, 1994, by and between Central Maine Power Company, a
Maine corporation with its principal place of business in
Augusta, Maine (hereinafter referred to as the "Company"), and
David E. Marsh (hereinafter referred to as the "Executive").
WHEREAS, the Company recognizes that the Executive is a
valued officer because of his knowledge of the Company's affairs
and his experience and leadership capabilities, and desires to
encourage his continued employment with the Company to assure
itself of the continuing advantage of that knowledge, experience
and leadership for the benefit of customers and shareholders,
particularly during a period of transition in various aspects of
the Company's business and in the event of a Change of Control of
the Company; and
WHEREAS, the Executive desires to serve in the employ of the
Company on a full-time basis for a period provided in this
Employment Agreement (hereinafter referred to as the "Agreement")
on the terms and conditions hereinafter set forth; and
WHEREAS, to these ends the Company desires to provide the
Executive with certain payments and benefits in the event of the
termination of his employment in certain circumstances; and
WHEREAS, the Company and the Executive wish to set forth the
terms and conditions under which such employment and payments and
benefits will occur.
NOW, THEREFORE, in consideration of the continued offer of
employment by the Company and the continued acceptance of
employment by the Executive, and the mutual promises and
covenants contained herein, the Company and the Executive hereby
agree as follows:
<PAGE>
1. Term of Agreement. a. The term of this Agreement
shall begin on December 9, 1994 (hereinafter referred to as the
"Effective Date") and shall expire on December 31, 1997;
provided, however, that on December 31, 1997 and on each
December 31 thereafter, the term of this Agreement shall
automatically be extended for one (1) additional year unless not
later than the preceding October 31 either the Company or the
Executive shall have given notice that such party does not wish
to extend the term of this Agreement.
b. If a Change of Control occurs during the original term
of this Agreement or any extension, then the term of this
Agreement shall be automatically extended for a thirty-six (36)
calendar month period beginning on the first day of the month
following the month in which such Change of Control occurs.
c. Notwithstanding anything to the contrary in this
Section 1, this Agreement and all obligations of the Company
hereunder shall terminate on the date of the Executive's death,
or thirty (30) days after the Company gives notice to the
Executive that the Company is terminating the Executive's
employment for reason of Total Disability or Cause.
2. Definitions. The following terms shall have the
meanings set forth below:
"Affiliate" means a person that directly or indirectly
through one or more intermediaries controls, is controlled by, or
is under common control with the Company.
"Board" means the Board of Directors of the Company.
"Cause" means any of the following events or occurrences:
(i) An act of material dishonesty taken by, or committed at
the request of, the Executive.
(ii) Any illegal or unethical conduct which, in the good
faith judgment of the Board, would impair the
<PAGE>
Executive's ability to perform his duties under this
Agreement or would impair the business reputation of
the Company.
(iii) Conviction of a felony.
(iv) The continued failure of the Executive to perform
substantially his responsibilities and duties under
this Agreement, after demand for performance has been
delivered in writing to the Executive specifying the
manner in which the Company believes that the Executive
is not performing.
Notwithstanding any contrary provision of this Agreement, the
Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Executive
a certified copy of a resolution duly adopted by the affirmative
vote of two-thirds of the members of the Board who are not
employees of the Company at a meeting of the Board called and
held for such purpose (after reasonable notice to the Executive
and an opportunity for the Executive, together with his counsel,
to be heard before the Board), finding in good faith one of the
events or occurrences set forth in parts (i) through (iv) of the
definition of "Cause" in this Agreement and specifying the
particulars thereof in detail.
"Change of Control" means the occurrence of any of the
following events:
(i) Any "person," as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company or
any Affiliate or any trustee or other fiduciary holding
securities under an employee benefit plan of the
Company or any Affiliate), is or becomes the beneficial
owner, as defined in Rule 13d-3 under the Exchange Act,
<PAGE>
directly or indirectly, of stock of the Company
representing thirty percent (30%) or more of the
combined voting power of the Company's then outstanding
stock eligible to vote.
(ii) During any period of two (2) consecutive years after
the execution of this Agreement, individuals who at the
beginning of such period constitute the Board, and any
new director whose election by the Board or nomination
for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then
in office who either were directors at the beginning of
the period or whose election or nomination for election
was previously so approved, cease for any reason to
constitute at least a majority thereof.
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other
corporation, other than a merger or consolidation which
would result in the voting stock of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) more than fifty percent (50%) of the combined
voting power of the outstanding voting stock of the
Company or such surviving entity immediately after such
merger or consolidation; provided, that a merger or
consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than
thirty percent (30%) of the combined voting power of
the Company's then outstanding securities shall not
constitute a Change of Control of the Company.
<PAGE>
(iv) The stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for
the sale, lease, exchange or other disposition by the
Company of all or substantially all of the Company's
assets (or any transaction having a similar effect).
"Constructive Discharge" means, so long as no Change of
Control has occurred, any reduction in the Executive's annual
base salary in effect as of the Effective Date of this
Agreement, or as the same may be increased from time to time,
other than any across-the-board base salary reduction for a
group or all of the executive officers of the Company, and
also means, on or after a Change of Control,
(i) any reduction in the Executive's annual base salary in
effect as of the Effective Date of this Agreement, or
as the same may be increased from time to time;
(ii) a failure to increase the Executive's annual base
salary commensurate with any across-the-board
percentage increases in the compensation of other
executive officers of the Company;
(iii) a substantial reduction in the nature or scope of the
Executive's responsibilities, duties or authority from
those described in Section 3.c of this Agreement;
(iv) a material adverse change in the Executive's title or
position; or
(v) relocation of the Executive's place of employment from
the Company's principal executive offices or to a place
more than twenty-five (25) miles from Augusta, Maine
without the Executive's consent.
"Severance Benefits" means the benefits set forth in Section
5.a or 5.b of this Agreement, as applicable.
"Severance Period" means, in the case of a Change of Control,
<PAGE>
the period from the date of termination as determined in
accordance with Section 6 of this Agreement until the third
anniversary of such date.
"Total Disability" means the complete and permanent inability
of the Executive to perform all of his duties under this
Agreement on a full-time basis for a period of at least six (6)
consecutive months, as determined by the Board upon the basis of
such evidence, which may include independent medical reports and
data, as the Board deems appropriate or necessary.
3. Employment. a. The Company hereby agrees to continue
its employment of the Executive in the capacity of Vice
President, Corporate Services, and Chief Financial Officer, and
the Executive hereby agrees to remain in the employ of the
Company for the period beginning on the Effective Date and ending
on the date on which the Executive's employment is terminated in
accordance with this Agreement (the "Employment Period"). This
Agreement shall not restrict in any way the right of the Company
to terminate the Executive's employment at whatever time and for
whatever reason it deems appropriate, nor shall it limit the
right of the Executive to terminate employment at any time for
whatever reason he deems appropriate.
b. The Executive agrees that during the Employment Period he
shall devote substantially all his business attention and time to
the business and affairs of the Company and its Affiliates, and
use his best efforts to perform faithfully and efficiently the
duties and responsibilities of the Executive under this
Agreement. It is expressly understood that (i) the Executive may
devote a reasonable amount of time to such industry associations
and charitable and civic endeavors as shall not materially
interfere with the services that the Executive is required to
render under this Agreement, and (ii) the Executive may serve as
<PAGE>
a member of one or more boards of directors of companies that are
not affiliated with the Company and do not compete with the
Company or any of its Affiliates.
c. The following listing of job duties shall represent the
Executive's primary responsibilities. Such responsibilities may
be expanded, and so long as no Change of Control has occurred may
be decreased, as the business needs of the Company require. The
Executive's primary job responsibilities shall include, but not
be limited to:
participation in the development and general oversight of
corporate policies, strategies and business initiatives as a
member of the Company's Executive Committee;
the development, implementation, management and oversight of
financial and administrative policies, strategies, plans and
activities including those concerning rate cases, capital
structure and financing, investor and financial community
relations, financial reporting, accounting, treasury
operations, information services, telecommunications,
administrative services, the Company's pension fund and
Savings and Investment (401(k)) Plan assets, and operating
and capital budgets; and coordination of business
opportunities and investment decisions with overall corporate
goals and objectives.
The departments reporting directly to the Executive shall be as
follows: Information Services; Corporate Services; Accounting;
and Treasury.
4. Compensation and Benefits. a. During the Employment
Period, the Executive shall be compensated as follows:
(i) He shall receive an annual base salary, the amount of
which shall be reviewed regularly and determined from
time to time by the Board, but which shall not be less
than $153,450. His salary shall be payable in
accordance with Company practice.
(ii) He shall be entitled to participate in any and all
plans and programs maintained by the Company from time
to time to provide benefits for its executives,
including without limitation any short-term or long-
<PAGE>
term incentive, pension, or supplemental pension plan
or program, in accordance with the terms and conditions
of any such plan or program or the administrative
guidelines relating thereto, as may be amended from
time to time.
(iii) He shall be entitled to participate in any and all
plans and programs maintained by the Company from time
to time to provide benefits for its salaried employees
generally, including without limitation any savings and
investment, stock purchase or group medical, dental,
life, accident or disability insurance plan or program,
subject to all eligibility requirements of general
applicability, to the extent that executives are not
excluded from participation therein under the terms
thereof or under the terms of any executive plan or
program or any approval or adoption thereof.
(iv) He shall be entitled to all fringe benefits generally
provided by the Company at any time to its full-time
salaried employees, including without limitation paid
vacation, holidays and sick leave but excluding
severance pay, in accordance with generally applicable
Company policies with respect to such benefits.
(v) He shall be entitled to all rights and benefits under
the Split-Dollar Life Insurance Agreement between the
Company and the Executive in effect as of the Effective
Date of this Agreement in accordance with the terms of
such Split-Dollar Life Insurance Agreement.
b. Notwithstanding any contrary provision of this
Agreement, any compensation or benefits which are vested in the
Executive or which the Executive is otherwise entitled to receive
under any plan or program of the Company or any agreement between
<PAGE>
the Company and the Executive before, at or subsequent to the
Executive's termination of employment shall be furnished and paid
in accordance with the terms and provisions of such plan, program
or agreement.
c. All compensation payable under this Section 4 shall be
subject to normal payroll deductions for withholding income
taxes, social security taxes and the like.
5. Severance Benefits. a. If, on or after a Change of
Control, the Executive's employment with the Company is
terminated during the Employment Period (i) by the Company and/or
any successor for any reason other than death, Total Disability
or Cause or (ii) by the Executive within twelve (12) calendar
months of a Constructive Discharge, Severance Benefits shall be
provided as follows:
(i) The Company shall pay the Executive, in one cash lump
sum within sixty (60) days following the date of
termination of employment as determined under Section 6
of this Agreement, an amount equal to 2.99 times the
Executive's base amount, as defined in
Section 280G(b)(3) of the Internal Revenue Code of
1986, as amended.
(ii) Core coverage for the Executive under the Company's
group medical, life, accident and disability plans or
programs shall continue for the Severance Period on the
same terms and conditions, as if the Executive's
employment had not terminated. In the event that the
Executive's participation in any such plan or program
is barred, the Company shall arrange at its expense to
provide him during the Severance Period with core
benefits substantially similar to those which he would
otherwise be entitled to receive under such plans and
<PAGE>
programs.
(iii) The Severance Period shall count as service for all
purposes (including benefit accrual and eligibility)
under any benefit plan of the Company applicable to the
Executive immediately prior to the Executive's
termination of employment, for which service with the
Company is taken into account, including without
limitation any pension or supplemental pension plan,
and all benefits under such plans that are subject to
vesting shall vest as of the date of such termination
of employment.
(iv) The Company shall pay a fee to an independent
outplacement firm selected by the Executive for
outplacement services in an amount equal to the actual
fee for such services up to a total of $10,000.
b. If no Change of Control has occurred and the
Executive's employment with the Company is terminated during the
Employment Period (i) by the Company for any reason other than
death, Total Disability or Cause or (ii) by the Executive within
six (6) calendar months of a Constructive Discharge, the Company
shall pay the Executive, in twelve (12) equal monthly cash
installments beginning not later than sixty (60) days following
the date of termination of employment as determined under Section
6 of this Agreement, Severance Benefits equal to one times the
Executive's annual base salary in effect on the date immediately
preceding the date of termination; provided, however, that each
of the last six (6) monthly cash installments shall be reduced by
an amount equal to any base salary or other base pay or
commissions earned through other employment or any fees earned as
a consultant for the particular month, such that an installment
shall not be paid or payable by the Company for any month for
<PAGE>
which such other base salary, base pay, commissions or fees equal
or exceed the amount of the installment.
6. Date of Termination. For purposes of this Agreement,
the date of termination of the Executive's employment shall be
the date written notice is given to the Executive by the Company
and/or any successor or, in the case of a Constructive Discharge,
the date written notice is given to the Company by the Executive,
provided that the Executive gives such notice within twelve (12)
calendar months of the Constructive Discharge in the case of a
Change of Control, and within six (6) calendar months of the
Constructive Discharge in other cases, and specifies therein the
event constituting the Constructive Discharge.
7. Taxes. a. In the event that any portion of the
Severance Benefits is subject to tax under Section 4999 of the
Internal Revenue Code of 1986, as amended, or any successor
provision thereto (the "Excise Tax"), the Company shall pay to
the Executive an additional amount (the "Gross-Up Amount") which,
after payment of all federal and State income taxes thereon
(assuming the Executive is at the highest marginal federal and
applicable State income tax rate in effect on the date of payment
of the Gross-Up Amount) and payment of any Excise Tax on the
Gross-Up Amount, is equal to the Excise Tax payable by the
Executive on such portion of the Severance Benefits. Any Gross-
Up Amount payable hereunder shall be paid by the Company
coincident with the payment of the Severance Benefits described
in Section 5.a(i) of this Agreement.
b. All amounts payable to the Executive under this Agreement
shall be subject to applicable withholding of income, wage and
other taxes.
8. Non-Competition, Confidentiality and Cooperation. The
Executive agrees that:
<PAGE>
(i) during the Employment Period and for one (1) year after
the termination of the Executive's employment with the
Company for any reason other than a Change of Control,
the Executive shall not serve as a director, officer,
employee, partner or consultant or in any other
capacity in any business that is involved in the
generation, transmission or distribution of electric
energy within the New England states, or solicit
Company employees for employment or other participation
in any such business, or take any other action intended
to advance the interests of such business;
(ii) during and after the Executive's employment with the
Company, he shall not divulge or appropriate to his own
use or the use of others any secret, proprietary or
confidential information or knowledge pertaining to the
business of the Company, or any of its Affiliates,
obtained during his employment with the Company; and
(iii) during the Employment Period, he shall support the
Company's interests and efforts in all regulatory,
administrative, judicial or other proceedings affecting
the Company and, after the termination of his
employment with the Company, he shall use best efforts
to comply with all reasonable requests of the Company
that he cooperate with the Company, whether by giving
testimony or otherwise, in regulatory, administrative,
judicial or other proceedings affecting the Company
except any proceeding in which he may be in a position
adverse to that of the Company. After the termination
of employment, the Company shall reimburse the
Executive for his reasonable expenses and his time, at
a reasonable rate to be determined, for the Executive's
<PAGE>
cooperation with the Company in any such proceeding.
The provisions of this Section 8 shall survive the expiration or
termination of this Agreement. The Executive agrees that the
Company shall be entitled to injunctive relief to prevent any
breach or threatened breach of these provisions. In the event of
a failure to comply with part (i), (ii) or (iii) of this Section
8, the Executive agrees that the Company shall have no further
obligation to pay the Executive any Severance Benefits under
Section 5.b of this Agreement. In the event of a failure to
comply with part (i) or (ii) hereof, the Executive agrees that he
shall repay to the Company any such Section 5.b Severance
Benefits paid to him. The Company shall have the right to offset
any amounts payable to the Executive under this Agreement or
otherwise against any Severance Benefits which he is obligated to
repay to the Company.
9. No Mitigation. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement
by seeking other employment.
10. Assignment. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be
binding upon the successors and assigns of the Company. This
Agreement and the rights of the Executive hereunder shall not be
assignable by the Executive, and any assignment by the Executive
shall be null and void.
11. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in Augusta, Maine, in accordance with the rules of
the American Arbitration Association then in effect. The
pendency of any such dispute or controversy shall not affect any
rights or obligations under this Agreement. Judgment may be
entered on the arbitrator's award in any court having
<PAGE>
jurisdiction.
12. Waiver; Amendment. The failure of either party to
enforce, or any delay in enforcing, any rights under this
Agreement shall not be deemed to be a waiver of such rights,
unless such waiver is an express written waiver which has been
signed by the waiving party. Waiver of any one breach shall not
be deemed to be a waiver of any other breach of the same or any
other provision hereof. This Agreement can be amended only by a
written instrument signed by each party hereto and no course of
dealing or practice or failure to enforce or delay in enforcing
any rights hereunder may be claimed to have effected an amendment
of this Agreement.
13. Notices. Any notice required or permitted to be given
under this Agreement shall be sufficient if in writing and sent
by first-class, registered or certified mail or hand-delivered to
the Executive at the last residence address he has provided to
the Company or, in the case of the Company, at its principal
executive offices to the attention of the Corporate Secretary.
14. Miscellaneous. This Agreement shall be construed and
enforced in accordance with the laws of the State of Maine. In
the event that any provisions of this Agreement shall be held to
be invalid, the other provisions hereof shall remain in full
force and effect.
15. Entire Agreement. The terms of this Agreement are
intended by the parties to be the final expression of their
agreement with respect to the employment of the Executive by the
Company and may not be contradicted by evidence of any prior or
contemporaneous oral or written agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
<PAGE>
WITNESS:
David E. Marsh
CENTRAL MAINE POWER COMPANY
By:
Carlton D. Reed, Jr.
Chairman of the Board of Directors
<PAGE>
Exhibit 13-1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Alternative Rate Plan
Offers "a high degree of stability and predictability in electric
rates"
"Moves toward leveling the playing field between CMP and its
competitors in the retail energy market"
"Offers a more direct link between performance and profits"
- MPUC Order
January 10, 1995
1994 was a very difficult year for earnings and dividends, as
indicated by the $33.8-million loss incurred, which amounts to a
loss of $1.04 per share, and the 42-percent reduction in the
quarterly dividend. While there is no satisfaction in reporting a
net loss itself, the Company believes its actions and the
regulatory decisions taken during the year are crucial steps
toward improving the Company s ability to compete and toward
providing it with an opportunity to improve its financial health.
The Company s Board of Directors decided in late 1993 to reduce
the level of quarterly common stock dividends from 39 cents to
22.5 cents based on the Company s overall financial position and
outlook, including the negative impacts associated with the
MPUC s December 1993 rate-case order and the expected near-term
revenue impact of weak sales.
The loss for 1994 reflects the impact of a significant decision
by the Maine Public Utilities Commission (MPUC), which approved
in December 1994 a five-year Alternative Rate Plan (ARP),
effective January 1, 1995.
The Company agreed in the ARP negotiations to record charges of
approximately $100 million ($60 million, net of tax) against
earnings in 1994. These charges, along with the other provisions
of the ARP, will lessen the impact of future price increases for
MPUC-mandated and fuel-related costs, and better position the
Company to improve its rate of return.
The ARP entails a fundamental change in the way the Company is
regulated. Under the ARP, the MPUC will continue to regulate the
Company s operations and prices, provide for continued recovery
of deferred costs, and specify a range for its rate of return.
The MPUC confirmed in its order that the ARP is intended to
comply with the provisions of Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of<PAGE>
Regulation" (SFAS No. 71). It has several benefits over
traditional regulation. These include making price change more
predictable for customers, creating increased incentive for
efficiency, reducing resources required for regulation, and
giving the Company the opportunity to be more competitive by
offering flexible prices.
The ARP replaces traditional regulation with its extensive
litigation and separate proceedings for recovering costs of
generating fuel and purchased power. Instead of price changes
based on the level of costs incurred and capital investments, the
ARP provides for a once-a-year adjustment of a cap on prices for
each rate. The adjustment is keyed to the prior year s inflation
rate, with offsets for productivity and modifications for
purchased-power savings and other factors. For example, using an
assumption of a 3-percent annual inflation rate into the late
1990s, the ARP would produce an average increase in the price
caps of approximately 1.3 percent per year over the same period.
The mechanism is expected to create price increases well below
the rate of inflation for the rest of the century, in keeping
with the Company s previously announced pricing-stability
objective.
The ARP provides the Company with pricing flexibility to respond
quickly by setting prices, for customer classes or end uses of
electricity, comparable to the competitive options available to
these customers from alternative fuel sources, self-generation
and other electric suppliers. The ability to compete on the price
of electricity is a major step in meeting the Company s 1995 goal
of offering flexible, competitive, and understandable products
and services that meet or exceed customers needs and
expectations of value.
Consistent with this goal and in response to growing competitive
pressures, as of mid-February 1995, the Company used the pricing
flexibility provisions of the ARP and signed 5-year service
contracts that ensure continued purchases of electricity by 18 of
its largest customers. Those contracts incorporate a previously
approved, non-cumulative tariff reduction of 15 percent for the
three years 1995 through 1997, 16 percent for 1998, and 18
percent for 1999, and exempt signers from any price increases
that would otherwise be possible under the ARP. Annual gross
revenues would be approximately $27 million lower than if these
customers continued to pay full retail rates without reducing
their purchases from the Company.
However, there are important related savings. Electricity price
changes affect the cost of non-utility generator (NUG) power. The
reduction in rates to the large customers discussed above also
reduces purchased-power costs by approximately $20 million, as a
result of reductions in the cost of purchased-power under several
NUG contracts where those costs are tied to the price of
electricity.
Because annual price changes under the ARP are now based on an
external inflation measure adjusted for productivity gains,
controlling costs at below the level of inflation is essential to
improving the Company s profitability. Operations under the ARP
shift the risk of fuel and purchased-power cost increases that
were previously permitted reconcilable treatment away from the
Company s customers to the Company, while at the same time
providing the opportunity for the Company s shareholders to share
in gains achieved through stringent cost control. <PAGE>
As a result of the Company s support of legislation to reduce the
cost of required power purchases from NUGs, on April 15, 1994,
the Governor of Maine signed into law a bill allowing the Finance
Authority of Maine (FAME) to borrow up to $100 million to lend to
electric utilities for financing buy-outs or other changes in NUG
contracts that would save money for customers. In October 1994,
FAME issued $79 million of bonds partially financing $66 million
of the Company s buy-out of a NUG contract for a 32-megawatt
wood-fired generating plant in Fort Fairfield, Maine. The
anticipated savings are approximately $47.9 million based on the
future payments that would have been required over the remaining
eight-year life of the contract. The Company made significant
progress toward its goal with regard to reducing its costs of NUG
power through 26 contract terminations, restructurings, or
renegotiations during 1994 that are expected to result in $172
million of net savings over the next five years.
The Company s credit ratings came under significant pressure
during 1993 and early 1994, when its senior secured debt was
downgraded by all three agencies that rate the Company s
securities.
In February, the actions taken during 1994 with respect to cost
control, NUG cost reductions, the regulatory reform including the
ARP, and the competitive pricing agreements with large customers,
were recognized by Moody s Investors Service (Moody s), which
upgraded the Company s ratings on its preferred stock and
commercial paper. Moody s stated "The upgrades reflect [the
Company s] improved earnings prospects due to the unprecedented
regulatory reform for a domestic investor-owned utility, load
retention, and ongoing reductions in the company s capital, and
operating and maintenance budgets, particularly for the cost of
mandated power purchased from nonutility generators (NUGs).
Increased competitive forces had significant impact on the
Company in 1994 and are expected to continue to challenge the
Company and the electric industry in the years to come.
Competitively priced fuel sources and suppliers, the threat of
municipalization, investigation into retail wheeling and the
overall restructuring of the industry are important issues in
Maine and throughout the nation, the outcome of which will
contribute significantly toward shaping the future prospects for
investor-owned electric utilities like the Company. These issues
required significant management focus during 1994 and will
continue to do so in the future.
In order to meet its financial objectives for 1995 and beyond,
the Company must:
1. Place customers first;
2. Control costs;
3. Reduce the cost of non-utility purchased power;
4. Avoid relying on price increases to restore financial health;
5. Continue to price its products and services to meet
competition; and
6. Expand its sales and lines of business.
Restoring earnings to competitive levels and improving overall
financial health will continue to be a challenge. Near term,
the challenge associated with the current plant outage at Maine
Yankee could present significant risks for the Company's
financial results for 1995 and beyond. However, the Company s<PAGE>
position has been enhanced through cost reduction and control, a
change in the form of regulation and successfully competing for
customers and sales. Future results will depend significantly on
meeting the continued challenges and changes facing the Company
and the electric industry.<PAGE>
Management's Discussion & Analysis
Earnings and Dividends: For 1994, the Company generated a net
loss of $23.3 million compared to net income of $61.3 million in
1993, and net income of $63.6 million in 1992. The loss
applicable to common stock was $33.8 million or $1.04 per share
in 1994, while earnings applicable to common stock were $52.5
million or $1.65 per share in 1993 and $56.8 million or $1.85 per
share in 1992. The loss reflects the write-off of approximately
$100 million ($60 million after taxes) of deferred balances in
accordance with the MPUC order in the Alternative Rate Plan (ARP)
proceeding discussed fully below under the caption "Alternative
Rate Plan" and in Note 3 to Consolidated Financial Statements,
"Regulatory Matters Alternative Rate Plan." This write-off had
the effect of reducing earnings per share by $1.85. Absent the
write-off, earnings for 1994 would have been $0.81 per share.
Total dividends declared in 1994 were $0.90 per common share,
$1.395 per share for 1993, and $1.56 per share in 1992. In
December 1993, the quarterly dividend payment per share of common
stock was reduced from $0.39 to $0.225. This reduction reflected
the then-current earnings levels and the near-term financial
outlook. Future dividend levels depend on earnings quality and
growth, and on other considerations such as changes in capital
costs.
Revenues and Sales: Electric operating revenues increased by
$11.3 million or 1.3 percent to $904.9 million in 1994 and by
$15.9 million or 1.8 percent to $893.6 million in 1993. The
components of the change in electric operating revenues are as
follows:
(Dollars in millions) 1994 1993
Revenues from kilowatt-hour sales:
Service-area base revenues $24.3 $15.3
Fuel cost recoveries 17.7 12.3
Non-territorial base revenues 2.3 (0.1)
Revenues from kilowatt-hour sales 44.3 27.5
Other operating revenues:
Electric Revenue Adjustment Mechanism (ERAM) (23.6) (14.6)
Other, including Maine Electric Power Company, Inc. (9.4) 3.0
Total Change in Electric Operating Revenues $11.3 $15.9
Refer to "Other Regulatory Decisions" and "Incentive Regulation,"
below, for a discussion of new base and fuel rates, ERAM and
their impact on revenues.
The Company s service-area sales for the years 1994, 1993, and
1992 are shown in the following table:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(Kilowatt-hours in millions)
1994 1993 1992
% % %
KWH change KWH change KWH change
Residential 2,860 (0.9)% 2,884 (3.5)% 2,990 0.4%
Commercial 2,439 2.2 2,387 0.9 2,366 1.7
Industrial 3,720 (1.9) 3,791 3.2 3,672 0.6
Wholesale and lighting 149 (3.5) 155 0.3 154 2.1
Total Service-Area Sales 9,168 (0.5)% 9,217 0.4% 9,182 0.8%
</TABLE>
The primary factors for the service-area kilowatt-hour sales
decrease in 1994 are the slowly growing economy, the loss of a<PAGE>
major industrial customer in September 1994, rising electricity
prices, energy management, and loss of sales due to conversions
from electricity to alternative fuels for such purposes as space
and water heating. The relatively minor growth in sales in 1993
and 1992 is a result of depressed economic conditions,
competitive pressures, electricity-price increases and energy-
management activities.
Residential kilowatt-hour sales decreased in both 1994 and 1993,
and increased in 1992. The increase in the average number of
residential customers was 4,679 in 1994, 4,771 in 1993, and 5,657
in 1992. Average usage per residential customer declined by 1.9
percent in 1994, which continued a trend of lower annual usage
that began in 1990.
The 1994 increase in commercial sales reflects a 1.3-percent
increase in the retail sector and a 3.3-percent increase in the
service sector, which combined comprise approximately 60 percent
of commercial sales. The 1993 increase in sales of 0.9 percent
reflects a 4-percent increase in the retail sector and a 3.6-
percent decrease in the service sector.
Industrial sales levels are significantly affected by changes in
power supplied to the Company s large pulp-and-paper industry
customers, who account for approximately 65 percent of industrial
sales and approximately 26 percent of total service-area sales.
Sales to the pulp-and-paper sector decreased by 3.6 percent in
1994, increased by 3.2 percent in 1993, and increased by 0.1
percent in 1992. The 1994 decrease reflects lower sales levels
primarily due to the late-1994 loss of a major customer that
purchased approximately 100 million kilowatt-hours less in 1994
than in 1993. Refer to "Competition" below and Note 4 to
Consolidated Financial Statements, "Commitments and Contingencies
Competition," for additional information regarding the loss of
this customer and the Company s actions taken to preserve its
remaining large-industrial-customer base.
In 1993, the increase in industrial sales results primarily from
the increased levels of production by many of the Company s
customers and purchases of excess energy under the then newly-
approved tariffs at lower rates. Sales to all other industrial
customers as a group increased 1.5 percent in 1994, by 3.3
percent in 1993, and by 1.5 percent in 1992.
Sales to major industrial sectors are shown in the following
table:
(Kilowatt-hours in millions) 1994 1993 1992
Paper and allied products 2,428* 2,519* 2,441*
Transportation equipment (shipbuilding) 199 208 212
Chemicals and allied products 171 182 167
Electrical and electronic machinery 143 136 151
Textile mill products 142 141 134
Food products 98 95 85
Lumber and wood products 96 88 85
Leather and leather products 83 81 77
*Totals include sales made under simultaneous-purchase-and-sale
contracts related to purchases required under the Public Utility
Regulatory Policies Act of 1978 (PURPA).
Alternative Rate Plan: In its December 14, 1993, base-rate order,
the MPUC ordered that a follow-up proceeding to the Company s<PAGE>
1993 base-rate proceeding be held to implement, during 1994, a
rate-stability plan (hereafter referred to as an "alternative
rate plan" or "ARP"). The MPUC encouraged the Company and the
parties electing to participate in the proceeding to work
together to develop a five-year plan containing price-cap,
profit-sharing, and pricing-flexibility components.
On October 14, 1994, the Company filed with the MPUC for its
approval a stipulation signed by most of the parties to the ARP
proceeding, including the MPUC Staff and the Public Advocate. The
stipulation noted its principal purpose was to offer the MPUC "a
single comprehensive Alternative Rate Plan consistent with the
objectives and guidance set forth by the [MPUC in its December
14, 1993, base-rate order]." The stipulation also noted the
parties were supporting the five-year ARP for reasons that
included " potential benefits such as a higher degree of price
stability and predictability, reduced regulatory costs, stronger
incentives for cost minimization, the shift of risks away from
ratepayers, continuation of comprehensive rate regulation and a
form of regulation that allows CMP needed flexibility to compete
in a changing electric utility business environment."
The MPUC approved the stipulation in December 1994 to take effect
January 1, 1995. The ARP contains a price-cap mechanism that
provides for the Company s retail rates to increase annually on
July 1, commencing July 1, 1995, by a percentage combining (1) a
price index, (2) a productivity offset, (3) a sharing mechanism,
and (4) flow-through items and mandated costs. The price cap
applies to all of the Company s retail rates, and includes fuel-
and-purchased power costs that previously had been treated
separately. As is stated in the MPUC s order approving the ARP,
operation under the ARP continues to meet the criteria of
Statement of Financial Accounting Standards No. 71, "Accounting
for the Effects of Certain Types of Regulation," (SFAS No. 71).
As a result, the Company will continue to apply the provisions of
SFAS No. 71 to its accounting transactions and to its future
financial statements.
For a detailed discussion of each of the individual provisions of
the ARP please refer to Note 3 to Consolidated Financial
Statements, "Regulatory Matters Alternative Rate Plan."
The Company agreed in the ARP negotiations to record charges of
approximately $100 million ($60 million, net of tax) against
earnings in 1994. These charges, along with the other provisions
of the ARP, will lessen the impact of future price increases for
MPUC-mandated and fuel-related costs, and better position the
Company to improve its rate of return.
The Company believes the ARP provides the benefits of needed
pricing flexibility through the ability to set prices between
defined floor and ceiling levels in three service categories: (1)
existing customer classes, (2) new customer classes for optional
targeted services, and (3) special-rate contracts. The Company
believes that the added flexibility will position it more
favorably to meet the competition from other energy sources that
has eroded segments of its customer base. Some price adjustments
could be implemented upon 30-days notice by the Company, while
certain others would be subject to expedited review by the MPUC.
The ARP also contains provisions to protect the Company and
ratepayers against unforeseen adverse results from its operation.
These include review by the MPUC if the Company s actual return<PAGE>
on equity falls outside a designated range two years in a row, a
mid-period review of the ARP by the MPUC in 1997 (including
possible modification or termination), and a "final" review by
the MPUC in 1999 to determine whether or with what changes the
ARP should continue in effect after 1999.
While the ARP provides the Company with an expanded opportunity
to be rewarded for efficiency, it also presents the risk of
reduced rates of return if costs are not controlled, or if
revenues from sales decline or are not adequate to fund costs and
provide fair rates of return on invested capital.
Other Regulatory Decisions: During 1994, the MPUC approved
several stipulations that resolved a number of open matters
related to the MPUC s investigation of the Company s non-utility
generator (NUG) contracts. The series of orders state that the
Company would be subject to no further prudence investigation,
penalties or disallowances resulting from any actions prior to
March 1, 1994, in any respect in connection with the two
contracts that were the subject of the MPUC s October 28, 1993,
imprudence finding and the Company s contract with Caithness King
of Maine Limited Partnership and provide that the Company will
not be subject to any further investigations, disallowances, or
other financially adverse consequences with respect to its
administration prior to March 22, 1994, of the Company s larger
NUG contracts (over 10 megawatts) totaling approximately 398
megawatts, that were then being investigated by the MPUC. The
Company believes that the MPUC s approval of these stipulations
resolves another of the complex issues that have been posing
risks to the Company since the MPUC s initiation of a general
investigation of the Company s administration of NUG contracts.
On July 18, 1994, the MPUC approved a stipulation entered into by
the Company and other parties providing for an annual rate
increase of $23.3 million. The increase is primarily for
recoveries of fuel cost, except for $0.8 million for recovery of
NUG contract buy-out or restructuring costs and $0.6 million in
unrecovered 1991 energy-management incentives.
Incentive Regulation: On May 7, 1991, the MPUC ordered a three-
year trial of the ERAM, a fundamental change in the way the
Company s revenues were treated, and set new incentives for
effective utility-sponsored energy-management. The revenue
accruals under the ERAM program continued through November 1993,
and collection of accrued balances continued through 1994.
As of December 31, 1994, the Company had collected approximately
$47.0 million of the ERAM revenues. In accordance with the MPUC s
order in the ARP proceeding, the $24.3 million balance of ERAM
revenues that had yet to be collected from customers at December
31, 1994 was written off. Please refer to Note 3 to Consolidated
Financial Statements, "Regulatory Matters Incentive
Regulation," for additional information on ERAM.
Non-Utility Generators: On June 9, 1994, the Company announced
that it had agreed to buy out a NUG contract for a 32-megawatt
wood-fired generating plant in Fort Fairfield, Maine. The Company
agreed to pay $76 million to buy out the contract and $2 million
to acquire the generating plant. After consideration of the buy-
out and facility-acquisition costs, the Company estimates net
savings of approximately $47.9 million, by avoiding the future
payments that would have been required over the remaining eight-
year life of the contract.<PAGE>
In August and September 1994, the MPUC issued a series of orders
approving stipulations entered into by the Company with the Town
of Fort Fairfield and other intervenors providing for recovery in
rates of the cost of the buy-out and acquisition of the unit by
the Company s subsequently established subsidiary, Aroostook
Valley Electric Company (AVEC). The stipulations provided for a
rate decrease of $5.6 million reflecting purchased-power savings,
effective December 1, 1994.
In September 1994, the Finance Authority of Maine (FAME), a state
agency, and the Company, pursuant to a new law, issued $79
million of bonds and entered into a loan agreement under which
the Company issued FAME a note for approximately $66.4 million,
evidencing a loan in that amount. The proceeds of the loan, along
with $13 million of the Company s own funds, were used to buy out
the Fort Fairfield contract. Refer to Note 3 to Consolidated
Financial Statements, "Regulatory Matters Non-Utility
Generators," for additional information on this matter.
During 1994, the Company reached agreement with 26 additional
NUGs to buy-out or restructure contracts or to give the Company
options to restructure their contracts. These restructurings
represent 205 megawatts of capacity and should result in net
savings of approximately $172 million over the next five years.
In accordance with prior MPUC policy and the ARP, $136.2 million
of buy out or restructuring costs incurred since January 1992
were included in Deferred Charges and Other Assets on the
Company s balance sheet and will be amortized over their
respective fuel savings periods. These costs result from
restructuring 34 contracts representing 281 megawatts of capacity
that should result in approximately $246 million in fuel savings
over the next five years.
Deferred Costs: Over the past few years, the amount of deferred
charges and regulatory assets has increased under regulatory
policies adopted by the MPUC. The Securities and Exchange
Commission has periodically considered issues regarding the
proper accounting treatment of charges deferred by regulatory
policy. As a result, the Company has regularly requested the MPUC
to issue accounting and ratemaking orders to provide appropriate
authority to comply with changing accounting requirements and to
allow the Company to appropriately reflect the amounts as
deferred charges and regulatory assets. In its order in the ARP
proceeding, the MPUC reaffirmed the applicability of these
accounting orders.
Competition: The Company faces competition in several aspects of
its traditional business and anticipates that competition will
continue to place pressure on both sales and the price the
Company can charge for its product. Alternative fuels and recent
modifications to regulations that had restricted competition from
suppliers outside of the Company s service territory have
expanded customers energy options. As a result, the Company
continues to pursue retention of its customer base. This
increasingly competitive environment has resulted in the
Company s entering into contracts with its wholesale customers,
as well as with certain industrial and commercial customers, to
provide their energy needs at prices and margins lower than the
current averages.
Pursuant to the pricing-flexibility provisions of the ARP, the
Company lowered tariffs for its transmission-level customers and
executed separate five-year definitive agreements with 18<PAGE>
individual customers providing additional reductions. The
participating customers agreed to take electrical service from
the Company for five years and agreed not to switch fuels,
install new self-generation equipment, or seek another supplier
of electricity for existing electrical load during that period.
Refer to the "Overview" above, and to Note 4 to Consolidated
Financial Statements, "Commitments and Contingencies
Competition," for additional detail.
In May 1994, the MPUC approved a stipulation among the Company,
The Town of Madison Electric Works (Madison) and Northeast
Utilities (NU) that resolved all issues in dispute among the
parties relating to the Madison and Madison Paper Industries
(MPI) decision in 1993 to select a competitive bid from NU to
become their wholesale electric supplier for a period of up to 10
years, pursuant to the new options available under the federal
Energy Policy Act of 1992. Refer to Note 4 to Consolidated
Financial Statements, "Commitments and Contingencies
Competition," for a detailed discussion of this matter. NU agreed
to pay the Company $8.4 million over a seven-year period, MPI
agreed to pay the Company $1.4 million over a three-year period,
and a transmission rate was agreed upon for the Company s
transmission service to Madison. In addition, NU and the Company
agreed to a five-year capacity exchange arrangement designed to
achieve significant replacement-power cost savings for the
Company when the Company s largest source of generation, the
Maine Yankee Atomic Power Company plant, is off-line. The
agreement provides more economic benefit to the Company than if
it had under-bid NU for Madison s business, but less than if
Madison stayed on the Company s system at the former rates.
Residents of several towns in the Company s service territory
publicly expressed interest in organizing local electric utility
districts for the purpose of providing their own electric service
with power purchased from selected suppliers. Four Maine
communities voted on November 8, 1994, on questions regarding the
creation of municipal electric districts. In three of the towns,
Westbrook, Norway, and Old Orchard Beach, the proposals were
defeated. The fourth, Jay, voted to create a district and in
March 1995, obtained MPUC approval to form a municipal power
district. Additional approvals are required before it can begin
furnishing utility service. The Company believes that such
actions are not in the best interests of either its customers or
its investors, and will strongly oppose them. The Company further
believes that formidable obstacles will be encountered by Jay or
any other group in attempting to implement the formation of such
districts, including obtaining the required findings by the MPUC
and economically acquiring or constructing the necessary
facilities for a local utility system. The Company cannot,
however, predict the ultimate results of such initiatives.
Rating Agency Actions: The current ratings assigned the Company
by the three major securities-rating agencies, Standard & Poor s
Corp. [S&P], Moody s Investors Service [Moody s], and Duff &
Phelps Credit Rating Co. [Duff & Phelps], are shown below:
<TABLE>
<S> <C> <S><C> <S> <C> <S><C>
General and Unsecured Commercial Preferred Stock
Refunding Bonds Notes Paper
S&P BB+ BB B B+
Moody s Baa2 Baa3 Prime-2 baa3
Duff & Phelps BBB BB+ (1) BB<PAGE>
(1) Not rated by Duff & Phelps
</TABLE>
In 1993 and early 1994, the three major securities-rating
agencies lowered their ratings on the Company s outstanding debt
and preferred stock. The rating agencies explained that their
downgrades primarily reflected the MPUC s "unsupportive" November
1993 base-rate decision, which in their opinion did not allow the
Company s financial parameters, adjusted for off-balance-sheet
obligations, to remain at acceptable levels for a utility with a
"below-average" business position. Additionally, the rating
agencies expressed the belief that the Company s business
position also reflects a depressed Maine economy, a large
industrial-customer base, significant purchased-power
obligations, relatively high production costs, increasing rate
pressures, and a high dividend payout. In early 1995, this
pressure began to ease when in February, the actions taken during
1994 with respect to cost control, NUG cost reductions, the
regulatory reform under the ARP, and the competitive pricing
agreements with large customers, were recognized by Moody s,
which upgraded the Company s ratings on preferred stock and
commercial paper, and Duff & Phelps, which upgraded its preferred
stock rating.
Financing and Refinancing in 1994: In April 1994, the Company
issued $25 million of Series U 7.54% (Adjustable Rate) General
and Refunding Mortgage Bonds, Due 1998, through a private
placement. The Series U Bonds do not have a sinking-fund
requirement and are redeemable at the option of the Company under
certain circumstances.
In June 1994, the Company entered into an agreement with a large
institutional investor under which the investor agreed to
purchase from the Company up to $25 million of additional General
and Refunding Mortgage Bonds on or before April 15, 1995, subject
to certain terms and conditions. Bonds issued pursuant to the
agreement must be due on or before April 15, 1998.
In 1994, the Company issued $32 million of notes under its $150-
million Medium-Term Note program at an average interest rate of
6.8 percent and an average life of 1.8 years. Notes in the amount
of $43.0 million matured during the year, decreasing the total
outstanding notes at year-end 1994 to $135 million, from $146
million at year-end 1993. Also during 1994, the Company reduced
the level of short-term borrowing outstanding by $25.5 million.
Refer to "Non-Utility Generators" above and Note 3 to
Consolidated Financial Statements, Regulatory Matters Non-
Utility Generators," for a discussion of the loan agreement
entered into with the Finance Authority of Maine related to the
buy-out of one of the Company s NUG contracts.
The financing proceeds were used for general corporate purposes
that included construction and energy-management projects,
retiring or refunding outstanding securities, repaying short-term
debt, and buying out purchased-power contracts.
On November 9, 1994, the Company entered into a Competitive
Advance and Revolving Credit Facility (revolving-credit
facility), with several banks and Chemical Bank, as agent for the
lenders, to provide up to $80 million of revolving-credit loans.
The revolving-credit facility supplements the existing $50-
million revolving-credit agreement and replaces the Company s $73
million of individual lines of credit. <PAGE>
On September 28, 1994, the Board of Directors of the Company
adopted a shareholder-rights plan and declared a dividend of one
common-share purchase right for each outstanding share of the
Company s common stock, par value $5.00 per share. The rights
dividend was distributed to the shareholders of record as of the
close of business on October 17, 1994. Please refer to Note 7 to
Consolidated Financial Statements, "Capitalization Rights
Plan," for a detailed description.
Environmental Actions: The Company has been named by the
Environmental Protection Agency (EPA) as a "potentially
responsible party" and has been incurring costs to determine the
best method of cleaning up an Augusta, Maine, site formerly owned
by a salvage company and identified by the EPA as containing soil
contaminated by PCBs from equipment originally owned by the
Company. Refer to Note 4 to Consolidated Financial Statements,
"Commitments and Contingencies - Legal and Environmental
Matters," for a more detailed discussion of this matter.
Expenses and Taxes: The Company s fuel expense, comprising the
cost of fuel used for company generation and the energy portion
of purchased power (the largest expense category), was 54 percent
of total operating expense in 1994 and 1993, and 53 percent in
1992. Purchased-power energy expense includes all costs
associated with purchases from NUGs. Fuel expense fluctuates with
changes in the price of oil, the level of energy generated and
purchased, and changes in the Company s own generation mix.
Through December 31, 1994, changes in fuel expense were provided
rate treatment through a fuel clause. Under the ARP, effective
January 1, 1995, fuel expense is no longer subject to
reconciliation or specific rate recovery. Fuel-cost recovery is
subject to the annual index-based price change. Fuel expense for
Maine Electric Power Company, Inc. (MEPCO), a 78-percent-owned
subsidiary of the Company, is fully recoverable through billing
to MEPCO participants and fluctuates with participants energy
requirements.
The Company s diverse energy mix held dependence on oil-fired
generation to 12.1 percent of 1994 net generation, compared to
15.5 percent of 1993 net generation. Diversification of the
Company s energy mix has helped mitigate the impact of oil-price
changes. However, in recent years, significant amounts of non-
utility generation have been purchased and added to the Company s
energy mix. The average price of NUGs energy is significantly
higher than the Company s own cost of generation, and much higher
than the price of energy on today s open market. The Company
continues to moderate the cost of non-utility generation by
further negotiation of buy-outs or changes whenever possible, and
by supporting legislative action on bills that would promote that
objective.
Purchased-power capacity expense is the non-fuel operation,
maintenance, and cost-of-capital expense associated with power
purchases, primarily from the Company s share of four Yankee
nuclear generating facilities. The Company uses an MPUC-approved
accounting and ratemaking methodology whereby it charges to
expense the cost of Maine Yankee s refueling outages over a
nineteen-month period (the estimated time between refueling
outages). Purchased-power capacity expense includes $8.2 million,
$5.0 million, and $7.6 million of such expense in 1994, 1993,
and 1992, respectively, related to the Maine Yankee outages.<PAGE>
The level of purchased-power capacity expense also fluctuates
with the timing of the maintenance and refueling outages at the
other Yankee nuclear generating facilities in which the Company
has equity interests. The cost of capacity increases during
refueling periods. During 1992, Yankee Atomic Electric Company,
in which the Company is a 9.5-percent equity owner, discontinued
the generation of power and prepared a plan for decommissioning.
Purchased-power capacity expense in 1994, 1993, and 1992
contained approximately $5.2 million, $5.7 million, and $6.9
million, respectively, of costs related to this facility. Refer
to Note 6 to Consolidated Financial Statements, "Capacity
Arrangements - Power Agreements," for a more detailed discussion
of this matter.
Operation-and-maintenance expense increased by $4.9 million in
1994 after a decrease of $3.2 million in 1993. The 1994 increase
primarily reflects the impacts of the MPUC-mandated Electric
Lifeline Program (ELP), the amortization of buy-out costs of the
Fort Fairfield and other contracts discussed previously, and the
effects of the adoption of Statement of Financial Accounting
Standards No. 112, "Employers Accounting for Postemployment
Benefits" (SFAS No. 112). The ELP, which provides electric-bill
credits to low-income customers, cost the Company approximately
$6.3 million in 1994, while amounts in 1993 were deferred for
recovery beginning in December 1993. Amortization of the buy-out
of the Fort Fairfield contract, which began in December 1994,
totaled approximately $0.8 million. SFAS No. 112 required the
Company to record, in 1994, an estimate of the future medical,
salary continuation and other benefits for employees who have
terminated their employment prior to retirement and who are
eligible for such continued benefits. The adoption resulted in a
one-time charge to expense during 1994 of approximately $1.6
million.
Operations-and-maintenance expense also reflects the Company s
ongoing commitment to control and reduce costs whenever possible.
In early 1994, the Company reduced its work force by over 200
employees, or approximately 10 percent. During the year, it also
implemented several new business processes and restructured its
customer-operations functions through closing and consolidating
locations. These new processes are aimed at streamlining the
Company s business practices in the areas of division operations,
billing, purchasing, inventory, accounts payable and system
design and construction.
The 1993 reduction reflects the impact of cost-containment
practices and certain one-time items. The MPUC s December 1993
base-rate-case decision required the Company to charge to expense
approximately $2.5 million of previously deferred costs. During
the fourth quarter of 1992, the Company was required, pursuant to
another MPUC decision, to charge to expense approximately $3.5
million of incremental costs related to Hurricane Bob, which hit
the Company s service territory in 1991.
The Company s overall level of interest expense during 1994
reflects the issuance of additional General and Refunding
Mortgage Bonds and additional notes under the Company s Medium-
Term Note program to replace short-term borrowings outstanding
during 1993. Interest expense in 1994 includes the ongoing
benefit of the 1993 refinancing of General and Refunding Mortgage
Bonds at lower interest rates. Short-term interest costs over the
period 1992 through 1994 fluctuated with the change in the cost
and average outstanding balances of short-term debt.<PAGE>
The increase in aggregate dividends on preferred stock for the
three-year period ended December 31, 1994, is due to the issuance
of two series of preferred stock in August 1992 and the
conversion of the dividend on the Company s Flexible Money Market
Preferred Stock in November 1993 to a fixed rate. The average
variable rate in 1993 was 3.35 percent, while the fixed rate is
7.999 percent.
State and federal income taxes fluctuate with the level of pre-
tax earnings and the regulatory treatment of taxes by the MPUC.
The significant decrease in income-tax expense for 1994 is due to
the impact of the loss which reflects the write-off of deferred
balances in accordance with the MPUC s ARP order.
The increase in 1993 is primarily the result of eliminating a
one-time accelerated flow-back of $5.9 million of deferred income
taxes recorded in 1992 pursuant to a January 1993 stipulation, as
discussed in Note 3 to Consolidated Financial Statements,
"Regulatory Matters - Incentive Regulation," and an increase in
the federal income tax rate to 35 percent from 34 percent.
Additionally, the December 1993 base-rate-case decision
discontinued a previously approved policy whereby the Company
could defer the impact of Internal Revenue Service audits for
recovery in future periods.
Liquidity and Capital Resources: The MPUC approved increases in
base and fuel electric rates in 1992, 1993, and 1994 that
produced additional cash. Increases in rates were used to fund
costs of fuel, energy-management programs, operations,
maintenance, systems improvements, investments in generation
needed to ensure the Company s continued ability to provide
reliable electric service, and collection of unbilled revenues
recorded pursuant to the ERAM.
Approximately $162.8 million of cash was provided from net income
before non-cash items. Approximately $77.4 million of cash was
used for fluctuations in working capital and other operating
activities, including the financing of deferred energy-management
programs, the buy-out of NUG contracts, and the financing of
unbilled fuel and ERAM balances.
Proceeds from the issuance of General and Refunding Mortgage
Bonds provided $25 million of cash. The issuance and redemption
of Medium-Term Notes used $11 million and short-term obligations
used $25.5 million of cash during 1994. Effective in January
1994, the Company announced that it was electing the option under
its Dividend Reinvestment and Common Stock Purchase Plan to
purchase shares pursuant to this plan on the market, rather than
issue new shares.
Dividends paid on common stock were $29.2 million, while
preferred-stock dividends were $10.1 million.
Capital-investment activities, primarily construction
expenditures, utilized $44.9 million in cash during 1994.
Construction expenditures comprised approximately $6.2 million
for generating projects, $2.3 million for transmission, $24.9
million for distribution, and $6.2 million for general
construction expenditures. In addition, $2.6 million was used for
various capitalized energy-management programs.
The Company estimates its capital expenditures for the period
1995 through 1999 at approximately $309 million, including an<PAGE>
Allowance for Funds Used During Construction of approximately $3
million. Actual capital expenditures will depend upon the
availability of capital and other resources, load forecasts,
customer growth, and general business conditions. During the
five-year period, the Company also anticipates refinancing needs
of approximately $402 million for sinking funds, debt and equity
maturities.
The Company estimates that for the period 1995 through 1999,
internally generated funds from depreciation, deferred taxes, and
retained earnings should provide a substantial portion of the
construction-program requirements. Current expectations place
little reliance on external funding sources to meet the reduced
capital expenditure requirements for the next several years.
However, the availability at any particular time of internally
generated funds for such requirements will depend on working-
capital needs, market conditions, and other relevant factors.
The Company s $150-million Medium-Term Note program was
implemented to provide flexibility to meet financing needs and
provide access to a broad range of debt maturities. As of
December 31, 1994, $135 million of Medium-Term Notes were
outstanding; that, pursuant to the terms of the program, permits
the issuance of an additional $15 million of such notes.
As previously discussed, to support its short-term capital
requirements, the Company entered into a revolving-credit
facility with several banks and Chemical Bank, as agent for the
lenders, to provide up to $80 million of revolving-credit loans.
The Company has an unsecured $50-million revolving-credit
agreement with several banks that can be used to support
commercial-paper borrowing or as short-term financing. However,
access to commercial paper markets has been substantially
reduced, if not eliminated, as a result of downgrading of the
Company s credit ratings. The amount of outstanding short-term
borrowing will fluctuate with day-to-day operational needs, the
timing of long-term financing, and market conditions.<PAGE>
Consolidated Financial Statements
<TABLE>
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Earnings
(Dollars in thousands, except per-share amounts) Year ended December 31
1994 1993 1992
Electric Operating Revenues (Notes 1 and 3) $904,883 $893,577 $877,695
Operating expenses
Fuel used for company generation (Notes 1 and 6) 14,783 16,906 23,411
Purchased power - energy (Notes 1 and 6) 430,874 408,944 388,599
Purchased power - capacity (Note 6) 77,775 84,520 79,895
Other operation 153,700 148,318 144,126
Maintenance 32,820 33,311 40,749
Depreciation and amortization (Note 1) 55,992 53,138 50,431
Federal and state income taxes (Note 2) 28,300 25,716 18,258
Taxes other than income taxes 25,512 23,023 24,706
Total Operating Expenses 819,756 793,876 770,175
Equity in Earnings of Associated Companies
(Note 6) 5,109 5,829 6,688
Operating Income 90,236 105,530 114,208
Other income (expense)
Allowance for equity funds used during
construction (Note 1) 807 1,523 1,633
Other, net (Note 3) (105,133) (673) 1,927
Income taxes (Notes 2 and 3) 42,443 3,127 (177)
Total Other Income (Expense) (61,883) 3,977 3,383
Income Before Interest Charges 28,353 109,507 117,591
Interest charges
Long-term debt (Note 7) 46,213 42,266 46,299
Other interest (Note 7) 5,887 6,784 8,844
Allowance for borrowed funds used during
construction (Note 1) (482) (845) (1,135)
Total Interest Charges 51,618 48,205 54,008
Net income (loss) (23,265) 61,302 63,583
Dividends on preferred stock 10,511 8,842 6,770
Earnings (Loss) Applicable to Common Stock $(33,776) $ 52,460 $ 56,813
Weighted Average Number of Shares of
Common Stock Outstanding 32,442,408 31,789,114 30,630,427
Earnings (Loss) Per Share of Common Stock $(1.04) $ 1.65 $1.85
Dividends Declared Per Share of Common Stock $ 0.90 $1.395 $1.56
The accompanying notes are an integral part of these financial statements.<PAGE>
</TABLE>
<TABLE>
<S> <C> <S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet
(Dollars in thousands)
December 31
Assets 1994 1993
Electric property, at original cost (Notes 6 and 7) $1,579,632 $1,564,875
Less: accumulated depreciation (Note 1) 521,645 503,280
Electric property in service 1,057,987 1,061,595
Construction work in progress (Note 4) 13,647 19,689
Nuclear fuel, less accumulated amortization
of $8,110 in 1994 and $7,242 in 1993 2,181 1,822
Net electric property 1,073,815 1,083,106
Investments in associated companies, at equity
(Notes 1 and 6) 49,602 47,452
Net Electric Property and Investments in Associated
Companies 1,123,417 1,130,558
Current assets
Cash and cash equivalents 58,112 1,956
Accounts receivable, less allowances for
uncollectible accounts
of $3,301 in 1994 and $2,704 in 1993:
Service - billed 81,289 83,330
Service - unbilled (Notes 1 and 3) 38,153 67,022
Other accounts receivable 12,088 10,651
Undercollected retail fuel costs (Note 3) - 84,708
Prepaid income taxes (Note 2) 28,068 1,335
Fuel oil inventory, at average cost 4,113 6,939
Materials and supplies, at average cost 13,026 14,430
Funds on deposit with trustee 27,820 27,758
Prepayments and other current assets 9,337 8,008
Total Current Assets 272,006 306,137
Deferred charges and other assets
Recoverable costs of Seabrook 1 and abandoned projects,
net (Note 1) 101,976 110,443
Yankee Atomic purchased-power contract (Note 6) 38,777 32,775
Regulatory assets - deferred taxes (Note 2) 233,234 237,387
Deferred charges and other assets (Notes 1 and 3) 276,597 187,562
Total Deferred Charges and Other Assets 650,584 568,167
Total Assets $2,046,007 $2,004,862<PAGE>
Stockholders Investment and Liabilities
Capitalization (see separate statement) (Note 7)
Common stock investment $ 491,323 $ 553,389
Preferred stock 65,571 65,571
Redeemable preferred stock 80,000 80,000
Long-term obligations 638,841 581,844
Total Capitalization 1,275,735 1,280,804
Current liabilities and interim financing
Interim financing (see separate statement) (Note 7) 63,000 68,500
Sinking-fund requirements (Note 7) 2,580 3,421
Accounts payable 97,800 94,417
Dividends payable 9,932 9,468
Accrued interest 14,102 12,680
Miscellaneous current liabilities 10,535 13,137
Total Current Liabilities and Interim Financing 197,949 201,623
Commitments and Contingencies (Notes 4 and 6)
Reserves and deferred credits
Accumulated deferred income taxes (Note 2) 348,287 341,349
Unamortized investment tax credits (Note 2) 34,167 36,679
Yankee Atomic purchased-power contract (Note 6) 38,777 32,775
Regulatory liabilities - deferred taxes (Note 2) 53,937 49,734
Other reserves and deferred credits 97,155 61,898
Total Reserves and Deferred Credits 572,323 522,435
Total Stockholders Investment and Liabilities $2,046,007 $2,004,862
The accompanying notes are an integral part of these financial statements.<PAGE>
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Consolidated Statement of Cash Flows
(Dollars in thousands) Year ended December 31
1994 1993 1992
Operating Activities
Net income (loss) $ (23,265) $ 61,302 $ 63,583
Items not requiring (providing) cash:
ARP-related charges (Note 3) 100,390 - -
Depreciation and amortization 75,417 63,647 60,330
Deferred income taxes and investment tax
credits, net 11,022 5,584 1,511
Allowance for equity funds used during
construction (807) (1,523) (1,633)
Changes in certain assets and liabilities:
Accounts receivable 5,175 (4,881) (26,017)
Inventories 4,230 2,838 1,168
Other current assets (1,391) (24,436) (2,184)
Retail fuel costs 32,922 (4,349) (1,617)
Accounts payable 4,062 1,338 (11,046)
Accrued taxes and interest (25,311) 3,077 1,736
Miscellaneous current liabilities (2,602) (3,296) 1,506
Deferred energy-management costs (5,789) (10,192) (11,183)
Maine Yankee outage accrual 8,197 4,962 (3,122)
Purchased-power contract buyouts (91,274) (515) (19,365)
Revenue adjustment-tax flowback - (9,990) 9,990
Other, net (5,604) (16,932) (6,771)
Net Cash Provided by Operating Activities 85,372 66,634 56,886
Investing Activities
Construction expenditures (42,246) (53,576) (72,307)
Investments in associated companies (2,004) - (885)
Changes in accounts payable - investing activities (679) (2,905) (1,932)
Net Cash Used by Investing Activities (44,929) (56,481) (75,124)
Financing Activities
Issuances:
Mortgage bonds 25,000 260,000 75,000
Common stock 927 25,513 24,179
Medium-term notes 32,000 48,000 70,000
Preferred stock - - 75,000
Finance Authority of Maine 66,429 - -
Redemptions:
Mortgage bonds - (177,500) (135,000)
Premiums on redemptions - (9,634) (3,212)
Preferred stock - (7,125) (2,750)
Medium-term notes (43,000) (26,500) (37,500)
Short-term obligations, net (25,500) (63,000) 5,000
Other long-term obligations, net (860) (868) (874)
Dividends:
Common stock (29,222) (49,345) (47,566)
Preferred stock (10,061) (8,664) (6,115)
Net Cash Provided (Used) by Financing Activities 15,713 (9,123) 16,162
Net Increase (Decrease) in Cash and
Cash Equivalents 56,156 1,030 (2,076)
Cash and cash equivalents, beginning of year 1,956 926 3,002
Cash and Cash Equivalents, end of year $ 58,112 $ 1,956 $ 926
Supplemental Cash-Flow Information:
Cash paid during the year for:
Interest (net of amounts capitalized) $ 44,874 $ 42,870 $ 49,874
Income taxes 1,568 15,852 17,749
For purposes of the statement of cash flows, the Company considers all highly
liquid instruments purchased having a maturity of three months or less to
be cash equivalents.
The accompanying notes are an integral part of these financial statements.<PAGE>
</TABLE>
<TABLE>
<S> <C> <S> <C> <C> <C> <C> <C>
Consolidated Statement of Capitalization and Interim Financing
(Dollars in thousands) December 31
1994 1993
Amount % Amount %
Capitalization (Note 7)
Common-stock investment:
Common stock, par value $5 per share:
Authorized - 80,000,000 shares
Outstanding - 32,442,752 shares in 1994
and 32,379,937 shares in 1993 $ 162,214 $ 161,900
Other paid-in capital 275,627 274,343
Retained earnings 53,482 117,146
Total Common Stock Investment 491,323 36.7% 553,389 41.0%
Preferred Stock - not subject
to mandatory redemption 65,571 4.9 65,571 4.9
Redeemable Preferred Stock -
subject to mandatory redemption 80,000 6.0 80,000 5.9
Long-term obligations:
Mortgage bonds 432,500 407,500
Less: unamortized debt discount 1,990 2,175
Total Mortgage Bonds 430,510 405,325
Medium-term notes 127,000 146,000
Less: Unamortized debt discount 17 -
Total Medium-Term Notes 126,983 146,000
Other long-term obligations:
Lease obligations 39,159 42,740
Pollution-control facility and
other notes 99,769 34,200
Total Other Long-Term Obligations 138,928 76,940
Less: Current Sinking Fund
Requirements and Current Maturities 57,580 46,421
Total Long-Term Obligations 638,841 47.7 581,844 43.1
Total Capitalization 1,275,735 95.3 1,280,804 94.9
Interim financing, amounts to
be refinanced (Note 7):
Short-term obligations 8,000 25,500
Current maturities of long-term
obligations 55,000 43,000
Total Interim Financing 63,000 4.7 68,500 5.1
Total Capitalization and Interim
Financing $1,338,735 100.0% $1,349,304 100.0%
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
<TABLE>
<C> <C> <C> <C> <C> <C>
Consolidated Statement of Changes in Common Stock Investment
For the three years ended December 31, 1994 Other
(Dollars in thousands) Amount at paid-in Retained
Shares par value capital earnings Total
Balance - December 31,
1991 29,998,934 $149,995 $237,576 $101,980 $489,551
Net income 63,583 63,583
Dividends declared:
Common stock (47,988) (47,988)
Preferred stock (6,908) (6,908)
Cost for reacquired
preferred stock 617 (617) -
Issues of common stock 1,149,387 5,747 18,432 24,179
Capital stock expense (2,049) (2,049)
Balance - December 31,
1992 31,148,321 155,742 254,576 110,050 520,368
Net income 61,302 61,302
Dividends declared:
Common stock (44,459) (44,459)
Preferred stock (8,704) (8,704)
Cost for reacquired
preferred stock 1,043 (1,043) -
Issues of common stock 1,231,616 6,158 19,355 25,513
Capital stock expense (631) (631)
Balance - December 31,
1993 32,379,937 161,900 274,343 117,146 553,389
Net income (loss) (23,265) (23,265)
Dividends declared:
Common stock (29,213) (29,213)
Preferred stock (10,511) (10,511)
Cost for reacquired
preferred stock 675 (675) -
Issues of common stock 62,815 314 613 927
Capital stock expense (4) (4)
Balance - December 31,
1994 32,442,752 $162,214 $ 275,627 $ 53,482 $ 491,323
The accompanying notes are an integral part of these financial statements.<PAGE>
</TABLE>
Notes To Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Financial Statements: The consolidated financial statements
include the accounts of Central Maine Power Company (the Company)
and its 78-percent-owned subsidiary, Maine Electric Power
Company, Inc. (MEPCO). The Company accounts for its investments
in associated companies not subject to consolidation using the
equity method. Certain prior-year information has been
reclassified to be consistent with the 1994 presentation.
Regulation: The rates, operations, accounting, and certain other
practices of the Company and MEPCO are subject to the regulatory
authority of the Maine Public Utilities Commission (MPUC) and the
Federal Energy Regulatory Commission (FERC).
Electric Operating Revenues: Electric operating revenues include
amounts billed to customers and estimates of unbilled sales and
fuel costs. Through December 31, 1994, the Company s approved
tariffs provided for the recovery of the cost of fuel used in
Company generating facilities and purchased-power energy costs.
The Company also collected interest on unbilled fuel and paid
interest on fuel-related over-collections. Effective January 1,
1995 with the approval of the Alternative Rate Plan (ARP), these
costs are no longer subject to reconciliation through the annual
fuel-cost adjustment. From March 1991 through November 1993, the
Company recorded unbilled revenues pursuant to the Electric
Revenue Adjustment Mechanism (ERAM) under an MPUC order. See Note
3, "Regulatory Matters Alternative Rate Plan and Incentive
Regulation," for further information.
Depreciation: Depreciation of electric property is calculated
using the straight-line method. The weighted average composite
rates were 3.0 percent in 1994, and 2.9 percent in 1993 and 1992.
Allowance for Funds Used During Construction (AFC): An allowance
for funds (including equity funds), a non-operating item, is
capitalized as an element of the cost of construction. The debt
component of AFC is classified as a reduction of interest
expense, while the equity component, a non-cash item, is
classified as other income. The average AFC rates applied to
construction were 8.9 percent in 1994, 9.8 percent in 1993 and
10.2 percent in 1992.
Property Taxes: Effective January 1, 1993, the Company changed
its method of accounting for property taxes such that these taxes
are accrued monthly during the fiscal period of the taxing
entity. Previously, the Company had accrued taxes over a
statutory tax year of April to March. The effect of the change
was to increase earnings for common stock by $2.7 million or $.09
per share for the year ended December 31, 1993.
Deferred Charges and Other Assets: The Company defers and
amortizes certain costs in a manner consistent with the
authorized or probable ratemaking treatment. The Company
capitalizes carrying costs as a part of certain deferred charges,
principally energy-management costs, and classifies such carrying
costs as other income.
Deferred costs related to non-utility generator (NUG) contract
buy-outs and restructuring totaling $136.2 million are being
amortized and recovered in rates, in accordance with provisions<PAGE>
of prior MPUC orders and the ARP, over the period of the related
fuel cost savings, generally one to 27 years. Refer to Note 3,
"Regulatory Matters Non-Utility Generators," and Note 6,
"Capacity Arrangements Non-Utility Generators," for additional
discussion of these matters. Deferred energy-management program
costs of $37.5 million are being amortized and recovered in rates
over periods of five to 10 years. Deferred financing costs of
$29.1 million are being amortized and recovered through rates
over a period ranging from three to 30 years. Other deferred
amounts totaling $24.2 million are being recovered through rates
over periods ranging from five to 25 years.
In accordance with MPUC accounting orders, which were reaffirmed
by the MPUC in its ARP order, deferred charges and other assets
includes $13.1 million related to environmental-site cleanup and
$16.5 million related to postretirement benefits, both of which
will be addressed in future ARP-related price changes. Refer to
Note 4, "Commitments and Contingencies Legal and Environmental
Matters," and Note 5, "Pension and Other Post-Employment
Benefits," for additional discussion of these matters.
Recoverable Costs of Seabrook I and Abandoned Projects: The
recoverable after-tax investments in Seabrook I and abandoned
projects are reported as assets, pursuant to May 1985 and
February 1991 MPUC rate orders. The Company is allowed a current
return on these assets based on its authorized rate of return. In
accordance with current ratemaking practices, the deferred taxes
related to these recoverable costs are being amortized over
periods of four to 10 years. As of December 31, 1994, all
deferred taxes related to Seabrook I have been amortized. The
recoverable investments as of December 31, 1994, and 1993 are as
follows:
<TABLE>
<S> <C> <C> <C> <C>
(Dollars in thousands) December 31
Recovery
1994 1993 periods ending
Recoverable costs of:
Seabrook 1 $141,084 $141,084 2015
Other projects 57,491 57,491 1995 to 2001
198,575 198,575
Less: accumulated amortization 94,439 84,212
Less: related income taxes 2,160 3,920
Total Net Recoverable Investment $101,976 $110,443
</TABLE>
Note 2 Income Taxes<PAGE>
The components of federal and state income-tax provisions
(benefits) reflected in the Consolidated Statement of Earnings
are as follows:
<TABLE>
<S> <C> <C> <C>
(Dollars in thousands) Year ended December 31
1994 1993 1992
Federal:
Current $(18,579) $13,456 $13,087
Deferred 2,175 37,455 4,187
Investment tax credits, net (2,512) (1,832) (1,690)
Regulatory deferred 8,379 (30,224) -
Total Federal Taxes (10,537) 18,855 15,584
State:
Current (6,586) 3,549 3,837
Deferred 3,003 10,250 (986)
Regulatory deferred (23) (10,065) -
Total State Taxes (3,606) 3,734 2,851
Total Federal and State Income Taxes $(14,143) $22,589 $18,435
Federal and state income taxes charged to:
Operating expenses $ 28,300 $25,716 $18,258
Other income (42,443) (3,127) 177
$(14,143) $22,589 $18,435
</TABLE>
The Company and MEPCO record deferred income-tax expense in
accordance with regulatory authority and also defer investment
and energy tax credits and amortize them over the estimated lives
of the assets that generated the credits. As of December 31,
1994, the Company had approximately $2 million of investment,
energy, and research and development credits available to reduce
future federal and state income taxes otherwise payable.
Effective January 1, 1993, the Company adopted the provisions of
the Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109). SFAS No. 109 requires recognition of
deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference
between the financial statement and tax basis of assets and
liabilities using the enacted tax rates in effect in the year in
which the differences are expected to reverse.
Adjustments to accumulated deferred taxes were required, as well
as the recognition of a liability to ratepayers for deferred
taxes established in excess of the amount calculated using
income-tax rates applicable to future periods. Additionally,
deferred taxes were recorded for the cumulative timing
differences for which no deferred taxes had been recorded
previously. Concurrently, the Company, in accordance with
Statement of Financial Accounting Standards No. 71, "Accounting
for the Effects of Certain Types of Regulation," (SFAS No. 71)
was able to record a regulatory asset representing its
expectations that, consistent with current and expected
ratemaking, it will collect these additional taxes recorded
through rates when they are paid in the future. The adoption of
SFAS No. 109 had no impact on net income.
The Company filed a request for an accounting order with the MPUC
in 1992 to reaffirm its regulatory policy allowing recovery of
amounts for income taxes payable in the future and on August 31,
1993, the MPUC adopted and established for regulatory accounting
and reporting purposes the standards required by the FASB in SFAS<PAGE>
No. 109. This policy was reaffirmed by the MPUC in its ARP-
related order in January 1995. Prior to the implementation of
SFAS No. 109, the Company accounted for income taxes using
Accounting Principles Board Opinion No. 11.
Accumulated deferred income taxes consisted of the following in
1994 and 1993:
<TABLE>
<S> <C> <C> <C>
(Dollars in thousands) 1994 1993
Accumulated deferred income taxes,
beginning of the year, net $345,269 $297,564
Deferred tax assets resulting from:
Investment tax credits, net $ 23,491 $ 25,198
Regulatory liabilities 15,629 10,191
Alternative minimum tax 24,175 4,768
All other 16,922 12,095
80,217 52,252
Deferred tax liabilities resulting from:
Property 263,060 254,796
Abandoned plant 70,294 76,128
Regulatory assets 97,310 66,597
430,664 397,521
Accumulated deferred income taxes,
end of year, net $350,447 $345,269
Accumulated deferred income taxes,
recorded as:
Accumulated deferred income taxes $348,287 $341,349
Recoverable costs of Seabrook 1 and
abandoned projects, net 2,160 3,920
$350,447 $345,269
</TABLE>
A valuation allowance has not been recorded at December 31, 1994,
and 1993, as the Company expects that all deferred income tax
assets will be realized in the future.
The tax effects of the significant timing differences for the
year ended December 31, 1992, are required to be disclosed
pursuant to the accounting standards for income taxes in effect
prior to the adoption of SFAS No. 109. Significant timing
differences included depreciation, amortization of loss on
investments in abandoned projects, energy-management costs,
losses on reacquired debt, and purchased-power contract buy-outs.
The Omnibus Budget Revenue Reconciliation Act of 1993 increased
the corporate tax rate from 34 percent to 35 percent effective
January 1, 1993. The tax impact on total current and deferred
tax expense for the year ended December 31, 1993 was
approximately $0.7 million. The additional deferred taxes
recorded as a result of the corporate tax rate change were
approximately $13.0 million.
Federal income tax, excluding federal regulatory deferred taxes,
differs from the amount of tax computed by multiplying income
before federal tax by the statutory federal rate. The following
table reconciles the statutory federal rate to a rate determined
by dividing the total federal income-tax expense by income before
that expense:<PAGE>
Year ended December 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
1994 1993 1992
Amount % Amount % Amount %
Income tax expense at
statutory federal rate $ (11,831) 35.0% $28,055 35.0% $26,917 34.0%
Permanent differences:
Investment tax credit
amortization (1,613) 4.8 (1,613) (2.0) (1,613) (2.0)
Dividend received deduction (1,469) 4.3 (1,731) (2.2) (1,920) (2.4)
Other, net (68) 0.2 (634) (.8) (585) (0.8)
(14,981) 44.3 24,077 30.0 22,799 28.8
Effect of timing differences
for which deferred taxes
are not recorded (flow
through):
Tax basis repairs (924) 2.7 (1,175) (1.5) (899) (1.1)
Depreciation differences
flowed through in prior
years 2,315 (6.8) 1,728 2.2 2,024 2.5
Accelerated flowback of
deferred taxes on loss on
abandoned generating projects 2,051 (6.1) (2,678) (3.3) (2,778) (3.5)
Deduction of removal costs (163) 0.5 (392) (0.5) (649) (0.8)
Carrying costs, net 429 (1.3) (523) (0.7) (199) (0.3)
Adjustment to tax accrual for
change in rate treatment 420 (1.2) 481 0.6 - -
Excess property taxes paid (116) 0.4 (912) (1.1) 175 0.2
Reduction for non-regulated
deferred taxes previously
flowed through - - (1,530) (1.9) - -
Accelerated flowback of
deferred taxes on loss on
reacquired debt - - - - (4,618) (5.8)
Other, net 432 (1.3) (221) (0.3) (271) (0.3)
Federal Income Tax Expense
and Effective Rate $(10,537) 31.2% $18,855 23.5% $15,584 19.7%
</TABLE>
Note 3 Regulatory Matters
Alternative Rate Plan: In December 1994, the MPUC approved a
stipulation signed by most of the parties to the Company s
Alternative Rate Plan (ARP) proceeding. This follow-up proceeding
to the Company s 1993 base-rate case was ordered by the MPUC in
an effort to develop a five-year plan containing price-cap,
profit-sharing, and pricing-flexibility components. Although the
ARP is a major reform, the MPUC will continue to regulate the
Company s operations and prices, provide for continued recovery
of deferred costs, and specify a range for its rate of return.
The Company believes, as stated in the MPUC s order approving the
ARP, that operation under the ARP continues to meet the criteria
of SFAS No. 71. In its order, the MPUC reaffirmed the
applicability of previous accounting orders allowing the Company
to reflect amounts as deferred charges and regulatory assets. As
a result, the Company will continue to apply the provisions of
SFAS No. 71 to its accounting transactions and in its future
financial statements.
The ARP contains a mechanism that provides price-caps on the
Company s retail rates to increase annually on July 1, commencing
July 1, 1995, by a percentage combining (1) a price index, (2) a
productivity offset, (3) a sharing mechanism, and (4) flow-<PAGE>
through items and mandated costs. The price cap applies to all of
the Company s retail rates, including the Company s fuel-and-
purchased power cost, which previously had been treated
separately. Under the ARP, fuel expense is no longer subject to
reconciliation or specific rate recovery, but is subject to the
annual indexed price-cap changes.
A specified standard inflation index will be the basis for each
annual price-cap change. The inflation index will be reduced by
the sum of two productivity factors, a general productivity
offset of 1.0 percent and a second formula-based offset starting
in 1996 intended to reflect the limited effect of inflation on
the Company s purchased-power costs during the proposed five-year
initial term of the ARP.
The sharing mechanism will adjust the subsequent year s July
price-cap change in the event the Company s earnings were outside
a range of 350 basis points above or below the Company s allowed
return on equity, starting at the current 10.55-percent allowed
return and indexed annually for changes in capital costs. Outside
that range, profits and losses would be shared equally by the
Company and ratepayers. This feature will commence with the
price-cap change of July 1, 1996, and reflect 1995 results.
The ARP also provides for partial flow-through to ratepayers of
cost savings from non-utility generator contract buy-outs and
restructuring, recovery of energy-management costs, penalties for
failure to attain customer-service and energy-efficiency targets,
and specific recovery of half the costs of the transition to
Statement of Financial Accounting Standards No. 106, "Accounting
for Postretirement Benefits Other Than Pensions" (SFAS No. 106),
the remaining 50 percent to be recovered through the annual
price-cap change. The ARP also generally defines mandated costs
that would be recoverable by the Company notwithstanding the
index-based price cap. To receive such treatment, a mandated
cost s revenue requirement must exceed $3 million and have a
disproportionate effect on the Company or the electric power
industry.
The Company agreed in the ARP negotiations to record charges
reflecting the write-off of approximately $100 million ($60
million, net of tax or $1.85 per share), as follows:
(1) the undercollected balance of fuel and purchased-power costs
as of December 31, 1994, totaling approximately $59 million;
(2) the unrecovered deferred charges for energy-management costs
for 1993 and 1994, which totaled approximately $15 million;
(3) the unrecovered balance of unbilled ERAM revenues as of
December 31, 1994, totaling approximately $24 million; and
(4) the unrecovered deferred charges related to the possible
extension of the operating life of one of the Company s
generating stations, as of December 31, 1994, which totaled
approximately $2.6 million.
The $100-million charge is included in "Other income (expense)
Other, net" on the Consolidated Statement of Earnings. The $40-
million tax impact is included in "Other income (expense)
Income taxes."<PAGE>
These charges, along with the other provisions of the ARP, will
lessen the impact of future price increases for MPUC-mandated and
fuel-related costs, and better position the Company to improve
its rate of return.
The Company believes the ARP provides the benefits of needed
pricing flexibility through the ability to set prices between
defined floor and ceiling levels in three service categories: (1)
existing customer classes, (2) new customer classes for optional
targeted services, and (3) special-rate contracts. The Company
believes that the added flexibility will position it more
favorably to meet the competition from other energy sources that
has eroded segments of its customer base.
The ARP also contains provisions to protect the Company and
ratepayers against unforeseen adverse results from its operation.
These include review by the MPUC if the Company s actual return
on equity falls outside the designated range two years in a row,
a mid-period review of the ARP by the MPUC in 1997 (including
possible modification or termination), and a "final" review by
the MPUC in 1999 to determine whether or with what changes the
ARP should continue in effect after 1999.
Other Regulatory Decisions: On December 14, 1993, the MPUC issued
its order in the Company s 1993 $83-million base-rate proceeding.
The MPUC s analysis indicated a need for additional revenues of
$51.5 million, yet found the Company to be entitled to a net
revenue increase of only $26.2 million. The MPUC found a total
cost of capital of 8.52 percent and a cost of equity of 10.05
percent, after deducting a one-half percent (.5%) return-on-
equity penalty it had established in a 1993 investigation of the
Company s management of certain NUG contracts. To arrive at its
revenue-requirement conclusion, the MPUC deducted $25.3 million
"to adjust for management inefficiency" after finding the
Company s performance in the areas of management efficiency and
cost-cutting to have been "inadequate."
The Company strongly disagreed with the MPUC s management-
inefficiency finding and with the resulting deduction of nearly
one-half the revenue increase to which the MPUC itself found the
Company to be otherwise entitled using traditional ratemaking
principles. The Company filed an appeal of the base-rate order
with the Maine Supreme Judicial Court (Law Court).
However, the Company also pursued a non-litigation strategy to
try to resolve these issues, with the result that the MPUC
approved a series of stipulations supported by the Company and
other parties to earlier proceedings on NUG contracts and the
Company s 1993 base-rate case. In the stipulations, the Company
agreed to write-off $5 million in purchased-power costs, to be
implemented through a one-time reduction in its deferred fuel-
cost balance, and further agreed not to seek recovery in rates of
the approximately $5.5 million (of which $4.5 million was
deferred) in costs incurred in pursuing the termination and buy-
out in January 1994 of its purchased-power contract with
Caithness King of Maine Limited Partnership. The Company also
agreed to withdraw its appeal to the Law Court of the MPUC s
October 1993 order in its NUG investigation that had the effect
of increasing the Company s annual base revenues by approximately
$4 million, the amount of the stayed one-half percent return-on-
equity penalty previously imposed by the MPUC, and to withdraw
its appeal to the Law Court of the MPUC s December 1993 decision
in the Company s base-rate case.<PAGE>
In return, the stipulations provided that the Company will not be
subject to any further investigations, disallowances, or other
financially adverse consequences with respect to its
administration prior to March 22, 1994, of the Company s larger
NUG contracts (over 10 megawatts) totaling approximately 398
megawatts in the aggregate, that were then being investigated by
the MPUC. The Company believes that the MPUC s approval of these
stipulations resolves another of the complex issues that have
been posing risks to the Company since the MPUC s initiation of a
general investigation of the Company s administration of NUG
contracts by its order of October 28, 1993.
Finally, in addition to agreement on procedural matters, the
stipulations contained an agreement that the Company would be
subject to no further investigation, disallowance or other
financially adverse consequence with respect to its
administration of its "Capacity Deficiency Fund" and would not be
required to flow through to ratepayers any amounts previously
recorded to that fund. That provision allowed the Company to
reverse, during the first quarter of 1994, the $4.1-million
reserve previously credited in 1993 against its deferred fuel-
cost balance.
Incentive Regulation: On May 7, 1991, the MPUC ordered a three-
year trial of the ERAM, a fundamental change in the way the
Company s revenues were treated, and set new incentives for
effective utility-sponsored energy management. On July 16, 1992,
the MPUC issued an order authorizing the Company to begin
collecting $7.8 million, which was only a portion of the $26.2
million of ERAM revenues accrued in its first year, and an
energy-management incentive of $1.5 million, beginning in
September 1992. In January 1993, the MPUC approved a stipulation
that permitted recovery of accrued ERAM balances in accordance
with the terms of the FASB s Emerging Issues Task Force
consensus. The stipulation also approved an Accounting Order
permitting the Company to accelerate the flow-back of $5.9
million of certain deferred taxes associated with prior losses on
reacquired debt. For 1992, the stipulation placed a limit of
11.25 percent on the Company s allowed rate of return on equity.
Earnings in excess of the limit, up to approximately $10 million
(the revenue requirement of the tax benefits), were applied on a
monthly basis to reduce 1993 ERAM accruals.
The stipulation also reduced the amount of ERAM accruals from
January 1993 through November 1993 by $591,000 per month. The
ERAM program continued until the effective date of new base
rates, December 1, 1993.
As contemplated in the January 1993 stipulation, the MPUC
approved a revenue increase, effective July 1, 1993, that
included, among other things, $21.2 million toward recovery of
unbilled ERAM revenues.
As previously discussed, in accordance with the MPUC s order in
the ARP proceeding, the $24.3 million balance of unbilled ERAM
revenues that had yet to be collected from customers at December
31, 1994 was written off.
Non-Utility Generators: In 1994, the Governor of Maine signed
into law a bill allowing the Finance Authority of Maine (FAME) to
borrow up to $100 million to lend to electric utilities for
financing buy-outs or other restructuring of NUG contracts that
would save money for customers. The law anticipated the State<PAGE>
agency s bonds, which do not pledge the full faith and credit of
the state, would likely bear lower interest rates than the bonds
of the Company with its then down-graded credit rating.
On June 9, 1994, the Company announced that it had agreed to buy
out a NUG contract for a 32-megawatt wood-fired generating plant
in Fort Fairfield, Maine. The Company agreed to pay $76 million
to buy out the contract and $2 million to acquire the generating
plant.
On August 5, 1994, the MPUC issued an order approving a
stipulation entered into by the Company with the Town of Fort
Fairfield and other intervenors to the Company s application for
approval of the buy-out. In the stipulation, the Company agreed
to continue operation of the plant for a minimum of three years,
provided that certain plant-efficiency criteria can be met, and
the Town agreed to support the Company s efforts to obtain the
necessary regulatory and financing approvals.
In a series of orders, the MPUC approved the buy-out of the
power-purchase contract; acquisition of the facility by the
Company s subsequently established subsidiary, Aroostook Valley
Electric Company (AVEC); recovery in rates of the cost of the
buy-out and operation of the plant; and an ultimate rate decrease
of $5.6 million reflecting purchased-power savings effective
December 1, 1994.
In September 1994, FAME approved the Company s application for
funds to finance the buy-out. On October 26, 1994, FAME issued
$79.3 million of Taxable Electric Rate Stabilization Revenue
Notes Series 1994A (FAME notes). FAME and the Company entered
into a loan agreement under which the Company issued FAME a note
for approximately $66.4 million, evidencing a loan in that
amount. The proceeds of the loan, along with $13 million of the
Company s own funds, were used to buy out the Fort Fairfield
contract. Concurrently, the Company purchased all of the common
stock of AVEC for $2 million. On October 26, 1994, AVEC paid the
former owners of the Fort Fairfield facility $2 million and took
title to the facility. In connection with the FAME financing,
AVEC granted FAME a mortgage on the facility. The remaining $12.9
million of FAME notes proceeds was placed in a capital-reserve
account. The amount in the capital-reserve account is equal to
the highest amount of principal and interest on the FAME notes to
accrue and come due in any year the FAME notes are outstanding.
The amounts invested in the capital reserve account are initially
invested in government securities designed to generate interest
income at a rate equal to the interest on the FAME notes. Under
the terms of the loan agreement, the Company is also responsible
for or receives the benefit from the interest rate differential
and investment gains and losses on the capital reserve account.<PAGE>
Note 4 Commitments and Contingencies
Construction Program: The Company s plans for improvements and
expansion of generating, transmission-and-distribution
facilities, and power-supply sources are under continuing review.
Actual construction expenditures will depend upon the
availability of capital and other resources, load forecasts,
customer growth, and general business conditions. The Company s
current forecasted capital expenditures for the five-year period
1995 through 1999, including AFC of approximately $3 million, are
as follows:
<TABLE>
<S> <C>
(Dollars in millions) 1995 1996-1999 Total
Type of Facilities:
Generating projects $ 9 $ 41 $ 50
Transmission 5 23 28
Distribution 23 106 129
General facilities and other 19 83 102
Total Estimated Capital Expenditures $56 $253 $309
</TABLE>
Competition: In July 1993, the Town of Madison Electric Works
(Madison), a wholesale customer of the Company, announced that it
had selected a competitive bid from Northeast Utilities (NU) and
was entering negotiations for NU to become its wholesale electric
supplier for a period of up to 10 years pursuant to the new
options available under the federal Energy Policy Act of 1992.
NU, a Connecticut-based holding company with substantial excess
generating capacity, had submitted a bid to provide up to 45
megawatts of capacity at a rate that would initially be well
below the Company s existing rates. Substantially all of the 45
megawatts would supply the large paper-making facility of Madison
Paper Industries (MPI) in Madison s service territory that has
been served directly by the Company under a special service
agreement with Madison during the last 12 years. Madison proposed
to start taking power from NU in late 1994 for that portion
required to serve MPI and in late 1996 for its remaining
requirements.
In May 1994, the MPUC approved the stipulation filed by the
Company, Madison and NU that resolved all issues in dispute among
the parties relating to Madison and MPI. Under the agreement, the
related MPUC and FERC regulatory proceedings were deemed to be
settled among the parties, and the Company withdrew its request
for compensation for stranded investment. In return, NU agreed to
pay the Company $8.4 million over a seven-year period, MPI agreed
to pay the Company $1.4 million over a three-year period, a
transmission rate was agreed upon for the Company s transmission
service to Madison commencing September 1, 1994, and the parties
agreed that Madison would be supplied by NU through 2003, with
Madison having an option for an additional five years. In
addition, NU and the Company agreed to a five-year capacity
exchange arrangement designed to achieve significant replacement-
power cost savings for the Company when the Company s largest
source of generation, the Maine Yankee Atomic Power Company
plant, is off-line, and provides Maine Yankee power to NU when
certain NU facilities are shut down. The agreement provides more
economic benefit to the Company than if it had under-bid NU for
Madison s business, but less than if Madison stayed on the
Company s system at the former rates. The Company records income
under this contract as the amounts are received.
Madison was the largest of the Company s three wholesale
customers. The Company has reached agreement with its other two<PAGE>
wholesale customers to continue to supply them at negotiated
prices and margins that are lower than the previous averages.
During 1994, the Company engaged in discussions with its
transmission system customers to ensure retention of those
customers because they have competitive options that the Company
believed needed to be addressed by lowering its applicable
tariffs to more competitive levels. In response to those
discussions, in November the Company filed revised tariff
schedules lowering prices 15 percent for its two high-voltage
transmission-level rate classes.
The Company then entered into five-year definitive agreements
with 18 of these customers that "lock-in" non-cumulative rate
reductions of 15 percent for the three years 1995 through 1997,
16 percent for 1998, and 18 percent for 1999, below the December
1, 1994, levels. These contracts also protect these customers
from any price increases that would otherwise be allowed under
the terms of the ARP.
The participating customers agreed to take electrical service
from the Company for five years and also agreed not to switch
fuels, install new self-generation equipment, or seek another
supplier of electricity for existing electrical load during that
period. New electrical load in excess of a stated minimum level
could be served by other available sources, but the Company could
compete for that load.
The Company believes that without offering the competitive
pricing provided in the agreements, a number of these customers
would be likely to install additional self-generation or take
other steps to decrease their electricity purchases from the
Company. The revenue loss from such a usage shift could have been
substantial.
The Company estimates that based on the rate reductions effective
January 1, 1995, its gross revenues will be approximately $27
million lower in 1995 than would have been the case if these
customers continued to pay full retail rates without reducing
their purchases from the Company.
However, there are important related savings. Electricity price
changes affect the cost of NUG power. The reduction in rates to
large customers discussed above is expected to reduce purchased-
power costs by approximately $20 million, as a result of
reductions in the cost of purchased power under several NUG
contracts where those costs are tied to the price of electricity.
Legal and Environmental Matters: The Company is a party in legal
and administrative proceedings that arise in the normal course of
business. In connection with one such proceeding, the Company has
been named a potentially responsible party and has been incurring
costs to determine the best method of cleaning up an Augusta,
Maine, site formerly owned by a salvage company and identified by
the Environmental Protection Agency (EPA) as containing soil
contaminated by polychlorinated biphenyls (PCBs) from equipment
originally owned by the Company.
In July 1994, the EPA approved changes to the remedy it had
previously selected, the principal change being to adjust the
soil cleanup standard to 10 parts per million from the one part
per million established in the EPA s 1989 Record of Decision, on
the part of the site where PCBs were found in their highest<PAGE>
concentration. The EPA stated that the purpose of adjusting the
standard of cleanup was to accommodate the selected technology s
current inability to reduce PCBs and other chemical components on
the site to the original standard.
Initial tests on the site have been completed and more complex
technological studies are still in progress. The Company believes
that its share of the remaining costs of the cleanup will total
between $10 million and $15 million, depending on the level of
cleanup ultimately required and other variable factors. Such
estimate is net of an agreed partial insurance recovery and
includes the 1993 court-ordered contributions of 41 percent from
Westinghouse Electric Co., but excludes contributions from the
other insurance carriers the Company has sued, or any other third
parties. As a result, the Company has recorded an estimated
liability of $10 million and an equal regulatory asset,
reflecting the anticipated ratemaking recovery of such costs when
ultimately paid.
In September 1994, in connection with the 12.5-percent court-
ordered contribution from the former owners, the Company, after
consideration of relevant factors, agreed to a settlement of all
claims against the former owners and received $15,000 as their
12.5-percent share of the cleanup costs. The excess of their
share above the $15,000 will be subject to the cost-sharing under
a partial insurance recovery agreement.
The Company cannot predict with certainty the level and timing of
the cleanup costs, the extent they will be covered by insurance,
or the ratemaking treatment of such costs, but believes it should
recover substantially all of such costs through insurance and
rates. The Company also believes that the ultimate resolution of
the legal and environmental proceedings in which it is currently
involved will not have a material adverse effect on its financial
condition.
Nuclear Insurance: The Price-Anderson Act (Act) is a federal
statute providing, among other things, a limit on the maximum
liability for damages resulting from a nuclear incident. The
liability is provided for by existing private insurance and by
retrospective assessments for costs in excess of that covered by
insurance, up to $75.5 million for each reactor owned, with a
maximum assessment of $10 million per reactor in any year. Based
on the Company s indirect ownership in four nuclear-generation
facilities (See Note 6, "Capacity Arrangements Power
Agreements") and its 2.5-percent ownership interest in the
Millstone 3 nuclear plant, the Company s retrospective premium
could be as high as $6 million in any year, for a cumulative
total of $45.3 million, exclusive of the effect of inflation
indexing and a 5-percent surcharge in the event that total public
liability claims from a nuclear incident should exceed the funds
available to pay such claims.
In addition to the insurance required by the Act, the nuclear
generating facilities referenced above carry additional nuclear
property-damage insurance. This additional insurance is provided
from commercial sources and from the nuclear electric-utility
industry s insurance company through a combination of current
premiums and retrospective premium adjustments. Based on current
premiums and the Company s indirect and direct ownership in
nuclear generating facilities, this adjustment could range up to
approximately $6.3 million annually.<PAGE>
Note 5 Pension and Other Post-Employment Benefits
Pension Benefits: The Company has two separate non-contributory,
defined-benefit plans that cover substantially all of its union
and non-union employees. The Company s funding policy is to
contribute amounts to the separate plans that are sufficient to
meet the funding requirements set forth in the Employee
Retirement Income Security Act (ERISA), plus such additional
amounts as the Company may determine to be appropriate. Plan
benefits under the non-union retirement plan are based on average
final earnings, as defined within the plan, and length of
employee service; benefits under the union plan are based on
average career earnings and length of employee service.
During 1991, the Company offered an Early Retirement Incentive
Plan (ERIP) to qualifying employees. Approximately 200 employees
accepted the offer. The actuarial present value of the ERIP of
$12.2 million, was included in pension expense in accordance with
an accounting order from the MPUC.
A summary of the components of net periodic pension cost for the
non-union and union defined-benefit plans in 1994, 1993, and 1992
follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1994 1993 1992
(Dollars in thousands) Non-union Union Non-union Union Non-union Union
Service cost - benefits earned
during the period $ 2,367 $ 1,684 $ 2,092 $ 1,436 $ 2,344 $ 1,271
Interest cost on projected
benefit obligation 5,469 3,816 5,355 3,691 5,709 3,705
Return on plan assets 2,336 1,397 (9,669) (6,051) (5,085) (3,198)
Net amortization and deferral (8,174) (5,311) 4,419 2,457 351 (104)
Early Retirement Incentive
Program 992 1,457 - - 1,240 1,821
Net Periodic Pension Cost $ 2,990 $ 3,043 $ 2,197 $ 1,533 $ 4,559 $ 3,495
</TABLE>
Assumptions used in accounting for the non-union and union
defined-benefit plans in 1994, 1993, and 1992 are as follows:
<TABLE>
<S> <C> <C> <C>
1994 1993 1992
Weighted average discount rate 8.25% 7.5% 8.0%
Rate of increase in future compensation levels 5.0% 5.0% 5.5%
Expected long-term return on assets 8.5% 8.5% 8.5%
</TABLE>
The following table sets forth the actuarial present value of
pension-benefit obligations, the funded status of the plans, and
the liabilities recognized on the Company s balance sheet at
December 31, 1994, and 1993:<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
1994 1993
(Dollars in thousands) Non-union Union Non-union Union
Actuarial present value of benefit
obligations:
Vested benefit obligation $51,657 $39,235 $54,837 $41,521
Accumulated benefit obligation $55,346 $42,247 $58,777 $44,674
Projected benefit obligation $68,578 $47,816 $73,674 $50,845
Plan assets at estimated market value
(primarily stocks, bonds, and guaranteed
annuity contracts) 74,905 46,067 80,787 50,007
Funded status - projected benefit obligation
in excess of or (less than) plan assets (6,327) 1,749 (7,113) 838
Early Retirement Incentive Program deferral - - (992) (1,457)
Unrecognized prior service cost (1,294) (1,009) (1,724) (1,089)
Unrecognized net gain 15,564 5,690 15,516 5,529
Unrecognized (net obligation) net asset (221) 2,655 (250) 2,980
Net Pension Liability Recognized in the
Balance Sheet $ 7,722 $ 9,085 $ 5,437 $ 6,801
</TABLE>
The Company offers an employee savings plan to all employees
which allows participants to invest from 1 percent to 15 percent
of their salaries among several investment alternatives. An
employer contribution equal to 60 percent of the first 5 percent
of the employees contributions is initially invested in Company
common stock. The Company s annual contributions to the savings
plan trust were $1.8 million in 1994, $1.9 million in 1993, and
$1.8 million in 1992.
Other Post-Employment Benefits: In addition to pension benefits,
the Company provides certain health-care and life-insurance
benefits for substantially all of its retired employees.
In December 1990, FASB issued SFAS No. 106, which the Company
adopted effective January 1, 1993. The new standards require the
accrual of the expected cost of such benefits during the
employees years of service. The effect of the change can be
reflected in annual expenses over the active service life of
employees or a period of 20 years, rather than in the year of
adoption.
The MPUC approved a rulemaking on SFAS No. 106, effective
July 20, 1993, that adopts the accrual method of accounting and
authorizes the establishment of a regulatory asset for the
deferral of such costs until they are "phased-in" for ratemaking
purposes. The MPUC prescribes the maximum amortization period of
the average remaining service life of active employees or 20
years, whichever is longer, for the transition obligation.
Segregation in an external fund will be required for amounts
collected in rates. A formal funding plan will be adopted
concurrent with the initial recovery in rates. Until then, no
return on assets will be reflected in postretirement benefit
cost.
As a result of the MPUC order, the Company continued to record
the cost of these benefits by charging expense in the period paid
($5.5 million in 1994, $6.5 million in 1993, and $5.0 million in
1992), with the excess over that amount of $7.1 million and $8.6
million in 1994 and 1993, respectively, deferred for future
recovery. Concurrent with the initial ARP price change, the
Company will begin to phase in the cost of SFAS No. 106 over a
three-year period. The amounts deferred until that point will be
amortized over the same period as the transition obligation. A<PAGE>
summary of the components of net periodic postretirement benefit
cost for the plan in 1994 and 1993 follows:
<TABLE>
<S> <C> <C>
(Dollars in thousands) 1994 1993
Service cost $ 1,472 $ 1,429
Interest on accumulated postretirement benefit obligation 6,712 8,352
Actual return on plan assets - -
Amortization of transition obligation 4,606 5,306
Amortization of gain (171) -
Postretirement benefits expense 12,619 15,087
Deferred postretirement benefits expense 7,108 8,612
Postretirement Benefit Expense Recognized
in the Statement of Earnings $ 5,511 $ 6,475
</TABLE>
The following table sets forth the accumulated postretirement
benefit obligation, the funded status of the plan, and the
liability recognized on the Company s balance sheet at December
31, 1994 and 1993:
<TABLE>
<S> <C> <C>
(Dollars in thousands) 1994 1993
Accumulated postretirement benefit obligation:
Retirees $62,911 $73,809
Fully eligible active plan participants 6,919 5,559
Other active plan participants 17,785 22,880
Total accumulated postretirement benefit obligation 87,615 102,248
Plan assets, at fair value 754 854
Accumulated postretirement benefits obligation in excess of
plan assets 86,861 101,394
Unrecognized net gain (loss) 13,022 (4,013)
Unrecognized transition obligation (82,909) (87,515)
Accrued Postretirement Benefit Cost Recognized
in the Balance Sheet $16,974 $ 9,866
</TABLE>
The assumed health-care cost-trend rates range from 6.8 percent
to 10.4 percent for 1994, reducing to 5.0 percent overall, over a
period of 10 years. Rates for 1993 range from 10.2 percent to
16.1 percent, reducing to 4.5 percent overall, over a period of
eight years. The effect of a one-percentage-point increase in the
assumed health-care cost trend rate for each future year would
increase the aggregate of the service and interest-cost
components of the net periodic postretirement benefit cost by
$0.9 million and the accumulated postretirement benefit
obligation by $8.4 million. Additional assumptions used in
accounting for the postretirement benefit plan in 1994 and 1993
are as follows:
1994 1993
Weighted average discount rate 8.25% 7.5%
Rate of increase in future compensation levels 5.0% 5.5%
Effective January 1, 1994, the plan was amended to limit the
reimbursement rate for prescription drugs, which reduced the
accumulated postretirement benefit obligation by approximately
$10 million.
The Company is exploring alternatives for mitigating the cost of
postretirement benefits and for funding its obligations. These
alternatives include mechanisms to fund the obligation prior to
actual payment of benefits, plan-design changes to limit future
expense increases, and additional cost-control and cost-sharing
programs.<PAGE>
Note 6 Capacity Arrangements
Power Agreements: The Company, through certain equity interests,
owns a portion of the generating capacity and energy production
of four nuclear generating facilities (the Yankee companies) and
is obligated to pay its proportionate share of the generating
costs, which include depreciation, operation-and-maintenance
expenses, a return on invested capital, and the estimated cost of
decommissioning the nuclear plants at the end of their estimated
service lives.
Pertinent data related to these power agreements as of December
31, 1994, are as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Maine Vermont Connecticut Yankee
Yankee Yankee Yankee Atomic*
Ownership share 38% 4% 6% 9.5%
Contract expiration date 2008 2012 1998 2000
Capacity (MW) 880 522 583 -
Company s share of:
Capacity (MW) 330 19 35 -
Estimated annual costs
(1994 costs in thousands) $73,290 $5,845 $11,750 $5,222
Long-term obligations and
redeemable preferred stock
(thousands) $96,124 $6,396 $10,595 $ 475
</TABLE>
* See below for discussion on Yankee Atomic.
Under the terms of its agreements, the Company pays its ownership
share (or entitlement share) of estimated decommissioning expense
to each of the Yankee companies and records such payments as a
cost of purchased power. Effective August 16, 1988, Maine Yankee
began collecting $9.1 million annually for decommissioning. In
1994, Maine Yankee, pursuant to FERC authorization, increased its
annual collection to $14.9 million and reduced its return on
common equity to 10.65 percent, for a total increase in rates of
approximately $3.4 million. The increase in decommissioning
collection is based on the estimated cost of decommissioning the
Maine Yankee Plant, assuming dismantlement and removal, of $317
million (in 1993 dollars) based on a 1993 external engineering
study. Accumulated decommissioning funds were $108.7 million as
of December 31, 1994. The estimated cost of decommissioning
nuclear plants is subject to change due to the evolving
technology of decommissioning and the possibility of new legal
requirements.
Condensed financial information of Maine Yankee Atomic Power
Company is as follows:<PAGE>
<TABLE>
<S> <C> <C> <C>
(Dollars in Thousands) 1994 1993 1992
Earnings:
Operating revenues $173,857 $193,102 $187,259
Operating income 16,223 16,580 17,064
Net income 8,573 8,980 9,173
Earnings applicable to common stock 7,014 7,376 8,394
Company s Equity Share of Net Earnings $ 2,665 $ 2,803 $ 3,190
Investment:
Net electric property and nuclear fuel $254,820 $261,674 $273,195
Current assets 38,950 36,018 44,149
Deferred charges and other assets 256,140 237,125 203,849
Total Assets 549,910 534,817 521,193
Less:
Redeemable preferred stock 19,200 19,800 20,400
Long-term obligations 226,491 218,839 210,754
Current liabilities 29,210 27,887 40,027
Reserves and deferred credits 208,100 201,222 183,095
Net Assets $ 66,909 $ 67,069 $ 66,917
Company s Equity in Net Assets $ 25,425 $ 25,486 $ 25,428
</TABLE>
On February 26, 1992, the Board of Directors of Yankee Atomic
Electric Company (Yankee Atomic) decided to permanently
discontinue power operation at the Yankee Atomic Plant in Rowe,
Massachusetts, and to decommission that facility.
The Company relied on Yankee Atomic for less than 1 percent of
the Company s system capacity. Its 9.5-percent equity investment
in Yankee Atomic is approximately $2.3 million. Presently,
purchased-power costs billed to the Company, which include the
estimated cost of the ultimate decommissioning of the unit, are
collected by the Company from its customers through the Company s
rates.
On March 18, 1993, the FERC approved a settlement agreement
regarding the decommissioning plan, recovery of plant investment,
and all issues with respect to prudence of the decision to
discontinue operation. The Company has estimated its remaining
share of the cost of Yankee Atomic s continued compliance with
regulatory requirements, recovery of its plant investments,
decommissioning and closing the plant, to be approximately $38.8
million. This estimate, which is subject to ongoing review and
revision, has been recorded by the Company as a regulatory asset
and a liability on the accompanying balance sheet. As part of the
MPUC s decision in the Company s 1993 base-rate case, the
Company s current share of costs related to the deactivation of
Yankee Atomic are being recovered through rates.
The Company has approximately a 60-percent ownership interest in
the jointly owned, Company-operated, 619-megawatt oil-fired W. F.
Wyman Unit No. 4. The Company also has a 2.5-percent ownership
interest in the Millstone 3 nuclear plant operated by Northeast
Utilities, and receives power from its approximately 29-megawatt
share of that unit s capacity. The Company s share of the
operating costs of these units is included in the appropriate
expense categories in the Consolidated Statement of Earnings. The
Company s plant in service, nuclear fuel, decommissioning fund,
and related accumulated depreciation and amortization
attributable to these units as of December 31, 1994, and 1993
were as follows:
<TABLE>
<S> <C> <S> <C> <C> <C> <C>
Wyman 4 Millstone 3
(Dollars in thousands) 1994 1993 1994 1993 <PAGE>
Plant in service, nuclear fuel
and decommissioning fund $116,363 $115,598 $109,640 $109,027
Accumulated depreciation and
amortization 56,605 53,397 32,594 28,744
</TABLE>
Power-Pool Agreements: The New England Power Pool, of which the
Company is a member, has contracted in its Hydro-Quebec Projects
to purchase power from Hydro-Quebec. The contracts entitle the
Company to 85.9 megawatts of capacity credit in the winter and
127.25 megawatts of capacity credit during the summer. The
Company has entered into facilities-support agreements for its
share of the related transmission facilities. The Company s share
of the support responsibility and of associated benefits is
approximately 7 percent.
The Company is making facilities-support payments on
approximately $31.6 million, its share of the construction cost
for these transmission facilities incurred through December 31,
1994. These obligations are reflected on the Company s balance
sheet as lease obligations with a corresponding charge to
electric property.
Non-Utility Generators: The Company has entered into a number of
long-term, non-cancelable contracts for the purchase of capacity
and energy from non-utility generators. The agreements generally
have terms of five to 30 years and require the Company to
purchase the energy at specified prices per kilowatt-hour. As of
December 31, 1994, facilities having 574 megawatts of capacity
covered by these contracts were in service. The costs of
purchases under all of these contracts amounted to $373.5 million
in 1994, $360.7 million in 1993, and $341.5 million in 1992.
During 1994, the Company reached agreement with 26 NUGs to buy-
out contracts or to give the Company options to restructure their
contracts through lump-sum or periodic payments. In accordance
with prior MPUC policy and the ARP, $136.2 million of buy-out or
restructuring costs incurred since January 1992 were included in
Deferred Charges and Other Assets on the Company s balance sheet
and will be amortized over their respective fuel savings periods.
Note 7 Capitalization and Interim Financing
Retained Earnings: Under terms of the most restrictive test in
the Company s General and Refunding Mortgage Indenture and the
Company s Articles of Incorporation, no dividend may be paid on
the common stock of the Company if such dividend would reduce
retained earnings below $29.6 million. At December 31, 1994, the
Company s retained earnings were $53.5 million, of which $23.9
million were not so restricted.
Mortgage Bonds: Substantially all of the Company s electric-
utility property and franchises are subject to the lien of the
General and Refunding Mortgage.
The Company s outstanding Mortgage Bonds may be redeemed at
established prices plus accrued interest to the date of
redemption, subject to certain refunding limitations. Bonds may
also be redeemed under certain conditions at their principal
amount plus accrued interest by means of cash deposited with the
trustee under certain provisions of the mortgage indenture.
Mortgage Bonds outstanding as of December 31, 1994, and 1993 were
as follows:<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
(Dollars in thousands)
Series Redeemed/maturity Interest rate 1994 1993
Central Maine Power Company
General and Refunding Mortgage Bonds:
U 1998-April 15 7.54%* $ 25,000 $ -
S 1998-August 15 6.03 60,000 60,000
T 1998-November 1 6.25 75,000 75,000
O 1999-January 1 7 3/8 50,000 50,000
P 2000-January 15 7.66 75,000 75,000
N 2001-September 15 8.50 22,500 22,500
Q 2008-March 1 7.05 75,000 75,000
R 2023-June 1 7 7/8 50,000 50,000
Total Mortgage Bonds $432,500 $407,500
*Adjustable, no adjustment during 1994.
</TABLE>
Limitations on Unsecured Indebtedness: The Company s Articles of
Incorporation limit certain unsecured indebtedness that may be
outstanding to 20 percent of capitalization, as defined; 20
percent of defined capitalization amounted to $222 million as of
December 31, 1994. Unsecured indebtedness, as defined, amounted
to $95 million as of December 31, 1994.
In May 1989, holders of the Company s preferred stock consented
to the issuance of unsecured Medium-Term Notes in an aggregate
principal amount of $150 million outstanding at any one time; the
notes are therefore not subject to such limitations.
Medium-Term Notes: Under the terms of the Company s Medium-Term
Note program, the Company may offer Medium-Term Notes up to an
aggregate principal amount of $150 million. Maturities can range
from nine months to 30 years; interest rates pertaining to such
notes are established at the time of issuance. Interest on fixed-
rate notes is payable on March 1 and September 1, while interest
on floating-rate notes is payable on the dates indicated
thereupon.
<TABLE>
<C> <C> <C> <C> <C>
Medium-Term Notes outstanding as of December 31, 1994, and 1993 were as
follows:
(Dollars in thousands)
Maturity Interest rate 1994 1993
Series A:
1992-1995 5.75%-9.58% $ - $ 13,000
1996-2000 9.35%-9.65 15,000 15,000
Total Series A 15,000 28,000
Series B:
1992-1995 3.625-6.50* 63,000 85,000
1996-2000 4.92%-7.98 57,000 33,000
Total Series B 120,000 118,000
Total Medium-Term Notes 135,000 146,000
Less: Amounts classified as
short-term obligations 8,000 -
Amounts Classified as Long-Term
Obligations $ 127,000 $146,000
</TABLE>
* Includes $10 million of variable rate notes in 1994 and 1993,
with an average interest rate of 4.615% and 3.625%, respectively,
and $8 million of variable notes in 1994 with an average interest
rate of 6.35%<PAGE>
Pollution-Control Facility and Other Notes: Pollution-control
facility and other notes outstanding as of December 31, 1994, and
1993 were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
Series Interest rate Maturity 1994 1993
Central Maine Power Company:
Yarmouth Installment Notes 6 3/4% June 1, 2002 $10,250 $10,250
Yarmouth Installment Notes 6 3/4 December 1, 2003 1,000 1,000
Industrial Development
Authority of the State of 7 3/8 May 1, 2014 11,000 11,000
New Hampshire Notes 7 3/8 May 1, 2014 8,500 8,500
Finance Authority of Maine 8.16 January 1, 2005 66,429 -
Maine Electric Power Company,
Inc.:
Promissory Notes Variable* July 1, 1996 2,590 3,450
Total Pollution-Control
Facility and Other Notes $99,769 $34,200
</TABLE>
*The average rate was 4.9% in 1994 and 4.4% in 1993.
The bonds issued by the Industrial Development Authority of the
State of New Hampshire are supported by loan agreements between
the Company and the Authority. The bonds are subject to
redemption at the option of the Company at their principal amount
plus accrued interest and premium, beginning in 2001.
Lease Obligations: The Company leases a portion of its buildings
and equipment under lease arrangements, and accounts for certain
transmission agreements as capital leases using periods expiring
between 2006 and 2021. The net book value of property under
capital leases was $36.2 million and $40.0 million at December
31, 1994, and 1993, respectively. Assets acquired under capital
leases are recorded as electric property at the lower of fair-
market value or the present value of future lease payments, in
accordance with practices allowed by the MPUC, and are amortized
over their contract terms. The related obligation is classified
as other long-term debt. Under the terms of the lease agreements,
executory costs are excluded from the minimum lease payments.
Estimated future minimum lease payments for the five years ending
December 31, 1999, together with the present value of the minimum
lease payments, are as follows:
(Dollars in thousands) Amount
1995 $ 5,898
1996 5,727
1997 5,555
1998 5,384
1999 5,213
Thereafter 64,563
Total minimum lease payments 92,340
Less: amounts representing interest 53,181
Present Value of Net
Minimum Lease Payments $39,159
Sinking Fund Requirements: Consolidated sinking-fund requirements
for long-term obligations, including capital lease payments and
maturing debt issues, for the five years ending December 31,
1999, are as follows:
(Dollars in thousands) Sinking Maturing<PAGE>
fund debt Total
1995 $ 2,580 $ 55,000 $ 57,580
1996 3,455 34,000 37,455
1997 8,477 15,000 23,477
1998 9,014 168,000 177,014
1999 9,657 60,000 69,657
Disclosure of Fair Value of Financial Instruments: The methods
and assumptions used to estimate the fair value of each class of
financial instruments for which it is practicable are discussed
below. The carrying amounts of cash and temporary investments
approximate fair value because of the short maturity of these
investments. The fair value of redeemable preferred stock and
pollution-control facility and other notes is based on market
prices as of December 31, 1994. The fair value of long-term
obligations is based on market prices for the same or similar
issues, or on the current rates offered to the Company based on
the weighted average life of each class of instruments.
The estimated fair values of the Company s financial instruments
as of December 31, 1994 and 1993 are as follows:
<TABLE>
<S> <C> <C> <C> <C>
1994 1993
(Dollars in thousands) Carrying Fair Carrying Fair
amount value amount value
Cash and temporary investments $ 58,112 $ 58,112 $ 1,956 $ 1,956
Redeemable preferred stock 80,000 79,476 80,000 79,450
Mortgage bonds 432,500 374,286 407,500 407,772
Medium-term notes 135,000 130,788 146,000 148,132
Pollution-control facility and other notes 99,769 90,873 34,200 37,253
</TABLE>
Rights Plan: On September 28, 1994, the Board of Directors of
the Company adopted a shareholder-rights plan and declared a
dividend of one common-share purchase right (a right) for each
outstanding share of the common stock, par value $5.00 per share,
of the Company (the common shares). The dividend was distributed
to the shareholders of record as of the close of business on
October 17, 1994. Each right entitles the registered holder to
purchase from the Company, one common share at an initial
purchase price of $40 per common share, subject to adjustment.
The rights become exercisable or transferrable apart from the
common shares, 10 business days following a public announcement
that a person or group (acquiring person) has acquired beneficial
ownership of, or commences a tender or exchange offer for, 20
percent or more of the outstanding common shares. The holder of
each right not owned by the acquiring person would be entitled to
purchase common shares having a market value equal to two times
the exercise price of the right (i.e., at a 50 percent discount).
The purchase price payable and the number of common shares
issuable upon exercise of the rights are subject to adjustment
from time to time and under certain circumstances.
The rights will expire on the earlier of (i) the close of
business on October 31, 2004, (ii) the time at which the rights
are redeemed by the Company or (iii) the time at which the rights
are exchanged for common shares at an exchange ratio of one
common share per right, as adjusted by the Company.<PAGE>
At any time prior to a person or group acquiring 20 percent or
more of the outstanding common stock, the Board of Directors of
the Company may redeem the then outstanding rights in whole, but
not in part, at a price of $.01 per right, subject to adjustment.
The redemption of the rights may be made effective at such time,
on such basis and with such conditions as the Board of Directors
in its sole discretion may establish. Immediately upon any
redemption of the rights, the right to exercise the rights will
terminate and the only right of the holders of rights will be to
receive the redemption price.
The terms of the rights may be amended by the Board of Directors
of the Company without the consent of the holders of the rights,
including, an amendment to lower the threshold for an acquiring
person from 20 percent to not less than the greater of (i) any
percentage greater than the largest percentage of the outstanding
common shares then known by the Company to be beneficially owned
by any person and (ii) 10 percent.
Preferred Stock: Preferred-stock balances outstanding as of
December 31, 1994, 1993, and 1992 were as follows:
<TABLE>
<S> <C> <S><C> <C> <C> <C> <C>
Current
(Dollars in thousands, except Shares
per-share amounts) outstanding 1994 1993 1992
Preferred Stock - Not Subject to
Mandatory Redemption:
$25 par value - authorized
2,000,000 shares outstanding: None$ - $ - $ -
$100 par value noncallable -
Authorized 5,713 shares;
outstanding: 6% voting 5,713 571 571 571
$100 par value callable -
authorized 2,300,000*
shares; outstanding:
3.50% series (redeemable at $101) 220,000 22,000 22,000 22,000
4.60% series (redeemable at $101) 30,000 3,000 3,000 3,000
4.75% series (redeemable at $101) 50,000 5,000 5,000 5,000
5.25% series (redeemable at $102) 50,000 5,000 5,000 5,000
7 7/8% series (optional redemption
after 9/1/97, at $100) 300,000 30,000 30,000 30,000
Flexible Money Market Preferred Stock,
Series A (450,000 shares in 1992)** None - - 45,000
Preferred Stock - Not Subject
to Mandatory Redemption $65,571 $65,571 $110,571
Redeemable Preferred Stock - Subject to
Mandatory Redemption:
$100 par value callable - authorized
2,300,000* shares; outstanding:
8.40% series (71,250 shares in 1992) None$ - $ - $ 7,125
Flexible Money Market Preferred Stock,
Series A 7.999% (redeemable at $100) 450,000 45,000 45,000 -
8 7/8% series (redeemable at $104.931) 350,000 35,000 35,000 35,000
Redeemable Preferred Stock - Subject
to Mandatory Redemption $80,000 $80,000 $ 42,125
</TABLE>
**Total authorized $100 par value callable is 2,300,000 shares.
Shares outstanding are classified as Not Subject to Mandatory
Redemption and Subject to Mandatory Redemption.
**The average rate was 3.35% through November 16,1993 and 3.45%
in 1992.<PAGE>
Sinking-fund provisions for the 8 7/8% Series Preferred Stock
require the Company to redeem all shares at par plus an amount
equal to dividends accrued to the redemption date on the basis of
70,000 shares annually beginning in July 1996. The Company also
has the non-cumulative right to redeem up to an equal amount of
the respective number of shares annually beginning in 1996, at
par plus an amount equal to dividends accrued to the redemption
date. The sinking-fund requirement for the five-year period
ending December 31, 1999, is $7.0 million annually beginning in
1996.
On August 27, 1992, the Company issued through a public offering
450,000 shares of Flexible Money Market Preferred Stock, Series
A, $100 par value. On November 16, 1993, the Board of Directors
voted to fix the dividend at 7.999 percent.
Sinking-fund provisions for the Flexible Money Market Preferred
Stock, Series A, 7.999% require the Company to redeem all shares
at par plus an amount equal to dividends accrued to the
redemption date on the basis of 90,000 shares annually beginning
in October 1999. The Company also has the non-cumulative right to
redeem up to an equal number of shares annually beginning in
1999, at par plus an amount equal to dividends accrued to the
redemption date.
Interim Financing and Credit Agreements: The Company uses funds
obtained from short-term borrowing, primarily through issuance of
commercial paper backed by lines of credit with commercial banks,
and its revolving-credit agreements to provide initial financing
for construction and other corporate purposes. Annual fees on the
unused portion of the lines of credit are 3/8 of 1 percent. Under
the terms of these agreements, the Company had no borrowings at
December 31, 1994 and had outstanding at December 31, 1993, $15.5
million of commercial paper and $10 million of short-term bank
notes.
On November 7, 1994, the Company entered into an unsecured
Competitive Advance and Revolving Credit Facility (revolving
credit facility), with several banks and Chemical Bank, as agent
for the lenders, to provide up to $80 million of revolving credit
loans. The revolving-credit facility supplements the existing
$50-million revolving-credit agreement and replaces the Company s
previous $73 million of individual lines of credit. The
revolving-credit loans under the revolving-credit facility may
consist of "Eurodollar Loans" or "ABR Loans," or a combination
thereof. The $80-million revolving-credit facility has a term of
364 days and expires November 6, 1995.
The Company has an unsecured revolving-credit agreement with
several banks providing for loans of up to $50 million. The
agreement is for a three-year period, but may be extended for
successive one-year periods with bank approval. With extensions,
the agreement is presently scheduled to expire on October 15,
1996. In addition, long-term floating-rate loans outstanding at
the termination of the revolving-credit phase may be payable two
years thereafter, under certain conditions. The Company may
borrow at rates, as defined within the credit agreement, based on
a certificate-of-deposit loan rate, a Eurodollar loan rate, or
the agent bank s reference rate. A commitment fee of 3/8 of 1
percent per annum is paid on the unused portion of the line.
As of December 31, 1994, MEPCO had lines of credit totaling $2.5
million with commercial banks to provide for its working-capital<PAGE>
needs. These lines of credit are subject to annual review and
renewal. Annual fees for the lines of credit range from 3/16 to
1/4 of 1 percent. At December 31, 1994, and 1993, there was no
short-term borrowing outstanding under the MEPCO credit lines.
Note 8 Quarterly Financial Data (Unaudited)
Unaudited, consolidated quarterly financial data pertaining to
the results of operations, which reflect the seasonality of
electric sales and higher rates and lower contribution to
earnings per kilowatt-hour during peak-consumption periods, are
shown below.
<TABLE>
<S> <C> <C> <C> <C>
(Dollars in thousands, except per-share amounts)
Quarter ended
March 31 June 30 September 30 December 31
1994
Electric operating revenues $241,026 $212,336 $233,543 $217,978
Operating income 26,233 26,609 25,652 11,742
Net income (loss) 11,416 15,307 14,083 (64,071)
Earnings (loss) per common
share (1) .27 .39 .35 (2.06)
1993
Electric operating revenues $236,021 $198,953 $227,383 $231,220
Operating income 33,298 24,227 21,623 26,382
Net income 21,573 13,702 13,561 12,466
Earnings per common share (1) .62 .37 .36 .31
1992
Electric operating revenues $246,624 $203,822 $207,170 $220,079
Operating income 34,801 28,678 27,423 23,306
Net income 21,521 15,105 15,203 11,754
Earnings per common share (1) .67 .45 .44 .30
</TABLE>
(1) Earnings per share are computed using the weighted average
number of common shares outstanding during the applicable
quarter.<PAGE>
Note 9 Subsequent Event
On March 23, 1995, the Company reported that the Maine Yankee
Plant, like other pressurized water reactors, has been
experiencing degradation of its steam generator tubes,
principally in the form of circumferential cracking, which, until
early 1995, was believed to be limited to a relatively small
number of tubes. Practice has been to plug degraded tubes.
During the refueling-and-maintenance shutdown that commenced in
early February of 1995 and is continuing, Maine Yankee detected
through new inspection methods greater than expected degradation
of the steam generator tubes; it is assessing the extent of
degradation and evaluating available courses of action to address
the matter. A substantial increase in the number of degraded
tubes would adversely affect the operation of the Maine Yankee
plant and result in substantial additional costs to Maine Yankee,
with the Company being responsible for its pro-rata share of non-
capital costs. In addition, the Company would also incur
substantial replacement power costs, the amount depending on the
length of time the Maine Yankee plant is out of service and the
prices paid for the replacement power.
With the effective termination of the reconcilable fuel-and-
purchased-power adjustment under the ARP, costs of replacement
power during a Maine Yankee outage would in general be treated
like other Company expenses, i.e., limited by the ARP's price-
index mechanism, and would not be deferred and collected through
a specific fuel-rate adjustment, as under pre-1995 ratemaking.
Under the ARP no additional price increase beyond the currently
pending increase associated with the price index will take effect
in 1995 as a result of the Maine Yankee outage. Althouth the ARP
contains provisions that could result in rate adjustments based
on low earnings or the incurring of extraordinary costs by the
Company, neither provision would affect prices in 1995. The
result is that costs associated with replacement power during an
extended Maine Yankee outage would have an adverse impact on
Central Maine's financial results for 1995.
If repair technologies do not prove feasible, substantial capital
expenditures could be required to restore the Maine Yankee plant
to service, especially if it is determined that the plant's three
steam generators should be replaced. The cost of replacement
generators would depend to a large extent on whether suitable
generators were already available from a canceled plant or
otherwise. If such generators were available, the plant could be
out of service for as much as 12 to 18 months. If it were
necessary to manufacture and install new generators, the plant
could be out of service for a substantially longer period. If
the generators were replaced, Maine Yankee might request equity
contributions from its common stockholders, including the
Company, under its capital funds agreements with them; the
stockholders would be required to contribute their pro-rata
shares, subject in some cases to regulatory approvals.
The Company cannot now predict what action Maine Yankee will
adopt, to what extent the operation of the Maine Yankee plant
will be affected, or what costs will ultimately be borne by the
Company, but such costs could have a material impact on the
future results of operations of the Company.<PAGE>
REPORT OF MANAGEMENT
THE MANAGEMENT OF CENTRAL MAINE POWER COMPANY and its subsidiary
is responsible for the consolidated financial statements and the
related financial information appearing in this annual report.
The financial statements are prepared in conformity with
generally accepted accounting principles and include amounts
based on informed estimates and judgments of management. The
financial information included elsewhere in this report is
consistent, where applicable, with the financial statements.
The Company maintains a system of internal accounting controls
that is designed to provide reasonable assurance that the
Company s assets are safeguarded, transactions are executed in
accordance with management s authorization, and the financial
records are reliable for preparing the financial statements.
While no system of internal accounting controls can prevent the
occurrence of errors or irregularities with absolute assurance,
management s objective is to maintain a system of internal
accounting controls that meets its goals in a cost-effective
manner.
The Company has policies and procedures in place to support and
document the internal accounting controls that are revised on a
continuing basis. Internal auditors conduct comprehensive
reviews, provide ongoing assessments of the effectiveness of
selective internal controls, and report their findings and
recommendations for improvement to management.
The Board of Directors has established an Audit Committee,
composed entirely of outside directors, which oversees the
Company s financial reporting process on behalf of the Board of
Directors. The Audit Committee meets periodically with
management, internal auditors, and the independent public
accountants to review accounting, auditing, internal accounting
controls, and financial reporting matters. The internal auditors
and the independent public accountants have full and free access
to meet with the Audit Committee, with or without management
present, to discuss auditing or financial reporting matters.
Coopers & Lybrand L.L.P., independent public accountants, has
been retained to audit the Company s consolidated financial
statements. The accompanying report of independent public
accountants is based on their audit, conducted in accordance with
generally accepted auditing standards, including a review of
selected internal accounting controls and tests of accounting
procedures and records.
David T. Flanagan
President and Chief Executive Officer
David E. Marsh
Vice President, Corporate Services, and Chief Financial Officer<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Percentage of
Jurisdiction of Voting Stock Owned
Name Incorporation by the Company
Central Securities Corporation Maine 100.0
Cumberland Securities Corporation Maine 100.0
Maine Industries, Inc.* Maine 100.0
The Union Water-Power Company Maine 100.0
Maine Electric Power Company, Inc. Maine 78.3
Kennebec Hydro Resources, Inc. Maine 100.0
NORVARCO Maine 100.0
CMP International Consultants,
formerly Integrated Resource
Management Services Maine 100.0
Aroostook Valley Electric Company Maine 100.0
*Maine Industries, Inc. is inactive.<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,073,815
<OTHER-PROPERTY-AND-INVEST> 49,602
<TOTAL-CURRENT-ASSETS> 272,006
<TOTAL-DEFERRED-CHARGES> 650,584
<OTHER-ASSETS> 0<F1>
<TOTAL-ASSETS> 2,046,007
<COMMON> 162,214
<CAPITAL-SURPLUS-PAID-IN> 275,627
<RETAINED-EARNINGS> 53,482
<TOTAL-COMMON-STOCKHOLDERS-EQ> 491,323
80,000
65,571
<LONG-TERM-DEBT-NET> 602,262
<SHORT-TERM-NOTES> 8,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 55,000
0
<CAPITAL-LEASE-OBLIGATIONS> 36,579
<LEASES-CURRENT> 2,580
<OTHER-ITEMS-CAPITAL-AND-LIAB> 704,692
<TOT-CAPITALIZATION-AND-LIAB> 2,046,007
<GROSS-OPERATING-REVENUE> 904,883
<INCOME-TAX-EXPENSE> 28,300
<OTHER-OPERATING-EXPENSES> 791,456
<TOTAL-OPERATING-EXPENSES> 819,756
<OPERATING-INCOME-LOSS> 90,236
<OTHER-INCOME-NET> (61,883)
<INCOME-BEFORE-INTEREST-EXPEN> 28,353
<TOTAL-INTEREST-EXPENSE> 51,618
<NET-INCOME> (23,265)
10,511
<EARNINGS-AVAILABLE-FOR-COMM> (33,776)
<COMMON-STOCK-DIVIDENDS> 29,213
<TOTAL-INTEREST-ON-BONDS> 30,216
<CASH-FLOW-OPERATIONS> 85,372
<EPS-PRIMARY> (1.04)
<EPS-DILUTED> (1.04)
<FN>
<F1>Included in Total Deferred Charges
</FN>
</TABLE>
