UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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
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)
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 _x_.
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 $360,772,712 on March 3, 1997
(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 3, 1997).
(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 3, 1997, 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 definitive proxy statement for the Company's 1997 Annual
Meeting of Shareholders are incorporated by reference in Part III hereof.
CENTRAL MAINE POWER COMPANY
INFORMATION REQUIRED IN FORM 10-K
Item Number Page
Part I
Item 1. Business 1
Item 2. Properties 12
Item 3. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of
Security Holders 20
Item 4.1. Executive Officers of the Registrant 21
Part II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters 22
Item 6. Selected Financial Data 22
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 23
Item 8. Financial Statements and Supplementary Data 42
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 81
Part III
Item 10. Directors and Executive Officers of the
Registrant 82
Item 11. Executive Compensation 82
Item 12. Security Ownership of Certain Beneficial
Owners and Management 82
Item 13. Certain Relationships and Related Transactions 82
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 83
Signatures 85
FORWARD LOOKING INFORMATION
In addition to the historical information contained herein,
this report contains a number of "forward-looking statements", within the
meaning of the Securities and Exchange Act of 1934. Such statements address
future events and conditions concerning capital expenditures, earnings on
assets, resolution and impact of litigation, regulatory matters, liquidity and
capital resources, and accounting matters. Actual results in each case could
differ materially from those projected in such statements, by reason of
factors including, without limitation, electric utility restructuring,
including the ongoing state and federal activities; future economic
conditions; earnings retention and dividend payout policies; developments in
the legislative, regulatory and competitive markets in which the Company
operates; and other circumstances that could affect anticipated revenues and
costs, such as unscheduled maintenance or repair requirements of nuclear and
other facilities and compliance with laws and regulations. Nuclear investments
and obligations, which are subject to increased regulatory scrutiny, and the
amount of the expenditures and the timing of the return of the Maine Yankee
generating plant to service could have a material effect on the Company's
financial position. These and other factors are discussed in the Company's
filings with the Securities and Exchange Commission, including this report.
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. The Company is also diversifying into new lines of business,
largely through its subsidiaries. See "Competition - Expansion of Lines of
Business", below. Its principal executive offices are located at 83 Edison
Drive, Augusta, Maine 04336, where its general telephone number is (207)
623-3521.
The Company is the largest electric utility in Maine, serving
approximately 521,000 customers in its 11,000 square-mile service area in
southern and central Maine and having $967 million in consolidated electric
operating revenues in 1996 (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 943,000 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 62 percent of the Company's industrial sales and
approximately 25 percent of total service-area sales.
Nuclear Plant Outages. In 1996 the Company incurred substantially
higher costs associated with its investments in nuclear generating units,
particularly the 879-megawatt unit owned and operated by Maine Yankee Atomic
Power Company ("Maine Yankee") in Wiscasset, Maine, (the "Maine Yankee Plant"
or the "Plant") and expects even higher costs in 1997 to have a significant
effect on the Company's financial results for 1997. For a complete discussion
of the regulatory and operational problems causing such higher Maine Yankee
costs, see "Maine Yankee Atomic Power Company," below, and Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
1996 Results. The Company generated net earnings of $60.2 million in
1996, compared to net earnings of $38.0 million in 1995. The earnings
applicable to common stock was $50.8 million, or $1.57 per share in 1996,
compared to earnings applicable to common stock of $27.8 million, or $0.86 per
share, in 1995.
Electric operating revenues increased by $51.0 million, or 5.6 percent,
to $967 million in 1996. Total service-area sales increased by 2.9 percent in
1996, with residential sales increasing by 1.0 percent, commercial sales
increasing by 0.5 percent, industrial sales increasing by 4.0 percent, and the
small wholesale and lighting category increasing by 58.9 percent. The primary
factors in the service-area kilowatt-hour sales increase were residential
customers' taking advantage of the Company's water heating program, increased
sales in the pulp and paper industry, and the addition of a wholesale
customer. The decreases in 1995 and 1994 were attributed to low economic
growth, the loss of a major industrial customer in September 1994, energy
management, and loss of sales due to conversions from electricity to
alternative fuels for such purposes as space and water heating.
In order to compete effectively in an increasingly competitive electric
utility industry, the Company is pursuing a strategy based on stabilizing its
price of electricity, in real terms, through the rest of the decade. To
accomplish that goal, the Company in 1996 continued its efforts to control
costs, which became a much greater challenge because of the nuclear plant
outages, reduce its costs of non-utility purchased power, and expand its lines
of business. Significant progress was made in stabilizing rates with the
adoption effective January 1, 1995, of the Alternative Rate Plan (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 over the last two years
with a number of its largest customers designed to ensure that those customers
would remain on the Company's system over the five-year period. The Company
has used the pricing flexibility provision in the ARP to provide new rates to
approximately 19,000 customers, representing approximately 40 percent of
annual kilowatt-hour sales and 27 percent of service-area revenues.
The Company is actively supporting electric industry restructuring
efforts now under consideration by the Maine Legislature. This is part of a
national trend to change the electric industry over time into a more
competitive industry. A primary goal of this effort is to provide customers
with greater choices in the terms, conditions and suppliers of their electric
power needs. While many aspects of the transition are uncertain, the
transition to direct retail competition could have substantial impacts on the
value of utility assets and on the ability of electric utilities to recover
their costs through rates. Without effective action by legislators and
regulators, utilities could find their above-market costs to be "stranded," or
unrecoverable, in the new competitive setting. The Company has substantial
exposure to cost stranding relative to its size. See "Competition" and
"Restructuring and Strandable Costs," below, for more information on this
subject.
Maine Yankee, the ARP, restructuring, strandable costs, and other
significant developments are discussed in succeeding sections of this report.
In some cases more complete information is included in Management's Discussion
and Analysis of Financial Condition and Results of Operations, which appears
in Item 7 of this report, or in the Notes to Consolidated Financial Statements
for the year ended December 31, 1996, which appear in Item 8 of this report.
In those cases Item 7 and 8 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 Items 7 and 8.
Topic Page
Regulation and Rates 3
Competition 4
Restructuring and Strandable Costs 5
Non-utility Generation 5
Maine Yankee Atomic Power Company 6
Financing and Related Considerations 7
Environmental Matters
Water Quality Control 9
Air Quality Control 9
Hazardous Waste Regulations 9
Electromagnetic Fields 10
Capital Expenditures 10
Employee Information 10
Regulation and Rates
General. The Company is subject to the regulatory authority of the
Maine Public Utilities Commission (the "MPUC" or the "PUC") 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 to the jurisdiction of the Federal Energy
Regulatory Commission ("FERC") under Parts I, II and III of the Federal Power
Act for 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. 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 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 and hydroelectric 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, local and other
federal 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 fourteen 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 with
licenses which expired in 1993, ten are operating under annual licenses, one
project is operating under a new license issued in 1993, one license was
allowed to expire, and one project was sold. 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 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 is continuing 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." See Note 3 of Consolidated Financial
Statements for more information on the ARP.
Competition
General. In 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, enhanced
access to electric transmission to promote competition for wholesale
purchasers and sellers. The Policy Act has combined with regulatory
development 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 at present 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
programs, including the implementation of special rates to maintain or
increase employment at specific large customers' plants and incremental-energy
rates to avoid losing specific groups of customers to other energy sources. In
addition, the Company has redesigned some rates to encourage off-peak usage
and discourage switching to alternative fuels. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
Notes 3 and 4 to Consolidated Financial Statements for more information.
Expansion of Lines of Business. The Company is also preparing for competition
by expanding its business opportunities through subsidiaries that capitalize
on core competencies. One such subsidiary, MaineCom Services ("MaineCom") is
developing opportunities in expanding markets by arranging fiber-optic data
service for bulk carriers, offering support for cable-TV or "super-cellular"
personal-communication vendors, and providing other telecommunications
services. The Company invested $10.7 million in MaineCom during 1996 to
develop an interchange network from Portland, Maine, to various points in New
Hampshire, Massachusetts and Connecticut. In addition, the Company has
subsidiaries or divisions that provide energy-efficiency services, utility
consulting (domestic and international) and research, engineering and
environmental services, management of rivers and recreational facilities,
locating of underground utility facilities and infrared photography, real
estate brokerage and management, modular housing, and credit and collection
services. All subsidiaries utilize skills of former Company employees and
compete for business with other companies.
In July 1996, the Company and Maine Electric Power Company, Inc.
(MEPCO), a 78 percent-owned subsidiary of the Company, entered into option
agreements with Maritimes and Northeast Pipeline, L.L.C. (M&N) in which the
Company and MEPCO agreed to provide exclusive options to M&N to acquire
property interests in certain transmission line rights of way to sections of
M&N's proposed natural gas pipeline from the United States-Canada border at
Woodland, Maine, to Dracut, Massachusetts. In November 1996, while the parties
were still engaged in negotiating the terms of the proposed long-term
arrangement, the options expired by their terms. Subsequent to the expiration
the parties have met to discuss a long-term arrangement for use of the
Company's and MEPCO's rights of way for the proposed pipeline, but the Company
cannot predict whether final agreement on such an arrangement will be reached.
Restructuring and Strandable Costs
The enactment by Congress of the Policy Act accelerated planning by
electric utilities, including the Company, for a transition to a more
competitive industry. The functional areas in which competition will take
place, the regulatory changes that will be implemented, and the resulting
structure of both the industry and the Company are still uncertain, but
regulatory, and in some states, legislative steps have already been taken
toward competition in generation and non-discriminatory transmission access. A
departure from traditional regulation could have substantial impacts on the
value of utility assets and on the ability of electric utilities to recover
their costs through rates. In the absence of full recovery, utilities would
find their above-market costs to be "stranded," or unrecoverable, in the new
competitive setting. The Company is pursuing efforts to mitigate its exposure
to stranded costs through securitization of regulatory assets. For further
discussion of this issue, see Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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 3.8 billion kilowatt-hours of electricity to the Company in
1996, representing 32 percent of total generation, a decrease from 37 percent
in 1995 when Maine Yankee was out of service for most of the year. The
Company's contracts with non-utility generators, however, which were entered
into pursuant to the mandates of PURPA and vigorous state implementation of
its policies, have contributed the largest part of the Company's increased
costs and the resulting rate increases in recent years prior to implementation
of the ARP in 1995, and constitute the largest part of the Company's
strandable costs.
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 purchased from 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 recent surplus of relatively
low-cost power in the New England market, prices paid by the Company under NUG
contracts have often been well above current wholesale market prices.
The Company's NUG contracts generally have had terms of five to 30
years, and expiration dates ranging from 1997 to 2021. They require the
Company to purchase the energy at specified prices per kilowatt-hour. As of
December 31, 1996, facilities having 573 megawatts of capacity covered by
these contracts were in service. The costs of purchases under all of these
contracts amounted to $313.4 million in 1996, $314.4 million in 1995, and
$373.5 million in 1994.
Because of the upward price pressure resulting in large part from costs
associated with its NUG contracts, the Company has taken steps to reduce those
costs. In recent years the Company has reached agreement with a number of NUGs
to buy out their contracts or to give the Company options to restructure their
contracts through lump-sum or periodic payments. The Company restructured 40
contracts representing 316 megawatts of capacity that the Company believes
should result in approximately $301 million in fuel savings over the next five
years.
Pursuant to one NUG contract buy-out, Aroostook Valley Electric Company
("AVEC"), a wholly-owned subsidiary of the Company, acquired a 33-megawatt
wood-fired generating plant in Fort Fairfield, in northern Maine. AVEC reduced
the operating costs of the plant and, after competitive bidding, was awarded a
12.5-megawatt contract to supply the Town of Houlton municipal electric
utility, which is outside the Company's retail service territory, at wholesale
for ten years starting January 1, 1996.
In accordance with prior MPUC policy and the ARP, $113 million of buyout
or restructuring costs since January 1992 has been included in Deferred
Charges and Other Assets on the Company's balance sheet and will be amortized
over their respective fuel savings periods. 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. In October 1997 a contract
with a major NUG supplier will expire, which should result in annual savings
of approximately $25 million for the Company.
Maine Yankee Atomic Power Company
The Company owns a 38 percent stock interest in Maine Yankee, which owns
and operates the Maine Yankee Plant and is entitled under a cost-based power
contract to an approximately equal percentage of the Plant's output. The Plant
has been in commercial operation since 1972 and, through 1994, generally
produced power at a cost among the lowest in the country for nuclear plants.
The Maine Yankee Plant was shut down for eleven months in 1995 for
repairs to its steam generator tubes. The Plant returned to service in January
1996 at 90 percent of its operating capacity. On December 6, 1996, the plant
was shut down for inspection and repairs, and is expected to remain out of
service at least until August 1997. During this time, Maine Yankee must
replace 92 fuel assemblies, conduct an intensive inspection of its steam
generators, resolve cable-separation issues and other regulatory issues, as
well as any additional issues that are discovered during the outage, and
obtain the approval of the NRC to restart the plant. In addition, Maine Yankee
will make use of the outage to inspect the Plant's steam generators,
commencing approximately April 1, 1997, for deterioration beyond that which
was repaired during the extended 1995 outage. Degradation of steam generators
of the age and design of those in use in the Plant has been identified at
other plants. If major repairs to, or replacement of, the steam generators
were found to be necessary for continued operation of the Plant, Maine Yankee
would review the economics of continued operation before incurring the
substantial capital expenditures that would be required.
On January 29, 1997, the NRC announced that it had placed the Plant on
its "watch list" in "Category 2", which includes plants that display
"weaknesses that warrant increased NRC attention", but which are not severe
enough to warrant a shut-down order. Plants in category 2 remain in that
category "until the licensee demonstrates a period of improved performance."
The Plant is one of fourteen nuclear units on the watch list announced that
day by the NRC, which regulates over 100 civilian nuclear power plants in the
United States.
On February 13, 1997, Maine Yankee and Entergy Nuclear, Inc. (Entergy),
which is a subsidiary of Entergy Corporation, a Louisiana-based utility
holding company and leading nuclear plant operator, entered into a contract
under which Entergy is providing management services to Maine Yankee. At the
same time, officials from Entergy assumed management positions, including
President, at Maine Yankee.
The Company will incur significantly higher costs in 1997 for its share
of inspection, repairs and refueling costs at Maine Yankee and will also need
to purchase replacement power while the Plant is out of service. While the
amount of higher costs is uncertain, Maine Yankee has indicated that it
expects it operations and maintenance costs to increase by up to approximately
$45 million in 1997, before refueling costs. The Company's share of such costs
based on its power entitlement of approximately 38 percent would be up to
approximately $17 million. In addition, the Company estimates its share of the
refueling costs will amount to approximately $15 million, of which $10.4
million has been accrued as of December 31, 1996. The Company has been
incurring incremental replacement-power costs of approximately $1 million per
week while the plant has been out of service and expects such costs to
continue at approximately the same rate until the plant returns to service.
The impact of these higher nuclear related costs on the Company will be
a major obstacle to achieving satisfactory results in 1997, despite prudent
control of other operating costs, and is likely to trigger the low earnings
bandwidth provision of the ARP. Under the ARP, actual earnings for 1997
outside a bandwidth of 350 basis points, above or below a 10.68 percent rate
of return allowance, triggers the profit sharing mechanism. A return below
the low end of the range provides for additional revenue through rates equal
to one-half of the difference between the actual earned rate of return and the
7.18 percent (10.68 - 3.50) low end of the bandwidth. While the Company
believes that the profit sharing mechanism is likely to be triggered in 1997,
it cannot predict the amount, if any, of additional revenues that may
ultimately result.
Higher nuclear-related costs are affecting other stockholders of
Maine Yankee in varying degrees. Bangor Hydro-Electric Company, a Maine-based
7-percent stockholder, has cited its "deteriorating" financial condition and
on March 19, 1997, eliminated its common-stock dividend for the quarter. Maine
Public Service Company, a 5-percent stockholder, cited problems in satisfying
financial covenants in loan documents and reduced its common-stock dividend
substantially in early March 1997. Northeast Utilities (20-percent stock
ownership through three subsidiaries), which is also adversely affected by the
substantial additional costs associated with the three shut-down Millstone
nuclear units and the permanently shut-down Connecticut Yankee unit, as well
as an unfavorable utility deregulation plan in New Hampshire currently under
appeal, announced on March 24, 1997, that its management was planning to
recommend a suspension of its second-quarter common-stock dividend to its
board of trustees. A default by a Maine Yankee stockholder in making payments
under its power contract or capital funds agreement could have a material
adverse effect on Maine Yankee, depending on the magnitude of the default, and
would constitute a default under Maine Yankee's bond indenture and its two
major credit agreements unless cured within applicable grace periods by the
defaulting stockholder or other stockholders. The Company cannot predict,
however, what effect, if any, the financial difficulties being experienced by
some Maine Yankee stockholders will have on Maine Yankee or the Company.
For a detailed discussion of the current Maine Yankee regulatory and
operational issues, see Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations" - "Maine Yankee Regulatory
Issues."
Financing and Related Considerations
1996 Financing Activity. During 1996 the Company issued $10 million of
notes under its $150-million Medium-Term Note program at variable interest
rates and an average life of five years. Notes in the amount of $34 million
matured during the year, reducing the total of outstanding Medium-Term Notes
at the end of 1996 to $68 million from $92 million at the end of 1995.
The Company's Articles of Incorporation limit the amount of unsecured
indebtedness the Company may incur without the consent of the holders of the
Company's preferred stock to 20 percent of the Company's total
capitalization. At the end of 1996, 20 percent of such capitalization
amounted to $219 million. In 1989 holders of the Company's preferred stock
consented to the issuance of unsecured Medium-Term Notes in an aggregate
principal amount of up to $150 million outstanding at any one time, so such
notes up to that amount are not included in the 20-percent limitation. The
Company is proceeding with plans to seek the consent of the holders of its
preferred stock to an additional $350 million of Medium-Term Notes, to $500
million outstanding at any one time, at its annual meeting of stockholders on
May 15, 1997, in order to increase its financing flexibility in anticipation
of industry restructuring and increased competition. The Company cannot
predict whether such consent will be obtained.
On October 23, 1996, the Company entered into a $125-million revolving
credit facility with several banks, with The First National Bank of Boston and
The Bank of New York as agents for the lenders, and terminated its 1986 and
1994 bank facilities. The new facility consists of two tranches, one a
364-day revolving-credit arrangement that matures on October 22, 1997, and the
other a three-year revolving-credit arrangement that matures on October 23,
1999. At December 31, 1996, the Company had $7.5 million in outstanding loans
under the new facility.
Securities Ratings. On September 25, 1996, Duff & Phelps Credit Rating
Co. ("D&P") placed the ratings of the Company's debt and preferred stock on
"Rating Watch--Down." D&P stated that its action was due to uncertainty
surrounding the Nuclear Regulatory Commission's investigations into the Maine
Yankee, Connecticut Yankee and Millstone Unit No. 3 nuclear facilities, in
which the Company has ownership interests." The rating agency recognized
"positive strides" taken by the Company over the past few years in dealing with
several challenges, but found that the Company's "troubled nuclear facilities
situation casts a shadow on the Company's prospects for financial
strengthening." On December 18, 1996, Moody's Investors Service ("Moody's")
placed the Company's credit ratings under review for possible downgrade, due
largely to the effect of its Maine Yankee-related costs. The current ratings
assigned the Company's securities by the three major securities-rating
agencies, Standard & Poor's Corp. ("S&P"), Moody's Investors Service and Duff
& Phelps Credit Rating Co., are shown below:
Mortgage Unsecured Commercial Preferred
Bonds Notes Paper Stock
S&P BB+ BB B B+
Moody's Baa2 Baa3 P2 Baa3
D&P BBB- BB+ D3 BB
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 substantial 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, state regulations restrict the sulfur content and other
characteristics of the fuel oil burned at the Company's William F. Wyman
Station in Yarmouth, Maine. The Company believes that it will continue to be
able to obtain a sufficient supply of oil with the required specifications,
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 continuing 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 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 1992 through
1996 totaled approximately $21.3 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 certain office and clerical
employees. At December 31, 1996, the Company had 1,655 full-time employees, of
whom approximately 44 percent were 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 1996 was due largely to the
implementation of an early-retirement program and other efficiency measures in
1991 and 1992, further staff reductions in the first quarter of 1994 in
connection with the Company's restructuring and cost-reduction program and
another early-retirement program in mid-1995.
In April 1995 the Company and the union agreed to a three-year labor
contract extension that provided for an annual wage increase of 2 percent on
May 1, 1995, 2 percent on May 1, 1996, and a reopening of wage negotiations
for the year commencing May 1, 1997. The wage negotiations are scheduled to
start in early April 1997.
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, 1996, the Company had
approximately 2,293 circuit-miles of overhead transmission lines, 19,254
pole-miles of overhead distribution lines and 1,330 miles of underground and
submarine cable. The maximum one-hour firm system net peak load experienced by
the Company during the winter of 1996 was approximately 1,301 megawatts on
January 3, 1996. At the time of the peak, the Company's net capability was
1,893 megawatts.
The Company operates 30 hydroelectric generating stations, of which 29
are owned by the Company, with an estimated net capability of 369 megawatts,
and it purchases an additional 74 megawatts of non-utility hydroelectric
generation in Maine. The Company also operates one oil-fired steam-electric
generating station, William F. Wyman Station in Yarmouth, Maine. The Company's
share of William F. Wyman Station has an estimated net capability of 593
megawatts. The oil-fired station is located on tidewater, permitting
waterborne delivery of fuel. The Company also has internal combustion
generating facilities with an estimated aggregate net capability of 38
megawatts.
The Company has ownership interests in five nuclear generating plants in
New England. The largest is a 38-percent interest in the Maine Yankee plant in
Wiscasset, Maine. In addition, the Company owns a 9.5 percent interest in
Yankee Atomic Electric Company ("Yankee Atomic"), discussed below, which has
permanently shut down its plant located in Rowe, Massachusetts, a 6 percent
interest in Connecticut Yankee Atomic Power Company ("Connecticut Yankee"),
discussed below, which has permanently shut down its 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, which has been off-line for regulatory reasons
since March 31, 1996.
In December 1996, the Board of Directors of Connecticut Yankee Atomic
Power Company voted to permanently shut down the Connecticut Yankee plant for
economic reasons, and to decommission the plant. An economic analysis
conducted by Connecticut Yankee estimated that the early closing of the plant
would save over $100 million (net present value) over its remaining license
life to the year 2007, compared with the costs of continued operation. The
Company's 6-percent equity interest totaled approximately $6.4 million at
December 31, 1996. The plant did not operate after July 22, 1996. The
Company estimates its share of the cost of Connecticut Yankee's continued
compliance with regulatory requirements, recovery of its plant investments,
decommissioning and closing the plant to be approximately $45.8 million and
has recorded a regulatory asset and a liability on the consolidated balance
sheet. The Company is currently recovering through rates an amount adequate
to recover these expenses.
In 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 of the Yankee
Atomic plant. The Company estimates 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
$16.5 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 three operating nuclear
generating plants, as of December 31, 1996, amounted to the following:
Maine Yankee 329 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 an interconnection agreement. MEPCO transmits
power between NB Power and various New England utilities under separate
agreements.
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 $28.8 million, its
share of the construction cost for the transmission facilities incurred
through December 31, 1996.
Maine Yankee Decommissioning. Effective in 1988 Maine Yankee began
collecting $9.1 million annually for decommissioning the Maine Yankee plant,
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 was 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. The market value of Maine Yankee's accumulated decommissioning
funds was $163.5 million (including actual interest earned) as of December 31,
1996.
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. Maine did not satisfy its milestone
obligation under the Waste Act requiring submission of a site license
application by the end of 1991, and therefore became subject to surcharges on
its waste and did not have access to regulated disposal facilities after the
end of 1992. Maine Yankee then began storing all low-level waste generated at
an on-site storage facility. On July 1, 1995, however, the State of South
Carolina restored access to its facility and Maine Yankee began to ship
low-level waste to the South Carolina facility for disposal.
The states of Maine, Texas and Vermont have been pursuing the
implementation of a compact for the disposal of low-level waste at a site in
Texas. The ratification bill for the compact is before Congress for
consideration at its 1997 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 the Company 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 Low-Level Radioactive Waste 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 has said it will ship
low-level waste offsite for disposal in South Carolina or other available
sites as long as such sites are available, reserving its capacity to store
approximately ten to twelve years' production of low-level waste at its
facility at the Plant site. 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 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 as well as dispose of low-level waste at the South
Carolina site or other available sites 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 $79.3 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 $47.6 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 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 $7.7 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 1996 capital investment outlays, including
deferred demand-side management expenditures, to minimum levels. During the
five-year period ended December 31, 1996, the Company's construction and
acquisition expenditures amounted to $264.8 million (including investment in
jointly-owned projects and excluding MEPCO). The program is currently
estimated at approximately $56 million for 1997 and $246 million for 1998
through 2001.
The following table sets forth the Company's estimated capital
expenditures as discussed above:
1998-
1997 2001 Total
Type of Facilities (Dollars in Millions)
Generating Projects $ 8 $ 33 $ 41
Transmission 3 14 17
Distribution 27 124 151
General facilities and Other 18 75 93
Total $56 246 $302
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, 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 the New England Power Pool (NEPOOL), which is
open to all investor-owned, municipal and cooperative electric utilities in
New England under a 1971 agreement 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.
On April 24, 1996, the Federal Energy Regulatory Commission (FERC)
issued Order No. 888, which requires all public utilities that own, control or
operate facilities used for transmitting electric energy in interstate
commerce to file open access non-discriminatory transmission tariffs that
offer both load-based, network and contract-based, point-to-point service,
including ancillary service to eligible customers containing minimum terms and
conditions of non-discriminatory service. This service must be comparable to
the service they provide themselves at the wholesale level; in fact, these
utilities must take wholesale transmission service they provide themselves
under the filed tariffs. The order also permits public utilities and
transmitting utilities the opportunity to recover legitimate, prudent and
verifiable wholesale stranded costs associated with providing open access and
certain other transmission services. It further requires public utilities to
functionally separate transmission from generation marketing functions and
communications. The intent of this order is to promote the transition of the
electric utility industry to open competition. Order No. 888 also clarifies
federal and state jurisdiction over transmission in interstate commerce and
local distribution and provides for deference of certain issues to state
recommendations.
On July 9, 1996, the Company and MEPCO submitted compliance filings to
meet the new pro forma tariff non-price minimum terms and conditions of
non-discriminatory transmission. Since July 9, 1996, the Company and MEPCO
have been transmitting energy pursuant to their filed tariffs, subject to
refund. FERC subsequently issued Order No. 888-A which generally reaffirms
Order No. 888 and clarifies certain terms.
Also on April 24, 1996, FERC issued Order No. 889 which requires public
utilities to functionally separate their wholesale power marketing and
transmission operation functions and to obtain information about their
transmission system for their own wholesale power transactions in the same way
their competitors do through the Open Access Same-time Information System
(OASIS). The rule also prescribed standards of conduct and protocols for
obtaining the information. The standards of conduct are designed to prevent
employees of a public utility engaged in marketing functions from obtaining
preferential information. The Company participated in efforts to develop a
regional OASIS, which was operational January 3, 1997. FERC subsequently
approved a New England Power Pool-wide Open Access Tariff, subject to refund
and issuance of further orders. The Company also participated in revising the
New England Power Pool Agreement to comply with the new regulatory
requirements. The revised agreement is pending FERC approval.
Fuel Supply
The Company's total kilowatt-hour production by energy source for each
of the last two years and as estimated for 1997 (consistent with the actual
mix for January 1997 with Maine Yankee off-line) is shown below. The 1997
estimate could change when, and if, Maine Yankee resumes operation.
<PAGE>
Actual Estimated
Source 1996 1995 1997
Nuclear 19% 7% 2%
Hydro 17 15 17
Oil 16 21 29
Non-utility 32 37 38
Other purchases 16 20 14
100% 100% 100%
The 1997 estimated kilowatt-hour output from oil and purchased power may
vary depending upon the relative costs of Company-generated power and power
purchased through independent producers and other sources.
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 1992 was $14.02, $13.12, $12.93,
$16.16 and $18.18, 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.
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 was given
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 $63.8
million of interest cost for the period April 7, 1983, through December 31,
1996.
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 $1.8 million through December 1997. Deposits are expected to
total approximately $73.2 million, with the total liability, including
interest due at the time of disposal, estimated to be approximately $126.5
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 in March 1994 the NRC granted its authorization.
Installation of the new racks began in 1996 and is expected to be completed
during 1997. 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 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
provided for the possible development of a Monitored Retrievable Storage
("MRS") facility and abandoned 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.
In 1994 several nuclear utilities sought a declaration from the United
States Court of Appeals for the District of Columbia that existing federal
legislation required the DOE to take responsibility for spent nuclear fuel in
1998. On July 23, 1996, the court held that the DOE is obligated "to start
disposing of [spent nuclear fuel] no later than January 31, 1998," and in
October 1996 the DOE said it would not appeal the decision. The Company
cannot predict when or how the DOE will meet its responsibility.
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.
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 standard of 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.
In June 1995, after discussions between the Company and the EPA, design
work on the selected remedy was suspended. On July 7, 1995, the Company
formally requested that the EPA abandon that remedy for an already-designated
alternative remedy that the Company believes could result in substantially
lower costs. On October 10, 1995, the EPA approved the new remedy after
determining that the old remedy was no longer feasible or cost-effective at
the site. The new remedy involves transporting the contaminated soil to a
secure off-site landfill.
The Company believes that its share of the remaining costs of the
cleanup under the new method could total approximately $2.7 million to $4.2
million. This estimate is net of an agreed partial insurance recovery and the
1993 court-ordered contribution of 41 percent from Westinghouse Electric
Corp., but does not reflect any possible contributions from other insurance
carriers the Company has sued, or from any other parties. The Company has
recorded an estimated liability of $2.7 million and an equal regulatory asset,
reflecting an accounting order to defer such costs and the anticipated
ratemaking recovery of such costs when ultimately paid. In addition, the
Company has deferred as a regulatory asset $5.1 million of costs incurred
through December 31, 1996.
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
David M. Jagger, 55, 1996 Chairman of the Board of Directors
Charles H. Abbott, 61, 1996 Vice Chairman of the Board of Directors
David T. Flanagan, 49, 1984 President and Chief Executive Officer,
and Director
Arthur W. Adelberg, 45, 1985 Vice President, Law and Power Supply
Richard A. Crabtree, 50, 1978 Vice President, Retail Operations
David E. Marsh, 49, 1986 Vice President, Corporate Services,
Treasurer and Chief Financial Officer
Curtis A. Mildner, 43, 1994 Vice President, Marketing
Gerald C. Poulin, 55, 1984 Vice President, Generation and
Technical Support
Anne M. Pare, 43, 1996 Secretary and Clerk
Each of the executive officers has for the past five years been
an officer or employee of the Company except Messrs. Jagger and Abbott, who
have been non-employee directors since 1988, and Mr. Mildner. Mr. 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.
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 December 31, 1996, there were 40,413 holders of record of the Company's
common stock.
Price Range of and Dividends on Common Stock
Market Price Dividends
High Low Declared
1996
First Quarter $16 1/4 $13 1/4 $0.225
Second Quarter 14 1/2 12 1/4 0.225
Third Quarter 13 7/8 11 5/8 0.225
Fourth Quarter 12 3/8 11 0.225
1995
First Quarter $14 1/8 $10 3/4 $0.225
Second Quarter 12 5/8 10 1/4 0.225
Third Quarter 13 1/2 11 0.225
Fourth Quarter 15 1/8 13 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, 1996, the Company's retained earnings were $72.5 million, of which $42.9
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, 1992 through 1996. 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 in Items
7 and 8 hereof. The selected consolidated financial data for the years ended
December 31, 1992 through 1996 are derived from the audited consolidated
financial statements of the Company.
<PAGE>
Selected Consolidated Financial Data
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Electric operating revenue $ 967,046 $ 916,016 $ 904,883 $ 893,577 $ 877,695
Net income (loss) 60,229 37,980 (23,265) 61,302 63,583
Long-term obligations 587,987 622,251 638,841 581,844 499,029
Redeemable preferred stock 53,528 67,528 80,000 80,000 40,750
Total assets 2,010,914 1,992,919 2,046,007 2,004,862 1,690,005
Earnings (loss) per common share
$1.57 $0.86 $(1.04) $ 1.65 $1.85
Dividends declared per common share
$0.90 $0.90 $0.90 $1.395 $1.56
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Overview
In 1996, the Company experienced higher than normal costs associated with its
investments in nuclear generating units, particularly the Maine Yankee nuclear
plant, and incurred replacement-power costs due to unplanned nuclear-plant
outages.
While the return to service of the Maine Yankee nuclear plant in mid-January
1996 ended an 11-month consecutive outage, the plant's operating capacity was
limited to 90% of its maximum production capacity during periods of operation
in 1996 and unscheduled outages reduced the availability of the plant to less
than 10 months of operation. The additional costs incurred by the Company
under its power contract with Maine Yankee were approximately $3.6 million.
Replacement-power costs associated with the reduced level of output and
limited availability of the plant amounted to approximately $13.5 million for
a total of $17.1 million or an earnings reduction of $0.31 per share, after
tax, during 1996.
The Company's 1996 financial results benefited by approximately $15.3 million,
after tax, or $0.47 per share, as a result of non-recurring items related to a
favorable resolution of federal income-tax issues with the Internal Revenue
Service, a reduction in purchased power costs associated with an extended
outage at a non-utility generator (NUG) under contracts to the Company, an
energy-swap agreement with another utility that reduced purchased-power costs,
and the affirmation of the rate recovery of a regulatory asset.
Earnings per share in 1996 were $1.57, after recognizing the higher
nuclear-related costs and benefits of non-recurring events, compared to $0.86
per share in 1995. The 1995 earnings per share included the recognition of
$0.70 per share in Maine Yankee-related repair and replacement-power costs.
The Maine Yankee nuclear plant was shut down on December 6, 1996, for
inspection and repairs. Maine Yankee has notified the Company that, due to the
need to replace 92 fuel assemblies, it will refuel the plant during the
current outage. While the plant is out of service, Maine Yankee must, in
addition to replacing the fuel assemblies, conduct an intensive inspection of
its steam generators, resolve cable-separation and other regulatory issues,
and obtain NRC approval to restart the plant. The Company believes the plant
will be out of service at least until August 1997, but cannot predict when or
whether all of the regulatory and operational issues will be satisfactorily
resolved, or what effect the repairs and improvements to the plant will have
on its operating economics.
The Company will incur significantly higher costs in 1997 for its share of
inspection, repairs and refueling costs at Maine Yankee, and will also need to
purchase replacement power while the plant is out of service. While the amount
of higher costs is uncertain, Maine Yankee has indicated that it expects its
operations-and-maintenance costs to increase by up to approximately $45
million in 1997, before refueling costs. The Company's share of such costs,
based on its power entitlement of approximately 38%, would be up to
approximately $17 million. In addition, the Company estimates its share of the
refueling costs will amount to approximately $15 million; $10.4 million has
been accrued as of December 31, 1996. The Company has been incurring
incremental replacement-power costs of approximately $1 million per week while
the plant has been out of service and expects such costs to continue at
approximately the same rate until the plant returns to service.
The impact of these higher nuclear-related costs on the Company's 1997
financial results will be significant and is likely to trigger a low earnings
bandwidth provision of the Alternative Rate Plan (ARP). Under the ARP, actual
earnings for 1997 outside a bandwidth of 350 basis points, above or below the
10.68% rate of return allowance, triggers the profit sharing mechanism. A
return below the low end of the range provides for additional revenue through
rates equal to one-half of the difference between the actual earned rate of
return and the 7.18% (10.68 - 3.50) low end of the bandwidth. While the
Company believes the profit-sharing mechanism is likely to be triggered in
1997, it cannot predict the amount, if any, of additional revenues that may
ultimately result.
The ARP was structured to permit reasonable assurance of continued recovery of
the cost of services, including past deferrals, provide a higher degree of
price stability and predictability, and reduce regulatory costs while
providing financial incentives for improved efficiencies and protection
against significant unforeseen events.
The Company declared dividends totaling $0.90 per share in 1996, unchanged
from 1995 and 1994 levels. Dividend and capital structure policy will continue
to be reviewed by management and the Board of Directors and will take into
consideration such issues as sustainable long-term earnings, capital needs,
business opportunities and business risk, the structure of the Company and the
industry, and the overall need to assure that financial risk and business risk
are aligned. In the near term, the Company anticipates significant downward
pressure on its earnings capacity as a result of the higher cost and outages
of the Maine Yankee and Millstone Unit No. 3 nuclear facilities. The capacity
of the Company to attain earnings levels that support the current dividend are
closely related to the performance and cost associated with the Company's
Maine Yankee investment and power entitlement.
Sustained nuclear-unit outages combined with higher nuclear operating costs in
1997 will be a major obstacle to achieving satisfactory results in 1997
despite prudent control of other operating costs. On a prospective basis, a
contract with a major NUG representing 62.5 MW of capacity expires on October
31, 1997. Net annual savings due to the contract expiration would be
approximately $25 million, with 1997 savings amounting to approximately $4
million.
The Company continues to face the challenges of competition and industry
restructuring, and must achieve and maintain financial performance and
resources commensurate with both the provision of service demanded by
customers and the obligation to achieve competitive returns on investor
capital.
The Company is aggressively addressing the challenges of restructuring, the
pressure from competitive energy sources, customers' desire for choices and
enhanced service, and nuclear-plant outages in 1997. The following long-term
financial objectives are key to sustainable future earnings and growth and
will be a major focus of our 1997 activities:
1. Continue increasing the efficiency of operations: cost management under
price-cap regulation must replace the cost-plus culture encouraged by
traditional regulation.
2. Focus on volume of sales as a revenue builder.
3. Align financial policies to changing business needs and risks; competition
tends to increase business risk, which impacts the desired level of
fixed-charge obligations.
4. Expand areas of investment for growth; open competition in electric energy
could significantly reduce traditional sales-growth opportunities.
5. Recover the substantial investments made and costs being incurred for
existing service obligations; open competition could strand these costs,
absent a transition mechanism for recovery.
Earnings and Dividends
For 1996, the Company generated net income of $60.2 million, compared to $38.0
million in 1995, and a net loss of $23.3 million in 1994. Earnings applicable
to common stock were $50.8 million in 1996 or $1.57 per share, compared to
$27.8 million or $0.86 per share in 1995. In 1994, the loss applicable to
common stock was $33.8 million or $1.04 per share. The Company benefited from
higher sales, cost management initiatives, surplus power sales and certain
non-recurring events during the year as discussed below. In addition, net
income in 1996 reflects replacement power costs for unscheduled nuclear unit
outages of approximately $18.5 million. Increased nuclear operations,
maintenance and study costs to comply with NRC safety actions amounted to
approximately $4.3 million in 1996. See "Maine Yankee Regulatory Issues" and
"Other Nuclear Issues" for more information.
Certain favorable one-time events took place in 1996. Due to a flood in the
fall of 1996, a non-utility generator was temporarily forced out of service
for an extended period. This enabled the Company to purchase replacement
power at a lower cost for a savings of approximately $5.4 million. An
energy-swap agreement signed in 1994 with Northeast Utilities allowed the
Company to save approximately $6 million in purchased power costs. A
settlement with the Internal Revenue Service on audits for the years 1988-1991
provided a decrease to income tax expense of approximately $4.8 million. The
1996 Maine Public Utilities Commission's (MPUC) Alternative Rate Plan (ARP)
decision provided the Company recovery in rates for its workers' compensation
regulatory asset of $6.4 million, which resulted in the reversal of a 1995
charge due to uncertainty about recovery in rates.
Net income in 1995 reflects $29 million of replacement purchased-power energy
expense and $10 million for the Company's share of sleeving repair costs
during the extended shutdown at Maine Yankee. These two items reduced earnings
applicable to common stock by $22.9 million after income taxes, or $0.70 per
share. The loss in 1994 reflects the write-off of approximately $100 million
($60 million after taxes) of deferred balances in accordance with the MPUC
order in the ARP proceeding discussed fully below under the caption
"Alternative Rate Plan" and 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.
Dividends declared per common share have remained at $0.90 on an annual basis
for the three years ended December 31, 1996.
Revenues and Sales
Electric operating revenues increased by $51.0 million or 5.6% to $967.0
million in 1996, and by $11.1 million or 1.2% to $916.0 million in 1995. The
components of the change in electric operating revenues are as follows:
(Dollars in millions) 1996 1995
Revenues from Company service-area kilowatt-hour sales $15.0 $ 4.5
Revenues from non-territorial sales 33.4 (9.2)
Other Company operating revenues 3.0 8.7
Maine Electric Power Company, Inc. fuel cost recovery and
other revenues (0.4) 7.1
Total Change in Electric Operating Revenues $51.0 $11.1
Refer to "Alternative Rate Plan" below, for a discussion of new rates and
their impact on revenues.
The Company's service-area sales for the years 1996, 1995, and 1994 are shown
in the following table:
(Kilowatt-hours in millions)
<TABLE>
1996 1995 1994
% % %
KWH change KWH change KWH change
<S> <C> <C> <C> <C> <C> <C>
Residential 2,829 1.0% 2,802 (2.0)% 2,860 (0.9)%
Commercial 2,489 0.5 2,477 1.6 2,439 2.2
Industrial 3,689 4.0 3,547 (4.7) 3,720 (1.9)
Wholesale and
lighting 217 58.9 136 (8.7) 149 (3.5)
Total Service-
Area Sales 9,224 2.9% 8,962 (2.2)% 9,168 (0.5)%
</TABLE>
The primary factors in the service-area kilowatt-hour sales increase were
residential customers' taking advantage of the Company's water-heating
programs, increased sales in the pulp and paper industry, and the addition of
a wholesale customer. The decreases in 1995 and 1994 were attributed to low
economic growth, the loss of a major industrial customer in September 1994,
energy management, and loss of sales due to conversions from electricity to
alternative fuels for such purposes as space and water heating.
The average number of residential customers increased by 5,157 in 1996, 5,076
in 1995, and 4,679 in 1994, while average usage per residential customer
declined slightly in 1996, 3.1% in 1995 and 1.9% in 1994.
The 1996 increase in commercial sales reflect increases in the retail and
wholesale trade and service sectors. Combined, these sectors comprise
approximately 68% of commercial sales. Sales to all others in the commercial
sector were lower than 1995. Sales to Maine Yankee increased by 4 million
kilowatt hours in 1996, and by 14.7 million kilowatt hours in 1995 due to the
Plant's operating capacity limit of 90% and extended outages in both periods.
Industrial sales levels are significantly affected by sales to the
pulp-and-paper industry, which accounts for approximately 62% of industrial
sales and approximately 25% of total service-area sales. Sales to the
pulp-and-paper sector increased by 3.7% in 1996 and decreased by 8.6% in 1995,
and by 3.6% in 1994. The increase in 1996 reflects special arrangements the
Company has made with several paper companies to back down some of their
self-generation and buy electricity from the Company at a discounted rate.
The 1995 and 1994 decreases reflect lower sales levels primarily due to the
late-1994 loss of a major customer that had previously purchased approximately
280 million kilowatt-hours annually. Refer to "Alternative Rate Plan" and
"Competition and Economic Development," below, and Note 4 to Consolidated
Financial Statements, "Commitment's and Contingencies - Competition," for
additional information regarding the loss of this customer and the Company's
actions to preserve its remaining large-industrial-customer base and other
customer groups. Sales to all other industrial customers as a group increased
4.5% in 1996, 2.7% in 1995, and 1.5% in 1994.
Revenues from non-territorial sales were significantly higher in 1996 due to
sales to an out-of-state utility impacted by nuclear plant outages. In March
1995, a contract with a power broker expired, resulting in a decrease of $9.2
million in 1995 in non-territorial sales.
Alternative Rate Plan
In December 1994, the MPUC approved a stipulation, signed by most of the
parties to the Company's ARP proceeding, which took effect January 1, 1995.
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. The price-cap mechanism
provides for adjusting the Company's retail rates annually on July 1,
commencing in 1995, at 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. The components of the July 1, 1995, price-cap increase of 2.43%
are the inflation index of 2.92%, reduced by a productivity offset of 0.5%,
and increased by 0.01% for flow-through items and mandated costs. The
components of the July 1, 1996, price-cap increase of 1.26% consisted of an
inflation index of 2.55% and earnings sharing and mandated cost items of
0.64%, reduced by a productivity offset of 1.0%, and sharing of contract
restructuring and buyout savings of 0.93%. As originally 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 financial statements.
In 1994, the Company agreed in the ARP negotiations to record charges of
approximately $100 million ($60 million, net of tax) against 1994 earnings.
The Company believes the ARP provides the benefits of needed pricing
flexibility 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 can be implemented upon 30-days' notice
by the Company, while certain others are subject to expedited review by the
MPUC. The Company has utilized this feature in providing new rates to
approximately 19,000 customers representing approximately 40% of annual
kilowatt-hour sales and 27% of service-area revenues. These reductions in
rates were offered to customers after consideration of associated NUG cost
reductions, savings from further NUG consolidations and other general cost
reductions.
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 a designated
range, 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 after 1999.
The Company will submit its 1997 compliance filing and mid-period review
filing in March 1997. The MPUC decision on the mid-period review is expected
by September 30, 1997.
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
rise unexpectedly, like those that have resulted from the recent outages at
Maine Yankee, or if revenues from sales decline or are not adequate to fund
costs. The Company believes the ARP continues to be a competitive advantage
and does not plan to propose any significant change during the mid-period
review.
For a detailed discussion of the ARP, refer to Note 3 to Consolidated
Financial Statements,"Regulatory Matters - Alternative Rate Plan," and
"Meeting the Requirements of SFAS 71."
Maine Yankee Regulatory Issues
The Company owns 38% of the common stock of Maine Yankee and is responsible
for an approximately equal percentage of its costs. The 879-megawatt Maine
Yankee nuclear generating plant in Wiscasset, Maine (the Plant), like others
with pressurized water reactors, had been experiencing degradation of its
steam generator tubes. Until early 1995, this was believed to be limited to a
relatively small number of tubes. During a refueling shutdown in February
1995, new inspection methods used by Maine Yankee revealed that approximately
60% of the Plant's 17,000 steam generator tubes appeared to have defects.
Following a detailed analysis of safety, technical and financial
considerations, Maine Yankee repaired the tubes by inserting and welding short
reinforcing sleeves of an improved material in substantially all of the
Plant's steam generator tubes. Repairs were completed in December 1995. The
Company's approximately $10-million share of the repair costs adversely
affected the Company's 1995 earnings by $0.18 per share, net of taxes, in
spite of significant cost-reduction measures implemented by both the Company
and Maine Yankee. In addition, the Company incurred incremental
replacement-power costs during the outage totaling approximately $29 million,
or $0.52 per share, net of taxes, for 1995.
Also in December 1995, the Nuclear Regulatory Commission's (NRC) Office of the
Inspector General (OIG) and its Office of Investigations (OI) initiated
separate investigations of certain anonymous "whistleblower" allegations of
wrongdoing by Maine Yankee and Yankee Atomic Electric Company (Yankee Atomic)
in 1988 and 1989 in connection with operating license amendments. On May 9,
1996, the OIG, which was responsible for investigating only the actions of the
NRC staff and not those of Maine Yankee or Yankee Atomic, issued its report.
The report found deficiencies in the NRC staff's review, documentation, and
communications practices in connection with the license amendments, as well as
"significant indications of possible licensee violations of NRC requirements
and regulations." Any such violations by Maine Yankee are within the purview
of the OI investigation, which, with related issues, is being reviewed by the
United States Department of Justice. A separate internal investigation
commissioned by the boards of directors of Maine Yankee and Yankee Atomic and
conducted by an independent law firm noted several areas that could have been
improved, including regulatory communications, definition of responsibilities
between Maine Yankee and Yankee Atomic, and documentation and tracking of
regulatory compliance, but found no wrongdoing by Maine Yankee or Yankee
Atomic or any of their employees. Issues raised by the anonymous allegations
caused the NRC to limit the Plant to an operating level of approximately 90%
of its full thermal capacity, pending resolution of those issues. The Company
cannot predict the results of the investigations by the OI and Department of
Justice.
The December 1995 allegations caused the Plant's extended tube-sleeving outage
to be further extended into January 1996, and the Plant returned to the 90%
operating level on January 24. On June 7, 1996, the NRC formally notified
Maine Yankee that it would conduct an "Independent Safety Assessment" (ISA) of
the Plant as a "follow-on" to the OIG report and to provide an independent
evaluation of the safety performance of Maine Yankee by a team of NRC
personnel and contractors who were "independent of any recent or significant
involvement with the licensing, regulation or inspection of Maine Yankee."
The NRC conducted the ISA in the summer of 1996 and released its report on
October 7, 1996.
The detailed ISA report identified both deficiencies and strengths in Maine
Yankee's performance, and concluded that overall performance at Maine Yankee
was "adequate" for operation of the Plant. The ISA team stressed that the
deficiencies noted in the report stemmed from two closely related root causes,
specifically, (1) that economic pressure to be a low-cost energy provider had
limited available resources to address corrective actions and some
improvements, and (2) that lack of a "questioning culture" had resulted in a
failure to identify or promptly correct significant problems in areas
perceived by Maine Yankee to be of low safety significance. In a letter to
Maine Yankee accompanying the ISA report, NRC Chairman Shirley Ann Jackson
noted that although overall performance at Maine Yankee was considered
adequate for operation, a number of significant weaknesses and deficiencies
identified in the report would result in NRC violations. The letter also
directed Maine Yankee to provide to the NRC its plans for addressing the root
causes of the deficiencies noted in the ISA and identified the NRC offices
that would be responsible for overseeing corrective actions and taking any
appropriate enforcement actions against Maine Yankee.
On December 10, 1996, Maine Yankee filed its formal response to the ISA report
with the NRC. In the response, Maine Yankee indicated that it would spend
substantial sums on improvements in several areas in 1997 to address the root
causes and associated deficiencies noted in the report, and that the
improvements would include physical and operating changes at the Plant, along
with a 10% increase in staffing, primarily in the engineering and maintenance
areas, and other changes. In a release accompanying the response, Maine
Yankee stated that a "fundamental shift in corporate culture" would accompany
the changes and that Maine Yankee would not seek to return the Plant to the
100% power level from its authorized 90% level until it had reviewed the
margins on all the key safety systems at the Plant, which had been another
matter of concern to the NRC.
The Plant operated substantially at the 90% capacity level until July 20,
1996, when it was taken off-line after a comprehensive review by Maine Yankee
of the Plant's systems and equipment revealed a need to add pressure-relief
capacity to the Plant's primary component cooling system. On August 18, 1996,
while the Plant was in the restart process, Maine Yankee conducted a review of
its electrical circuitry testing procedures pursuant to a generic NRC letter
to nuclear-plant licensees that was intended to ensure that every feature of
every safety system be routinely tested. During the expanded review, Maine
Yankee found a deficiency in an electrical circuit of a safety system and
therefore elected to conduct an intensified review of other safety-related
circuits to resolve immediately any questions as to the adequacy of related
testing procedures. The Plant returned to the 90% operating level on
September 3, 1996.
On December 6, 1996, Maine Yankee took the Plant off-line to resolve
cable-separation and other operational and design issues. On January 3, 1997,
Maine Yankee announced that it would use the opportunity presented by that
outage to inspect the Plant's 217 fuel assemblies, since daily monitoring had
indicated evidence of a small number of defective fuel rods. As a result of
the inspection, Maine Yankee determined that all of the assemblies
manufactured by one supplier and currently in the reactor core (approximately
one-third of the total) would have to be replaced before the Plant could be
restarted. Maine Yankee will therefore keep the Plant off-line for refueling,
which had previously been scheduled for late 1997. In addition, Maine Yankee
will make use of the outage to inspect the Plant's steam generators,
commencing approximately April 1, 1997, for deterioration beyond that which
was repaired during the extended 1995 outage. Degradation of steam generators
of the age and design of those in use in the Plant has been identified at
other plants. If major repairs to, or replacement of, the steam generators
were found to be necessary for continued operation of the Plant, Maine Yankee
would review the economics of continued operation before incurring the
substantial capital expenditures that would be required.
In January, the NRC announced that it had placed the Plant on its "watch list"
in "Category 2", which includes plants that display "weaknesses that warrant
increased NRC attention", but which are not severe enough to warrant a
shut-down order. Plants in category 2 remain in that category "until the
licensee demonstrates a period of improved performance." The Plant is one of
fourteen nuclear units on the watch list announced that day by the NRC, which
regulates slightly over 100 civilian nuclear power plants in the United States.
After year end, Maine Yankee and Entergy Nuclear, Inc. (Entergy), which is a
subsidiary of Entergy Corporation, a Louisiana-based utility holding company
and leading nuclear plant operator, entered into a contract under which
Entergy is providing management services to Maine Yankee. At the same time,
officials from Entergy assumed management positions, including President, at
Maine Yankee.
While the Plant remains out of service, Maine Yankee must, in addition to
replacing the fuel assemblies and conducting an intensive inspection of its
steam generators, resolve the cable-separation issues and other known
regulatory issues, as well as any additional issues that are discovered during
the outage. The Company must obtain the approval of the NRC to restart the
Plant, following a mandated NRC process that includes an NRC-approved restart
plan and opportunities for public participation. The Company believes the
Plant will be out of service at least until August 1997, but cannot predict
when or whether all of the regulatory and operational issues will be
satisfactorily resolved or what effect the total of the repairs and
improvements to the Plant will have on the economics of operating the Plant.
The Company will incur significantly higher costs in 1997 for its share of
inspection, repairs and refueling costs at Maine Yankee and will also need to
purchase replacement power while the Plant is out of service. While the amount
of higher costs is uncertain, Maine Yankee has indicated that it expects it
operations and maintenance costs to increase by up to approximately $45
million in 1997, before refueling costs. The Company's share of such costs
based on its power entitlement of approximately 38% would be up to
approximately $17 million. In addition, the Company estimates its share of the
refueling costs will amount to approximately $15 million, of which $10.4
million has been accrued as of December 31, 1996. The Company has been
incurring incremental replacement-power costs of approximately $1 million per
week while the plant has been out of service and expects such costs to
continue at approximately the same rate until the plant returns to service.
The impact of these higher nuclear related costs on the Company's 1997
financial results will be significant and is likely to trigger the low
earnings bandwidth provision of the ARP. Under the ARP, actual earnings for
1997 outside a bandwidth of 350 basis points, above or below a 10.68% rate of
return allowance, triggers the profit sharing mechanism. A return below the
low end of the range provides for additional revenue through rates equal to
one-half of the difference between the actual earned rate of return and the
7.18% (10.68 - 3.50) low end of the bandwidth. While the Company believes that
the profit sharing mechanism is likely to be triggered in 1997, it cannot
predict the amount, if any, of additional revenues that may ultimately result.
Other Nuclear Issues
On December 4, 1996, the Board of Directors of Connecticut Yankee Atomic
Power Company voted to permanently shut down the Connecticut Yankee plant, for
economic reasons, and to decommission the unit. The Company has a 6% equity
interest in Connecticut Yankee, totaling approximately $6.4 million at
December 31, 1996. The plant did not operate after July 22, 1996, causing the
Company to incur replacement power costs of approximately $1.5 million in
1996. The Company estimates its share of the cost of Connecticut Yankee's
continued compliance with regulatory requirements, recovery of its plant
investments, decommissioning and closing the plant to be approximately $45.8
million and has recorded a regulatory asset and a liability on its
consolidated balance sheet. The Company is currently recovering through rates
an amount adequate to recover these expenses.
The Company has a 2.5% ownership interest in Millstone Unit No. 3 which is
operated by Northeast Utilities. This facility has been off-line since March
31, 1996 due to NRC concerns regarding license requirements and the Company
cannot predict when it will return to service. Millstone Unit No. 3, along with
two other units at the same site owned by Northeast Utilities, is on the NRC's
"watch list" in "Category 3," which requires formal NRC action before a unit
can be restarted. The Company estimates that it will incur approximately
$300,000 to $500,000 in replacement power costs each month Millstone Unit No. 3
remains out of service. The Company incurred replacement power costs of $3.5
million in 1996.
Environmental Actions
The Company has been named by the Environmental Protection Agency (EPA) as a
"potentially responsible party" (PRP) 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. The
Company also has been named as a PRP at eleven former gas plant sites, six
former waste oil sites, and two former pole treatment and storage locations.
Refer to Note 4 to Consolidated Financial Statements, "Commitments and
Contingencies - Legal and Environmental Matters," for a more detailed
discussion of this matter.
Industry Restructuring and Strandable Costs
The Federal Energy Policy Act of 1992 accelerated planning by electric
utilities, including the Company, for a transition to a more competitive
industry. The functional areas in which competition will take place, the
regulatory changes that will be implemented, and the resulting structure of
both the industry and the Company are all uncertain, but regulatory steps have
already been taken toward competition in generation and non-discriminatory
transmission access. A departure from traditional regulation and industry
restructuring, however, could have substantial impacts on the value of utility
assets and on electric utilities' abilities to recover their costs through
rates. In the absence of full recovery, utilities would find their
above-market costs to be "stranded," or unrecoverable, in the new competitive
setting.
In January, 1996, the Company filed its recommendations for an orderly
transition to competition and adequate reimbursement of its potentially
strandable costs with the MPUC. In December 1996, the MPUC issued its Report
and Recommended Plan for Electric Utility Restructuring in Maine. The major
elements of the MPUC plan, which are similar in most, but not all, respects to
the Company's proposal include:
(1) By January 2000, investor owned utilities would transfer all generating
assets to entities distinct from transmission and distribution (T&D) assets
and obligations.
(2) By January 2006, the Company would be required to divest all generation
assets (except Maine Yankee).
(3) By January 2000, investor-owned utilities would be required to transfer
the rights to market power from all qualifying facilities contracts.
(4) Contracts between investor-owned utilities and qualifying facilities would
remain with the T&D company.
(5) Beginning January 1, 2000, all customers would have the option to purchase
power directly from power suppliers or from intermediaries such as load
aggregators, power marketers or energy service companies.
(6) Standard-offer service would be provided to customers who do not choose a
competitive power provider and who cannot obtain power in the market on
reasonable terms.
(7) The MPUC would not regulate companies that produce or sell power once
customers can purchase power in a competitive market.
(8) T&D companies would continue to be regulated. T&D companies would have
exclusive service territories and an obligation to connect customers to the
power grid.
(9) A "reasonable opportunity" to recover strandable costs would be achieved
through the regulated rates of the T&D utilities. Amounts recovered could
include costs of fulfilling obligations under contracts with NUGs, as well as
investments (and returns thereon) and other obligations undertaken by the
Company in fulfilling its legal duty to serve, with requirements for the
Company to mitigate such costs where practicable.
(10) The MPUC recommended that the Legislature fund low-income assistance
programs; otherwise, these programs would continue to be funded through T&D
company rates.
(11) All companies selling power to retail customers in Maine would be
required to include a minimum amount of renewable energy in their generation
mix, and customers would continue to fund cost-effective energy efficiency
programs through T&D rates.
The Company has substantial exposure to cost stranding relative to its size.
In its January 1996 filing, the Company estimated its net-present-value
strandable costs could be approximately $2 billion as of January 1, 1996.
These costs represent the excess costs of purchased-power obligations and the
Company's own generating costs over the market value of the power, and the
costs of deferred charges and other regulatory assets. Of the $2 billion,
approximately $1.3 billion is related to above-market costs of purchased-power
obligations, approximately $200 million is related to estimated net
above-market cost of the Company's own generation, and the remaining $500
million is related to deferred regulatory assets.
The MPUC also provided estimates of strandable costs for the Company, which
they found to be within a wide range of a negative $445 million to a positive
$965 million. These estimates were prepared using assumptions that differ
from those used by the Company, particularly a starting date for measurement
of January 1, 2000 versus a measurement starting date of January 1, 1996
utilized by the Company. The MPUC concluded that there is a high degree of
uncertainty that surrounds stranded costs numbers, resulting from having to
rely on projections and assumptions about future conditions. Given the
inherent uncertainty and volatility of these projections, the Company believes
that an annual estimation of stranded costs could serve to prevent significant
over-or-under-collection beginning in the year 2000.
Estimated strandable costs are highly dependent on estimates of the future
market for power. Higher market rates lower stranded cost exposure, while
lower market rates increase it. In addition to market-related impacts, any
estimate of the ultimate level of strandable costs depends on state and
federal regulations; the extent, timing and form that competition for electric
service will take; the ongoing level of the Company's costs of operations;
regional and national economic conditions; growth of the Company's sales;
timing of any changes that may occur from state and federal initiatives on
restructuring; and the extent to which regulatory policies ultimately address
recovery of strandable costs.
The estimated market rate for power is based on anticipated regional market
conditions and future costs of producing power. The present value of future
purchased-power obligations and the Company's generating costs reflects the
underlying costs of those sources of generation in place today, with
reductions for contract expirations and continuing depreciation. Deferred
regulatory asset totals include the current uncollected balances and existing
amortization schedules for purchased-power contract restructuring and buyouts
negotiated by the Company to lessen the impact of these obligations, energy
management costs, financing costs, and other regulatory promises. The Company
expects its strandable-cost exposure to decline over time as the market price
of power increases, non-utility generator (NUG) contracts expire, and
regulatory assets are recovered.
Major cost stranding would have a material adverse effect on the Company's
financial position. The Company believes it is entitled to recover
substantially all of its potential strandable costs, but cannot predict when
or if open electric energy competition will occur in its service territory, or
how much it might ultimately be allowed to recover through state or federal
regulation, the future market price of electricity, or the timing or
implementation of any formal recommendations in any regulatory or legislative
proceedings dealing with such issues.
The Company believes there are many uncertainties associated with any major
restructuring of the electric utility industry in Maine. Among them are: the
positions that will ultimately be taken by the Maine Legislature and the MPUC;
the role and policies of the FERC in any restructuring involving the Company,
the extent and effect of Congressional involvement; whether political
consensus is attained; and the extent to which the Company will be permitted
to recover its strandable costs.
The Company is pursuing efforts to mitigate its exposure to stranded costs.
One method of mitigation that is being actively pursued is securitization of
stranded costs including regulatory assets, above market NUG costs and above
market company owned generation costs. Pursuant to a future legislative
mandate and subject to determination by the MPUC, a portion of existing
revenues related to stranded costs would be assigned by the Company for
repayment of these costs. The property right created by this assignment could
be used as security by a trust to sell bonds, the proceeds of which could be
used by the Company to refinance existing obligations. Similarly a portion of
existing revenues could also be dedicated directly to payment of above market
non-utility power contract obligations, reducing the risks for the suppliers
as well as for the Company. Mitigation from this mechanism would result from
lower cost financing of stranded costs, enhanced credit worthiness of the
utility, which should further reduce the Company's costs, and from increased
availability of low cost funds to finance additional purchased power contract
restructuring efforts. Any mitigation achieved would be passed on to
residential and small commercial customers through lower rates. The Company
cannot predict when or if legislative support for the use of securitization
may occur.
Open-Access Transmission Service Ruling
On April 24, 1996, the Federal Energy Regulatory Commission (FERC) issued
Order No. 888, which requires all public utilities that own, control or
operate facilities used for transmitting electric energy in interstate
commerce to file open access non-discriminatory transmission tariffs that
offer both load-based, network and contract-based, point-to-point service,
including ancillary service to eligible customers containing minimum terms and
conditions of non-discriminatory service. This service must be comparable to
the service they provide themselves at the wholesale level; in fact, these
utilities must take wholesale transmission service they provide themselves
under the filed tariffs. The order also permits public utilities and
transmitting utilities the opportunity to recover legitimate, prudent and
verifiable wholesale stranded costs associated with providing open access and
certain other transmission services. It further requires public utilities to
functionally separate transmission from generation marketing functions and
communications. The intent of this order is to promote the transition of the
electric utility industry to open competition. Order No. 888 also clarifies
federal and state jurisdiction over transmission in interstate commerce and
local distribution and provides for deference of certain issues to state
recommendations.
On July 9, 1996, the Company and MEPCO submitted compliance filings to meet
the new pro forma tariff non-price minimum terms and conditions of
non-discriminatory transmission. Since July 9, 1996, the Company and MEPCO
have been transmitting energy pursuant to their filed tariffs, subject to
refund. FERC subsequently issued Order No. 888-A which generally reaffirms
Order No. 888 and clarifies certain terms.
Also on April 24, 1996, FERC issued Order No. 889 which requires public
utilities to functionally separate their wholesale power marketing and
transmission operation functions and to obtain information about their
transmission system for their own wholesale power transactions in the same way
their competitors do through the Open Access Same-time Information System
(OASIS). The rule also prescribed standards of conduct and protocols for
obtaining the information. The standards of conduct are designed to prevent
employees of a public utility engaged in marketing functions from obtaining
preferential information. The Company participated in efforts to develop a
regional OASIS, which was operational January 3, 1997. FERC subsequently
approved a New England Power Pool-wide Open Access Tariff, subject to refund
and issuance of further orders. The Company also participated in revising the
New England Power Pool Agreement, which is pending FERC approval.
Competition and Economic Development
The Company faces competition in several aspects of its traditional business
and anticipates that competition will continue to put 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, commercial, and residential 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
redesigned some rates to encourage off-peak usage and discourage switching to
alternative fuels. These include water-heat and space-heat retention rates,
Super-Saver rates, which discount off-peak usage, Diesel Deferral rates,
Economic Development rates, and the Maine Made Incentive program, which target
small businesses. In 1994, the Company lowered tariffs for its large
general-service customers and executed separate five-year definitive
agreements with 18 individual customers providing additional reductions.
Approximately 40% of annual service area kilowatt-hour sales and 27% of annual
revenues are covered under special tariffs allowed under the pricing
flexibility provisions of the ARP. These reductions in rates were offered to
customers after consideration of associated NUG cost reductions, savings from
further NUG consolidations and other general cost reductions. Refer to Note 4
to Consolidated Financial Statements,"Commitments and Contingencies -
Competition," for additional information.
Non-Utility Generators
In accordance with prior MPUC policy and the ARP, $113 million of buy-out or
contract-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. The Company restructured
40 contracts representing 316 megawatts of capacity that should result in
approximately $301 million in fuel savings over the next five years.
The Company also restructured a purchased power contract with a 20 megawatt
waste-to-energy facility, which is estimated to save the Company approximately
$20 million over the next five years. Refer to Note 6 to Consolidated
Financial Statements, "Capacity Arrangements - Non-Utility Generators," for
more information.
On October 31, 1997, a contract with a major NUG from which the Company is
obligated to purchase electricity at substantially above-market prices will
expire. As a result, the Company expects annual operating income to increase
by approximately $25 million. Two months of this benefit, or approximately $4
million, will be reflected in 1997 results.
Expansion Of Lines Of Business
The Company is also preparing for competition by expanding its business
opportunities through subsidiaries that capitalize on core competencies. One
such subsidiary, MaineCom Services, which was approved by the MPUC on July 13,
1995, is developing opportunities in expanding markets by arranging
fiber-optic data service for bulk carriers, offering support for cable-TV or
"super-cellular" personal-communication vendors, and providing other
telecommunications consulting services. The Company invested $10.7 million in
MaineCom during 1996 to develop an interchange network from Portland, Maine,
to various points in New Hampshire, Massachusetts and Connecticut. In
addition, the Company has subsidiaries or divisions that provide
energy-efficiency services, utility consulting (domestic and international)
and research, engineering and environmental services, management of rivers and
recreational facilities, locating of underground utility facilities and
infrared photography, real estate brokerage and management, modular housing,
and credit and collections services. All subsidiaries utilize skills of
former Company employees and compete for business with other companies.
In July 1996, the Company and Maine Electric Power Company, Inc. (MEPCO), a
78%-owned subsidiary of the Company, entered into option agreements with
Maritimes and Northeast Pipeline, L.L.C. (M&N) in which the Company and MEPCO
agreed to provide exclusive options to M&N to acquire property interests in
certain transmission line rights of way to sections of M&N's proposed natural
gas pipeline from the United States-Canada border at Woodland, Maine, to
Dracut, Massachusetts. In November 1996, while the parties were still engaged
in negotiating the terms of the proposed long-term arrangement, the options
expired by their terms. Subsequent to the expiration the parties have met to
discuss a long-term arrangement for use of the Company's and MEPCO's rights of
way for the proposed pipeline, but the Company cannot predict whether final
agreement on such an arrangement will be reached.
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 49% of total operating expense in 1996, 51% in 1995, and 54% in
1994. Purchased-power energy expense includes costs associated with purchases
from NUGs, which amounted to 74% of this expense category in 1996. 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 recovery is subject to the annual index-based price change. Fuel
cost decreases are generally retained by the Company. Fuel expense for MEPCO
was fully recoverable through billing to MEPCO participants. See Note 3 to
Consolidated Financial Statements, "Regulatory Matters - Open Access
Transmission Service Ruling," for a discussion on FERC Order No. 888 and its
effect on MEPCO's operations.
The extended outages and reduced operating level at Maine Yankee (see"Maine
Yankee Regulatory Issues") resulted in significant increases in fuel expense,
including purchased-power energy and purchased-power capacity expense, and
affected the Company's generation mix in 1996 and 1995. The Company replaced
this power through short-term agreements.
Purchased power expense in 1996 reflected savings of approximately $5.4
million related to a paper company's extended forced outage of its
cogeneration facility due to a flood. Additional savings of approximately $6
million were achieved through a five-year capacity exchange arrangement with
Northeast Utilities designed to reduce replacement power cost when either
Maine Yankee or Northeast Utilities facilities are off-line. Although this
agreement was suspended in 1995, Northeast Utilities owed the Company energy,
which they delivered in 1996. The Company benefited by purchasing this power
at rates lower than market rates. See Note 4 to Consolidated Financial
Statements, "Commitments and Contingencies - Competition," for more
information on this matter.
The Company's oil-fired generation decreased to 16.3% of the Company's net
generation in 1996, compared to 21.6% in 1995 net generation, and 12.1% in
1994. The NUG component of the energy mix decreased from 36.8% in 1995, to
31.4% in 1996, as a result of the ongoing efforts to reform the Company's NUG
contracts and an extended forced outage at one NUG facility. The average price
of NUG energy of 8.3 cents per kilowatt-hour 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 try to moderate the cost of
non-utility generation by pursuing renegotiation of contracts, by supporting
legislative bills that would promote that objective, and by other means such
as strict contract-term enforcement.
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 the Yankee nuclear generating facilities. In 1996,
purchased-power capacity expense increased by $15.2 million. Maine Yankee
capacity expense decreased by $12.2 million in 1996 , due mainly to the 1995
$10-million steam-generator tube repair costs. 1996 costs increased primarily
as a result of an accrual for the 1997 refueling outage that accounted for a
year over year increase of $13 million. In addition, expense increased by
$9.4 million resulting from the restructuring of a contract with a non-utility
generator. This agreement significantly decreased the cost of purchased-power
fuel resulting in a net savings in total purchased power costs.
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. In December 1996, the Board of
Directors of Connecticut Yankee Atomic Power Company announced a permanent
shutdown of the Connecticut Yankee plant for economic reasons and their intent
to decommission the plant. The Company has a 6% equity interest in Connecticut
Yankee, totaling approximately $6.4 million at December 31, 1996. Purchased
power capacity expense in 1996, 1995 and 1994 includes $11.5 million, $11.5
million, and $10 million, respectively, of costs related to this facility.
During 1992, Yankee Atomic Electric Company, in which the Company is a 9.5%
equity owner, discontinued power generation and prepared a plan for
decommissioning. Purchased-power capacity expense in 1996, 1995, and 1994
contained approximately $4.8 million, $3.9 million, and $5.2 million,
respectively, of costs related to this facility. Refer to Note 6 to
Consolidated Financial Statements, "Capacity Arrangements - Power Agreements,"
and "Other Nuclear Issues" above for a more detailed discussion.
The 1996 reduction in other operation and maintenance expense is attributed to
the reversal of a reserve of $6.4 million established in 1995 for the
Company's workers compensation regulatory asset for which recovery was not
certain. In the June 1996 ARP decision, the MPUC approved recovery of this
regulatory asset. Also in 1996, the Company increased the workers
compensation obligation and charged the increase of $1.6 million to expense.
As a result, a net year-over-year reduction of $11.2 million for workers
compensation was recorded. The Company did incur an increase in distribution
expenses of $4.1 million, mainly due to line-clearance activities. The
Company has contractual obligations related to demand-side energy-management
programs which increased expense by $2.8 million in 1996. Maintenance expense
other than distribution increased $3.5 million, of which $1.4 million was for
repairs at the Millstone Unit No. 3 nuclear facility.
The 1995 other operation-and-maintenance expense increase reflects
significantly higher charges totaling approximately $27.7 million for
amortization and cost of purchased-power contract buy-outs. Also reflected is
a one-time charge of $5.6 million related to a Special Retirement Offer (SRO)
to all employees aged 50 or more who had at least five years of continuous
service. The goal of the SRO was to help the Company achieve financial savings
and make the organizational changes it needed to be an effective competitor in
the energy marketplace. Approximately 200 employees accepted the SRO.
The Company continued its reengineering effort that began in 1995 to analyze
the financial controls and customer service sectors of the business. Employee
teams have begun implementing solutions that are expected to yield
improvements in work processes and result in cost savings. The Company is
also continuing cost containment measures.
Interest expense decreased in 1996 by $1.4 million due to lower levels of
Medium-Term Notes and the repurchase of $11.5 million of Series N General and
Refunding Mortgage Bonds. Long-term debt interest expense includes $1 million
of accelerated amortization of loss on reacquired debt, as specified in the
1996 ARP. In 1995, interest expense included a full year's interest costs on
the Company's October 1994 note to the Finance Authority of Maine to finance
the buy-out of a major NUG contract, and lower interest cost from a decrease
in the amount of Medium-Term Notes outstanding. Short-term interest costs over
the period 1994 through 1996 fluctuated with the levels of rates and
outstanding balances of short-term debt.
In July 1996, the Company redeemed $14 million of its 8 7/8% Series Preferred
Stock at par, under the mandatory and optional sinking-fund provisions of that
series. This reduced dividends by approximately $700,000 in 1996. The
Company reduced the level of Flexible Money Market Preferred Stock outstanding
in 1995 by $5.5 million in anticipation of the 1999 sinking-fund requirement,
thereby reducing dividends in 1995 by $300,000.
State and federal income taxes fluctuate with the level of pre-tax earnings
and the regulatory treatment of taxes by the MPUC. A settlement with the
Internal Revenue Service on audits for the years 1988-1991 provided a decrease
to income tax expense of approximately $4.8 million in 1996. The significant
increase in income-tax expense for 1995 is due to the impact of the loss from
the write-off of deferred balances in accordance with the MPUC's ARP order in
1994. See Note 2 to Consolidated Financial Statements, "Income Taxes," for
more information.
Liquidity and Capital Resources
The MPUC approved increases in electric retail rates of 1.26% and 2.43% in
1996 and 1995, respectively, that produced additional cash pursuant to the
price cap mechanism in the ARP. Increases in rates under the ARP were based on
increases in the related price index, the sharing mechanism and provisions for
certain mandated costs. Prior rate increases were provided to fund costs of
fuel, energy-management programs, operations, maintenance, systems
improvements, and investments in generation needed to ensure the Company's
continued ability to provide reliable electric service.
Approximately $141.7 million of cash was provided from net income after adding
back non-cash items. Approximately $16.2 million of cash was used for
fluctuations in working capital. Other operating activities, including the
financing of deferred energy-management programs and the buy-out of NUG
contracts, required cash resources.
The level of cash balances and activity in capital investment programs have
required little investment-related activity during 1996 and 1995. The issuance
and redemption of Medium-Term Notes and the purchase of 8 7/8% Series
Preferred Stock used $24 million and $14 million, respectively, of cash during
1996. Dividends paid on common stock were $29.2 million, while
preferred-stock dividends were $9.8 million.
Capital-investment activities, primarily construction expenditures, utilized
$57.1 million in cash during 1996. Construction expenditures comprised
approximately $6.3 million for generating projects, $3.0 million for
transmission, $27.9 million for distribution, and $9.7 million for general
facilities and other construction expenditures. The Company invested $12.1
million in subsidiaries in 1996, of which $10.7 million was in MaineCom
Services.
The Company estimates its capital expenditures for the period 1997 through
2001 at approximately $302 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 incurring approximately $462 million for
sinking funds, and debt and equity maturities.
The Company estimates that for the period 1997 through 2001, internally
generated funds from operating activities should provide a substantial portion
of the construction-program requirements. 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.
Replacement power costs and increased operation, maintenance and refueling
costs for Maine Yankee will have a significant negative effect on cash and
liquidity in 1997. The Company has been incurring incremental
replacement-power costs of approximately $1 million per week while the plant
has been out of service and expects such costs to continue at approximately
the same rate until the plant returns to service. Maine Yankee has indicated
that it expects its operations and maintenance costs to increase by up to
approximately $45 million, before refueling costs. The Company's share of
such costs would be up to approximately $17 million. In addition, the Company
estimates its share of the refueling costs will amount to approximately $15
million. Internally generated funds from operating activities will not be
sufficient to meet these demands. The Company also plans to utilize its
Medium-Term Note program and revolving credit facilities, as described below,
for these cash requirements.
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, 1996, $68 million of Medium-Term Notes
were outstanding which, under the terms of the program, permits issuance of an
additional $82 million of such notes. The Company is planning to seek the
consent of its preferred stockholders to increase the capacity of the
Medium-Term Note program from $150 million to $500 million at its annual
meeting of stockholders on May 15, 1997, in order to increase its financing
flexibility in anticipation of restructuring and increased competition. The
Company cannot predict whether such consent will be obtained.
In 1996, the Company deposited approximately $29.6 million in cash with the
Trustee under the Company's General and Refunding Mortgage Indenture in
satisfaction of the renewal and replacement fund and other obligations under
the Indenture. The total of such cash on deposit with the Trustee as of
December 31, 1996, was approximately $59.5 million. Under the Indenture such
cash may be applied at any time, at the direction of the Company, to the
redemption of bonds outstanding under the Indenture at a price equal to the
principal amount of the bonds being redeemed, without premium, plus accrued
interest to the date fixed for redemption. Such cash may also be withdrawn by
the Company by substitution of allocated property additions or available bonds.
To support its short-term capital requirements, on October 23, 1996 , the
Company entered into a $125 million revolving credit facility with several
banks, with The First National Bank of Boston and The Bank of New York acting
as agents for the lenders. The credit facility has two tranches: a $75
million, 364-day revolving credit facility that matures on October 22, 1997,
and a $50-million, 3-year revolving credit facility that matures on October
23, 1999. Both credit facilities require annual fees on the unused portion of
the credit lines. The fees are based on the Company's credit ratings and
allow for various borrowing options including LIBOR-priced, base-rate-priced
and competitive-bid-priced loans. Access to commercial paper markets has been
substantially reduced, if not precluded, 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. There was $7.5 million outstanding as of
December 31, 1996, under this agreement.
Factors That May Affect Future Results
This management's discussion and analysis section contains forecast
information items that are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. All such forward-looking
information is necessarily only estimated. There can be no assurance that
actual results will not materially differ from expectations. Actual results
have varied materially and unpredictably from past expectations.
Factors that could cause actual results to differ materially include, among
other matters, electric utility restructuring, including the ongoing state and
federal activities; future economic conditions; earnings-retention and
dividend-payout policies; developments in the legislative, regulatory, and
competitive environments in which the Company operates; and other
circumstances that could affect anticipated revenues and costs, such as
unscheduled maintenance or repair requirements and compliance with laws and
regulations. Nuclear investments and obligations, which are subject to
increased regulatory scrutiny, and the amount of expenditures and the timing
of the return of the Maine Yankee generating plant to service, could have a
material effect on the Company's financial position.
Item 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA.
Page
Index to Financial Statements and Financial Statement Schedule
Financial Statements:
Management report on responsibility for financial reporting 43
Report of Independent Accountants 44
Consolidated Statement of Earnings for the three years ended
December 31, 1996, 1995 and 1994 45
Consolidated Balance Sheet as of December 31, 1996 and 1995 46
Consolidated Statement of Cash Flows 48
Consolidated Statement of Capitalization and Interim Financing 50
Consolidated Statement of Changes in Common-Stock Investment 51
Notes to Consolidated Financial Statements 52
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts 101
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 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 David E. Marsh
President and Chief Executive Officer Vice President,
Corporate Services,
Treasurer and Chief
Financial Officer
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. These financial statements and
financial statements schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule 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 consolidated financial position of Central Maine
Power Company and subsidiary as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, 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 23, 1997
Consolidated Financial Statements
Consolidated Statement of Earnings
<TABLE>
(Dollars in thousands, except per-share Year ended December 31,
amounts)
1996 1995 1994
<S> <C> <C> <C> <C> <C>
Electric Operating Revenues (Notes 1 and 3) $967,046 $916,016 $904,883
Operating expenses
Fuel used for company generation (Notes 1
and 6) 16,827 18,702 14,783
Purchased power - energy (Notes 1 and 6) 407,926 408,072 430,874
Purchased power - capacity (Note 6) 108,720 93,489 77,775
Other operation 182,910 188,013 153,700
Maintenance 37,449 32,862 32,820
Depreciation and amortization (Note 1) 53,694 55,023 55,992
Federal and state income taxes (Note 2) 30,125 13,328 28,300
Taxes other than income taxes 27,861 27,885 25,512
Total Operating Expenses 865,512 837,374 819,756
Equity in Earnings of Associated Companies
(Note 6) 6,138 7,217 5,109
Operating Income 107,672 85,859 90,236
Other income (expense)
Allowance for equity funds used during
construction (Note 1) 851 663 807
Other, net (Note 3) 5,255 7,170 (105,133)
Income taxes (Notes 2 and 3) (1,897) (2,704) 42,443
Total Other Income (Expense) 4,209 5,129 (61,883)
Income Before Interest Charges 111,881 90,988 28,353
Interest charges
Long-term debt (Note 7) 47,966 50,307 46,213
Other interest (Note 7) 4,341 3,244 5,887
Allowance for borrowed funds used during
construction (Note 1) (655) (543) (482)
Total Interest Charges 51,652 53,008 51,618
Net income (loss) 60,229 37,980 (23,265)
Dividends on preferred stock 9,452 10,178 10,511
Earnings (Loss) Applicable to Common Stock $ 50,777 $ 27,802 $(33,776)
Weighted Average Number of Shares of
Common Stock Outstanding 32,442,752 32,442,752 32,442,408
Earnings (Loss) Per Share of Common Stock $1.57 $0.86 $(1.04)
Dividends Declared Per Share of Common
Stock $0.90 $0.90 $ 0.90
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
Consolidated Balance Sheet
(Dollars in thousands) December 31
Assets 1996 1995
<S> <C> <C> <C> <C>
Electric property, at original cost (Notes 6 and 7) $1,644,434 $1,611,941
Less: accumulated depreciation (Notes 1 and 6) 598,415 560,078
Electric property in service 1,046,019 1,051,863
Construction work in progress (Note 4) 20,007 15,928
Nuclear fuel, less accumulated amortization of $9,035 in
1996 and $8,909 in 1995 1,157 1,391
Net electric property 1,067,183 1,069,182
Investments in associated companies, at equity (Notes 1 and
6) 67,809 54,669
Net Electric Property and Investments in Associated
Companies 1,134,992 1,123,851
Current assets
Cash and cash equivalents 8,307 57,677
Accounts receivable, less allowances for uncollectible
accounts of $4,177 in 1996 and $3,313 in 1995:
Service - billed 84,396 87,140
Service - unbilled (Notes 1 and 3) 45,721 41,798
Other accounts receivable 17,517 15,131
Prepaid income taxes (Note 2) 264 -
Fuel oil inventory, at average cost 9,256 3,772
Materials and supplies, at average cost 12,172 12,772
Funds on deposit with trustee (Note 7) 59,512 29,919
Prepayments and other current assets 9,500 9,192
Total Current Assets 246,645 257,401
Deferred charges and other assets
Recoverable costs of Seabrook 1 and abandoned projects, net (Note 1) 89,551 95,127
Yankee Atomic purchased-power contract (Note 6) 16,463 21,396
Connecticut Yankee purchased-power contract (Note 6) 45,769 -
Regulatory assets - deferred taxes (Note 2) 239,291 235,081
Deferred charges and other assets (Notes 1 and 3) 238,203 260,063
Total Deferred Charges and Other Assets 629,277 611,667
Total Assets $2,010,914 $1,992,919
The accompanying notes are an integral part of these financial statements.
</TABLE>
Stockholders' Investment and Liabilities
Capitalization (see separate statement) (Note 7)
Common-stock investment $ 511,578 $ 490,005
Preferred stock 65,571 65,571
Redeemable preferred stock 53,528 67,528
Long-term obligations 587,987 622,251
Total Capitalization 1,218,664 1,245,355
Current liabilities and interim financing
Interim financing (see separate statement) (Note 7) 32,500 34,000
Sinking-fund requirements (Note 7) 9,375 10,455
Accounts payable 93,197 108,170
Dividends payable 9,512 9,823
Accrued interest 11,610 12,648
Accrued income taxes (Note 2) - 3,668
Miscellaneous current liabilities 21,342 13,870
Total Current Liabilities and Interim Financing 177,536 192,634
Commitments and Contingencies (Notes 4 and 6)
Reserves and deferred credits
Accumulated deferred income taxes (Note 2) 357,994 351,868
Unamortized investment tax credits (Note 2) 31,988 32,452
Yankee Atomic purchased-power contract (Note 6) 16,463 21,396
Connecticut Yankee purchased-power contract (Note 6) 45,769 -
Regulatory liabilities - deferred taxes (Note 2) 52,616 50,366
Other reserves and deferred credits (Note 5) 109,884 98,848
Total Reserves and Deferred Credits 614,714 554,930
Total Stockholders' Investment and Liabilities $2,010,914 $1,992,919
The accompanying notes are an integral part of these financial statements.
<TABLE>
Consolidated Statement of Cash Flows
(Dollars in thousands) Year ended December 31
1996 1995 1994
Operating Activities
<S> <C> <C> <C>
Net income (loss) $ 60,229 $ 37,980 $(23,265)
Items not requiring (providing) cash:
ARP-related charges (Note 3) - - 100,390
Depreciation 44,104 43,676 42,627
Amortization 34,881 37,196 32,790
Deferred income taxes and investment tax credits, net 3,318 (3,710) 11,022
Allowance for equity funds used during construction (851) (663) (807)
Changes in certain assets and liabilities:
Accounts receivable (3,565) (12,539) 5,175
Inventories (4,884) 595 4,230
Other current assets (308) (1,954) (1,391)
Retail fuel costs - - 32,922
Accounts payable (16,862) 12,025 4,062
Accrued taxes and interest (4,970) 30,282 (25,311)
Miscellaneous current liabilities 7,472 3,335 (2,602)
Deferred energy-management costs (5,222) (4,075) (5,789)
Maine Yankee outage accrual 8,280 (4,710) 8,197
Purchased-power contract buyouts (75) (13,405) (91,274)
Other, net 3,961 11,495 (5,604)
Net Cash Provided by Operating Activities 125,508 135,528 85,372
Investing Activities
Construction expenditures (46,922) (44,867) (42,246)
Investments in associated companies (12,059) (600) (2,004)
Changes in accounts payable - investing activities
1,889 (1,655) (679)
Net Cash Used by Investing Activities (57,092) (47,122) (44,929)
Financing Activities
Issuances:
Mortgage bonds - - 25,000
Common stock - - 927
Medium-term notes 10,000 30,000 32,000
Other Long-Term Obligations 870 - -
Finance Authority of Maine - - 66,429
Redemptions:
Mortgage bonds (11,500) - -
Preferred stock (14,000) (5,472) -
Medium-term notes (34,000) (65,000) (43,000)
Finance Authority of Maine (6,300) - -
Short-term obligations, net 7,500 (8,000) (25,500)
Other long-term obligations (1,780) (860) (860)
Funds on Deposit with Trustee (29,593) - -
Dividends:
Common stock (29,220) (29,222) (29,222)
Preferred stock (9,763) (10,287) (10,061)
Net Cash Provided (Used) by Financing Activities
(117,786) (88,841) 15,713
Net Increase (Decrease) in Cash and Cash
Equivalents (49,370) (435) 56,156
Cash and cash equivalents, beginning of year 57,677 58,112 1,956
Cash and Cash Equivalents, end of year $ 8,307 $ 57,677 $ 58,112
Supplemental Cash-Flow Information:
Cash paid during the year for:
Interest (net of amounts capitalized) $47,835 $51,127 $44,874
Income taxes (net of amounts refunded of
$0, $29,045 and $2,802 in respective years
indicated) $32,632 $(11,994) $1,568
</TABLE>
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.
Consolidated Statement of Capitalization and Interim Financing
<TABLE>
December 31
(Dollars in thousands) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
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
1996 and 1995 $ 162,214 $ 162,214
Other paid-in capital 276,818 276,287
Retained earnings 72,546 51,504
Total Common-Stock Investment 511,578 40.9% 490,005 38.3%
Preferred Stock - not subject to mandatory redemption
65,571 5.2 65,571 5.1
Preferred Stock - subject to mandatory redemption
60,528 74,528
Less: current sinking fund requirements 7,000 7,000
Redeemable Preferred Stock - subject to mandatory
redemption 53,528 4.3 67,528 5.3
Long-term obligations:
Mortgage bonds 421,000 432,500
Less: unamortized debt discount 1,620 1,807
Total Mortgage Bonds 419,380 430,693
Medium-term notes 68,000 92,000
Less: unamortized debt discount - 8
Total Medium-Term Notes 68,000 91,992
Other long-term obligations:
Lease obligations 36,283 38,112
Pollution-control facility and other notes 91,699 98,909
Total Other Long-Term Obligations 127,982 137,021
Less: Current Sinking Fund Requirements and Current
Maturities 27,375 37,455
Total Long-Term Obligations 587,987 47.0 622,251 48.6
Total Capitalization 1,218,664 97.4 1,245,355 97.3
Interim financing (Note 7):
Short-term obligations 7,500 -
Current maturities of long-term obligations 25,000 34,000
Total Interim Financing 32,500 2.6 34,000 2.7
Total Capitalization and Interim Financing $1,251,164 100.0% $1,279,355 100.0%
</TABLE>
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Changes in Common-Stock Investment
<TABLE>
For the three years ended December 31, 1996
(Dollars in thousands) Amount at Other
par value paid-in Retained
Shares capital earnings Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1993 32,379,937 $161,900 $274,343 $117,146 $553,389
Net 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
Net income 37,980 37,980
Dividends declared:
Common stock (29,199) (29,199)
Preferred stock (10,178) (10,178)
Cost for reacquired preferred stock 581 (581)
Shareholders Rights Plan redemption (324) (324)
Capital stock expense 403 403
Balance - December 31, 1995 32,442,752 162,214 276,287 51,504 490,005
Net income 60,229 60,229
Dividends declared:
Common stock (29,199) (29,199)
Preferred stock (9,452) (9,452)
Cost for reacquired preferred stock 536 (536)
Capital stock expense (5) (5)
Balance - December 31, 1996 32,442,752 $162,214 $276,818 $72,546 $511,578
The accompanying notes are an integral part of these financial statements.
</TABLE>
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
General Description
Central Maine Power Company (the Company) is an investor-owned public utility
primarily engaged in the sale of electric energy at the wholesale and retail
levels to residential, commercial, industrial, and other classes of customers
in the State of Maine.
Financial Statements
The consolidated financial statements include the accounts of the Company and
its 78%-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. The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
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 implementation of the
Alternative Rate Plan (ARP), these costs are no longer subject to
reconciliation through the annual fuel-cost adjustment. See Note 3,
"Regulatory Matters - Alternative Rate Plan," for further information.
Depreciation
Depreciation of electric property is calculated using the straight-line
method. The weighted average composite rate was 3.0% in each of 1996, 1995 and
1994.
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 8.7% in 1996, 8.4% in 1995, and 8.9% in
1994.
Asset Valuation
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," effective January 1, 1996. The standard requires
impairment losses on long-lived assets to be recognized when an asset's book
value exceeds its expected future cash flows (undiscounted and without
interest). The new standard also imposes stricter criteria for retention of
regulatory-created assets by requiring that such assets be probable of future
recovery at each balance sheet date. The Company's adoption of this standard
in 1996 had no impact on accompanying financial statements. However, this may
change in the future as changes are made in the current regulatory framework
or as competitive factors influence wholesale and retail pricing in the
electric utility industry.
Deferred Charges and Other Assets
The Company defers and amortizes certain costs in a manner consistent with
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. The following table
depicts the components of deferred charges and other assets at December 31,
1996, and 1995:
(Dollars in thousands) 1996 1995
NUG contract buy-outs and restructuring (Note 6) $113,796 $126,485
Energy-management costs 35,986 36,224
Postretirement benefits (Note 5) 22,962 21,849
Financing costs 20,684 24,775
Environmental site clean-up costs (Note 4) 7,876 7,375
Non-operating property, net 7,176 7,486
Electric Lifeline Program 2,368 3,603
Other, including MEPCO 27,355 32,266
Total $238,203 $260,063
Certain costs are being amortized and recovered in rates over periods ranging
from three to 30 years. Amortization expense for the next five years is shown
below:
(Dollars in thousands) Amount
1997 $26,790
1998 26,053
1999 23,910
2000 22,807
2001 19,304
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 these rate orders, the deferred
taxes related to these recoverable costs are amortized over periods of four to
10 years. As of December 31, 1996, substantially all deferred taxes related to
Seabrook I have been amortized. The recoverable investments as of December 31,
1996, and 1995 are as follows:
December 31 Recovery
(Dollars in thousands) 1996 1995 periods ending
Recoverable costs of:
Seabrook I $141,084 $141,084 2015
Other Projects 57,491 57,491 2001
198,575 198,575
Less: accumulated amortization 108,209 102,248
Less: related income taxes 815 1,200
Total Net Recoverable Investment $ 89,551 $ 95,127
Note 2: Income Taxes
The components of federal and state income-tax provisions (benefits) reflected
in the Consolidated Statement of Earnings are as follow:
Year ended December 31
(Dollars in thousands) 1996 1995 1994
Federal:
Current $ 21,682 $ 15,965 $(18,579)
Deferred 5,751 2,278 2,175
Investment tax credits, net (464) (1,715) (2,512)
Regulatory deferred (623) (2,619) 8,379
Total Federal Taxes 26,346 13,909 (10,537)
State:
Current $ 7,022 $ 3,777 $ (6,586)
Deferred (10) 343 3,003
Regulatory deferred (1,336) (1,997) (23)
Total State Taxes 5,676 2,123 (3,606)
Total Federal and State Income Taxes $ 32,022 $ 16,032 $(14,143)
Federal and state income taxes charged to:
Operating expenses $ 30,125 $ 13,328 $ 28,300
Other income 1,897 2,704 (42,443)
$ 32,022 $ 16,032 $(14,143)
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:
<TABLE>
Year ended December 31
1996 1995 1994
Amount % Amount % Amount %
(Dollars in thousands)
Income tax expense at statutory federal
<S> <C> <C> <C> <C> <C> <C>
rate $30,301 35.0% $18,161 35.0% $(11,831) 35.0%
Permanent differences:
Investment tax-credit amortization
(1,482) (1.7) (1,613) (3.1) (1,613) 4.8
Dividend-received deduction (1,895) (2.2) (2,219) (4.3) (1,469) 4.3
Other, net (293) (0.3) (217) (0.4) (68) 0.2
26,631 30.8 14,112 27.2 (14,981) 44.3
Effect of timing differences for items
which receive flow through treatment:
Tax-basis repairs (1,229) (1.4) (891) (1.7) (924) 2.7
Depreciation differences flowed through
in prior years 2,327 2.7 2,291 4.4 2,315 (6.8)
Accelerated flowback of deferred taxes
on loss on abandoned generating projects
1,708 1.9 1,873 3.6 2,051 (6.1)
Deduction of removal costs (202) (0.2) (189) (0.4) (163) 0.5
Carrying costs, net 186 0.2 253 0.5 429 (1.3)
Adjustment to tax accrual for change in
rate treatment 300 0.3 - - 420 (1.2)
Excess property taxes paid - - - - (116) 0.4
IRS audit resolution regarding
depreciation methods (3,230) (3.7) - - - -
Provision for deferred taxes relating
to normalization of certain short-term
timing differences*
- - (2,545) (4.9) - -
Other, net (145) (0.2) (995) (1.9) 432 (1.3)
Federal Income Tax Expense and
Effective Rate $26,346 30.4% $13,909 26.8% $(10,537) 31.2%
</TABLE>
*During 1995, the Company adjusted the deferred tax balances for certain
normalized items (Note 3).
The Company and MEPCO record deferred income-tax expense in accordance with
regulatory authority; they also defer investment and energy tax credits and
amortize them over the estimated lives of the assets that generated the
credits.
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns as required under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). Under this
method, effective January 1, 1993, 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.
At-adoption 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), recorded 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.
A valuation allowance has not been recorded at December 31, 1996, and 1995, as
the Company expects that all deferred income tax assets will be realized in
the future.
Accumulated deferred income taxes consisted of the following in 1996 and 1995:
(Dollars in thousands) 1996 1995
Deferred tax assets resulting from:
Investment tax credits, net $ 22,050 $ 22,370
Regulatory liabilities 17,919 13,882
Alternative minimum tax 10,241 23,850
All other 26,588 22,545
76,798 82,647
Deferred tax liabilities resulting from:
Property 288,370 273,565
Abandoned plant 61,729 65,573
Regulatory assets 85,508 96,577
435,607 435,715
Accumulated deferred income taxes, end of year, net $358,809 $353,068
Accumulated deferred income taxes, recorded as:
Accumulated deferred income taxes $357,994 $351,868
Recoverable costs of Seabrook 1 and abandoned projects,
net 815 1,200
$358,809 $353,068
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 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 is continuing to
regulate the Company's operations and prices, provide for continued recovery
of deferred costs, and specify a range for its authorized rate of return. The
ARP was adopted effective January 1, 1995.
The Company believes the ARP provides the benefits of needed pricing
flexibility 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. See Note 4 to Consolidated
Financial Statements, "Commitments and Contingencies - Competition," for a
discussion of actions taken by the Company under the ARP's pricing flexibility
provisions.
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 a designated
range, 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. The Company will submit its 1997 compliance filing and the mid-period
review filing in March 1997. The mid-period review decision is expected from
the MPUC by September 30, 1997.
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 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-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 is the basis for each annual price-cap
change. The inflation index is reduced by the sum of two productivity factors,
a general productivity offset of 1.0%, (0.5% for 1995), and a second
formula-based offset that started 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 are outside a range of 350 basis points
above or below the Company's allowed return on equity, starting at the 10.55%
allowed return (1995) and indexed annually for changes in capital costs.
Outside that range, profits and losses would be shared equally by the Company
and ratepayers in computing the price-cap adjustment. This feature commenced
with the price-cap change of July 1, 1996, and reflected 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% 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.
Effective July 1, 1995, the MPUC approved a 2.43% increase pursuant to the
annual price-change provision in the ARP. The primary component of the
increase was the inflation-index change of 2.92%, reduced by a productivity
offset of 0.5%, and increased by .01% for flowthrough items and mandated
costs. On June 28, 1996, the MPUC approved a 1.26% increase in rates under
the ARP effective July 1, 1996. The components of the increase included the
inflation-index of 2.55% and earnings sharing and mandated cost items of
0.64%, reduced by the productivity offset of 1.0% and sharing of contract
restructuring and buyout savings of 0.93%.
The Company agreed in the ARP negotiations to record charges in 1994
reflecting the write-off of approximately $100 million ($60 million, net of
tax, or $1.85 per share) which consisted of undercollected balance of fuel and
purchased power costs, unrecovered energy-management costs, unrecovered
unbilled ERAM revenues and unrecovered deferred charges related to the
possible extension of the operating life of one of the Company's generating
stations. The $100-million charge was included in "Other income (expense) -
Other, net" on the Consolidated Statement of Earnings. The $40-million tax
impact was included in "Other income (expense) - Income taxes." These
charges, with the other provisions of the ARP, lessen the impact of future
price increases for MPUC-mandated and fuel-related costs.
Restructuring
The Maine Legislature in 1995 took action by Legislative Resolve (Resolve) to
develop recommendations for the MPUC on the future structure of the electric
utility industry in Maine. The Resolve stated that the findings of the MPUC
would have no legal effect, but that the MPUC's study would"...provide
information to the Legislature in order to allow the Legislature to make
informed decisions when it evaluates those plans"
In accordance with the Resolve, on December 31, 1996, the MPUC, pursuant to
the mandate of the Maine Legislature, filed its Report and Recommended Plan
for Utility Industry Restructuring (Restructuring Report).
The Company believes there are many uncertainties associated with any major
restructuring of the electric utility industry in Maine. Among them are: the
actions that will be ultimately taken by the legislature and the MPUC; the
role of the FERC in any restructuring involving the Company and the ultimate
positions it will take on relevant issues within its jurisdiction; to what
extent the United States Congress will become involved in resolving or
redefining the issues through legislative action and, if so, with what
results; whether the necessary political consensus can be reached on the
significant and complex issues involved in changing the long-standing
structure of the electric-utility industry; and, particularly with respect to
the Company, to what extent utilities will be permitted to recover strandable
costs.
The Company has substantial exposure to cost stranding relative to its size.
The Company estimated its net-present-value strandable costs could be
approximately $2 billion as of January 1, 1996. These costs represent the
excess costs of purchased-power obligations and the Company's own generating
costs over the market value of the power, and the costs of deferred charges
and other regulatory assets. Of the $2 billion, approximately $1.3 billion is
related to above-market costs of purchased-power obligations, approximately
$200 million is related to estimated net above-market cost of the Company's
own generation, and the remaining $500 million is related to deferred
regulatory assets.
Meeting the Requirements of SFAS No. 71
The Company continues to meet the requirements of SFAS No. 71, as described
above. The standard provides specialized accounting for regulated
enterprises, which requires recognition of assets and liabilities that
enterprises in general could not record. Examples of regulatory assets
include deferred income taxes associated with previously flowed through items,
NUG buyout costs, losses on abandoned plants, deferral of postemployment
benefit costs, and losses on debt refinancing. If an entity no longer meets
the requirements of SFAS No. 71, then regulatory assets and liabilities must
be written off.
The ARP provides incentive-based rates intended to recover the cost of service
plus a rate of return on the Company's investment together with a sharing of
the costs or earnings between ratepayers and the shareholders should the
earnings be less than or exceed a target rate of return. The Company has
received recognition from the MPUC that the rates implemented as a result of
the ARP continue to provide specific recovery of costs deferred in prior
periods.
The MPUC's Restructuring Report submitted to the Legislature in December 1996
recognizes that a reasonable opportunity to recover strandable costs is
essential to a successful transition to competition, with incentives for the
Company to mitigate such costs where practicable. The Company is actively
pursuing securitization of regulatory assets, which would provide further
assurance of their recoverability.
Open-Access Transmission Service Ruling
On April 24, 1996, FERC issued Order No. 888, which requires all public
utilities that own, control or operate facilities used for transmitting
electric energy in interstate commerce to file open access non-discriminatory
transmission tariffs that offer both load-based, network and contract-based,
point-to-point service, including ancillary service to eligible customers
containing minimum terms and conditions of non-discriminatory service. This
service must be comparable to the service they provide themselves at the
wholesale level; in fact, these utilities must take wholesale transmission
service they provide themselves under the filed tariffs. The order also
permits public utilities and transmitting utilities the opportunity to recover
legitimate, prudent and verifiable wholesale stranded costs associated with
providing open access and certain transmission services. It further requires
public utilities to functionally separate transmission from generation
marketing functions and communications. The intent of this order is to
promote the transition of the electric utility industry to open competition.
Order No. 888 also clarifies federal and state jurisdiction over transmission
in interstate commerce and local distribution and provides for deference of
certain issues to state recommendations.
On July 9, 1996, the Company and MEPCO submitted its compliance filings to
meet the new pro forma tariff non-price minimum terms and conditions of
non-discriminatory transmission. Since July 9, 1996, the Company and MEPCO
have been transmitting energy pursuant to their filed tariffs, subject to
refund. FERC subsequently issued Order No. 888-A, which reaffirms Order No.
888 and clarifies certain terms.
Also on April 24, 1996, FERC issued Order No. 889 which requires public
utilities to functionally separate their wholesale power marketing and
transmission operation functions and to obtain information about their
transmission system for their own wholesale power transactions in the same way
their competitors do through the Open Access Same-time Information System
(OASIS). The rule also prescribed standards of conduct and protocols for
obtaining the information. The standards of conduct are designed to prevent
employees of a public utility engaged in marketing functions from obtaining
preferential information. The Company participated in efforts to develop a
regional OASIS, which was operational January 3, 1997. FERC subsequently
approved a New England Power Pool-wide Open Access Tariff, subject to refund
and issuance of further orders. The Company also participated in revising the
New England Power Pool Agreement, which is pending FERC approval.
Note 4: Commitments and Contingencies
Construction Program
The Company's plans for improving and expanding generating, transmission,
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 forecast of capital expenditures for the
five-year period 1997 through 2001, are as follows:
(Dollars in millions) 1997 1998-2001 Total
Type of Facilities:
Generating projects $ 8 $ 33 $ 41
Transmission 3 14 17
Distribution 27 124 151
General facilities and other 18 75 93
Total Estimated Capital Expenditures $56 $246 $302
Competition
In September 1994, the Town of Madison's Department of Electric Works
(Madison), a wholesale customer of the Company, began receiving power from
Northeast Utilities (NU) as a result of a competitive bidding process
available under the federal Energy Policy Act of 1992. Substantially all of
the 45 megawatts involved supply the large paper-making facility of Madison
Paper Industries (MPI) in Madison's service territory that had been served
directly by the Company under a special service agreement with Madison during
the preceding 12 years.
The MPUC approved the stipulation filed by the Company, Madison, and NU,
whereby 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 costs. 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 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 later reached agreement with its other two wholesale customers to
continue to supply them at negotiated prices and margins that are lower than
the previous averages. Subsequent to year end, these customers initiated a
request for proposals to supply their energy needs after 1998.
During 1994, the Company engaged in discussions with its large general-service
customers. Those customers have alternative energy options that the Company
believed needed to be addressed by lowering its applicable tariffs. In
response to those discussions, in November 1994, the Company filed revised
tariff schedules lowering prices 15% 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% for the three
years 1995 through 1997, 16% for 1998, and 18% for 1999, below the December 1,
1994, levels. These contracts also protect these customers from price
increases that might otherwise be allowed under the ARP. The participating
customers agreed to take electrical service from the Company for five years
and 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 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 were approximately $27 million lower in 1995, and
approximately $45 million lower in 1996, than would have been the case if
these customers continued to pay full retail rates without reducing their
purchases from the Company.
However, these rate reductions were negotiated giving consideration to
important related cost savings. Electricity price changes affect the cost of
some NUG power contracts. The reduction in rates to large customers reduced
purchased-power costs by approximately $20 million as a result of linkage
between retail tariffs and some contract prices.
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 (PRP) 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 1995, the EPA approved a remedy to adjust the soil cleanup standard to 10
parts per million. The cleanup method using solvent extraction was found to
be technically infeasable. On July 30, 1996, the EPA approved the off-site
disposal of the contaminated soil to a EPA licensed secure landfill.
The Company believes that its share of the remaining costs of the cleanup
under the approved remedy could total approximately $2.7 million to $4.2
million. This estimate is net of an agreed partial insurance recovery and the
1993 court-ordered contribution of 41% from Westinghouse Electric Corp., but
does not reflect any possible contributions from other insurance carriers the
Company has sued, or from any other parties. The Company has recorded an
estimated liability of $2.7 million and an equal regulatory asset, reflecting
an accounting order to defer such costs and the anticipated ratemaking
recovery of such costs when ultimately paid. In addition, the Company has
deferred, as a regulatory asset, $5.1 million of costs incurred through
December 31, 1996.
The Company cannot predict with certainty the level and timing of the cleanup
costs, the extent they will be covered by insurance, or their ratemaking
treatment, but believes it should recover substantially all of such costs
through insurance and rates.
Other Environmental Sites
The Company has been named as a PRP at eleven former manufactured gas plant
sites, six former waste oil sites, and two former pole treatment and storage
locations. The Company believes that its share of the investigation and
cleanup and other costs associated with these sites could total approximately
$0.9 million which was charged to income in 1996. The Company believes that
the ultimate resolution of current legal and environmental proceedings 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 $79.3 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% ownership interest in the Millstone Unit No. 3
nuclear plant, the Company's retrospective premium could be as high as $6
million in any year, for a cumulative total of $47.6 million, exclusive of the
effect of inflation indexing and a 5% 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 $7.7
million annually.
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 1995, the Company offered a Special Retirement Offer (SRO) to
qualifying employees. Approximately 200 employees accepted the offer. The
$7-million cost of the SRO was included in pension expense. As part of the
SRO, the plans were amended to add five years to age and five years to
credited service for all plan participants for purposes of eligibility and
early retirement discounts. Early Retirement Incentive Program (ERIP) expenses
for 1994 relate to a 1991 ERIP reflected in accordance with an MPUC accounting
order.
A summary of the components of net periodic pension cost for the non-union and
union defined-benefit plans in 1996, 1995 and 1994 follows:
<TABLE>
1996 1995 1994
(Dollars in Non- Non- Non-
thousands) union Union union Union union Union
Service cost -
benefits earned
<S> <C> <C> <C> <C> <C> <C>
during the period $2,334 $1,780 $2,014 $1,414 $2,367 $1,684
Interest cost on
projected benefit
obligation 5,225 3,852 5,653 3,889 5,469 3,816
Return on plan
assets (8,168) (5,036) (16,135) (9,786) 2,336 1,397
Net amortization
and deferral 2,911 1,536 10,030 6,028 (8,174) (5,311)
Early Retirement
Incentive Programs
- - 3,859 3,141 992 1,457
Net Periodic
Pension Cost $2,302 $2,132 $5,421 $4,686 $2,990 $3,043
</TABLE>
Assumptions used in accounting for the non-union and union defined-benefit
plans in 1996, 1995, and 1994 are as follows:
1996 1995 1994
Weighted average discount rate 7.50% 7.25% 8.25%
Rate of increase in future compensation levels 4.5% 4.5% 5.0%
Expected long-term return on assets 8.5% 8.5% 8.5%
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, 1996, and 1995:
<TABLE>
1996 1995
(Dollars in thousands) Non- Non-
union Union union Union
Actuarial present value of benefit obligations:
<S> <C> <C> <C> <C>
Vested benefit obligation $62,461 $47,617 $64,916 $47,948
Accumulated benefit obligation 64,394 48,783 $64,916 $47,948
Projected benefit obligation 75,570 55,688 $77,939 $53,735
Plan assets at estimated market value (primarily
stocks, bonds, and guaranteed annuity contracts) 77,996 48,091 73,973 45,061
Funded status - projected benefit obligation in
excess of or (less than) plan assets (2,426) 7,597 3,966 8,674
Unrecognized prior service cost (1,785) (1,481) (1,940) (1,610)
Unrecognized net gain 19,819 3,745 11,309 2,530
Unrecognized (net obligation) net asset (163) 1,675 (192) 1,945
Net Pension Liability Recognized in the
Balance Sheet $15,445 $11,536 $13,143 $11,539
</TABLE>
Savings Plan
The Company offers an employee savings plan to all employees which allows
participants to invest from 2% to 15% of their salaries among several
alternatives. An employer contribution equal to 60% of the first 5% of the
employees' contributions is initially invested in Company common stock. The
Company's contributions to the savings-plan trust were $1.7 million in 1996,
$1.6 million in 1995, and $1.8 million in 1994.
Other Post-Employment Benefits
In addition to pension and savings-plan benefits, the Company provides certain
health-care and life-insurance benefits for substantially all of its retired
employees.
The MPUC approved a rulemaking on SFAS No. 106, effective July 20, 1993, that
adopted the accrual method of accounting for the expected cost of such
benefits during the employees' years of service, and authorized the
establishment of a regulatory asset for the deferral of such costs until they
are "phased-in" for ratemaking purposes. 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 prescribes the maximum amortization period of the average remaining
service life of active employees or 20 years, whichever is longer, for the
transition obligation. The Company is utilizing a 20 year amortization
period. Segregation in an external fund is required for amounts collected in
rates. The Company is proposing initial funding of $3 million annually. Until
amounts are funded, no return on assets will be reflected in postretirement
benefit cost.
As a result of the MPUC order, the Company records the cost of these benefits
by charging expense in the period recovered through rates ($9.8 million in
1996, $6.7 million in 1995, and $5.5 million in 1994), with the excess over
that amount of $1.1 million in 1996, $6.2 million in 1995 and $7.1 million in
1994, deferred for future recovery. The total amount defined as a regulatory
asset as of December 31, 1996 was $23 million. Concurrent with the initial
ARP price change, the Company began to phase in the cost of SFAS No. 106 over
a three-year period, $3 million for the first year beginning July 1, 1995 and
an additional $2.1 million for the year beginning July 1, 1996. The amounts
deferred until that point are being amortized over the same period as the
transition obligation. A summary of the components of net periodic
postretirement benefit cost for the plan in 1996, 1995 and 1994 follows:
(Dollars in thousands) 1996 1995 1994
Service cost $ 1,347 $ 846 $ 1,472
Interest on accumulated postretirement benefit
obligation 5,720 7,389 6,712
Special retirement offer - 200 -
Amortization of transition obligation 4,080 4,606 4,606
Amortization of prior service cost 35 42 -
Amortization of gain (329) (188) (171)
Postretirement benefits expense 10,853 12,895 12,619
Deferred postretirement benefits expense 1,056 6,204 7,108
Postretirement Benefit Expense Recognized in the
Statement of Earnings $ 9,797 $ 6,691 $ 5,511
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, 1996 and 1995:
(Dollars in thousands) 1996 1995
Accumulated postretirement benefit obligation:
Retirees $ 51,815 $ 87,632
Fully eligible active plan participants 2,707 4,791
Other active plan participants 19,381 15,069
Total accumulated postretirement benefit obligation 73,903 107,492
Plan assets, at fair value 849 879
Accumulated postretirement benefits obligation in
excess of plan assets 73,054 106,613
Unrecognized net gain (loss) 15,987 (2,511)
Unrecognized prior service cost (5) (1,131)
Unrecognized transition obligation (59,267) (78,303)
Accrued Postretirement Benefit Cost Recognized
in the Balance Sheet $ 29,769 $ 24,668
The assumed health-care cost-trend rates range from 5.7% to 6.8% for 1996,
reducing to 5.0% overall over a period of 25 years. Rates range from 6.4% to
9.3% for 1995, reducing to 5.0% overall, over a period of 10 years. Rates
range from 6.8% to 10.4% for 1994, reducing to 5.0% overall, over a period of
10 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 $0.7 million and the accumulated postretirement benefit
obligation by $8.9 million. Additional assumptions used in accounting for the
postretirement benefit plan in 1996, 1995 and 1994 are as follows:
1996 1995 1994
Weighted-average discount rate 7.50% 7.25% 8.25%
Rate of increase in future compensation levels 4.50% 4.50% 5.0%
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.
Effective September 1, 1996, the Company implemented a phase-out of the
long-term care portion of its retiree medical plans. With the exception of
one group of approximately 200 retirees, all benefits of this type will be
eliminated by September 1, 2002. These changes decreased Plan liabilities by
approximately $16 million, based on 1996 actuarial valuation results.
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), two of which have been permanently shut
down, and is obligated to pay its proportionate share of costs, which include
fuel, depreciation, operation-and-maintenance expenses, a return on invested
capital, and the estimated cost of decommissioning the nuclear plants.
Pertinent data related to these power agreements as of December 31, 1996, are
as follows:
(Dollars in thousands) Maine Yankee Vermont Connecticut Yankee
Yankee Yankee* Atomic*
Ownership share 38% 4% 6% 9.5%
Contract expiration date 2008 2012 1998 2000
Capacity (MW) 879 531 -- --
Company's share of: Capacity (MW)
329 19 -- --
Estimated 1996 costs $ 79,282 $ 6,525 $ 12,355 $ 4,896
Long-term obligations and redeemable
preferred stock $ 94,559 $ 6,950 $ 10,447 $ --
Estimated decommissioning obligation $118,586 $ 13,150 $ 45,769 $16,463
Accumulated decommissioning fund $ 61,254 $ 5,474 $ 12,269 $11,408
* See following for discussion on Connecticut Yankee and 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 Atomic Power Company (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%, 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 dismantling and removal, of $317 million (in
1993 dollars) based on a 1993 external engineering study. Accumulated
decommissioning funds were $163.5 million as of December 31, 1996. 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.
The Maine Yankee Plant, like other pressurized water reactors, experienced
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. During a refueling and maintenance
shutdown in February 1995, Maine Yankee detected through new inspection
methods that approximately 60% of the Plant's 17,000 steam generator tubes
appeared to have defects.
Following a detailed analysis of safety, technical and financial
considerations, Maine Yankee repaired the tubes by inserting and welding short
reinforcing sleeves of an improved material in substantially all of the
Plant's steam generator tubes, which was completed in December 1995. The
Company's approximately $10-million share of the repair costs adversely
affected the Company's 1995 earnings by $0.18 per share, net of taxes, in
spite of significant cost-reduction measures implemented by both the Company
and Maine Yankee. In addition, the Company's incremental replacement-power
costs during the outage totaled approximately $29 million, or $0.52 per share,
net of taxes, for 1995.
Also in December 1995, the Nuclear Regulatory Commission's (NRC) Office of the
Inspector General (OIG) and its Office of Investigations (OI) initiated
separate investigations of certain anonymous "whistleblower" allegations of
wrongdoing by Maine Yankee and Yankee Atomic Electric Company (Yankee Atomic)
in 1988 and 1989 in connection with operating license amendments. On May 9,
1996, the OIG, which was responsible for investigating only the actions of the
NRC staff and not those of Maine Yankee or Yankee Atomic, issued its report on
its investigation. The report found deficiencies in the NRC staff's review,
documentation, and communications practices in connection with the license
amendments, as well as "significant indications of possible licensee
violations of NRC requirements and regulations." Any such violations by Maine
Yankee are within the purview of the OI investigation, which, with related
issues, is being reviewed by the United States Department of Justice. A
separate internal investigation commissioned by the boards of directors of
Maine Yankee and Yankee Atomic and conducted by an independent law firm noted
several areas that could have been improved, including regulatory
communications, definition of responsibilities between Maine Yankee and Yankee
Atomic, and documentation and tracking of regulatory compliance, but found no
wrongdoing by Maine Yankee or Yankee Atomic or any of their employees. Issues
raised as a result of the anonymous allegations caused the NRC to limit the
Plant to an operating level of approximately 90% of its full thermal capacity,
pending resolution of those issues. The Company cannot predict the results of
the investigations by the OI and Department of Justice.
On January 11, 1996, Maine Yankee began start-up operations and was up to a
90% generation level on January 24, 1996. The Plant operated substantially at
that level until July 20, 1996, when it was taken off-line after a
comprehensive review by Maine Yankee of the Plant's systems and equipment
revealed a need to add pressure-relief capacity to the Plant's primary
component cooling system. On August 18, 1996, while the Plant was in the
restart process, Maine Yankee conducted a review of its electrical circuitry
testing procedures pursuant to a generic NRC letter to nuclear-plant licensees
that was intended to ensure that every feature of every safety system be
routinely tested. During the expanded review, Maine Yankee found a deficiency
in an electrical circuit of a safety system and therefore elected to conduct
an intensified review of other safety-related circuits to resolve immediately
any questions as to the adequacy of related testing procedures. The Plant
returned to the 90% operating level on September 3, 1996.
On December 6, 1996, Maine Yankee took the Plant off-line to resolve
cable-separation and associated issues. On January 3, 1997, Maine Yankee
announced that it would use the opportunity presented by that outage to
inspect the Plant's 217 fuel assemblies, since daily monitoring had indicated
evidence of a small number of defective fuel rods. As a result of the
inspection, Maine Yankee determined that all of the assemblies manufactured by
one supplier and currently in the reactor core (approximately one-third of the
total) have to be replaced. Maine Yankee will therefore keep the Plant
off-line for refueling, which had previously been scheduled for late 1997. In
addition, Maine Yankee will make use of the outage to inspect the Plant's
steam generators for deterioration beyond that which was repaired during the
extended 1995 outage. Degradation of steam generators of the age and design
of those in use in the Plant has been identified at other plants.
In January 1997, the NRC announced that it had placed the Plant on its "watch
list" in "Category 2", which includes plants that display "weaknesses that
warrant increased NRC attention", but which are not severe enough to warrant a
shut-down order. Plants in category 2 remain in that category "until the
licensee demonstrates a period of improved performance." The Plant is one of
fourteen nuclear units on the watch list announced that day by the NRC, which
regulates slightly over 100 civilian nuclear power plants in the United States.
After year end, Maine Yankee and Entergy Nuclear, Inc. (Entergy), which is a
subsidiary of Entergy Corporation, a Louisiana-based utility holding company
and leading nuclear plant operator, entered into a contract under which
Entergy is providing management services to Maine Yankee at the same time,
officials from Entergy assumed management positions, including President, at
Maine Yankee.
The Maine Yankee nuclear plant was shut down on December 6, 1996, for
inspection and repairs. While the plant is out service, Maine Yankee must, in
addition to replacing the fuel assemblies, conduct an intensive inspection of
its steam generators, resolve cable-separation issues and other regulatory
issues, and obtain the approval of the NRC to restart the plant. The Company
believes the plant will be out of service at least until August 1997, but
cannot predict when or whether all of the regulatory and operational issues
will be satisfactorily resolved or what effect the repairs and improvements to
the plant will have on the economics of operating the plant.
The Company will incur significantly higher costs in 1997 for its share of
inspection, repairs and refueling costs at Maine Yankee and will also need to
purchase replacement power while the plant is out of service. While the amount
of higher costs is uncertain, Maine Yankee has indicated that it expects it
operations and maintenance costs to increase by up to approximately $45
million in 1997, before refueling costs. The Company's share of such costs
based on its power entitlement of approximately 38% would be up to
approximately $17 million. In addition, the Company estimates its share of the
refueling costs will amount to approximately $15 million, of which $10.4
million has been accrued as of December 31, 1996. The Company has been
incurring incremental replacement-power costs of approximately $1 million per
week while the plant has been out of service and expects such costs to
continue at approximately the same rate until the plant returns to service.
The impact of these higher nuclear related costs on the Company's 1997
financial results will be significant and is likely to trigger the low
earnings bandwidth provision of the ARP. Under the ARP actual earnings for
1997 outside a bandwidth of 350 basis points, above or below a 10.68% rate of
return allowance, triggers the profit sharing mechanism. A return below the
low end of the range provides for additional revenue through rates equal to
one-half of the difference between the actual earned rate of return and the
7.18% (10.68 - 3.50) low end of the bandwidth. While the Company believes that
the profit sharing mechanism is likely to be triggered in 1997, it cannot
predict the amount, if any, of additional revenues that may ultimately result.
Condensed financial information on Maine Yankee Atomic Power Company is as
follows:
(Dollars in thousands) 1996 1995 1994
Earnings:
Operating revenues $185,661 $205,977 $173,857
Operating income 17,150 18,527 16,223
Net income 8,106 8,571 8,573
Earnings applicable to common stock 6,637 7,057 7,014
Company's Equity Share of Net Earnings $ 2,522 $ 2,682 $ 2,665
Investment:
Net electric property and nuclear fuel $222,360 $242,399 $254,820
Current assets 44,979 34,799 38,950
Deferred charges and other assets 334,722 303,760 256,140
Total Assets 602,061 580,958 549,910
Less:
Redeemable preferred stock 18,000 18,600 19,200
Long-term obligations 223,572 224,185 226,491
Current liabilities 34,265 30,904 29,210
Reserves and deferred credits 255,472 236,653 208,100
Net Assets $ 70,752 $ 70,616 $ 66,909
Company's Equity in Net Assets $ 26,886 $ 26,834 $ 25,425
In December 1996, the Board of Directors of Connecticut Yankee Atomic Power
Company announced a permanent shutdown of the Connecticut Yankee plant in
Haddam, Connecticut, and decided to decommission the plant for economic
reasons. An economic analysis conducted by Connecticut Yankee estimates that
the early closing of the Plant would save over $100 million (net present
value) over its remaining license life to the year 2007, compared with the
costs of continued operation. The Company has a 6% equity interest in
Connecticut Yankee, totaling approximately $6.4 million at December 31, 1996.
The plant did not operate after July 22, 1996. The Company estimates its
share of the cost of Connecticut Yankee's continued compliance with
regulatory requirements, recovery of its plant investments, decommissioning
and closing the plant to be approximately $45.8 million and has recorded a
regulatory asset and a liability on the consolidated balance sheet. The
Company is currently recovering through rates an amount adequate to recover
these expenses.
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% of the
Company's system capacity. Its 9.5% equity investment in Yankee Atomic is
approximately $2.2 million.
On March 18, 1993, the FERC approved a settlement agreement regarding the
Yankee Atomic 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 $16.5
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 consolidated 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 has approximately a 60% ownership interest in the jointly owned,
Company-operated, 620-megawatt oil-fired W. F. Wyman Unit No. 4. The Company
also has a 2.5% ownership interest in the Millstone Unit No. 3 nuclear plant
operated by Northeast Utilities, and is entitled to 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, 1996, and 1995
were as follows:
<TABLE>
Wyman 4 Millstone 3
(Dollars in thousands) 1996 1995 1996 1995
Plant in service, nuclear fuel and
<S> <C> <C> <C> <C>
decommissioning fund $116,372 $116,447 $112,040 $112,033
Accumulated depreciation and amortization 63,023 59,832 39,181 36,411
</TABLE>
Millstone Unit No. 3 has been out of service since April, 1996, due to NRC
concerns regarding operating license requirements and the Company cannot predict
when it will return to service. The Company estimates that it will incur
approximately $300,000 to $500,000 in replacement power costs each month
Millstone Unit No. 3 remains out of service. The Company incurred replacement
power costs of $3.5 million in 1996.
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%.
The Company is making facilities-support payments on approximately $28.8
million, its remaining share of the construction cost for these transmission
facilities incurred through December 31, 1996. These obligations are reflected
on the Company's consolidated 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 (NUG). The
agreements generally have terms of five to 30 years, with expiration dates
ranging from 1997 to 2021. They require the Company to purchase the energy at
specified prices per kilowatt-hour, which are often above market prices. As of
December 31, 1996, facilities having 573 megawatts of capacity covered by
these contracts were in-service. The costs of purchases under all of these
contracts amounted to $313.4 million in 1996, $314.4 million in 1995, and
$373.5 million in 1994.
During 1996, the Company reached agreement with three 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, at December 31, 1996, $113 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 are amortized over their respective
fuel savings periods.
The Company's estimated contractual obligations with NUGs as of December 31,
1996, are as follows:
(Dollars in Amount
millions)
1997 $ 331
1998 291
1999 295
2000 294
2001 268
2002 - 2015 2,369
$3,848
In early 1996, the Company entered into a restructuring agreement with Maine
Energy Recovery Company (MERC), a 20 megawatt waste to energy facility located
in Biddeford, Maine. The agreement provides for a significant reduction in
energy rates for energy sold to the Company and extended the previous power
contract five years. In addition, the Company will make capacity payments to
CL Power Sales One.
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, 1996, the
Company's retained earnings were $72.5 million, of which $42.9 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. In 1996, the
Company deposited approximately $29.6 million in cash with the Trustee under
the Company's General and Refunding Mortgage Indenture in satisfaction of the
renewal and replacement fund and other obligations under the Indenture. The
total of such cash on deposit with the Trustee as of December 31, 1996, was
approximately $59.5 million. Under the Indenture such cash may be applied at
any time, at the direction of the Company, to the redemption of bonds
outstanding under the Indenture at a price equal to the principal amount of
the bonds being redeemed, without premium, plus accrued interest to the date
fixed for redemption. Such cash may also be withdrawn by the Company by
substitution of allocated property additions or available bonds.
Mortgage Bonds outstanding as of December 31, 1996, and 1995 were as follows:
(Dollars in thousands)
<TABLE>
Interest
Series Redeemed/maturity rate 1996 1995
Central Maine Power Company
General and Refunding Mortgage Bonds:
<S> <C> <C> <C> <C> <C>
U 1998-April 15 7.54% $ 25,000 $ 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 11,000 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 $421,000 $432,500
</TABLE>
Limitations on Unsecured Indebtedness
The Company's Articles of Incorporation limit certain unsecured indebtedness
that may be outstanding to 20% of capitalization, as defined; 20% of defined
capitalization amounted to $219 million as of December 31, 1996. Unsecured
indebtedness, as defined, amounted to $96 million as of December 31, 1996.
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.
Medium-Term Notes outstanding as of December 31, 1996, and 1995 were as
follows:
(Dollars in thousands)
Maturity Interest rate 1996 1995
Series A:
2000 9.65% $ 5,000 $ 5,000
Series B:
1996-1998 4.92-7.98 23,000 57,000
Series C:
1997-2001 7.40-7.50 40,000 30,000
Total Medium-Term Notes $68,000 $92,000
Pollution-Control Facility and Other Notes
Pollution-control facility and other notes outstanding as of December 31,
1996, and 1995 were as follows:
(Dollars in thousands)
Series Interest rate Maturity 1996 1995
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 60,129 66,429
Maine Electric Power
Company, Inc.:
Promissory Notes Variable* July 1, 1996 - 1,730
Variable* November 1, 2000 820
Total Pollution-Control
Facility and Other Notes $91,699 $98,909
*The average rate was 6.3% in 1996 and 6.7% in 1995.
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.
In September 1994, the Finance Authority of Maine (FAME) approved the
Company's application for funds to finance the contract buy-out of a NUG
contract for a 32-megawatt wood fired generating plant in Fort Fairfield,
Maine. 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 Aroostook Valley Electric Company (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.
Capital 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 $33.1 million and $35.1 million at December
31, 1996, and 1995, 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,
2001, together with the present value of the minimum lease payments, are as
follows:
(Dollars in thousands) Amount
1997 $ 5,619
1998 5,447
1999 5,276
2000 5,105
2001 4,934
Thereafter 56,298
Total minimum lease payments 82,679
Less: amounts representing interest 46,396
Present Value of Net Minimum Lease Payments $36,283
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, 2001, are as follows:
(Dollars in thousands)
Sinking fund Maturing debt
Total
1997 $ 2,375 $ 25,000 $ 27,375
1998 9,212 178,000 187,212
1999 9,855 60,000 69,855
2000 10,520 80,000 90,520
2001 10,950 21,000 31,950
Operating Lease Obligations
The Company has a number of operating-lease agreements primarily involving
computer and other office equipment, land, and telecommunication equipment.
These leases are noncancelable and expire on various dates through 2007.
Following is a schedule by year of future minimum rental payments required
under the operating leases that have initial or remaining noncancelable lease
terms in excess of one year as of December 31, 1996:
(Dollars in thousands) Amount
1997 $4,277
1998 4,042
1999 3,278
2000 3,123
2001 3,099
Thereafter 1,936
$19,755
Rent expense under all operating leases was approximately $5 million, $5.7
million, and $7 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
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 quoted market prices as of December 31, 1996 and 1995. The fair
value of long-term obligations is based on quoted 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, 1996, and 1995 are as follows:
<TABLE>
1996 1995
Carrying Fair value Carrying Fair value
(Dollars in thousands) amount amount
<S> <C> <C> <C> <C>
Cash and temporary investments $ 8,307 $ 8,307 $ 57,677 $ 57,677
Redeemable preferred stock 60,528 57,228 74,528 75,117
Mortgage bonds 421,000 415,578 432,500 435,311
Medium-term notes 68,000 67,667 92,000 92,156
Pollution-control facility and other notes 91,699 91,791 98,909 99,694
</TABLE>
Preferred Stock
Preferred-stock balances outstanding as of December 31, 1996, 1995, and 1994
were as follows:
<TABLE>
Current shares
(Dollars in thousands, except per-share amounts) outstanding 1996 1995 1994
Preferred Stock - Not Subject to
Mandatory Redemption:
$25 par value - authorized 2,000,000
<S> <C> <C> <C>
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
Preferred Stock - Not Subject to Mandatory Redemption $65,571 $65,571 $65,571
Redeemable Preferred Stock - Subject to
Mandatory Redemption:
$100 par value callable - authorized
2,300,000*shares; outstanding: None $ - $ - $ -
Flexible Money Market Preferred Stock,
Series A - 7.999% (395,275 shares in 1996 and 1995; 450,000
shares in 1994) 395,275 39,528 39,528 45,000
8 7/8% series (redeemable at $102.958) 210,000 21,000 35,000 35,000
Redeemable Preferred Stock - Subject to
Mandatory Redemption $60,528 $74,528 $80,000
</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.
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 commencing on
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, 2000 is
$7.0 million annually beginning in 1996. The Company redeemed $14 million of
these shares at par in 1996 pursuant to the mandatory and optional
sinking-fund provisions.
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. The sinking-fund requirement for the five-year period ending
December 31, 2000, is $9 million annually beginning in 1999. In 1995, the
Company purchased 54,725 shares on the open market that may be used to reduce
the sinking-fund requirement in 1999.
Interim Financing and Credit Agreements
The Company uses funds obtained from short-term borrowing to provide initial
financing for construction and other corporate purposes.
To support its short-term capital requirements, on October 23, 1996 , the
Company entered into a $125 million revolving credit facility with several
banks, with The First National Bank of Boston and The Bank of New York acting
as agents for the lenders. The credit facility has two tranches which consist
of: a $75 million 364-day revolving credit facility which matures on October
22, 1997 and a $50-million 3-year revolving credit facility which matures on
October 23, 1999. Both credit facilities require annual fees on the unused
portion of the credit lines which are based on the Company's credit ratings
and allow for various borrowing options including LIBOR-priced,
base-rate-priced and competitive-bid-priced loans. The amount of outstanding
short-term borrowing will fluctuate with day-to-day operational needs, the
timing of long-term financing, and market conditions. There was $7.5 million
outstanding as of December 31, 1996, under this credit agreement.
Note 8: Quarterly Financial Data (Unaudited)
Quarterly revenue variability increased after January 1, 1995, when the ARP
replaced MPUC rules prescribing different revenue allocations for energy sold
in winter versus non-winter months. Twelve-month results are unaffected by
this reporting change.
Unaudited, consolidated quarterly financial data pertaining to the results of
operations are shown below.
<TABLE>
(Dollars in thousands, except per-
share amounts) Quarter ended
March 31 June 30 September 30 December 31
1996
<S> <C> <C> <C> <C>
Electric operating revenues $274,139 $216,358 $228,987 $247,562
Operating income 39,601 20,495 14,667 32,909
Net income 27,857 9,096 3,392 19,884
Earnings per common share* .78 .20 .04 .54
1995
Electric operating revenues $263,312 $202,584 $217,872 $232,248
Operating income 39,361 4,052 22,169 20,277
Net income (loss) 26,376 (8,619) 10,400 9,823
Earnings (loss) per common share* .73 (.34) .24 .23
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* .27 .39 .35 (2.06)
</TABLE>
*Earnings per share are computed using the weighted-average number of common
shares outstanding during the applicable quarter.
Item 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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 15, 1997, 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 15, 1997, 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 15, 1997, 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 15, 1997, which is hereby
incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.
(a) List of documents filed as part of this report:
(1) Financial Statements and Supplementary Data
See the Index to Financial Statements and Schedules under Item
8 in Part II hereof, where these documents are listed, on page
42.
(2) Exhibits - see (c) below.
(b) Reports on Form 8-K. The Company filed the following reports on
Form 8-K during the last quarter of 1996 and thereafter to date:
Date of Report Items Reported
December 4, 1996 Item 5
The Company reported on Maine Yankee Atomic Power Company's response to
the NRC's Independent Safety Assessment.
The Board of Directors of Connecticut Yankee Atomic Power Company voted
to permanently discontinue power operation at the Connecticut Yankee
plant at Haddam, Connecticut ("CY Plant"), and to decommission the CY
Plant, for reasons based on the economics of continuing to operate the
unit.
Date of Report Items Reported
December 18, 1996 Item 5
On December 20, 1996, Maine Yankee Atomic Power Company announced that
its President and Chief Executive Officer, Charles D. Frizzle, had
submitted his registration to facilitate a broad restructuring effort.
On December 18, 1996, Moody's Investors Service placed the credit
ratings of the Company under review for possible downgrade.
Date of Report Items Reported
December 31, 1996 Item 5
The Company reported that on December 31, 1996, the MPUC issued its
Report and Recommended Plan on Electric Utility Industry Restructuring.
The Company reported the inspection of fuel assemblies and resolution of
the cable-separation and associated issues at the Maine Yankee Atomic
Power Company nuclear generating plant and that Maine Yankee and Entergy
Corporation, a Louisiana-based utility holding company and nuclear plant
operator, announced the signing of a memorandum of understanding for
Entergy to provide management services to Maine Yankee.
Date of Report Items Reported
January 29, 1997 Item 5
On January 29, 1997, the NRC announced that it had placed the Plant on
its "watch list," in "Category 2," which includes plants that display
"weaknesses that warrant increased NRC attention," but which are not
severe enough to warrant a shut-down order.
The Company reported on a Maine-based group which had announced its
intention to start gathering signatures aimed at a new referendum to
force a permanent shutdown of the Maine Yankee Atomic Power Company Plant.
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 27th day of March, 1997.
CENTRAL MAINE POWER COMPANY
By
David E. Marsh
Vice President, Corporate Services,
Treasurer, and Chief Financial Officer
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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Signature Title Date
President and Chief Executive Officer; Director March 27, 1997
David T. Flanagan
(Principal Executive Officer)
Vice President, Corporate Services, Treasurer, and March 27, 1997
David E. Marsh Chief Financial Officer
(Principal Financial Officer)
Comptroller March 27, 1997
Michael W. Caron
(Principal Accounting Officer)
Chairman of the Board of Directors March 27, 1997
David M. Jagger
Vice Chairman of the Board of Directors March 27, 1997
Charles H. Abbott
Director March 27, 1997
Charleen M. Chase
Director March 27, 1997
E. James Dufour
Director March 27, 1997
Duane D. Fitzgerald
Director March 27, 1997
Robert H. Gardiner
Director March 27, 1997
Peter J. Moynihan
Director March 27, 1997
William J. Ryan
Director March 27, 1997
Kathryn M. Weare
Director March 27, 1997
Lyndel J. Wishcamper
</TABLE>
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, 1996
CENTRAL MAINE POWER COMPANY
File No. 1-5139
(Exact name of Registrant as specified in charter)
EXHIBITS
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.
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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
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Incorporated herein by reference:
3-1 Articles of Incorporation, as amended. Annual Report on Form 10-K 3.1
for year ended December 31,
1992
3-2 Bylaws, as amended. Filed herewith
EXHIBIT 4: INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
Incorporated herein by reference:
4-1 General and Refunding Mortgage between the Company 2-58251 2.18
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 as of March 15, 2-60786 2.19
1977 to the General and Refunding Mortgage.
4-3 Supplemental Indenture to the General and Annual Report on Form 10-K A
Refunding Mortgage Indenture dated as of October for the year ended December
1, 1978 relating to the Series B Bonds. 31, 1978
4-4 Supplemental Indenture to the General and Quarterly Report on for the A
Refunding Mortgage Indenture dated as of October quarter ended September 30,
1, 1979, relating to the Series C Bonds. 1979
4.10 Supplemental Indenture to the General and 33-9232 4.16
Refunding Mortgage Indenture dated as of December
1, 1986, relating to the Series I Bonds.
4.14 Indenture, dated as of August 1, 1989, between the 33-29626 4.1
Company and The Bank of New York, Trustee,
relating to the Medium-Term Notes.
4.15 First Supplemental Indenture, dated as of August Current Report on Form 8-K 4.15
7, 1989, relating to the Medium-Term Notes, Series dated August 16, 1989
A, and supplementing the Indenture relating to the
Medium-Term Notes.
4.15.1 Second Supplemental Indenture, dated as of January Current Report on Form 8-K 4.1
10, 1992, relating to the Medium-Term Notes, dated January 28, 1992
Series B, and supplementing the Indenture relating
to the Medium-Term Notes.
4.15.2 Third Supplemental Indenture, dated as of December Annual Report on Form 10-K 4.15.2
15, 1994, relating to the Medium-Term Notes, for year ended December 31,
Series C, and supplementing the Indenture relating 1994
to the Medium-Term Notes.
4.17 Supplemental Indenture to the General and Current Report on Form 8-K 4.1
Refunding Mortgage Indenture, dated as of dated September 17, 1991
September 15, 1991, relating to the Series N Bonds.
4.18 Supplemental Indenture to the General and Current Report on Form 8-K 1.2
Refunding Mortgage Indenture, dated as of December dated December 10, 1991
1, 1991, relating to the Series O Bonds.
4.19 Supplemental Indenture to the General and Annual Report on Form 10-K 4.19
Refunding Mortgage Indenture, dated as of December for year ended December 31,
15, 1992, relating to the Series P Bonds. 1992
4.20 Supplemental Indenture to the General and Current Report on Form 8-K 4.1
Refunding Mortgage Indenture, dated as of February dated March 1, 1993
15, 1993, relating to the Series Q Bonds.
4.21 Supplemental Indenture to the General and Current Report on Form 8-K 4.1
Refunding Mortgage Indenture, dated as of May 20, dated May 20, 1993
1993, relating to the Series R Bonds.
4.22 Supplemental Indenture to the General and Current Report on Form 8-K 4.1
Refunding Mortgage Indenture, dated as of August dated November 30, 1993
15, 1993, relating to the Series S Bonds.
4.23 Supplemental Indenture to the General and Current Report on Form 8-K 4.2
Refunding Mortgage Indenture, dated as of November dated November 30, 1993
1, 1993, relating to the Series T Bonds.
4.24 Supplemental Indenture to the General and Annual Report on Form 10-K 4.24
Refunding Mortgage Indenture, dated as of April for year ended December 31,
12, 1994, relating to the Series U Bonds. 1994
4.26 Supplemental Indenture to the General and Annual Report on Form 10-K 4.26
Refunding Mortgage Indenture, dated as of February for year ended December 31,
15, 1996, evidencing the succession of State 1995
Street Bank and Trust Company as Trustee
EXHIBIT 9: VOTING TRUST AGREEMENT
Not applicable.
EXHIBIT 10: MATERIAL CONTRACTS
Incorporated herein by reference:
10-1 Agreement dated April 1, 1968 between the Company 2-30554 4.27
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 Agreement dated as 2-55385 4.8
of September 1, 1971 as amended to November 1,
1975.
10-3 Agreement setting forth Supplemental NEPOOL 2-50198 5.10
Understandings dated as of April 2, 1973.
10-4 Sponsor Agreement dated as of August 1, 1968 among 2-32333 4.27
the Company and the other sponsors of Vermont
Yankee Nuclear Power Corporation.
10-5 Power Contract dated as of February 1, 1968 2-32333 4.28
between the Company and Vermont Yankee Nuclear
Power Corporation.
10-6 Amendment to Exhibit 10.5 dated as of June 1, 1972. 2-46612 13-21
10-7 Capital Funds Agreement dated as of February 1, 2-32333 4.29
1968 between the Company and Vermont Yankee
Nuclear Power Corporation.
10-8 Amendment to Exhibit 10.7 dated as of March 12, 70-4611 B-3
1968.
10-9 Stockholder Agreement dated as of May 20, 1968 2-32333 4.30
among the Company and the other stockholders of
Maine Yankee Atomic Power Company.
10-10 Power Contract dated as of May 20, 1968 between 2-32333 4.31
the Company and Maine Yankee Atomic Power Company.
10-10.1 Amendment No. 1 to Exhibit 10-10 dated as of March Annual Report on Form 10-K 10-1.1
1, 1984. 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 dated as of Annual Report on Form 10-K 10-1.2
January 1, 1984. 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 dated as of Annual Report on Form 10-K 10-1.3
October 1, 1984. for the year ended December
31, 1985 of Maine Yankee
Atomic Power Company (File
No. 1-6554)
10-10.4 Additional Power Contract between the Company and Annual Report on Form 10-K 10-1.4
Maine Yankee Atomic Power Company dated February for the year ended December
1, 1984. 31, 1985 of Maine Yankee
Atomic Power Company (File
No. 1-6554)
10-11 Capital Funds Agreement dated as of May 20, 1968 2-32333 4.32
between the Company and Maine Yankee Atomic Power
Company.
10-11.1 Amendment No. 1 to Exhibit 10-11 dated as of Annual Report on Form 10-K 10-2.1
August 1, 1985. 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 for Joint 2-48966 13-57
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 10-25 dated as of Annual Report on Form 10-K 10-42
September 19, 1986. for the year ended December
31, 1986
10-46 Participation Agreement, dated June 20, 1969 among 2-35073 4.23.1
Maine Electric Power Company, Inc., the Company
and certain other utilities.
10-47 Power Purchase and Transmission Agreement dated 2-35073 4.23.2
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 dated June 24, 2-37987 4.41
1970.
10-49 Agreement supplementing Exhibit 10-47 dated 2-51545 5.7.4
December 1, 1971.
10-50 Assignment Agreement dated March 20, 1972, between 2-51545 5.7.5
Maine Electric Power Company, Inc., and the New
Brunswick Electric Power Commission.
10-51 Capital Funds Agreement dated as of September 1, 2-24123 4.19.1
1964 among Connecticut Yankee Atomic Power
Company, the Company and certain other utilities.
10-52 Power Contract dated as of July 1, 1964 among 2-24123 4.19.2
Connecticut Yankee Atomic Power Company, the
Company and certain other utilities.
10-53 Stockholder Agreement dated as of July 1, 1964 2-24123 4.19.3
among the stockholders of Connecticut Yankee
Atomic Power Company, including the Company.
10-54 Connecticut Yankee Transmission Agreement dated as 2-24123 4.19.4
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 Cambridge Electric 2-15553 4.18
Light Company and other sponsoring stockholders of
Yankee Atomic Electric Company.
10-57 Agreement for Joint Ownership, Construction and 2-52900 5.16
Operation of Wyman Unit No. 4 dated November 1,
1974 among the Company and certain utilities.
10-58 Amendment to Exhibit 10-57 dated as of June 30, 2-55458 5.48
1975.
10-59 Amendment to Exhibit 10-57 dated as of August 16, 2-58251 5.19
1976.
10-60 Amendment to Exhibit 10-57 dated as of December 2-68184 5.31
31, 1978.
10-61 Transmission Agreement dated November 1, 1974 2-54449 13-57
among the Company and certain other utilities,
relating to Wyman Unit No. 4.
10-62 Sharing Agreement--1979 Connecticut Nuclear Unit 2-50142 2.43
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 as of August 1, 2-51999 5.16
1974, relating to Millstone Unit
No. 3.
10-64 Agreement dated as of February 25, 1977 among the 2-58251 5.24
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 December 5, 1984 among the Annual Report on Form 10-K 10-69
Company, the Cities of Lewiston and Auburn, Maine for the year ended December
and certain other parties, relating to development 31, 1984
of hydro-electric plant.
10-73 Trust Indenture dated as of June 1, 1977 between 2-60786 5.27
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 as of June 1, 2-60786 5.28
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 of May 1, 1984. Quarterly Report on Form 28.3
10-Q for the quarter ended
June 30, 1984
10-75.2 Loan Agreement dated as of May 1, 1984. Quarterly Report on Form 28.4
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 December 28, 1984. Annual Report on Form 10-K 10-77.1
for year ended December 31,
1984
10-76.2 Loan Agreement dated as of December 1, 1984. Annual Report on Form 10-K 10-77.2
for year ended December 31,
1984
10-77.1 Indenture of Trust dated as of March 14, 1988 Annual Report on Form 10-K 10-1.4
between Maine Yankee Atomic Power Company and for year ended December 31,
Maine National Bank relating to decommissioning 1987, of Maine Yankee Atomic
trust funds. Power Company (1-6554)
10-77.1(a) Amended and Restated Indenture of Trust dated as Annual Report on Form 10-K 10-6.1
of January 1, 1993 between Maine Yankee Atomic for year ended December 31,
Power Company and The Bank of New York relating to 1992, of Maine Yankee Atomic
decommissioning trust funds. Power Company (1-6554)
10-77.2 Indenture of Trust dated as of October 16, 1985 Annual Report on Form 10-K 10-7
between the Company and Norstar Bank of Maine for year ended December 31,
relating to the spent fuel disposal funds. 1985, of Maine Yankee Atomic
Power Company (1-6554)
10-78 Form of Agreement of Purchase and Sale dated Annual Report on Form 10-K 0.79
February 19, 1986 between the Company and Eastern for the year ended December
Utilities Associates, relating to the sale of the 31, 1985
Company's Seabrook Project interest.
10-79 Addendum to Agreement of Purchase and Sale dated Quarterly Report on Form 2.1
June 23, 1986, among the Company, Eastern 10-Q for the quarter ending
Utilities Associates and EUA Power Corporation, June 30, 1986
amending Exhibit 10-78.
10-80 Agreement, dated as of October 29, 1986, between Quarterly Report on Form 2.1
the Company and EUA Power Corporation, relating to 10-Q for the quarter ended
the sale of the Company's interest in the Seabrook September 30, 1986
Project.
10-81 Credit Agreement, dated as of October 15, 1986, Quarterly Report on Form 2.2
among the Company, various banks and Continental 10-Q for the quarter ended
Illinois National Bank and Trust Company of September 30, 1986
Chicago, as agent, establishing the terms of a $40
million unsecured credit facility.
10-86 Labor Agreement dated as of May 1, 1989 between Annual Report on Form 10-K 10.86
the Company (Northern, Western and Southern for the year ended December
Division) and Local 1837 of the International 31, 1989
Brotherhood of Electrical Workers.
10-86.1 Agreement dated as of November 25, 1991 extending Annual Report on Form 10-K 10.86.1
Labor Contract. for year ended December 31,
1991
10-89 1987 Executive Incentive Plan, as amended January Annual Report on Form 10-K 10.89
20, 1993.* for year ended December 31,
1992
10-90 Deferred Compensation Plan for Non-Employee Annual Report on Form 10-K 10.90
Directors, as amended and restated effective for year ended December 31,
February 1, 1992.* 1992
10-91 Retirement Plan for Outside Directors, as amended Annual Report on Form 10-K 10.91
and restated effective April 24, 1991.* for year ended December 31,
1992
10-92 Employment Agreement between the Company and Annual Report on Form 10-K 10.92
Matthew Hunter dated as of October 20, 1993.* for year ended December 31,
1993.
10-93 Central Maine Power Company Long-Term Incentive Annual Report on Form 10-K 10.93
Plan.* for year ended December 31,
1993.
10-94.1 Central Maine Power Company Supplemental Executive Annual Report on Form 10-K 10-94.1
Retirement Plan, as Amended and Restated Effective for year ended December 31,
January 1, 1993, and as further Amended Effective 1995
January 1, 1996.*
10-95 Competitive Advance and Revolving Credit Facility Annual Report on Form 10-K 10.95
between the Company and Chemical Bank dated as of for year ended December 31,
November 7, 1994. 1994
10-96.5 Employment Agreement between the Company and Annual Report on Form 10-K 10-96.5
Arthur W. Adelberg As Amended and Restated for year ended December 31,
Effective December 9, 1994.* 1995
10-96.6 Employment Agreement between the Company and Annual Report on Form 10-K 10-96.6
Richard A. Crabtree As Amended and Restated for year ended December 31,
Effective December 9, 1994.* 1995
10-96.7 Employment Agreement between the Company and Annual Report on Form 10-K 10-96.7
Gerald C. Poulin As Amended and Restated Effective for year ended December 31,
December 9, 1994.* 1995
10-96.8 Employment Agreement between the Company and David Annual Report on Form 10-K 10-96.8
E. Marsh As Amended and Restated Effective for year ended December 31,
December 9, 1994.* 1995
10-97 Employment Agreement between the Company and Annual Report on Form 10-K 10-97
David T. Flanagan dated December 29, 1995.* for year ended December 31,
1995
10-98 Credit Agreement dated as of October 23, 1996, Filed herewith
between the Company and certain banks.
*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
Not Applicable.
EXHIBIT 16: LETTER RE CHANGE IN CERTIFYING ACCOUNTANT
Not Applicable.
EXHIBIT 18: LETTER RE CHANGE IN ACCOUNTING PRINCIPLES
Not Applicable.
EXHIBIT 21: SUBSIDIARIES OF THE REGISTRANT
List of subsidiaries of registrant. Filed herewith
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 Coopers & Lybrand to the incorporation Filed herewith
by reference 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).
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, 1996, 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.
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Central Maine Power Company
Form 10-K - 1996
Schedule II
Page 1 of 3
Central Maine Power Company
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1996
(Dollars in Thousands)
Additions
Charged Charged to
Balance to costs other Balance
at Beginning and accounts- Deductions at end
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Description of Period Expenses describe -describe of period
Reserves deducted from
assets to which they apply:
Uncollectible accounts $ 3,313 $7,396 $ $6,532(A) $ 4,177
Reserves not applied
against assets:
Casualty and insurance $ 1,275 $ 798 $ $ 798(C) $ 1,275
Workers' compensation 6,400 2,820 270(B) 1,496(C) 7,994
Hazardous material
clean-up 3,540 895 796(D) 3,639
Total $11,215 $4,513 $270 $3,090 $12,908
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Notes: (A) Amounts charged off as uncollectible after deducting
customers' deposits and recoveries of accounts previously
charged off.
(B) Amounts transferred to capital accounts.
(C) Principally payments for various injuries and damages and
expenses in connection therewith.
(D) Amounts charged to regulatory asset account.
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Central Maine Power Company
Form 10-K - 1996
Schedule II
Page 2 of 3
Central Maine Power Company
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1995
(Dollars in Thousands)
Additions
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Charged Charged to
Balance to costs other Balance
at Beginning and accounts- Deductions at end
Description of Period Expenses describe -describe of period
Reserves deducted from
assets to which they apply:
Uncollectible accounts $ 3,301 $4,407 $ $ 4,395(A) $ 3,313
Reserves not applied
against assets:
Casualty and insurance $ 1,275 $1,274 $273(B) $ 1,547(C) $ 1,275
Workers' compensation 6,400 6,400
Hazardous material
clean-up 10,000 6,460(D) 3,540
Postemployment benefits 1,045 1,045(E)
Compensation 2,344 2,344(E) -
Interest on IRS issues 1,000 1,000(F)
Total $22,064 $1,274 $273 $12,396 $11,215
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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) To adjust the estimated minimum liability balance for a
change in clean-up method.
(E) Amounts transferred to deferred credit account.
(F) Reversal of reserve.
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Central Maine Power Company
Form 10-K - 1996
Schedule II
Page 3 of 3
Central Maine Power Company
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1994
(Dollars in Thousands)
Additions
Charged Charged to
Balance to costs other Balance
at Beginning and accounts- Deductions at end
Description of Period Expenses describe -describe of period
Reserves deducted from
assets to which they apply:
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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
</TABLE>
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.
BY-LAWS
CENTRAL MAINE POWER COMPANY
As Revised and Amended Through
June 20, 1996
BY-LAWS
of
CENTRAL MAINE POWER COMPANY
SECTION 1. ARTICLES OF INCORPORATION
The name of the Company and its location shall be as set forth in the
Articles of Incorporation (sometimes referred to in these By-Laws as the
"Charter"). References in these By-Laws to the Articles of Incorporation or the
Charter shall mean the Articles of Incorporation as from time to time in effect.
References in these By-Laws to the Maine Business Corporation Act and to
particular sections of said Act are to said Act and said sections as from time
to time in effect.
SECTION 2. STOCKHOLDERS' MEETINGS
2.1. Annual Meeting. An annual meeting of the stockholders for the purpose
of electing Directors and transacting such other business as may properly come
before the annual meeting shall be held on the third Thursday in May in each
year, at such hour as may be fixed by the Chairman of the Board of Directors, by
the President or by a majority of the members of the Board of Directors then in
office. If that day be a legal holiday, the meeting shall be held on the next
succeeding day not a legal holiday. Purposes for which an annual meeting is to
be held, additional to the election of directors and those prescribed by law, by
the Articles of Incorporation or by these By-Laws, may be specified by the
Chairman of the Board of Directors, by the President or by a majority of the
members of the Board of Directors then in office.
2.2. Special Meeting in Place of Annual Meeting. In case an annual meeting
of the stockholders shall be omitted through inadvertence or otherwise, the
business of such meeting may be transacted at a special meeting duly called in
lieu thereof and any action taken at such special meeting shall have the same
force and effect as if taken at the annual meeting, and in such case all
references in these By-Laws to the annual meeting of the stockholders shall be
deemed to refer to such special meeting. Any such special meeting shall be
called as provided in Section 2.3.
2.3. Special Meetings. A special meeting of the stockholders may be called
at any time by the Chairman of the Board of Directors, by the President, by a
majority of the members of the Board of Directors then in office, unless
otherwise provided by law, by the holders of not less than 10% of the
outstanding shares of the Company entitled to vote at the meeting or as
otherwise provided in the Articles of Incorporation. Each call of a special
meeting shall state the place, date, hour and purposes of the meeting.
2.4. Organization of Meetings. At each meeting of the stockholders the
Chairman of the Board of Directors, or in his absence the Vice Chairman of the
Board of Directors, or in their absence the President, shall act as chairman of
the meeting. Procedure at the meeting shall be established by the chairman of
the meeting.
2.5. Place of Meetings. All meetings of the stockholders shall be held at
the principal office of the Company in the State of Maine, Edison Drive,
Augusta, Maine, or at such other place in the State of Maine as shall be fixed
by the Chairman of the Board of Directors, by the President or by a majority of
the members of the Board of Directors then in office.
2.6. Notice of Meetings. Written notice of each meeting of stockholders
shall be given in accordance with the provisions of the Maine Business
Corporation Act, including, without limitation, Section 604 of said Act, unless
such notice shall be waived as provided in said Act, including, without
limitation, Section 605 of said Act.
2.7. Quorum of Stockholders. At all stockholders' meetings, unless
otherwise specifically provided in these By-Laws, a representation of shares
entitled in the aggregate to a majority of the total votes to which the
outstanding shares of capital stock of the Company of all classes are then
entitled shall be necessary to constitute a quorum for the transaction of
business other than (a) adjourning from time to time until a quorum shall be
present, or (b) adjourning sine die, and for any such adjournment a majority
vote of whatever stock shall be represented shall be sufficient; provided, that
such quorum requirement shall be applicable to stockholders' meetings only when
the outstanding Preferred Stock of all classes and series are not entitled to
vote as a class for the election of a majority of the Directors of the Company;
and, provided further, that, at stockholders' meetings when the outstanding
Preferred Stock of all classes and series are entitled to vote as a class for
the election of a majority of the Directors, the foregoing quorum requirement
shall be reduced from a majority of such total votes to one-third of such total
votes. When a quorum is present at any meeting, a majority of the votes to which
stock represented thereat and voting is entitled shall, except when a larger
vote is required by law, by the Charter or by these By-Laws, decide any question
brought before such meeting.
At all meetings of stockholders held: (i) for any of the purposes specified
in Section B.6(b) of the Capital Stock Provisions of the Articles of
Incorporation the presence in person or by proxy of the holders of shares, of
the Common Stock and other stock having the general right to vote with the
Common Stock, entitled in the aggregate to not less than one-third of the total
votes to which all outstanding shares of such capital stock of the Company are
then entitled, shall be required to constitute a quorum of such class for the
election of Directors; and (ii) for any of the purposes specified in Section
B.6(b) and in Section B.8 of the Capital Stock Provisions of the Articles of
Incorporation, the presence in person or by proxy of the holders of a majority
of the total number of shares of all classes and series of the Company's
Preferred Stock then issued and outstanding shall be necessary to constitute a
quorum of such classes, provided, for the purposes specified in said Section
B.6(b), that if such quorum shall not have been obtained at such meeting, or at
any adjournment thereof, within ninety (90) days from the date of such meeting
as originally called, the presence in person or by proxy of the holders of
one-third of the total number of shares of all classes and series of the
Company's Preferred Stock then issued and outstanding shall then be sufficient
to constitute a quorum of such classes. The absence of a quorum of the holders
of stocks of either class shall not prevent the election at any such meeting, or
any adjournment thereof, of Directors by the other such class, if the necessary
quorum of the holders of stock of such other class is present in person or by
proxy at such meeting. In the absence of a quorum of the holders of stocks of
either class, a majority of those holders of the stocks of such class who are
present in person or by proxy shall have power to adjourn such meeting from time
to time (without notice, other than announcement at the meeting, if for thirty
(30) days or less) until the requisite amount of holders of stock of such class
shall be present in person or by proxy, but such adjournment shall not be made
to a date beyond the date for the mailing of notice of the next annual meeting
or special meeting in lieu thereof.
2.8. Voting. At all stockholders' meetings, holders of record of stock
entitled to vote on any question or at any election shall be entitled to one
vote for each share of stock held by them respectively, except that holders of
Common Stock shall be entitled to one-tenth vote for each share of said stock
held by them. In elections of Directors by the stockholders, when, and only
when, the Preferred Stocks are not entitled to vote as a class for the election
of a majority of the full Board of Directors, each stockholder having the right
to vote shall be entitled to as many votes as pertain to his shares of stock
multiplied by the number of Directors to be elected, and he may cast all such
votes for a single Director or may distribute them among the number to be voted
for, or any two or more of them, as he may see fit. Such vote may, in all cases,
be given by proxy duly authorized in writing; but no proxy granted more than six
months before the meeting, which shall be named therein, shall be accepted, and
no proxy shall be valid after the final adjournment of such meeting.
2.9. Voting Inspectors. At all meetings of stockholders there shall be one
or more voting inspectors as provided in the Maine Business Corporation Act,
including, without limitation, Section 609 of said Act.
SECTION 3. BOARD OF DIRECTORS
3.1. Number and Term of Office. Except as otherwise fixed in or pursuant to
provisions of the Articles of Incorporation with respect to the right of the
holders of any class or series of capital stock having a preference over Common
Stock as to dividends or upon liquidation to elect Directors under specified
circumstances, the Company shall have a Board of Directors consisting of not
fewer than nine members nor more than eighteen members, the exact number (i) to
be twelve persons upon adoption of this Section 3.1, subject to change
exclusively by the Board of Directors as provided in this Section 3.1, and (ii)
if to be changed from twelve persons to some other number not fewer than nine
nor more than eighteen persons subsequent to the adoption of this Section 3.1,
to be fixed from time to time exclusively by the Board of Directors pursuant to
a resolution adopted by a majority of the total number of authorized Directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any such resolution is presented to the Board for adoption).
No person shall be a Director or executive officer of the Company who is
also a director or executive officer of Central Vermont Public Service
Corporation, of Public Service Company of New Hampshire, or of any corporation
which may succeed to all or substantially all of the property and business of
either. A majority of the Directors shall at all times be persons who are not
employees of the Company. The provisions of this paragraph shall not apply to
the election of Directors by the holders of Preferred Stock when, in accordance
with the provisions of the Articles of Incorporation, they shall be entitled to
elect the smallest number of Directors necessary to constitute a majority of the
full Board of Directors.
3.2. Term of Directors, Vacancies and Resignations and Removals. Each
Director shall hold office as provided in the Maine Business Corporation Act,
including, without limitation, Section 704 of said Act. The term of office for
each Director elected by the holders of the Preferred Stock of the Company as
provided in Section B.6 of the Capital Stock Provisions of the Articles of
Incorporation shall be as provided in said Section B.6.
At the annual meeting of stockholders of the Company at which this Section
3.2 is adopted, the Directors shall be classified, with respect to the time for
which they severally hold office, into three classes, Class I, Class II and
Class III, as nearly equal in number as possible, Class I to hold office
initially for a term expiring at the annual meeting of stockholders to be held
in 1988, Class II to hold office initially for a term expiring at the annual
meeting of stockholders to be held in 1989, and Class III to hold office
initially for a term expiring at the annual meeting of stockholders to be held
in 1990, with the members of each class to hold office until their successors
are elected and qualified. At each annual meeting of stockholders of the Company
following the annual meeting of stockholders at which this Section 3.2 is
adopted, the successors to the class of Directors whose term expires at that
meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders to be held in the third year following the year of their
election.
Except as otherwise fixed in or pursuant to provisions of the Articles of
Incorporation with respect to the right of the holders of any class or series of
capital stock having a preference over Common Stock as to dividends or upon
liquidation to elect Directors under specified circumstances, newly created
directorships resulting from any increase in the authorized number of Directors
or any vacancies resulting from death, resignation, retirement,
disqualification, removal from office or other cause may be filled only by a
majority vote of the Directors then in office, though less than a quorum of the
Board of Directors, acting at a regular or special meeting. If any applicable
provision of the Maine Business Corporation Act expressly confers power on
stockholders to fill such a directorship at a special meeting of stockholders,
such a directorship may be filled at such a meeting only by the affirmative vote
of at least 80 percent of the combined voting power of all of the then
outstanding shares of Voting Stock, voting together as a single class. Any
Director elected in accordance with the two preceding sentences shall hold
office for the remainder of the full term of the class of Directors in which the
new directorship was created or the vacancy occurred and until such Director's
successor shall have been elected and qualified. If the number of authorized
Directors is changed by resolution of the Board of Directors pursuant to this
Section 3.2, any increase or decrease shall be apportioned among the classes so
as to maintain the number of Directors in each class as nearly equal as
possible, but in no case shall a decrease in the number of Directors shorten the
term of any incumbent Director.
Subject to any controlling provision of Maine law and subject to the right
of the holders of any class or series of capital stock having a preference over
Common Stock as to dividends or upon liquidation to elect Directors under
specified circumstances, any Director, or the entire Board of Directors, may be
removed from office at any time by the holders of the stock of all classes and
series of the Company entitled to vote generally (the "Voting Stock"), but only
for cause and only by the affirmative vote of the holders of at least 80 percent
of the combined voting power of all of the then outstanding shares of the Voting
Stock, voting together as a single class (it being understood that, for all
purposes of these By-Laws, each share of the Voting Stock shall have the number
of votes granted to it pursuant to these By-Laws or the Capital Stock Provisions
of the Articles of Incorporation or any designation of the rights, powers and
preferences of any class or series of the capital stock of the Company fixed in
or made pursuant to the Articles of Incorporation). The Company must notify the
Director of the grounds of his impending removal and the Director shall have an
opportunity, at the expense of the Company, to present his defense to the
stockholders by a statement which accompanies or precedes the Company's
solicitation of proxies to remove him. The term "entire Board of Directors" as
used in these By-Laws means the total number of Directors which the Company
would have if there were no vacancies.
3.3. Powers. The business and affairs of the Company shall be managed by
the Board of Directors. The Board of Directors may exercise all of the powers of
the Company and do and perform, or cause to be done and performed, all such
lawful acts and things as are not by law, by the Articles of Incorporation, or
by these By-Laws, required to be exercised or done by the stockholders.
3.4. Committees. The Board of Directors, by a resolution adopted by a
majority of the full Board of Directors, may designate from among its members an
Executive Committee and other Committees, each consisting of two or more
Directors, and may delegate to such Committee or Committees all the authority of
the Board of Directors except those which by the Maine Business Corporation Act,
including, without limitation, Section 713 of said Act, the Articles of
Incorporation, or these By-Laws, may not be exercised by such Committee or
Committees. Alternate members of such Committee or Committees may also be
appointed as specified in said Section 713. Except as the Board of Directors may
otherwise determine, the business of such Committee or Committees shall be
conducted as nearly as may be in the same manner as is provided by these By-Laws
for the conduct of business by the Board of Directors. Each such Committee shall
report its actions to the Board of Directors.
3.5. Regular Meetings. A regular meeting of the Board of Directors may be
held without call or notice immediately after and at the same place as the
annual meeting of the stockholders. Other regular meetings of the Board of
Directors may be held without call or notice if the time and place of such
meetings are fixed by the Board of Directors, provided that notice of the first
regular meeting following any such determination shall be given to each
Director.
3.6. Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board of Directors, by the President, or, if he is
absent or is unable to act, by any Vice President, or by any two Directors. The
person or persons calling the special meeting shall set the time and place
thereof.
Notice of each special meeting of the Board of Directors shall be given by
the Clerk, the Secretary or the person or persons calling the meeting.
It shall be sufficient notice to a Director of a special meeting to send
notice by mail at least forty-eight hours or by telegram at least twenty-four
hours before the meeting addressed to him at his usual or last known business or
residence address or to give notice to him in person or by telephone at least
twenty-four hours before the meeting. Notice of a meeting need not be given to
any Director who signs a waiver of notice, either before or after the meeting.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board of Directors need be specified in the notice of the
meeting except as otherwise required by the Articles of Incorporation, these
By-Laws or the Maine Business Corporation Act.
3.7. Action Without A Meeting. Action may be taken by the Board of
Directors without a meeting as provided in the Maine Business Corporation Act,
including, without limitation, Sections 708, 711 and 712 of said Act.
3.8. Quorum. At any meeting of the Directors a majority of the Directors
then in office shall constitute a quorum for the transaction of business. The
Directors present at a duly called or held meeting at which a quorum was once
present may continue to do business at the meeting notwithstanding the
withdrawal of enough Directors to leave less than a quorum. Any meeting may be
adjourned from time to time by a majority of the votes cast upon the question,
whether or not a quorum is present, and the meeting may be held as adjourned
without further notice if the time and place to which it is adjourned are fixed
and announced at such meeting.
3.9. Action by Vote. The vote of a majority of the Directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors
unless the vote of a greater number is required by the Articles of
Incorporation, these By-Laws or the Maine Business Corporation Act.
SECTION 4. OFFICERS AND AGENTS
4.1. Enumeration; Qualification. The officers of the Company shall consist
of a Chairman of the Board of Directors, a President, one or more Vice
Presidents, a Treasurer, a Clerk, a Secretary and such other officers, if any,
as the Board of Directors from time to time may in their discretion elect or
appoint. The President shall be elected from the Board of Directors, and the
Chairman of the Board of Directors and any Vice Chairman of the Board shall be
elected from those Directors who are not employees of the Company. The Clerk
shall be a resident of the State of Maine. Any two or more offices may be held
by the same person. Any officer may be required by the Board of Directors to
give bond for the faithful performance of his duties to the Company in such
amount and with such sureties as the Board of Directors may determine.
4.2. Powers. Subject to the Maine Business Corporation Act, the Articles of
Incorporation and the other provisions of these By-Laws, each officer shall have
such duties and powers as are usually incident to his respective office and such
other duties and powers as may be prescribed from time to time by the Board of
Directors.
4.3. Election. The Chairman of the Board of Directors, the President and
the Clerk shall be elected annually by the Board of Directors at their first
meeting following the annual meeting of the stockholders. Other officers may be
elected or appointed by the Board of Directors at said meeting or at any other
time.
4.4. Tenure. Except as otherwise provided by the Maine Business Corporation
Act, by the Articles of Incorporation or by these By-Laws, the Chairman of the
Board of Directors, the President and the Clerk shall hold office until the
first meeting of the Board of Directors following the next annual meeting of
stockholders and until their respective successors are chosen and qualified, and
each other officer shall hold office until the first meeting of the Directors
following the next annual meeting of stockholders unless, in any case, a shorter
period shall have been specified by the terms of his election or appointment, or
until he sooner dies, resigns, is removed or becomes disqualified.
SECTION 5.
RESIGNATION, VACANCIES AND REMOVALS
Any Director or officer may resign at any time by delivering his
resignation in writing to the Chairman of the Board of Directors, the President
or the Clerk or to a meeting of the Board of Directors. Such resignation shall
be effective upon receipt unless specified to be effective at some other time.
Any vacancy, however occurring, in the office of any officer may be filled by
the Board of Directors. The Board of Directors may remove any officer as
provided in the Maine Business Corporation Act including, without limitation,
Section 715 of said Act.
SECTION 6. STOCK CERTIFICATES,
TRANSFERS OF SHARES AND RECORD DATES
6.1. Stock Certificates. Each stockholder, upon payment in full for his
shares, shall be entitled to a certificate certifying the number and the class
and the designation of the series, if any, of the shares owned by him, in such
form as shall, in conformity to law, be prescribed from time to time by the
Board of Directors. Such certificate shall conform with the provisions of the
Maine Business Corporation Act and be signed by any two of the President or any
Vice President and by the Treasurer or any Assistant Treasurer, and may be
sealed with the seal of the Company or a facsimile thereof. If the certificate
is countersigned by the Clerk, a transfer agent or any assistant transfer agent,
or registered by a registrar, other than the Company itself or an employee of
the Company, any other signature on the certificate may be a facsimile. In case
any officer who has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Company with the same effect as if he were such
officer at the date of its issue.
6.2. Loss of Certificates. In the case of the alleged loss or destruction
or the mutilation of a certificate of stock, a duplicate certificate may be
issued in place thereof, upon such terms as the Directors may prescribe.
6.3. Transfer on Books. Subject to the restrictions, if any, stated or
noted on the stock certificates, shares of stock may be transferred on the books
of the Company by the surrender to the Company or one of its transfer agents of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
Board of Directors or the particular transfer agent may reasonably require.
Except as may be otherwise required by law, by the Articles of Incorporation or
by these By-Laws, the Company shall be entitled to treat the record holder of
stock as shown on its books as the owner of such stock for all purposes,
including the payment of dividends and the right to receive notice and to vote
with respect thereto, regardless of any transfer, pledge or other disposition of
such stock until the shares have been transferred on the books of the Company in
accordance with the requirements of these By-Laws.
It shall be the duty of each stockholder to notify the Company of his post
office address.
6.4. Record Date. The Board of Directors may by resolution fix in advance a
record date not exceeding sixty (60) days nor less than ten (10) full days prior
to (a) the date of any stockholders' meeting for the purpose of determining
stockholders entitled to notice of and to vote at such meeting and any
adjournment thereof, or (b) the date of the payment of any dividend, other
distribution, right or other benefit, including the issuance of rights to
subscribe for securities, for the purpose of determining stockholders entitled
to receive such dividend, other distribution, right or other benefit; and may by
resolution, subject to such time limitations, fix a record date for any other
proper purpose.
SECTION 7. INDEMNIFICATION
7.1. To the extent permitted and in the manner provided by the Maine
Business Corporation Act, the Company shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer or
employee of the Company or is or was serving at the request of the Company as a
director, officer, trustee, partner, fiduciary, employee or agent of another
corporation, partnership, joint venture, trust, pension or other employee
benefit plan, or other enterprise, against expenses (including attorneys' fees),
judgments, fines, assessments, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding.
Expenses incurred in defending a civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the Company in advance
of the final disposition of such action, suit or proceeding, as authorized in
the specific case in the manner provided by the Maine Business Corporation Act,
upon receipt of an undertaking by or on behalf of the person seeking
indemnification to repay such amount unless it shall ultimately be determined
that he is entitled to be indemnified by the Company.
The foregoing rights of indemnification shall not be deemed exclusive of
any other rights to which any person seeking indemnification may be entitled
under any agreement, vote of stockholders or disinterested directors or
otherwise, and shall continue as to a person who has ceased to be a director,
officer, trustee, partner, fiduciary, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
7.2. The Company shall have power to purchase and maintain insurance, in
such amounts as the Board of Directors may deem appropriate, on behalf of any
person who is or was a director, officer, employee or agent of the Company, or
is or was serving at the request of the Company as a director, officer, trustee,
partner, fiduciary, employee or agent of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan, or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Company would
have the power to indemnify him against such liability under applicable
provisions of law.
SECTION 8. AMENDMENTS
These By-Laws may be altered, amended or repealed, except as may be
otherwise expressly provided by law or in other sections of these By-Laws or in
the Articles of Incorporation, at any annual or special meeting of the
stockholders called for the purpose, of which the notice shall include the
proposed action, by vote of stockholders holding shares entitled in the
aggregate to a majority of the total votes to which the outstanding shares of
capital stock of the Company of all classes are then entitled, except that in
the case of the provisions of the first paragraph of Section 2.7 relating to the
requirements for a quorum and in the case of the provisions of Section 2.8
relating to cumulative voting such vote shall be by the affirmative vote of
stockholders holding shares entitled in the aggregate to two-thirds of the total
votes to which the outstanding shares of capital stock of the Company of all
classes are then entitled and except that in the case of the provisions of
Section 2.8 relating to the rights of the Company's Preferred Stock to vote such
vote shall be by the affirmative vote of two-thirds in interest of each class of
the Company's Preferred Stock then outstanding which is affected by the change,
voting separately as a class. These By-Laws may also be altered, amended or
repealed by vote of a majority of the Board of Directors then in office, except
that the Board of Directors shall not alter, amend or repeal the provisions of
the first paragraph of Section 2.7 relating to the requirements for a quorum,
the provisions of Section 2.8 relating to cumulative voting, the provisions of
the second paragraph of Section 3.1 relating to the qualification of Directors,
the provisions of the first paragraph of Section 3.1 relating to the number of
Directors and the provisions of Section 3.2 relating to the classification and
term of Directors, the filling of vacancies and the resignation and removal of
Directors from office and any provision of this Section 8 pertaining to the
foregoing sections. Notwithstanding any other provision in these By-Laws or any
provision of law that might otherwise permit a lesser vote, but in addition to
any affirmative vote of the holders of any particular class or series of stock
required by law, the Articles of Incorporation or these By-Laws, the affirmative
vote of the holders of at least 80 percent of the combined voting power of all
of the then outstanding shares of Voting Stock (as defined in the Corporate
Governance Provisions of the Articles of Incorporation) of the Company, voting
together as a single class, shall be required to alter or repeal the first
paragraph of Section 3.1 relating to the number of Directors and the provisions
of Section 3.2 relating to the classification and term of Directors, the filling
of vacancies and the resignation and removal of Directors from office and any
provision of this Section 8 pertaining to the foregoing sections.
SECTION 9. TITLES OF SECTIONS
All titles of sections are inserted for convenience only, and are not a
part of these By-Laws or to be used in the construction thereof.
Exhibit 10.98
CENTRAL MAINE POWER COMPANY
CREDIT AGREEMENT
Dated as of October 23, 1996
THE FIRST NATIONAL BANK OF BOSTON, Managing Agent
THE BANK OF NEW YORK, Managing Agent
TABLE OF CONTENTS
<TABLE>
Page
1. Definitions; Certain Rules of Construction...............................................................1
2. The Credits.............................................................................................20
<S> <C> <C>
2.1. Three-Year Revolving Credit....................................................................20
2.1.1. Three-Year Revolving Loan.............................................................20
2.1.2. Maximum Amount of Three-Year Revolving Credit.........................................20
2.1.3. Borrowing Requests....................................................................21
2.1.4. Three-Year Revolving Notes............................................................21
2.2. 364-Day Revolving Credit.......................................................................21
2.2.1. 364-Day Revolving Loan.................................................................21
2.2.2. Maximum Amount of 364-Day Revolving Credit............................................22
2.2.3. Borrowing Requests....................................................................22
2.2.4. 364-Day Revolving Notes...............................................................22
2.3. Competitive Auction Facility Credit............................................................22
2.3.1. Request by the Company................................................................23
2.3.2. Dissemination of Requests for Bids for Competitive Auction Facility Loans.............23
2.3.3. Bids for Competitive Auction Facility Loans...........................................24
2.3.4. Acceptance of Bids by the Borrower....................................................24
2.3.5. Funding by the New York Managing Agent; Competitive Auction Facility Loan Account, etc25
2.3.6. Prepayments in Respect of Competitive Auction Facility Loans..........................27
2.4. Application of Proceeds........................................................................27
2.4.1. Three-Year Revolving Loan.............................................................27
2.4.2. 364-Day Revolving Loan................................................................27
2.4.3. Competitive Auction Facility Loan.....................................................27
2.4.4. Specifically Prohibited Applications..................................................27
2.5. Nature of Obligations of Lenders to Make Extensions of Credit..................................27
2.5.1. Revolving Loans.......................................................................27
2.5.2. Competitive Auction Facility Loans....................................................27
2.6. Extension of Final Maturity Dates of the Revolving Loan........................................28
2.6.1. Three-Year Final Maturity Date........................................................28
2.6.2. 364-Day Final Maturity Date...........................................................28
3. Interest; Eurodollar Pricing Options; Fees..............................................................28
3.1. Interest on Revolving Loan.....................................................................28
3.2. Interest on Competitive Auction Facility Loans.................................................28
3.3. Eurodollar Pricing Options.....................................................................29
3.3.1. Election of Eurodollar Pricing Options................................................29
3.3.2. Notice to Lenders and Company.........................................................29
3.3.3. Selection of Eurodollar Interest Periods..............................................30
3.3.4. Additional Interest...................................................................30
3.3.5. Violation of Legal Requirements.......................................................31
3.3.6. Funding Procedure.....................................................................31
3.4. Facility Fees..................................................................................31
3.5. Changes in Circumstances; Yield Protection.....................................................31
3.5.1. Reserve Requirements, etc.............................................................31
3.5.2. Taxes.................................................................................32
3.5.3. Capital Adequacy......................................................................32
3.5.4. Regulatory Changes....................................................................33
3.5.5. Compensation Claims...................................................................33
3.5.6. Mitigation............................................................................33
3.6. Computations of Interest and Fees..............................................................33
4. Payment.................................................................................................34
4.1. Payment at Maturity............................................................................34
4.2. Contingent Required Prepayments for Excess Credit Exposure.....................................34
4.3. Voluntary Prepayments..........................................................................34
4.4. Reborrowing; Application of Payments, etc......................................................35
4.4.1. Reborrowing...........................................................................35
4.4.2. Order of Application..................................................................35
4.4.3. Payments for Lenders..................................................................35
5. Conditions to Extending Credit..........................................................................35
5.1. Conditions on Initial Closing Date.............................................................35
5.1.1. Officer's Certificate.................................................................35
5.1.2. Revolving Notes........................................................................36
5.1.3. Payment of Fees.......................................................................36
5.1.4. Legal Opinions........................................................................36
5.1.5. Termination of Prior Credit Agreements................................................36
5.1.6. Maine Public Utilities Commission.....................................................36
5.1.7. Proper Proceedings....................................................................37
5.1.8. General...............................................................................37
5.2. Conditions to Each Extension of Credit.........................................................37
5.2.1. Bring-Down of Representations and Warranties..........................................37
5.2.2. Material Adverse Change...............................................................37
5.2.3. Legality, etc.........................................................................38
5.2.4. Connecticut Waiver....................................................................38
6. General Covenants.......................................................................................38
6.1. Taxes and Other Charges; Accounts Payable......................................................38
6.1.1. Taxes and Other Charges...............................................................38
6.1.2. Accounts Payable......................................................................39
6.2. Conduct of Business, etc.......................................................................39
6.2.1. Types of Business.....................................................................39
6.2.2. Maintenance of Properties.............................................................39
6.2.3. Statutory Compliance..................................................................39
6.2.4. Amendments and Supplements.............................................................40
6.3. Insurance......................................................................................40
6.4. Financial Statements and Reports...............................................................40
6.4.1. Annual Reports........................................................................41
6.4.2. Quarterly Reports.....................................................................41
6.4.3. Other Reports.........................................................................42
6.4.4. Notice of Litigation, Defaults, etc...................................................43
6.4.5. ERISA Reports.........................................................................43
6.4.6. Other Information; Audit..............................................................44
6.5. Certain Financial Tests........................................................................44
6.5.1. Consolidated Net Worth................................................................44
6.5.2. Common Stock Investment to Total Capitalization.......................................44
6.5.3. Consolidated Operating Income to Consolidated Interest Expense........................44
6.6. Indebtedness...................................................................................44
6.7. Guarantees.....................................................................................46
6.8. Liens..........................................................................................46
6.9. Certain Investments............................................................................49
6.10. Asset Dispositions and Mergers.................................................................49
6.11. Negative Pledge Clauses........................................................................50
6.12. ERISA..........................................................................................50
6.13. Environmental Laws.............................................................................50
6.13.1. Compliance with Law and Permits......................................................50
6.13.2. Notice of Claims, etc................................................................50
7. Representations and Warranties..........................................................................51
7.1. Organization and Business......................................................................51
7.1.1. The Company...........................................................................51
7.1.2. Subsidiaries..........................................................................51
7.1.3. Qualification.........................................................................51
7.1.4. Capitalization........................................................................51
7.2. Financial Statements and Other Information; Material Agreements................................51
7.2.1. Financial Statements and Other Information............................................51
7.2.2. Material Agreements...................................................................52
7.3. Agreements Relating to Financing Debt..........................................................53
7.4. Changes in Condition...........................................................................53
7.5. Title to Assets................................................................................53
7.6. Operations in Conformity With Law, etc.........................................................53
7.7. Litigation.....................................................................................53
7.8. Authorization and Enforceability...............................................................53
7.9. No Legal Obstacle to Agreements................................................................54
7.10. Defaults.......................................................................................54
7.11. Licenses, etc..................................................................................55
7.12. Tax Returns....................................................................................55
7.13. Certain Business Representations...............................................................55
7.13.1. Labor Relations......................................................................55
7.13.2. Burdensome Obligations...............................................................55
7.14. Environmental Regulations......................................................................55
7.14.1. Environmental Compliance.............................................................55
7.14.2. Environmental Litigation.............................................................56
7.14.3. Hazardous Material...................................................................56
7.15. Pension Plans..................................................................................57
7.16. Foreign Trade Regulations; Government Regulation; Margin Stock.................................57
7.16.1. Foreign Trade Regulations............................................................57
7.16.2. Government Regulation................................................................57
7.17. Disclosure.....................................................................................57
8. Defaults................................................................................................57
8.1. Events of Default..............................................................................57
8.1.1. Payment...............................................................................57
8.1.2. Specified Covenants...................................................................58
8.1.3. Other Covenants.......................................................................58
8.1.4. Representations and Warranties........................................................58
8.1.5. Cross Default, etc....................................................................58
8.1.6. Enforceability, etc...................................................................59
8.1.7. Judgments.............................................................................59
8.1.8. ERISA.................................................................................59
8.1.9. Bankruptcy, etc.......................................................................59
8.2. Certain Actions Following an Event of Default..................................................60
8.2.1. Terminate Obligation to Extend Credit.................................................60
8.2.2. Specific Performance; Exercise of Rights..............................................60
8.2.3. Acceleration..........................................................................61
8.2.4. Enforcement of Payment; Credit Security; Setoff.......................................61
8.2.5. Cumulative Remedies...................................................................61
8.3. Annulment of Defaults..........................................................................61
8.4. Waivers........................................................................................61
9. Expenses; Indemnity.....................................................................................62
9.1. Expenses.......................................................................................62
9.2. General Indemnity..............................................................................62
10. Operations; Managing Agents.............................................................................63
10.1. Interests in Credits...........................................................................63
10.2. Roles of Managing Agents.......................................................................63
10.3. Managing Agents' Authority to Act, etc.........................................................63
10.4. Company to Pay New York Managing Agent, etc....................................................63
10.5. Lender Operations for Advances, etc............................................................64
10.5.1. Advances.............................................................................64
10.5.2. New York Managing Agent to Allocate Payments, etc....................................64
10.5.3. Delinquent Lenders; Nonperforming Lenders............................................65
10.6. Sharing of Payments, etc.......................................................................65
10.7. Amendments, Consents, Waivers, etc.............................................................66
10.8. Managing Agent's Resignation...................................................................67
10.9. Concerning the Managing Agents.................................................................68
10.9.1. Action in Good Faith, etc............................................................68
10.9.2. No Implied Duties, etc...............................................................68
10.9.3. Validity, etc........................................................................68
10.9.4. Compliance...........................................................................68
10.9.5. Employment of Agents and Counsel.....................................................69
10.9.6. Reliance on Documents and Counsel....................................................69
10.9.7. Managing Agents' Reimbursement.......................................................69
10.10. Rights as a Lender.............................................................................69
10.11. Independent Credit Decision....................................................................70
10.12. Indemnification................................................................................70
11. Successors and Assigns; Lender Assignments and Participations...........................................70
11.1. Assignments by Lenders.........................................................................71
11.1.1. Assignees and Assignment Procedures..................................................71
11.1.2. Terms of Assignment and Acceptance...................................................72
11.1.3. Register.............................................................................73
11.1.4. Acceptance of Assignment and Assumption..............................................73
11.1.5. Federal Reserve Bank.................................................................73
11.1.6. Further Assurances...................................................................73
11.2. Credit Participants............................................................................74
11.3. Replacement of Lender..........................................................................74
12. Confidentiality.........................................................................................76
13. Foreign Lenders.........................................................................................76
14. Notices.................................................................................................77
15. Course of Dealing; Amendments and Waivers...............................................................77
16. No Strict Construction..................................................................................78
17. Defeasance..............................................................................................78
18. Venue; Service of Process...............................................................................78
19. WAIVER OF JURY TRIAL....................................................................................79
20. General.................................................................................................79
</TABLE>
EXHIBITS
2.1.4 - Form of Three-Year Revolving Note
2.2.4 - Form of 364-Day Revolving Note
2.3.1 - Form of Competitive Auction Facility Loan Bid Request
2.3.2 - Form of Invitation to Bid on Competitive Auction Facility Loan
2.3.3A - Form of Competitive Auction Facility Loan Bid
2.3.3B - Form of List of Competitive Auction Facility Loan Bids
2.3.4A - Form of List of Acceptances and Non-Acceptances of
Competitive Auction Facility Loan Bids
2.3.4B - Form of Acceptance of Competitive Auction Facility Loan Bid
2.3.4C - Form of Non-Acceptance of Competitive Auction Facility Loan
Bid
2.3.4D - Form of Notice of Competitive Auction Facility Loan
2.3.5 - Form of Competitive Auction Facility Note
5.1.1 - Form of Officer's Certificate
7.2.2 - Material Agreements
7.3 - Financing Debt
10.1 - Percentage Interests
11.1.1 - Form of Assignment and Acceptance
CENTRAL MAINE POWER COMPANY
CREDIT AGREEMENT
This Agreement, dated as of October 23, 1996, is among Central Maine Power
Company, a Maine corporation, the Lenders from time to time party hereto, The
First National Bank of Boston, both in its capacity as a Lender and in its
capacity as agent for itself and the other Lenders, and The Bank of New York,
both in its capacity as a Lender and in its capacity as agent for itself and the
other Lenders. The parties agree as follows:
Definitions; Certain Rules of Construction. Certain capitalized terms are
used in this Agreement and in the other Credit Documents with the specific
meanings defined below in this Section 1. Except as otherwise explicitly
specified to the contrary or unless the context clearly requires otherwise, (a)
the capitalized term "Section" refers to sections of this Agreement, (b) the
capitalized term "Exhibit" refers to exhibits to this Agreement, (c) references
to a particular Section include all subsections thereof, (d) the word
"including" shall be construed as "including without limitation", (e) accounting
terms not otherwise defined herein have the meaning provided under GAAP, (f)
references to a particular statute or regulation include all rules and
regulations thereunder and any successor statute, regulation or rules, in each
case as from time to time in effect and (g) references to a particular Person
include such Person's successors and assigns to the extent not prohibited by
this Agreement and the other Credit Documents. References to "the date hereof"
mean the date first set forth above.
.0. "Affected Lender" is defined in Section 11.3.
.1. "Affiliate" means, with respect to the Company (or any other specified
Person), any other Person directly or indirectly controlling, controlled by or
under direct or indirect common control with the Company (or such specified
Person), and shall include (a) any officer or director or general partner of the
Company (or such specified Person) and (b) any Person of which the Company (or
such specified Person) or any Affiliate (as defined in clause (a) above) of the
Company (or such specified Person) shall, directly or indirectly, beneficially
own either (i) at least 10% of the outstanding equity securities having the
general power to vote or (ii) at least 10% of all equity interests.
.2. "Agreement" means this Credit Agreement as from time to time amended,
modified and in effect.
.3. "Applicable Margin" means, for the 364-Day Revolving Loan, .55% per
annum, and for the Three-Year Revolving Loan, the percentage per annum in the
following table set opposite the applicable Rating Level:
Rating Applicable Margin
Level
Level 1 .30% Level 2 .425% Level 3 .50% if (a)-less than 25% of the Maximum
Amount of Three-Year Revolving Credit is outstanding or (b)-at least 25% but
less than 50% of the Maximum Amount of Three-Year Revolving Credit is
outstanding and the Rating by S&P is at least BBB- and the Rating by Moody's is
at least Baa3 .625% if (a) at least 25% but less than 50% of the Maximum Amount
of Three-Year Revolving Credit is outstanding and (b) without giving effect to
the second-to-last sentence of the definition of "Rating Level" in Section
1.109, either the Rating by S&P is lower than BBB- or the Rating by Moody's is
lower than Baa3 .75% if (a) 50% or more of the Maximum Amount of Three-Year
Revolving Credit is outstanding and (b) the Rating by S&P is at least BBB- and
the Rating by Moody's is at least Baa3 .875% if (a) 50% or more of the Maximum
Amount of Three-Year Revolving Credit is outstanding and (b) either the Rating
by S&P is lower than BBB- or the Rating by Moody's is lower than Baa3 Level 4
.65% if less than 25% of the Maximum Amount of Three-Year Revolving Credit is
outstanding .775% if at least 25% but less than 50% of the Maximum Amount of
Three-Year Revolving Credit is outstanding 1.025% if 50% or more of the Maximum
Amount of Three-Year Revolving Credit is outstanding
Level 5 .875% if less than 25% of the Maximum Amount of Three-Year
Revolving Credit is outstanding
1.00% if at least 25% but less than 50% of the Maximum Amount of Three-Year
Revolving Credit is outstanding 1.25% if 50% or more of the Maximum Amount of
Three-Year Revolving Credit is outstanding
For the purpose of calculating Applicable Margin, the aggregate amount of
all outstanding Three-Year Competitive Auction Facility Loans shall be counted
in the numerator in determining the percentage of the Maximum Amount of
Three-Year Revolving Credit outstanding.
.0. "Applicable Rate" means, at any date, the sum of:
(a) (i) with respect to each portion of the Revolving Loan subject to a
Eurodollar Pricing Option, the sum of the Applicable Margin plus the Eurodollar
Rate with respect to such Eurodollar Pricing Option;
(ii) with respect to each other portion of the Revolving Loan, the Base
Rate;
plus (b) an additional 2% effective on the day the New York Managing Agent
notifies the Company that the interest rates hereunder are increasing as a
result of the occurrence and continuance of an Event of Default under Section
8.1.1 until the earlier of such time as (i)-such Event of Default is no longer
continuing or (ii)-such Event of Default is deemed no longer to exist, in each
case pursuant to Section-8.3.
.1. "Assignee" is defined in Section-11.1.1.
.2. "Assignment and Acceptance" is defined in Section-11.1.1.
.3. "Bank of Boston" means The First National Bank of Boston.
.4. "Bank of New York" means The Bank of New York.
.5. "Banking Day" means any day other than Saturday, Sunday or a day on
which banks in Portland, Maine, New York, New York and Boston, Massachusetts are
authorized or required by law or other governmental action to close and, if such
term is used with reference to a Eurodollar Pricing Option, any day on which
dealings are effected in the Eurodollars in question by first-class banks in the
inter-bank Eurodollar markets in London, England.
.6. "Bankruptcy Code" means Title-11 of the United States Code.
.7. "Bankruptcy Default" means an Event of Default referred to in
Section-8.1.9.
.8. "Base Rate" means, on any date, the greater of (a)-the rate of interest
announced by Bank of New York at the New York Office as its Base Rate or (b) the
sum of 1/2% plus the Federal Funds Rate.
.9. "Base Rate Advances" means advances under a Revolving Loan on which the
applicable rate of interest is the Base Rate.
.10. "Boston Managing Agent" means Bank of Boston, in its capacity as a
Managing Agent hereunder.
.11. "By-laws" means all written by-laws and all other similar constituent
documents relating to the management, governance or internal regulation of any
Person other than an individual, or interpretive of the Charter of such Person,
all as from time to time in effect.
.12. "Capitalized Lease" means any lease which is required to be
capitalized on the balance sheet of the lessee in accordance with GAAP,
including to the extent applicable Statement Nos. 13 and 98 of the Financial
Accounting Standards Board.
.13. "Capitalized Lease Obligations" means the amount of the liability
reflecting the aggregate discounted amount of future payments under all
Capitalized Leases calculated in accordance with GAAP, including to the extent
applicable Statement Nos. 13 and 98 of the Financial Accounting Standards Board.
.14. "Cash Equivalents" means:
( ) negotiable certificates of deposit, time deposits (including sweep
accounts), demand deposits and bankers' acceptances having a maturity of nine
months or less and issued by any United States financial institution having
capital and surplus and undivided profits aggregating at least $100,000,000 and
rated at least Prime-1 by Moody's or A-1 by S&P or issued by any Lender or
Affiliate thereof;
(a) corporate obligations having a maturity of nine months or less and
rated at least Prime-1 by Moody's or A-1 by S&P or issued by any Lender;
(b) any direct obligation of the United States of America or any agency or
instrumentality thereof, or of any state or municipality thereof, (i)-which has
a remaining maturity at the time of purchase of not more than one year or which
is subject to a repurchase agreement with any Lender or Affiliate thereof (or
any other financial institution referred to in clause (a)-above) exercisable
within one year from the time of purchase and (ii) which, in the case of
obligations of any state or municipality, is rated at least Aa by Moody's or AA
by S&P;
(c) any mutual fund or other pooled investment vehicle rated at least Aa by
Moody's or AA by S&P which invests principally in obligations described above;
and
(d) any Investment by a Foreign Subsidiary in its local jurisdiction
comparable to the items described above.
.15. "CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
.16. "CERCLIS" means the federal Comprehensive Environmental Response
Compensation Liability Information System List (or any successor document)
issued under CERCLA.
.17. "Charter" means the articles of organization, certificate of
incorporation, statute, constitution, joint venture agreement, partnership
agreement, trust indenture, limited liability company agreement or other charter
document of any Person other than an individual, each as from time to time in
effect.
.18. "Closing Date" means the Initial Closing Date and each other date on
which any extension of credit is made pursuant to Section-2.1 or 2.2 and the
Competitive Auction Facility Loan Closing Dates.
.19. "Code" means the federal Internal Revenue Code of 1986, as amended.
.20. "Commitment" means, with respect to any Lender, such Lender's
obligations to extend the credits contemplated by Section 2. The original
Commitments are set forth in Exhibit 10.1 and the current Commitments are
recorded from time to time in the Register.
.21. "Company" means Central Maine Power Company, a Maine corporation.
.22. "Competitive Auction Facility Loan" is defined in Section 2.3.
.23. "Competitive Auction Facility Loan Accounts" is defined in Section
2.3.5.
.24. "Competitive Auction Facility Loan Closing Date" is defined in Section
2.3.1.
.25. "Competitive Auction Facility Loan Interest Payment Date" is defined
in Section 2.3.1.
.26. "Competitive Auction Facility Loan Maturity Date" is defined in
Section 2.3.1.
.27. "Competitive Auction Facility Note" is defined in Section 2.3.5.
.28. "Competitive Auction Facility Rates" is defined in Section 2.3.3.
.29. "Consolidated" and "Consolidating", when used with reference to any
term, mean that term as applied to the accounts of the Company (or other
specified Person) and all of its Subsidiaries (or other specified group of
Persons), or such of its Subsidiaries as may be specified, consolidated (or
combined) or consolidating (or combining), as the case may be, in accordance
with GAAP and with appropriate deductions for minority interests in
Subsidiaries.
.30. "Consolidated Current Assets" means, at any date, all amounts carried
as current assets on the balance sheet of the Company and its Subsidiaries
determined in accordance with GAAP on a Consolidated basis.
.31. "Consolidated Interest Expense" means, for any period, the aggregate
amount of interest, including commitment fees, payments in the nature of
interest under Capitalized Leases and net payments under Interest Rate
Protection Agreements, accrued by the Company and its Subsidiaries (whether such
interest is reflected as an item of expense or capitalized) in accordance with
GAAP on a Consolidated basis.
.32. "Consolidated Net Income" means, for any period, the net income (or
loss) applicable to common stock of the Company and its Subsidiaries, determined
in accordance with GAAP on a Consolidated basis; provided, however, that
Consolidated Net Income shall not include:
( ) all amounts included in computing such net income (or loss) in respect
of (i) the write-up of any asset after December 31, 1995 or (ii) the retirement
of any Indebtedness or equity at less than face value after December 31, 1995;
(a) extraordinary and nonrecurring gains; and
(b) any after-tax gains or losses attributable to returned surplus assets
of any Plan.
.33. "Consolidated Net Worth" means, at any date, the total of
stockholders' equity of the Company and its Subsidiaries determined in
accordance with GAAP on a Consolidated basis; provided, however, that
Consolidated Net Worth shall not include all amounts included in computing such
Consolidated Net Worth in respect of (i) the write-up of any asset after
December 31, 1995 or (ii) the retirement of any Indebtedness or equity at less
than face value after December 31, 1995.
.34. "Consolidated Operating Income" means, for any period, the total of:
( ) Consolidated Net Income;
plus (b) all amounts deducted in computing such Consolidated Net Income in
respect of: ( ) depreciation and amortization,
(i) interest on, and commitment fees with respect to, Indebtedness
(including payments in the nature of interest under Capitalized Leases and
Interest Rate Protection Agreements),
(ii) taxes based upon or measured by net income, and
(iii) dividends on preferred stock.
.35. "Credit Documents" means:
( ) this Agreement, the Notes, the Fee Letter, and each Interest Rate
Protection Agreement provided by a Lender (or an Affiliate of a Lender) in
connection with this Agreement and the Notes to the Company or any of its
Subsidiaries, each as from time to time in effect;
(a) all financial statements, reports, notices, mortgages, assignments, UCC
financing statements and certificates delivered to either of the Managing Agents
or any of the Lenders by the Company or any of its Subsidiaries in connection
herewith or therewith; and
(b) any other present or future agreement or instrument from time to time
entered into among the Company or any of its Subsidiaries, on one hand, and the
Managing Agents or all the Lenders, on the other hand, relating to, amending or
modifying this Agreement or any other Credit Document referred to above or which
is stated to be a Credit Document, each as from time to time in effect.
.36. "Credit Obligations" means all present and future liabilities,
obligations and Indebtedness of the Company owing to either of the Managing
Agents or any Lender (or any Affiliate of a Lender) under or in connection with
this Agreement or any other Credit Document, including obligations in respect of
principal, interest, reimbursement obligations under Interest Rate Protection
Agreements provided by a Lender (or an Affiliate of a Lender) in connection with
this Agreement and the Notes, Facility Fees, amounts provided for in
Sections-3.3.4, 3.5 and 9 and other fees, charges, indemnities and expenses from
time to time owing hereunder or under any other Credit Document (whether
accruing before or after a Bankruptcy Default).
.37. "Credit Participant" is defined in Section 11.2.
.38. "Default" means any Event of Default and any event or condition which
with the passage of time or giving of notice, or both, would become an Event of
Default and the filing against the Company or any of its Subsidiaries of a
petition commencing an involuntary case under the Bankruptcy Code.
.39. "Delinquency Period" is defined in Section-10.5.3.
.40. "Delinquent Lender" is defined in Section-10.5.3.
.41. "Delinquent Payment" is defined in Section-10.5.3.
.42. "Domestic Subsidiary" means any Subsidiary that is not a Foreign
Subsidiary.
.43. "Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules and regulations (including consent
decrees and administrative orders) relating to public health and safety and
protection of the environment, including OSHA.
.44. "Equity Transaction" means any issuance by the Company or any of its
Subsidiaries to any Person (other than the Company's or a Subsidiary's officers,
employees and directors) of any shares of its capital stock, other equity
interests or options, warrants or other purchase rights to acquire such capital
stock or other equity interests.
.45. "ERISA" means the federal Employee Retirement Income Security Act of
1974.
.46. "ERISA Group Person" means the Company and any Person which is a
member of the controlled group or under common control with the Company within
the meaning of section 414 of the Code or section-4001(a)(14) of ERISA.
.47. "Eurodollars" means, with respect to any Lender, deposits of United
States Funds in a non-United States office or an international banking facility
of such Lender.
.48. "Eurodollar Basic Reference Rate" means, for any Eurodollar Interest
Period, the rate of interest at which Eurodollar deposits in an amount
comparable to the Percentage Interest of the Reference Lender in the portion of
the Revolving Loan as to which a Eurodollar Pricing Option has been elected and
which have a term corresponding to the Eurodollar Interest Period are offered to
the Reference Lender by first-class banks in the London inter-bank market for
deposits in United States dollars for delivery in immediately available funds at
the Eurodollar Office on the first day of such Eurodollar Interest Period as
determined by the Reference Lender at approximately 10:00 a.m. (New York time)
two Banking Days prior to the date upon which such Eurodollar Interest Period is
to commence (which determination by the Reference Lender shall, in the absence
of manifest error, be conclusive).
.49. "Eurodollar Interest Period" means any period, selected as provided in
Section 3.3.1, of one, two, three or six months, commencing on any Banking Day
and ending on the corresponding date in the subsequent calendar month so
indicated (or, if such subsequent calendar month has no corresponding date, on
the last day of such subsequent calendar month); provided, however, that subject
to Section 3.3.3, if any Eurodollar Interest Period so selected would otherwise
begin or end on a date which is not a Banking Day, such Eurodollar Interest
Period shall instead begin or end, as the case may be, on the immediately
preceding or succeeding Banking Day as determined by the New York Managing Agent
in accordance with the then current banking practice in the inter-bank
Eurodollar market with respect to deposits at the Eurodollar Office, which
determination by the New York Managing Agent shall, in the absence of manifest
error, be conclusive.
.50. "Eurodollar Office" means a non-United States office or international
banking facility of Bank of New York.
.51. "Eurodollar Pricing Options" means the options granted pursuant to
Section 3.3.1 to have the interest on any portion of the Revolving Loan computed
on the basis of a Eurodollar Rate.
.52. "Eurodollar Rate" for any Eurodollar Interest Period means the rate,
rounded upward to the nearest 1/100%, obtained by dividing (a) the Eurodollar
Basic Reference Rate for such Eurodollar Interest Period by (b)-an amount equal
to 1 minus the Eurodollar Reserve Rate; provided, however, that if at any time
during such Eurodollar Interest Period the Eurodollar Reserve Rate applicable to
any outstanding Eurodollar Pricing Option changes, the Eurodollar Rate for such
Eurodollar Interest Period shall automatically be adjusted to reflect such
change, effective as of the date of such change to the extent required by the
Legal Requirement implementing such change.
.53. "Eurodollar Reserve Rate" means the stated maximum rate (expressed as
a decimal) of all reserves (including any basic, supplemental, marginal or
emergency reserve or any reserve asset), if any, as from time to time in effect,
required by any Legal Requirement to be maintained by any Lender against (a)
"Eurocurrency liabilities" as specified in Regulation D of the Board of
Governors of the Federal Reserve System applicable to Eurodollar Pricing
Options, (b) any other category of liabilities that includes Eurodollar deposits
by reference to which the interest rate on portions of the Revolving Loan
subject to Eurodollar Pricing Options is determined, (c)-the principal amount of
or interest on any portion of the Revolving Loan subject to a Eurodollar Pricing
Option, to the extent that such reserves arise by reason of Eurodollar funding,
or (d) any other category of extensions of credit, or other assets, that
includes loans subject to a Eurodollar Pricing Option by a non-United States
office of any of the Lenders to United States residents, in each case without
the benefits of credits for prorations, exceptions or offsets that may be
available to a Lender.
.54. "Event of Default" is defined in Section 8.1.
.55. "Exchange Act" means the federal Securities Exchange Act of 1934, as
amended.
.56. "Facility Fee" means, for the 364-Day Revolving Loan, .20% per annum
multiplied by the Maximum Amount of 364-Day Revolving Credit, and for the
Three-Year Revolving Loan, the percentage per annum in the table below set
opposite the applicable Rating Level, multiplied by the Maximum Amount of
Three-Year Revolving Credit:
Rating Level Facility Fee Rate
Level 1 .15%
Level 2 .20%
Level 3 .25%
Level 4 .35%
Level 5 .425%
.0. "FAME Loan Agreement" means the Loan Agreement dated as of October-19,
1994 between Finance Authority of Maine and the Company relating to the
$79,300,000 Finance Authority of Maine Taxable Electric Rate Stabilization
Revenue Notes, Series 1994A (Central Maine Power Company).
.1. "Federal Funds Rate" means, for any day, the rate equal to the weighted
average (rounded upward to the nearest 1/8%) of (a) the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, (a) as such weighted average is published for such day
(or, if such day is not a Banking Day, for the immediately preceding Banking
Day) by the Federal Reserve Bank of New York or (b) if such rate is not so
published for such Banking Day, quotations received by the New York Managing
Agent from three federal funds brokers of recognized standing selected by the
New York Managing Agent. Each determination by the New York Managing Agent of
the Federal Funds Rate shall, in the absence of manifest error, be conclusive.
.2. "Fee Letter" is defined in Section 5.1.2.
.3. "Final Maturity Date" means each of the Three-Year Final Maturity Date
and the 364-Day Final Maturity Date.
.4. "Financial Officer" of the Company (or other specified Person) means
its chief executive officer, chief financial officer, chief operating officer,
chairman, president or treasurer, or any of its vice presidents whose primary
responsibility is for its financial affairs, all of whose incumbency and
signatures have been certified to the Managing Agents by the secretary or other
appropriate attesting officer of the Company (or such specified Person).
.5. "Financing Debt" means each of the items described in clauses (a)
through (f) of the definition of the term "Indebtedness" and, without
duplication, any Guarantees of such items.
.6. "Foreign Subsidiary" means each Subsidiary that is organized under the
laws of, and conducting its business primarily in a jurisdiction outside of, the
United States of America.
.7. "Foreign Trade Regulations" means (a) any act that prohibits or
restricts, or empowers the President or any executive agency of the United
States of America to prohibit or restrict, exports to or financial transactions
with any foreign country or foreign national, (b) the regulations with respect
to certain prohibited foreign trade transactions set forth at 22 C.F.R. Parts
120-130 and 31 C.F.R. Part 500 and (c) any order, regulation or ruling relating
to any of the foregoing.
.8. "Funding Liability" means, without duplication, (a) any Eurodollar
deposit which was used (or deemed by Section 3.3.6 to have been used) to fund
any portion of the Revolving Loan subject to a Eurodollar Pricing Option, and
(b) any portion of the Revolving Loan subject to a Eurodollar Pricing Option
funded (or deemed by Section 3.3.6 to have been funded) with the proceeds of any
such Eurodollar deposit.
.9. "GAAP" means generally accepted accounting principles as from time to
time in effect, including the statements and interpretations of the United
States Financial Accounting Standards Board.
.10. "General and Refunding Mortgage Indenture" means the General and
Refunding Mortgage Indenture dated as of April 15, 1976 between the Company and
Bank of Boston, as trustee (State Street Bank and Trust Company, successor
trustee), as currently in effect and as hereafter supplemented and amended in a
manner permitted under Section 6.2.4.
.11. "Guarantee" means, with respect to the Company (or other specified
Person):
( ) any guarantee by the Company (or such specified Person) of the payment
or performance of, or any contingent obligation by the Company (or such
specified Person) in respect of the complete or partial payment of, any
Indebtedness of any primary obligor;
(a) any other arrangement whereby credit is extended to a primary obligor
on the basis of any promise or undertaking of the Company (or such specified
Person) in writing, including any binding "comfort letter" or "keep well
agreement" written by the Company (or such specified Person), to a creditor or
prospective creditor of such primary obligor, to (i) pay the Indebtedness of
such primary obligor, (ii) purchase an obligation owed by such primary obligor,
(iii) pay for the purchase or lease of assets or services regardless of the
actual delivery thereof or (iv) maintain the capital, working capital, solvency
or general financial condition of such primary obligor; and
(b) payment obligations, whether contingent or matured, of the Company (or
such specified Person) with respect to letters of credit, bankers acceptances,
surety bonds, other financial guarantees and Interest Rate Protection
Agreements,
in each case whether or not any of the foregoing are reflected on the
balance sheet of the Company (or such specified Person) or in a footnote
thereto; provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any Guarantee and the amount of Indebtedness resulting from such
Guarantee shall be the maximum amount that the guarantor may become obligated to
pay in respect of the obligations (whether or not such obligations are
outstanding at the time of computation).
.12. "Hazardous Material" means any pollutant, toxic or hazardous material
or waste, including any "hazardous substance" or "pollutant" or "contaminant" as
defined in section 101(14) of CERCLA or any other Environmental Law or regulated
as toxic or hazardous under RCRA or any other Environmental Law.
.13. "Indebtedness" means all obligations, contingent or otherwise, of the
Company (or other specified Person) for:
( ) borrowed money;
(a) indebtedness evidenced by notes, debentures or similar instruments;
(b) Capitalized Lease Obligations;
(c) liabilities classified upon the balance sheet in accordance with GAAP
representing the deferred purchase price of assets (other than ordinary trade
accounts payable within six months after the incurrence thereof in the ordinary
course of business);
(d) payment obligations, whether contingent or matured, with respect to
standby letters of credit, bankers acceptances, surety bonds, other financial
guarantees and Interest Rate Protection Agreements, in each case supporting
Indebtedness under clauses (a) through (d) above (without duplication of other
Indebtedness supported or guaranteed thereby); and
(e) all Guarantees in respect of Indebtedness of others.
.14. "Indemnified Party" is defined in Section 9.2.
.15. "Initial Closing Date" means October 23, 1996 or such other date
agreed to by the Company and the Managing Agents.
.16. "Interest Rate Protection Agreement" means any interest rate swap,
interest rate cap, interest rate hedge or other contractual arrangement that
converts variable interest rates into fixed interest rates, fixed interest rates
into variable interest rates or other similar arrangements with respect to
interest obligations.
.17. "Investment" means, with respect to the Company (or other specified
Person):
( ) any share of capital stock, partnership or other equity interest,
evidence of Indebtedness or other security issued by any other Person;
(a) any loan, advance or extension of credit to, or contribution to the
capital of, any other Person;
(b) any Guarantee of the Indebtedness of any other Person;
(c) any acquisition of all, or any division or similar operating unit of,
the business of any other Person or the assets comprising such business,
division or unit; and
(d) any other similar investment.
The investments described in the foregoing clauses (a) through (e) shall be
included in the term "Investment" whether they are made or acquired by purchase,
exchange, issuance of stock or other securities, merger, reorganization or any
other method; provided, however, that the term "Investment" shall not include
(i) current trade and customer accounts receivable for property leased, goods
furnished or services rendered in the ordinary course of business and payable in
accordance with customary trade terms, (ii) deposits, advances or prepayments to
suppliers for property leased or licensed, goods furnished and services rendered
in the ordinary course of business, (iii) advances to employees for relocation
and travel expenses, drawing accounts and similar expenditures, (iv) stock or
other securities acquired in connection with the satisfaction or enforcement of
Indebtedness or claims due to the Company (or such specified Person) or as
security for any such Indebtedness or claim or (v) demand deposits in banks or
similar financial institutions.
In determining the amount of outstanding Investments:
(A) the amount of any Investment shall be the cost thereof minus any
returns of capital in cash on such Investment (determined in accordance with
GAAP without regard to amounts realized as income on such Investment);
(B) the amount of any Investment in respect of a purchase described in
clause (d) above shall include the amount of any Financing Debt assumed in
connection with such purchase or secured by any asset acquired in such purchase
(whether or not any Financing Debt is assumed) or for which any Person that
becomes a Subsidiary is liable on the date on which the securities of such
Person are acquired; and
(C) no Investment shall be increased as the result of an increase in the
undistributed retained earnings of the Person in which the Investment was made
or decreased as a result of an equity interest in the losses of such Person.
.18. "Legal Requirement" means any present or future requirement imposed
upon any of the Lenders or the Company and its Subsidiaries by any law, statute,
rule, regulation, directive, order or decree (or any interpretation thereof by
courts or of administrative bodies) of the United States of America, or each
jurisdiction in which the Eurodollar Office is located or any state or political
subdivision of any of the foregoing, or by any board, governmental or
administrative agency, central bank or monetary authority of the United States
of America, each jurisdiction in which the Eurodollar Office is located, or any
political subdivision of any of the foregoing. Any such law, statute, rule,
regulation, directive, order, decree or interpretation imposed on any of the
Lenders not having the force of law shall be deemed to be a Legal Requirement
for purposes of Section 3 if such Lender reasonably believes that compliance
therewith is customary commercial practice.
.19. "Lender" means each of the Persons listed as lenders on the signature
page hereto, including Bank of Boston and Bank of New York, each in its capacity
as a Lender, and such other Persons who may from time to time own a Percentage
Interest in the Credit Obligations, but the term "Lender" shall not include any
Credit Participant.
.20. "Lien" means, with respect to the Company (or any other specified
Person):
( ) any lien, encumbrance, mortgage, pledge, charge or security interest of
any kind upon any property or assets of the Company (or such specified Person),
whether now owned or hereafter acquired, or upon the income or profits
therefrom;
(a) the acquisition of, or the agreement to acquire, any property or asset
upon conditional sale or subject to any other title retention agreement, device
or arrangement (including a Capitalized Lease); and
(b) the transfer of any tangible property or assets, other than in the
ordinary course of business, for the purpose of creating collateral for the
payment of previously outstanding Indebtedness in priority to payment of the
general creditors of the Company (or such specified Person).
.21. "Loan" means, collectively, the Revolving Loan and the Competitive
Auction Facility Loans.
.22. "Managing Agents" means Bank of Boston and Bank of New York in their
capacity as managing agents for the Lenders hereunder, as well as their
successors and assigns in such capacity pursuant to Section 10.8.
.23. "Margin Stock" means "margin stock" within the meaning of Regulations
G, T, U or X of the Board of Governors of the Federal Reserve System.
.24. "Material Adverse Change" means, since any specified date or from the
circumstances existing immediately prior to the happening of any specified
event, a material adverse change in (a) the financial condition, operations,
properties or financial or business prospects of the Company (on an individual
basis) or the Company and its Subsidiaries (on a Consolidated basis), whether as
a result of (i) general economic conditions affecting the electric power
industry, (ii) difficulties in obtaining supplies and raw materials, (iii) fire,
flood or other natural calamities, (iv) environmental pollution, (v) regulatory
changes, judicial decisions, war or other governmental action or (vi) any other
event or development, whether or not related to those enumerated above or (b)
the ability of the Company to perform its obligations under the Credit Documents
or (c) the rights and remedies of the Managing Agents and the Lenders under the
Credit Documents.
.25. "Material Agreements" means the General and Refunding Mortgage
Indenture, the FAME Loan Agreement and other financing documents evidencing
Indebtedness permitted under Section 6.6.
.26. "Maximum Amount of 364-Day Revolving Credit" is defined in Section
2.2.2.
.27. "Maximum Amount of Three-Year Revolving Credit" is defined in Section
2.1.2.
.28. "Moody's" means Moody's Investors Service, Inc.
.29. "More Favorable Provision" is defined in Section 6.2.4.
.30. "Multiemployer Plan" means, at any date, a "multiemployer plan" as
defined in section 4001(a)(3) of ERISA, to which contributions have been made or
are or were required to be made, by any ERISA Group Person within six years
prior to such date.
.31. "New York Managing Agent" means Bank of New York, in its capacity as a
Managing Agent hereunder.
.32. "New York Office" means the principal banking office of Bank of New
York in New York, New York.
.33. "1995 10-K" is defined in Section 7.2.1.
.34. "Nonperforming Lender" is defined in Section 10.5.3.
.35. "Notes" means collectively, the Revolving Notes and the Competitive
Auction Facility Notes.
.36. "OSHA" means the federal Occupational Safety and Health Act.
.37. "Overdue Reimbursement Rate" means, at any date, the highest
Applicable Rate then in effect.
.38. "Payment Date" means (a) the last Banking Day of each March, June,
September and December occurring after the Initial Closing Date and (b) the
Final Maturity Date.
.39. "PBGC" means the Pension Benefit Guaranty Corporation or any successor
entity.
.40. "Percentage Interest" means (a) at all times when no Event of Default
under Section 8.1.1 and no Bankruptcy Default exists, the ratio that the
respective Commitments of the Lenders bear to the total Commitments of all
Lenders as from time to time in effect and reflected in the Register, and (b) at
all other times, the ratio that the respective amounts of the outstanding Credit
Obligations owing to the Lenders in respect of extensions of credit under
Section 2 bear to the total outstanding Credit Obligations owing to all Lenders.
.41. "Performing Lender" is defined in Section 10.5.3.
.42. "Person" means any present or future natural person or any
corporation, association, partnership, joint venture, limited liability, joint
stock or other company, business trust, trust, organization, business or
government or any governmental agency or political subdivision thereof.
.43. "Plan" means, at any date, any pension benefit plan subject to Title
IV of ERISA, other than a Multiemployer Plan, maintained, or to which
contributions have been made or are required to be made, by any ERISA Group
Person within six years prior to such date.
.44. "Pre-Closing 1934 Act Reports" means the Company's Report on Form 10-K
for fiscal year 1995, its Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996 and June 30, 1996 and its Reports on Form 8-K dated January 12,
February 1, April 19, August 21, September 6 and October 16, 1996, each as
furnished to the Lenders prior to the date hereof.
.45. "Prior Credit Agreements" means the $50,000,000 Credit Agreement dated
as of October 15, 1986, as amended, among the Company, Continental Illinois
National Bank and Trust Company of Chicago, as Agent, and the other lenders
named therein and the $80,000,000 Competitive Advance and Revolving Credit
Facility dated as of November 7, 1994, as amended, among the Company, Chemical
Bank, as Agent, and the other lenders named therein.
.46. "Rating" means, with respect to either Moody's or S&P, such agency's
credit rating on the Company's outstanding General and Refunding Mortgage Bonds
not entitled to external credit support or, if none of such General and
Refunding Mortgage Bonds remain outstanding, on the unsecured long-term
Indebtedness of the Company outstanding under the Company's Indenture dated as
of August 1, 1989, as amended, not entitled to external credit support or if
neither said Bonds or Indebtedness remain outstanding, such other senior secured
or unsecured Indebtedness of the Company as the Managing Agents shall designate.
.47. "Rating Level" means the category of the Ratings from time to time in
effect, as determined with reference to the Ratings issued by both Moody's and
S&P, as follows:
( ) "Level 1" means a BBB+ or higher Rating by S&P and a Baa1 or higher
Rating by Moody's.
(a) "Level 2" means a BBB or higher Rating by S&P and a Baa2 or higher
Rating by Moody's.
(b) "Level 3" means a BBB- or higher Rating by S&P and a Baa3 or higher
Rating by Moody's.
(c) "Level 4" means a BB+ or higher Rating by S&P and a Ba1 or higher
Rating by Moody's.
(d) "Level 5" means a BB or lower Rating by S&P and a Ba2 or lower Rating
by Moody's.
In the event that the Ratings qualify for more than one Rating Level, the
Rating Level shall be the one with the lowest numerical designation. In the
event that the Ratings by S&P and Moody's differ by one level, the Rating Level
determined by the lower Rating shall apply. In the event that the Ratings by S&P
and Moody's differ by more than one level, the Rating Level determined by
raising the lower Rating by one level shall apply. Rating Levels will be
redetermined upon any change in either the S&P Rating or the Moody's Rating.
.48. "RCRA" means the federal Resource Conservation and Recovery Act,
42 U.S.C. ss 6901, et seq.
.49. "Reference Lender" means Bank of New York.
.50. "Register" is defined in Section 11.1.3.
.51. "Replacement Lender" is defined in Section 11.3.
.52. "Request Date" is defined in Section 2.3.1.
.53. "Required Lenders" means, with respect to any approval, consent,
modification, waiver or other action to be taken by the Managing Agents or the
Lenders under the Credit Documents which requires action by the Required
Lenders, such Lenders as own at least a majority of the Percentage Interests;
provided, however, that with respect to any matters referred to in the proviso
to Section 10.7, Required Lenders means such Lenders as own at least the
respective portions of the Percentage Interests required by Section 10.7.
.54. "Revolving Loan" means, collectively, the Three-Year Revolving Loan
and the 364-Day Revolving Loan.
.55. "Revolving Notes" means, collectively, the Three-Year Revolving Notes
and the 364-Day Revolving Notes.
.56. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill
Corporation.
.57. "Securities Act" means the federal Securities Act of 1933, as amended.
.58. "Significant Subsidiary" means, at the time any determination thereof
is to be made, any Subsidiary which (i) as of the end of the next preceding
fiscal quarter had assets which comprised not less than 5% of the aggregate book
value of the Consolidated assets of the Company and its Subsidiaries, determined
in accordance with GAAP, as of the end of such quarter or (ii) for the period of
four consecutive fiscal quarters most recently ended had operating income which
comprised not less than 5% of the Consolidated Operating Income of the Company
and its Subsidiaries for such period.
.59. "Subsidiary" means any corporation of which the Company (or other
specified Person) shall at the time, directly or indirectly through one or more
of its Subsidiaries, own more than 50% of the outstanding capital stock (or
other shares of beneficial interest) entitled to vote generally and any other
Person whose financial statements are required to be included in the
Consolidated financial statements of the Company in accordance with GAAP.
.60. "Tax" means any present or future tax, levy, duty, impost, deduction,
withholding or other charges of whatever nature at any time required by any
Legal Requirement (a) to be paid by any Lender or (b) to be withheld or deducted
from any payment otherwise required hereby to be made to any Lender, in each
case on or with respect to its obligations hereunder, the Loan, any payment in
respect of the Credit Obligations or any Funding Liability not included in the
foregoing; provided, however, that the term "Tax" shall not include taxes
imposed upon or measured by the net income of such Lender (other than
withholding taxes) or franchise taxes.
.61. "$10,000,000 Financing Debt" is defined in Section 8.1.5.
.62. "364-Day Competitive Auction Facility Loan" means a Competitive
Auction Facility Loan, the amount of which is to be applied against the Maximum
Amount of 364-Day Revolving Credit.
.63. "364-Day Final Maturity Date" means October 22, 1997 or such date to
which this date is extended pursuant to Section 2.6.2.
.64. "364-Day Revolving Loan" is defined in Section 2.2.4.
.65. "364-Day Revolving Notes" is defined in Section 2.2.4.
.66. "Three-Year Competitive Auction Facility Loan" means a Competitive
Auction Facility Loan, the amount of which is to be applied against the Maximum
Amount of Three-Year Revolving Credit.
.67. "Three-Year Final Maturity Date" means October 22, 1999 or such date
to which this date is extended pursuant to Section 2.6.1.
.68. "Three-Year Revolving Loan" is defined in Section 2.1.4.
.69. "Three-Year Revolving Notes" is defined in Section 2.1.4.
.70. "United States Funds" means such coin or currency of the United States
of America as at the time shall be legal tender therein for the payment of
public and private debts.
.71. "Unsecured Medium Term Notes" means unsecured Indebtedness of the
Company denominated "Medium Term Notes" and issued or to be issued pursuant to
the Company's Indenture, dated as of August 1, 1989, as amended.
.72. "Wholly Owned Subsidiary" means any Subsidiary of which all of the
outstanding capital stock (or other shares of beneficial interest) entitled to
vote generally (other than directors' qualifying shares and, in the case of
Foreign Subsidiaries, shares required by Legal Requirements to be held by
foreign nationals) is owned by the Company (or other specified Person) directly,
or indirectly through one or more Wholly Owned Subsidiaries.
The Credits. The Credits
Three-Year Revolving Credit.r Revolving Credit
Three-Year Revolving Loan. Subject to all the terms and conditions of this
Agreement and so long as no Default exists, from time to time on and after the
Initial Closing Date and prior to the Three-Year Final Maturity Date the Lenders
will, severally in accordance with their respective Commitments in the
Three-Year Revolving Loan, make loans to the Company in such amounts as may be
requested by the Company in accordance with Section 2.1.3. The sum of the
aggregate principal amount of loans made under this Section 2.1.1 at any one
time outstanding plus the Three-Year Competitive Auction Facility Loans shall in
no event exceed the Maximum Amount of Three-Year Revolving Credit. In no event
will the principal amount of loans at any one time outstanding made by any
Lender pursuant to this Section 2.1 exceed such Lender's Commitment with respect
to the Three-Year Revolving Loan.
Maximum Amount of Three-Year Revolving Credit. The term "Maximum Amount of
Three-Year Revolving Credit" means $50,000,000 minus the amount (in a minimum of
$2,500,000 and in an integral multiple of $1,000,000 that is in excess of
$2,500,000) by which $50,000,000 shall have been irrevocably reduced from time
to time upon three business days' prior notice from the Company to the New York
Managing Agent. Upon termination or reduction of the Maximum Amount of
Three-Year Revolving Credit, the Company shall pay to the New York Managing
Agent, for the account of the Lenders according to each's Percentage Interest,
accrued Facility Fees (to the date of termination or reduction) on the
terminated or reduced portion of the Maximum Amount of Three-Year Revolving
Credit.
Borrowing Requests. The Company may from time to time request a loan under
Section 2.1.1 by providing to the New York Managing Agent a notice (which may be
given by a telephone call if promptly confirmed in writing). Such notice must be
not later than 10:30 a.m. (New York time) on the same Banking Day as the
requested Closing Date for such loan (or on the third Banking Day prior to the
requested Closing Date if any portion of such loan will be subject to a
Eurodollar Pricing Option on the requested Closing Date). The notice must
specify (a) the amount of the requested loan (which shall be not less than
$1,000,000 and shall otherwise be an integral multiple of $500,000) and (b) the
requested Closing Date therefor (which shall be a Banking Day). Upon receipt of
such notice, the New York Managing Agent will promptly inform each other Lender
(by telephone or otherwise). Each such loan will be made at the New York Office
by depositing the amount thereof to the general account of the Company with the
New York Managing Agent.
Three-Year Revolving Notes. The aggregate principal amount of the loans
outstanding from time to time under this Section 2.1 is referred to as the
"Three-Year Revolving Loan". The Three-Year Revolving Loan shall be deemed owed
to each Lender having a Commitment therein severally in accordance with such
Lender's Percentage Interest therein, and all payments thereon shall be for the
account of each Lender in accordance with its Percentage Interest therein. The
Company's obligations to pay each Lender's Percentage Interest in the Three-Year
Revolving Loan shall be evidenced by a separate note of the Company in
substantially the form of Exhibit 2.1.4 (the "Three-Year Revolving Notes"),
payable to each Lender in accordance with such Lender's Percentage Interest in
the Three-Year Revolving Loan.
364-Day Revolving Credit.-Day Revolving Credit
364-Day Revolving Loan. Subject to all the terms and conditions of this
Agreement and so long as no Default exists, from time to time on and after the
Initial Closing Date and prior to the 364-Day Final Maturity Date the Lenders
will, severally in accordance with their respective Commitments in the 364-Day
Revolving Loan, make loans to the Company in such amounts as may be requested by
the Company in accordance with Section 2.2.3. The sum of the aggregate principal
amount of loans made under this Section 2.2.1 at any one time outstanding plus
the 364-Day Competitive Auction Facility Loans shall in no event exceed the
Maximum Amount of 364-Day Revolving Credit. In no event will the principal
amount of loans at any one time outstanding made by any Lender pursuant to this
Section 2.2 exceed such Lender's Commitment with respect to the 364-Day
Revolving Loan.
Maximum Amount of 364-Day Revolving Credit. The term "Maximum Amount of
364-Day Revolving Credit" means $75,000,000 minus the amount (in a minimum of
$2,500,000 and in an integral multiple of $1,000,000 that is in excess of
$2,500,000) by which $75,000,000 shall have been irrevocably reduced from time
to time upon three business days' prior notice from the Company to the New York
Managing Agent. Upon termination or reduction of the Maximum Amount of 364-Day
Revolving Credit, the Company shall pay to the New York Managing Agent, for the
account of the Lenders according to each's Percentage Interest, accrued Facility
Fees (to the date of termination or reduction) on the terminated or reduced
portion of the Maximum Amount of 364-Day Revolving Credit.
Borrowing Requests. The Company may from time to time request a loan under
Section 2.2.1 by providing to the New York Managing Agent a notice (which may be
given by a telephone call if promptly confirmed in writing). Such notice must be
not later than 10:30 a.m. (New York time) on the same Banking Day as the
requested Closing Date for such loan (or on the third Banking Day prior to the
requested Closing Date if any portion of such loan will be subject to a
Eurodollar Pricing Option on the requested Closing Date). The notice must
specify (a) the amount of the requested loan (which shall be not less than
$1,000,000 and shall otherwise be an integral multiple of $500,000) and (b) the
requested Closing Date therefor (which shall be a Banking Day). Upon receipt of
such notice, the New York Managing Agent will promptly inform each other Lender
(by telephone or otherwise). Each such loan will be made at the New York Office
by depositing the amount thereof to the general account of the Company with the
New York Managing Agent.
364-Day Revolving Notes. The aggregate principal amount of the loans
outstanding from time to time under this Section 2.2 is referred to as the
"364-Day Revolving Loan". The 364-Day Revolving Loan shall be deemed owed to
each Lender having a Commitment therein severally in accordance with such
Lender's Percentage Interest therein, and all payments thereon shall be for the
account of each Lender in accordance with its Percentage Interest therein. The
Company's obligations to pay each Lender's Percentage Interest in the 364-Day
Revolving Loan shall be evidenced by a separate note of the Company in
substantially the form of Exhibit 2.2.4 (the "364-Day Revolving Notes"), payable
to each Lender in accordance with such Lender's Percentage Interest in the
364-Day Revolving Loan.
Competitive Auction Facility Credit. As provided in this Section 2.3, the
Company may request, and one or more Lenders, each acting in its sole and
absolute discretion, may offer to make, loans on a competitive auction facility
basis (each such loan made by any of the Lenders pursuant to this Section 2.3
being referred to as a "Competitive Auction Facility Loan"), which the Company
may, in its sole and absolute discretion, agree to accept; provided, however,
that in no event shall the sum of the aggregate Three-Year Competitive Auction
Facility Loans at any one time outstanding plus the Three-Year Revolving Loan
exceed the Maximum Amount of Three-Year Revolving Credit, and further provided
that in no event shall the sum of the aggregate 364-Day Competitive Auction
Facility Loans at any one time outstanding plus the 364-Day Revolving Loan
exceed the Maximum Amount of 364-Day Revolving Credit.
Request by the Company. Subject to all the terms and conditions of this
Agreement and so long as no Default exists, the Company may, at any time prior
to the Final Maturity Date, by telex or telecopy notice to the New York Managing
Agent substantially in the form of Exhibit 2.3.1 received not later than 10:00
a.m. (New York time) on any Banking Day (the "Request Date"), request bids for
loans pursuant to this Section 2.3 to be made on the following Banking Day (the
"Competitive Auction Facility Loan Closing Date"), such request to specify:
( ) whether the proposed loans shall be Three-Year Competitive Auction
Facility Loans or 364-Day Competitive Auction Facility Loans,
(a) the aggregate amount of the proposed loans, which shall not be less
than $1,000,000 and which shall otherwise be in integral multiples of $500,000,
(b) the proposed maturity dates (each such date a "Competitive Auction
Facility Loan Maturity Date") for such proposed loans (which maturity dates
shall be not earlier than seven days following the applicable Competitive
Auction Facility Loan Closing Date and not later than the earlier of (i) the
180th day following the applicable Competitive Auction Facility Loan Closing
Date and (ii) the applicable Final Maturity Date) and,
(c) the proposed dates (each such date a "Competitive Auction Facility Loan
Interest Payment Date"), if any, prior to the applicable Competitive Auction
Facility Loan Maturity Date on which accrued but unpaid interest shall be due
and payable on the principal amount of such proposed loans; provided, however,
that in the event the proposed Competitive Auction Facility Loan Maturity Date
is more than 90 days after the proposed Competitive Auction Facility Loan
Closing Date, the Company shall also pay accrued and unpaid interest on the
proposed loans on the 90th day after the proposed Competitive Auction Facility
Loan Closing Date. No more than 10 Eurodollar Pricing Options and Competitive
Auction Facility Loans in the aggregate may be outstanding at any one time.
Dissemination of Requests for Bids for Competitive Auction Facility Loans.
Promptly upon receipt of each request submitted by the Company pursuant to
Section 2.3.1, and in any event not later than 2:00 p.m. (New York time) on the
applicable Request Date, the New York Managing Agent shall, by telex or telecopy
notice (or by telephonic notice on a reasonable efforts basis, promptly
confirmed by telex or telecopy) to each Lender in substantially the form of
Exhibit 2.3.2, notify each Lender of such request, which notice shall constitute
an invitation on behalf of the Company for each Lender to submit bids pertaining
to the proposed Competitive Auction Facility Loans in accordance with Section
2.3.3.
Bids for Competitive Auction Facility Loans. Each Lender may, in its sole
and absolute discretion, respond to such invitation by submitting a bid by telex
or telecopy notice to the New York Managing Agent no later than 10:00 a.m. (New
York time) on the proposed Competitive Auction Facility Loan Closing Date. Such
notice shall be in substantially the form of Exhibit 2.3.3A, which notice shall
constitute an offer by such Lender to the Company to make Competitive Auction
Facility Loans on the proposed Competitive Auction Facility Loan Closing Date in
the principal amounts specified in the notice from such Lender, which principal
amounts (a) may be for all or any portion of the proposed Competitive Auction
Facility Loans, notwithstanding the Percentage Interest of such Lender in the
Revolving Loan, (b) may be different principal amounts for different Competitive
Auction Facility Loan Maturity Dates (subject to an over-all maximum) and (c)
shall be an integral multiple of $500,000 maturing on the Competitive Auction
Facility Loan Maturity Dates requested by the Company, with accrued and unpaid
interest on the principal amount thereof to be due and payable on the
Competitive Auction Facility Loan Interest Payment Dates, if any, requested by
the Company, and on such Competitive Auction Facility Loan Maturity Dates, such
interest to accrue at the rates per annum (which shall be in integral multiples
of 1/100%) specified in such notice (the "Competitive Auction Facility Rates").
The New York Managing Agent shall disregard any bid (i) not submitted by 10:00
a.m. (New York time) on the proposed Competitive Auction Facility Loan Closing
Date or (ii) not substantially in the form of Exhibit 2.3.3A, or not complete,
or containing qualifying, conditional or similar language, or terms different
from or in addition to those set forth in the pertinent request, and any late or
non-conforming bid shall be deemed not to have been given for any purpose of
this Agreement. The New York Managing Agent shall promptly, and in any event not
later than 11:00 a.m. (New York time) on the proposed Competitive Auction
Facility Loan Closing Date, by telephonic notice to the Company, confirmed in
writing, forward to the Company in substantially the form of Exhibit 2.3.3B, all
bids submitted in compliance with this Section 2.3.3. Notwithstanding the
foregoing provisions of this Section 2.3.3, each of the Lenders constituting the
Managing Agents shall submit its own bid, if any, to the Company by telex or
telecopy not later than 9:45 a.m. (New York time) on the proposed Competitive
Auction Facility Loan Closing Date.
Acceptance of Bids by the Borrower. Not later than Noon (New York time) on
the applicable Competitive Auction Facility Loan Closing Date, the Company shall
by telex or telecopy notice to the New York Managing Agent in substantially the
form of Exhibit 2.3.4A, indicate its acceptance or non-acceptance of each offer
submitted pursuant to Section 2.3.3. In the case of acceptance, such notice
shall be irrevocable and shall specify the aggregate principal amount of each
offered Competitive Auction Facility Loan that is accepted. Such notice shall be
deemed to constitute the certification of the Company that the closing
conditions for such Competitive Auction Facility Loans contained in Section 5.2
(other than the delivery of an officer's certificate) have been satisfied. The
Company may accept each such offer in whole or in part; provided, however, that
(a) the aggregate principal amount of all Competitive Auction Facility Loans
accepted and made on any Competitive Auction Facility Loan Closing Date may not
exceed the applicable amount set forth in the applicable request, (b) the
principal amount of each Competitive Auction Facility Loan shall be an integral
multiple of $500,000, and (c) acceptance of offers for Competitive Auction
Facility Loans with the same Competitive Auction Facility Loan Maturity Date may
be made only on the basis of ascending quoted Competitive Auction Facility
Rates; and provided, further, that if offers are made by two or more Lenders
having the same Competitive Auction Facility Rate for a greater aggregate
principal amount than the amount in respect of which offers at such rate are
accepted, the principal amount of such Competitive Auction Facility Loans in
respect of which such offers are accepted at such rate shall be allocated by the
New York Managing Agent among such Lenders as nearly as possible (in integral
multiples of $500,000) in proportion to the aggregate principal amount of such
offers. Determinations by the New York Managing Agent of the amounts of
Competitive Auction Facility Loans pursuant to the immediately preceding
sentence shall be conclusive in the absence of manifest error. The New York
Managing Agent shall, not later than 1:00 p.m. (New York time) on the
Competitive Auction Facility Loan Closing Date, notify each Lender who submitted
an offer for the particular loans requested pursuant to Section 2.3.1 whether
any offer has been accepted (substantially in the form of Exhibit 2.3.4B) or
rejected (substantially in the form of Exhibit 2.3.4C) and, if accepted, in what
principal amount and maturity. In the event the Company fails to provide such
notice to the New York Managing Agent by Noon (New York time) on the Competitive
Auction Facility Loan Closing Date, the New York Managing Agent may conclusively
presume that all such offers have been rejected by the Company and, in such
event, the New York Managing Agent shall, not later than 1:00 p.m. (New York
time), so notify each Lender which submitted an offer. Each time a Competitive
Auction Facility Loan is made, the New York Managing Agent shall send a notice
to the Company and each Lender in substantially the form of Exhibit 2.3.4D
specifying the principal amount and maturity date of such Competitive Auction
Facility Loan.
.4. Funding by the New York Managing Agent; Competitive Auction Facility
Loan Account, etc Funding by the New York Managing Agent; Competitive Auction
Facility Loan Account, etc. Each Competitive Auction Facility Loan by any Lender
will be made on the terms offered by such Lender and accepted by the Company in
accordance with this Section 2.3 at the New York Office on the applicable
Competitive Auction Facility Loan Closing Date by adding the amount thereof to
the applicable Competitive Auction Facility Loan Accounts and either (a) by
crediting the amount thereof to either the Three-Year Revolving Loan or the
364-Day Revolving Loan of the Company, as the Company specifies in its request
under Section 2.3.1, for the account of the Lenders in accordance with their
respective Percentage Interests therein or (b) if the Company shall have
specified by written notice to the New York Managing Agent, by crediting the
amount thereof to the general account of the Company with the New York Managing
Agent at the New York Office.
( ) Competitive Auction Facility Loan Account. The New York Managing Agent
will establish on its books separate loan accounts (the "Competitive Auction
Facility Loan Accounts") for each Lender extending a Competitive Auction
Facility Loan to the Company which the New York Managing Agent shall administer
as follows: (i) the New York Managing Agent shall debit to the pertinent
Competitive Auction Facility Loan Account the principal amount of all
Competitive Auction Facility Loans from time to time made by such Lender to the
Company and (ii) the New York Managing Agent shall credit to the pertinent
Competitive Auction Facility Loan Account of the Lender for whose benefit
payment is made, all payments made on account of the principal amount of
Indebtedness evidenced by the pertinent Competitive Auction Facility Loan
Account. Upon the request of any Lender, the Company shall issue a note in
substantially the form of Exhibit 2.3.5 (a "Competitive Auction Facility Note")
evidencing the Indebtedness evidenced by such Lender's Competitive Auction
Facility Loan Account.
(a) Maturity Date; Interest; Repayment. The stated maturity date of each
Competitive Auction Facility Loan shall be the applicable Competitive Auction
Facility Loan Maturity Date for such Competitive Auction Facility Loan. The
Company will pay interest on the principal amount of each Competitive Auction
Facility Loan at the applicable Competitive Auction Facility Rate (plus an
additional 2% per annum effective on the day either Managing Agent notifies the
Company that the interest rates hereunder are increasing as a result of the
occurrence and continuation of an Event of Default under Section 8.1.1 until the
earlier of such time as (x) such Event of Default is no longer continuing or (y)
such Event of Default is deemed pursuant to Section 8.3 no longer to exist) for
such Competitive Auction Facility Loan on each applicable Competitive Auction
Facility Loan Interest Payment Date, if any, and on the applicable Competitive
Auction Facility Loan Maturity Date for such Competitive Auction Facility Loan.
Upon the maturity of any Competitive Auction Facility Loan, so long as either
(i) no Event of Default then exists or (ii) the New York Managing Agent shall
have received the consent of all the Lenders if an Event of Default then exists,
the New York Managing Agent shall debit either the Three-Year Revolving Loan or
the 364-Day Revolving Loan of the Company, as the Company specified in its
request under Section 2.3.1, in the principal amount of such Competitive Auction
Facility Loan for the account of the Lenders in accordance with their respective
Percentage Interests and shall credit the same amount to the pertinent
Competitive Auction Facility Loan Account.
Prepayments in Respect of Competitive Auction Facility Loans. No
Competitive Auction Facility Loan may be prepaid by the Company.
Application of Proceeds.plication of Proceeds
Three-Year Revolving Loan. Subject to Section 2.4.4, the Company will apply
the proceeds of the Three-Year Revolving Loan for working capital and other
lawful corporate purposes of the Company and its Subsidiaries.
364-Day Revolving Loan. Subject to Section 2.4.4, the Company will apply
the proceeds of the 364-Day Revolving Loan for working capital and other lawful
corporate purposes of the Company and its Subsidiaries.
Competitive Auction Facility Loan. Subject to Section 2.4.4, the Company
will apply the proceeds of the Competitive Auction Facility Loan for working
capital and other lawful corporate purposes of the Company and its Subsidiaries.
Specifically Prohibited Applications. The Company will not, directly or
indirectly, apply any part of the proceeds of any extension of credit made
pursuant to the Credit Documents to purchase or to carry Margin Stock, or to any
transaction prohibited by the Foreign Trade Regulations or by the Credit
Documents or to any transaction prohibited by other Legal Requirements
applicable to the Lenders of which notice has been given by any Lender to the
Company.
Nature of Obligations of Lenders to Make Extensions of Credite Extensions
of Credit
Revolving Loans. The Lenders' obligations to make Revolving Loans under
this Agreement are several and are not joint or joint and several. If on any
Closing Date any Lender shall fail to perform its obligations under this
Agreement, the aggregate amount of Commitments to make the extensions of credit
under this Agreement shall be reduced by the amount of unborrowed Commitment of
the Lender so failing to perform and the Percentage Interests shall be
appropriately adjusted. Lenders that have not failed to perform their
obligations to make the extensions of credit contemplated by Section 2 may, if
any such Lender so desires, assume, in such proportions as such Lenders may
agree, the obligations of any Lender who has so failed and the Percentage
Interests shall be appropriately adjusted. The provisions of this Section 2.5
shall not affect the rights of the Company against any Lender failing to perform
its obligations hereunder.
Competitive Auction Facility Loans. The obligation to make a Competitive
Auction Facility Loan shall be an obligation solely of the Lenders which offered
to make such loan in accordance with Section 2.3 and whose offers were accepted
thereunder.
Extension of Final Maturity Dates of the Revolving Loan.of the Revolving
Loan
Three-Year Final Maturity Date. At the request of the Company (the first
request to occur not earlier than 60 days prior to the second anniversary of the
Initial Closing Date) and with the approval of all the Lenders, the Three-Year
Final Maturity Date may be extended up to two times for additional periods of up
to one year each.
364-Day Final Maturity Date. At the request of the Company and with the
approval of all the Lenders, the 364-Day Final Maturity Date may be extended,
each such succeeding 364-Day Final Maturity Date to be no later than the date
which is 364 days after the preceding 364-Day Final Maturity Date.
Interest; Eurodollar Pricing Options; Fees.ricing Options; Fees
Interest on Revolving Loan. The Revolving Loan shall accrue and bear
interest at a rate per annum which shall at all times equal the Applicable Rate.
Prior to any stated or accelerated maturity of the Revolving Loan, the Company
will, on each Payment Date, pay the accrued and unpaid interest on the portion
of the Revolving Loan which was not subject to a Eurodollar Pricing Option. On
the last day of each Eurodollar Interest Period or on any earlier termination of
any Eurodollar Pricing Option, the Company will pay the accrued and unpaid
interest on the portion of the Revolving Loan which was subject to the
Eurodollar Pricing Option which expired or terminated on such date. In the case
of any Eurodollar Interest Period longer than three months, the Company will
also pay the accrued and unpaid interest on the portion of the Revolving Loan
subject to the Eurodollar Pricing Option having such Eurodollar Interest Period
at three-month intervals, the first such payment to be made on the last Banking
Day of the three-month period which begins on the first day of such Eurodollar
Interest Period. On the stated or any accelerated maturity of the Revolving
Loan, the Company will pay all accrued and unpaid interest on the Revolving
Loan, including any accrued and unpaid interest on any portion of the Revolving
Loan which is subject to a Eurodollar Pricing Option. Upon the occurrence and
during the continuance of an Event of Default, the Lenders may require accrued
interest to be payable on demand or at regular intervals more frequent than each
Payment Date. All payments of interest with respect to the Revolving Loan shall
be made to the New York Managing Agent for the account of each Lender in
accordance with such Lender's Percentage Interest.
Interest on Competitive Auction Facility Loans. The Company will pay
interest on each Competitive Auction Facility Loan to the New York Managing
Agent for the benefit of the applicable Lender at the rate and on the dates
specified in Section 2.3.5(b).
Eurodollar Pricing Options.ollar Pricing Options
Election of Eurodollar Pricing Options. Subject to all of the terms and
conditions hereof and so long as no Default exists, the Company may from time to
time, by irrevocable notice to the New York Managing Agent actually received not
less than three Banking Days prior to the commencement of the Eurodollar
Interest Period selected in such notice, elect to have such portion of the
Revolving Loan as the Company may specify in such notice accrue and bear
interest during the Eurodollar Interest Period so selected at the Applicable
Rate computed on the basis of the Eurodollar Rate. In the event the Company at
any time fails to elect a Eurodollar Pricing Option under this Section 3.3.1 for
any portion of the Revolving Loan, then such portion of the Revolving Loan will
accrue and bear interest at the Applicable Rate based on the Base Rate. No
election of a Eurodollar Pricing Option shall become effective:
( ) if, prior to the commencement of any such Eurodollar Interest Period,
the New York Managing Agent determines that (i) the electing or granting of the
Eurodollar Pricing Option in question would violate a Legal Requirement,
(ii) Eurodollar deposits in an amount comparable to the principal amount of the
Revolving Loan as to which such Eurodollar Pricing Option has been elected and
which have a term corresponding to the proposed Eurodollar Interest Period are
not readily available in the inter-bank Eurodollar market, or (iii) by reason of
circumstances affecting the inter-bank Eurodollar market, adequate and
reasonable methods do not exist for ascertaining the interest rate applicable to
such deposits for the proposed Eurodollar Interest Period; or
(a) if any Lender shall have advised the New York Managing Agent by
telephone or otherwise at or prior to noon (New York time) on the second Banking
Day prior to the commencement of such proposed Eurodollar Interest Period (and
shall have subsequently confirmed in writing) that, after reasonable efforts to
determine the availability of such deposits, such Lender reasonably anticipates
that deposits in an amount equal to the Percentage Interest of such Lender in
the portion of the Revolving Loan as to which such Eurodollar Pricing Option has
been elected and which have a term corresponding to the Eurodollar Interest
Period in question will not be offered in the inter-bank Eurodollar market to
such Lender.
Notice to Lenders and Company. The New York Managing Agent will promptly
inform each Lender (by telephone or otherwise) of each notice received by it
from the Company pursuant to Section 3.3.1 and of the Eurodollar Interest Period
specified in such notice. Upon determination by the New York Managing Agent of
the Eurodollar Rate for such Eurodollar Interest Period or in the event such
election shall not become effective, the New York Managing Agent will promptly
notify the Company and each Lender (by telephone or otherwise) of the Eurodollar
Rate so determined or why such election did not become effective, as the case
may be.
Selection of Eurodollar Interest Periods. Eurodollar Interest Periods shall
be selected so that:
( ) the portion of the Revolving Loan subject to any Eurodollar Pricing
Option shall be at least $2,500,000 and otherwise an integral multiple of
$500,000;
(a) no more than ten Eurodollar Pricing Options shall be outstanding at any
one time; and
(b) no Eurodollar Interest Period with respect to any part of the Revolving
Loan subject to a Eurodollar Pricing Option shall expire later than the Final
Maturity Date.
Additional Interest. If any portion of the Revolving Loan subject to a
Eurodollar Pricing Option is repaid, or any Eurodollar Pricing Option is
terminated for any reason (including acceleration of maturity), on a date which
is prior to the last Banking Day of the Eurodollar Interest Period applicable to
such Eurodollar Pricing Option, the Company will pay to the New York Managing
Agent for the account of each Lender in accordance with such Lender's Percentage
Interest, in addition to any amounts of interest otherwise payable hereunder, an
amount equal to the present value (calculated in accordance with this Section
3.3.4) of interest for the unexpired portion of such Eurodollar Interest Period
on the portion of the Revolving Loan so repaid, or as to which a Eurodollar
Pricing Option was so terminated, at a per annum rate equal to the excess, if
any, of (a) the rate applicable to such Eurodollar Pricing Option minus (b) the
rate of interest obtainable by the New York Managing Agent upon the purchase of
debt securities customarily issued by the Treasury of the United States of
America which have a maturity date approximating the last Banking Day of such
Eurodollar Interest Period. The present value of such additional interest shall
be calculated by discounting the amount of such interest for each day in the
unexpired portion of such Eurodollar Interest Period from such day to the date
of such repayment or termination at a per annum interest rate equal to the
interest rate determined pursuant to clause (b) of the preceding sentence, and
by adding all such amounts for all such days during such period. The
determination by the New York Managing Agent of such amount of interest shall,
in the absence of manifest error, be conclusive. For purposes of this
Section 3.3.4, if any portion of the Revolving Loan which was to have been
subject to a Eurodollar Pricing Option is not outstanding on the first day of
the Eurodollar Interest Period applicable to such Eurodollar Pricing Option
other than for reasons described in Section 3.3.1, the Company shall be deemed
to have terminated such Eurodollar Pricing Option.
Violation of Legal Requirements. If any Legal Requirement shall prevent any
Lender from funding or maintaining through the purchase of deposits in the
inter-bank Eurodollar market any portion of the Revolving Loan subject to a
Eurodollar Pricing Option or otherwise from giving effect to such Lender's
obligations as contemplated by Section 3.3, (a) the New York Managing Agent may
by notice to the Company terminate all of the affected Eurodollar Pricing
Options, (b) the portion of the Revolving Loan subject to such terminated
Eurodollar Pricing Options shall immediately bear interest thereafter at the
Applicable Rate computed on the basis of the Base Rate and (c) the Company shall
make any payment required by Section 3.3.4.
Funding Procedure. The Lenders may fund any portion of the Revolving Loan
subject to a Eurodollar Pricing Option out of any funds available to the
Lenders. Regardless of the source of the funds actually used by any of the
Lenders to fund any portion of the Revolving Loan subject to a Eurodollar
Pricing Option, however, all amounts payable hereunder, including the interest
rate applicable to any such portion of the Revolving Loan and the amounts
payable under Section 3.3.4 and 3.5, shall be computed as if each Lender had
actually funded such Lender's Percentage Interest in such portion of the
Revolving Loan through the purchase of deposits in such amount of the type by
which the Eurodollar Basic Reference Rate was determined with a maturity the
same as the applicable Eurodollar Interest Period relating thereto and through
the transfer of such deposits from an office of the Lender having the same
location as the Eurodollar Office to one of such Lender's offices in the United
States of America.
Facility Fees. In consideration of the Lenders' commitments to make the
extensions of credit provided for in Section 2.1, the Company will pay to the
New York Managing Agent for the account of the Lenders in accordance with the
Lenders' respective Commitments in the Three-Year Revolving Loan, on each
Payment Date and on the Three-Year Final Maturity Date, the applicable Facility
Fees. In consideration of the Lenders' commitments to make the extensions of
credit provided for in Section 2.2, the Company will pay to the New York
Managing Agent for the account of the Lenders in accordance with the Lenders'
respective commitments in the 364-Day Revolving Loan, on each Payment Date and
on the 364-Day Final Maturity Date, the applicable Facility Fees.
Changes in Circumstances; Yield Protection.ces; Yield Protection
Reserve Requirements, etc. If any Legal Requirement shall (a) impose,
modify, increase or deem applicable any insurance assessment, reserve, special
deposit or similar requirement against any Funding Liability, (b) impose,
modify, increase or deem applicable any other requirement or condition with
respect to any Funding Liability, or (c) change the basis of taxation of Funding
Liabilities (other than changes in the rate of taxes measured by the overall net
income of such Lender) and the effect of any of the foregoing shall be to
increase the cost to any Lender of issuing, making, funding or maintaining its
respective Percentage Interest in any portion of the Revolving Loan subject to a
Eurodollar Pricing Option, to reduce the amounts received or receivable by such
Lender under this Agreement or to require such Lender to make any payment or
forego any amounts otherwise payable to such Lender under this Agreement (other
than any Tax or any reserves that are included in computing the Eurodollar
Reserve Rate), then such Lender may claim compensation from the Company under
Section 3.5.5.
Taxes. All payments of the Credit Obligations shall be made without set-off
or counterclaim and free and clear of any deductions, including deductions for
Taxes, unless the Company is required by law to make such deductions. If (a) any
Lender shall be subject to any Tax with respect to any payment of the Credit
Obligations or its obligations hereunder or (b) the Company shall be required to
withhold or deduct any Tax on any payment on the Credit Obligations, then such
Lender may claim compensation from the Company under Section 3.5.5. Whenever
Taxes must be withheld by the Company with respect to any payments of the Credit
Obligations, the Company shall promptly furnish to the New York Managing Agent
for the account of the applicable Lender official receipts (to the extent that
the relevant governmental authority delivers such receipts) evidencing payment
of any such Taxes so withheld. If the Company fails to pay any such Taxes when
due or fails to remit to the New York Managing Agent for the account of the
applicable Lender the required receipts evidencing payment of any such Taxes so
withheld or deducted, the Company shall indemnify the affected Lender for any
incremental Taxes and interest or penalties that may become payable by such
Lender as a result of any such failure. In the event any Lender receives a
refund of any Taxes for which it has received payment from the Company under
this Section 3.5.2, such Lender shall promptly pay the amount of such refund to
the Company, together with any interest thereon actually earned by such Lender.
Capital Adequacy. If any Lender shall determine that compliance by such
Lender with any Legal Requirement regarding capital adequacy of banks or bank
holding companies has or would have the effect of reducing the rate of return on
the capital of such Lender and its Affiliates as a consequence of such Lender's
Commitment to make the extensions of credit contemplated hereby, or such
Lender's maintenance of the extensions of credit contemplated hereby, to a level
below that which such Lender could have achieved but for such compliance (taking
into consideration the policies of such Lender and its Affiliates with respect
to capital adequacy immediately before such compliance and assuming that the
capital of such Lender and its Affiliates was fully utilized prior to such
compliance) by an amount deemed by such Lender to be material, then such Lender
may claim compensation from the Company under Section 3.5.5.
Regulatory Changes. If any Lender shall determine that (a) any change in
any Legal Requirement (including any new Legal Requirement) after the date
hereof shall directly or indirectly (i) reduce the amount of any sum received or
receivable by such Lender with respect to the Revolving Loan or the return to be
earned by such Lender on the Revolving Loan, (ii) impose a cost on such Lender
or any Affiliate of such Lender that is attributable to the making or
maintaining of, or such Lender's Commitment to make, its portion of the
Revolving Loan, or (iii) require such Lender or any Affiliate of such Lender to
make any payment on, or calculated by reference to, the gross amount of any
amount received by such Lender under any Credit Document (other than Taxes or
income or franchise taxes), and (b) such reduction, increased cost or payment
shall not be fully compensated for by an adjustment in the Applicable Rate, then
such Lender may claim compensation from the Company under Section 3.5.5.
Compensation Claims. Within 15 days after the receipt by the Company of a
certificate from any Lender setting forth why it is claiming compensation under
this Section 3.5 and computations (in reasonable detail) of the amount thereof,
the Company shall pay to such Lender such additional amounts as such Lender sets
forth in such certificate as sufficient fully to compensate it on account of the
foregoing provisions of this Section 3.5, together with interest on such amount
from the 15th day after receipt of such certificate until payment in full
thereof at the Overdue Reimbursement Rate. The determination by such Lender of
the amount to be paid to it and the basis for computation thereof hereunder
shall, in the absence of manifest error, be conclusive. In determining such
amount, such Lender may use any reasonable averaging and attribution methods.
The Company shall be entitled to replace any such Lender in accordance with
Section 11.3.
Mitigation. Each Lender shall take such commercially reasonable steps as it
may determine are not disadvantageous to it, including changing lending offices
to the extent feasible, in order to reduce amounts otherwise payable by the
Company to such Lender pursuant to Sections 3.3.4 and 3.5 or to make Eurodollar
Pricing Options available under Sections 3.3.1 and 3.3.5. In addition, the
Company shall not be responsible for costs (a) under Section 3.5 arising more
than 90 days prior to receipt by the Company of the certificate from the
affected Lender pursuant to such Section 3.5 or (b) under Section 3.3.4 arising
from the termination of Eurodollar Pricing Options more than 90 days prior to
the demand by the New York Managing Agent for payment under Section 3.3.4.
Computations of Interest and Fees. For purposes of this Agreement, interest
and Facility Fees (and any other amount expressed as interest or such fees)
shall be computed on the basis of a 360-day year for actual days elapsed, except
for interest on Base Rate Advances for so long as the Base Rate is applicable,
which shall be computed on the basis of a 365- or 366-day year for actual days
elapsed. If any payment required by this Agreement becomes due on any day that
is not a Banking Day, such payment shall, except as otherwise provided in the
Eurodollar Interest Period, be made on the next succeeding Banking Day. If the
due date for any payment of principal is extended as a result of the immediately
preceding sentence, interest shall be payable for the time during which payment
is extended at the Applicable Rate.
Payment. 3. Payment
Payment at Maturity. Except as set forth in Section 2.3.5, on each
Competitive Auction Facility Loan Maturity Date, the Company will pay to the New
York Managing Agent for credit to the applicable Competitive Auction Facility
Loan Account the outstanding principal amount of its Competitive Auction
Facility Loan maturing on such date, together with all accrued and unpaid
interest with respect thereto. On the Three-Year Final Maturity Date or any
accelerated maturity of the Three-Year Revolving Loan, the Company will pay to
the New York Managing Agent for the account of the Lenders an amount equal to
the Three-Year Revolving Loan then due, together with all accrued and unpaid
interest and fees with respect thereto. On the 364-Day Final Maturity Date or
any accelerated maturity of the 364-Day Revolving Loan, the Company will pay to
the New York Managing Agent for the account of the Lenders an amount equal to
the 364-Day Revolving Loan then due, together with all accrued and unpaid
interest and fees with respect thereto.
Contingent Required Prepayments for Excess Credit Exposure. If at any time
the Three-Year Revolving Loan exceeds the limits set forth in Section 2.1 or the
364-Day Revolving Loan exceeds the limits set forth in Section 2.2, the Company
shall within one Banking Day pay the amount of such excess to the New York
Managing Agent for the account of the Lenders.
Voluntary Prepayments. In addition to the prepayments required by
Section 4.2, the Company may from time to time prepay all or any portion of the
Three-Year Revolving Loan or the 364-Day Revolving Loan (in an amount of at
least $2,500,000 and otherwise any integral multiple of $1,000,000 that is in
excess of $2,000,000, or such lesser amount as is then outstanding), without
premium or penalty of any type (except as provided in Section 3.3.4 with respect
to the early termination of Eurodollar Pricing Options). The Company shall give
each Managing Agent in the case of prepayments of portions of the Revolving Loan
bearing interest at the Base Rate, notice on or prior to 11:00 a.m., New York
City time, on the Banking Day of such prepayment, and in the case of prepayments
of portions of the Revolving Loan bearing interest at a rate determined by
reference to the Eurodollar Rate, at least three Banking Days prior notice of
its intention to prepay, specifying the date of prepayment, the total amount of
the Three-Year Revolving Loan or the 364-Day Revolving Loan to be prepaid on
such date and the amount of interest to be paid with such prepayment, which
interest shall be all accrued interest on the amount prepaid up to the date of
prepayment and shall include any payments required by Section 3.3.4. Competitive
Auction Facility Loans may not be prepaid under this Section 4.3.
Reborrowing; Application of Payments, etc.tion of Payments, etc.
Reborrowing. The amounts of the Three-Year Revolving Loan prepaid pursuant
to Section 4.2 or 4.3 may be reborrowed from time to time prior to the
Three-Year Final Maturity Date in accordance with Section 2.1, subject to the
limits and conditions set forth therein. The amounts of the 364-Day Revolving
Loan prepaid pursuant to Section 4.2 or 4.3 may be reborrowed from time to time
prior to the 364-Day Final Maturity Date in accordance with Section 2.2, subject
to the limits and conditions set forth therein.
Order of Application. Any prepayment of the Three-Year Revolving Loan
pursuant to Section 4.2 or 4.3 shall be applied first to the portion of the
Three-Year Revolving Loan not then subject to Eurodollar Pricing Options, then
the balance of any such prepayment shall be applied to the portion of the
Three-Year Revolving Loan then subject to Eurodollar Pricing Options, in the
chronological order of the respective maturities thereof (or as the Company may
otherwise specify in writing), together with any payments required by Section
3.3.4. Any prepayment of the 364-Day Revolving Loan pursuant to Section 4.2 or
4.3 shall be applied first to the portion of the 364-Day Revolving Loan not then
subject to Eurodollar Pricing Options, then the balance of any such prepayment
shall be applied to the portion of the 364-Day Revolving Loan then subject to
Eurodollar Pricing Options, in the chronological order of the respective
maturities thereof (or as the Company may otherwise specify in writing),
together with any payments required by Section 3.3.4.
Payments for Lenders. All payments of principal under the Revolving Loan
shall be made to the New York Managing Agent for the account of the Lenders in
accordance with the Lenders' respective Percentage Interests.
Conditions to Extending Credit. to Extending Credit
Conditions on Initial Closing Date. The obligations of the Lenders to make
any extension of credit pursuant to Section 2 shall be subject to the
satisfaction, on or before the Initial Closing Date, of the conditions set forth
in this Section 5.1 as well as the further conditions in Section 5.2. If the
conditions set forth in this Section 5.1 are not met on or prior to the Initial
Closing Date, the Lenders shall have no obligation to make any extensions of
credit hereunder.
Officer's Certificate. The representations and warranties contained in
Section 7 shall be true and correct on and as of the Initial Closing Date with
the same force and effect as though made on and as of such date (except as to
any representation or warranty which is limited to a specific earlier date); no
Default shall exist on the Initial Closing Date; and the Company shall have
furnished to the Managing Agents a certificate to these effects in substantially
the form of Exhibit 5.1.1, signed by a Financial Officer.
Revolving Notes. The Company shall have duly executed and delivered to the
New York Managing Agent a Three-Year Revolving Note and a 364-Day Revolving Note
for each Lender.
Payment of Fees. The Company shall have paid to the New York Managing Agent
all fees required to be paid on or prior to the Initial Closing Date by the
separate agreement between each of the Managing Agents and the Company dated
September 11, 1996 (the "Fee Letter").
Legal Opinions. On the Initial Closing Date, the Lenders shall have
received from the following counsel their respective opinions with respect to
the transactions contemplated by the Credit Documents, which opinions shall be
in form and substance satisfactory to the Required Lenders:
( ) LeBoeuf, Lamb, Greene & MacRae, L.L.P., special counsel for the
Company, as to matters the Lenders may reasonably request.
(a) Corporate counsel of the Company, as to matters the Lenders may
reasonably request.
(b) Ropes & Gray, special counsel for the Managing Agents, as to matters
the Managing Agents may reasonably request.
The Company consents to the furnishing by its counsel of the foregoing
opinions.
Termination of Prior Credit Agreements. The Company shall have paid in full
all principal, interest and other accrued and outstanding amounts under the
Prior Credit Agreements, all commitments to extend further credit under the
Prior Credit Agreements shall have been terminated, all Liens, if any, securing
amounts owing under the Prior Credit Agreements shall have been released and the
Prior Credit Agreements shall have become terminated and of no further force or
effect (except for indemnity and similar provisions, if any, that by their terms
survive the termination of the Prior Credit Agreements).
Maine Public Utilities Commission. The Boston Managing Agent shall have
received certified or attested copies of the Orders of the State of Maine Public
Utilities Commission and any other regulatory authorities having jurisdiction,
authorizing all borrowings hereunder, which shall be in full force and effect
and not subject to appeal or rehearing.
Proper Proceedings. This Agreement, each other Credit Document and the
transactions contemplated hereby and thereby shall have been authorized by all
necessary corporate or other proceedings. All necessary consents, approvals and
authorizations of any governmental or administrative agency or any other Person
of any of the transactions contemplated hereby or by any other Credit Document
shall have been obtained and shall be in full force and effect; provided,
however, that a waiver of jurisdiction by the Connecticut Department of Public
Utility Control need not have been obtained on or prior to the Initial Closing
Date.
General. All legal and corporate proceedings in connection with the
transactions contemplated by this Agreement shall be satisfactory in form and
substance to the Managing Agents and the Managing Agents shall have received
copies of all documents, including certified copies of the Charter (Capital
Stock Provisions) and By-Laws of the Company, records of corporate proceedings
(including certified copies of the resolutions of the Board of Directors, or the
Executive and Finance Committee thereof, authorizing the execution, delivery and
performance of this Agreement and the Notes), certificates as to signatures and
incumbency of officers and opinions of counsel, which either Managing Agent may
have reasonably requested in connection therewith, such documents where
appropriate to be certified by proper corporate or governmental authorities.
Conditions to Each Extension of Credit. In addition to the conditions set
forth in Section 5.1 being met on the Initial Closing Date, the obligations of
the Lenders to make any extension of credit pursuant to Section 2 shall be
subject to the satisfaction, on or before the Closing Date for such extension of
credit, of the following conditions:
Bring-Down of Representations and Warranties. The representations and
warranties contained in Section 7 (excluding Sections 7.4(a) and 7.7) shall be
true and correct on and as of such Closing Date with the same force and effect
as though made on and as of such date (except as to any representation or
warranty which is limited to a specific earlier date); no Default shall exist on
such Closing Date prior to or immediately after giving effect to the requested
extension of credit; and the Company's making of a borrowing request shall be
deemed to constitute a representation on which the Managing Agents and the
Lenders may rely that no Default exists on such Closing Date and that such
representations and warranties are true and correct on and as of such Closing
Date.
Material Adverse Change. On any Closing Date on which the aggregate
principal amount outstanding under either Revolving Loan is to be increased, no
Material Adverse Change shall have occurred since the Initial Closing Date and
the representations and warranties contained in Section 7.7 shall be true and
correct on and as of such Closing Date; and the Company's making of a borrowing
request shall be deemed to constitute a representation on which the Managing
Agents and the Lenders may rely that no Material Adverse Change shall have
occurred since the Initial Closing Date and that the representations and
warranties contained in Section 7.7 are true and correct on as of such Closing
Date.
Legality, etc. The making of the requested extension of credit shall not
(a) subject any Lender to any penalty or special tax (other than a Tax for which
the Company is required to reimburse the Lenders under Section 3.5), (b) be
prohibited by any Legal Requirement or (c) violate any credit restraint program
of the executive branch of the government of the United States of America, the
Board of Governors of the Federal Reserve System or any other governmental or
administrative agency so long as any Lender reasonably believes that compliance
therewith is in the best interests of such Lender.
Connecticut Waiver. On or prior to such Closing Date, the Company shall
have received a waiver of jurisdiction from the Connecticut Department of Public
Utility Control waiving jurisdiction over the Company's authority to borrow
hereunder; and corporate counsel of the Company shall have authorized the
deletion from the opinion rendered pursuant to Section 5.1.4(b) hereof of any
qualification relating to the failure to have obtained such waiver on or prior
to the Initial Closing Date.
General Covenants. The Company covenants that, until all of the Credit
Obligations (other than indemnities, expense and similar obligations that
survive the termination of this Agreement) shall have been paid in full and
until the Lenders' commitments to extend credit under this Agreement and any
other Credit Document shall have been irrevocably terminated, the Company and
its Subsidiaries will comply with the following provisions:
Taxes and Other Charges; Accounts Payable.ges; Accounts Payable
Taxes and Other Charges. Each of the Company and its Significant
Subsidiaries shall duly pay and discharge, or cause to be paid and discharged,
before the same become in arrears, all taxes, assessments and other governmental
charges imposed upon such Person and its properties, sales or activities, or
upon the income or profits therefrom, as well as all claims for labor, materials
or supplies which if unpaid might by law become a Lien upon any of its property;
provided, however, that any such tax, assessment, charge or claim need not be
paid if (a) the validity or amount thereof shall at the time be contested in
good faith by appropriate proceedings or actions and if such Person shall, if
required by GAAP, have set aside on its books adequate reserves with respect
thereto, it being understood that each of the Company and its Subsidiaries shall
pay or bond, or cause to be paid or bonded, all such taxes, assessments, charges
or other governmental claims promptly upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefor (except to the
extent such proceedings have been dismissed or stayed) or (b) failure to comply
has not resulted, and is not likely to result, in any Material Adverse Change.
Accounts Payable. Each of the Company and its Significant Subsidiaries
shall promptly pay when due, or in conformity with customary trade terms, all
accounts payable incident to the operations of such Person not referred to in
Section 6.1.1; provided, however, that any such accounts payable need not be
paid if (a) the validity or amount thereof shall at the time be contested in
good faith and if such Person shall, if required by GAAP, have set aside on its
books adequate reserves with respect thereto or (b) failure to comply has not
resulted, and is not likely to result, in any Material Adverse Change.
Conduct of Business, etc.duct of Business, etc.
Types of Business. The Company shall engage only in the businesses of (a)
electric power generation, transmission and/or distribution and (b) other
businesses related to those set forth in the foregoing clause (a) that are
immaterial in relation to the foregoing businesses. The Subsidiaries of the
Company shall engage only in the businesses described in the preceding sentence,
other energy-related activities and other businesses that are immaterial in
relation to the foregoing businesses.
Maintenance of Properties. Each of the Company and its Significant
Subsidiaries:
( ) shall keep its properties in such repair, working order and condition,
and shall from time to time make such repairs, replacements, additions and
improvements thereto, as are necessary for the efficient operation of its
businesses and shall comply at all times in all material respects with all
material franchises, licenses and leases to which it is party so as to prevent
any loss or forfeiture thereof or thereunder, except where (i) compliance is at
the time being contested in good faith by appropriate proceedings or actions or
(ii) failure to comply has not resulted, and is not likely to result, in the
aggregate in any Material Adverse Change; and
(a) shall do all things necessary to preserve, renew and keep in full force
and effect its legal existence; provided, however, that this Section 6.2.2(b)
shall not prevent the merger, consolidation or liquidation of Significant
Subsidiaries permitted by Section 6.10.
Statutory Compliance. Each of the Company and its Significant Subsidiaries
shall comply in all material respects with all valid and applicable statutes,
laws, ordinances, zoning and building codes and other rules and regulations of
the United States of America, of the states and territories thereof and their
counties, municipalities and other subdivisions and of any foreign country or
other jurisdictions applicable to such Person, except where (a) compliance
therewith shall at the time be contested in good faith by appropriate
proceedings or actions or (b) failure so to comply has not resulted, and is not
likely to result, in the aggregate in any Material Adverse Change.
Amendments and Supplements. The General and Refunding Mortgage Indenture
shall not be amended so as to increase the aggregate principal amount of bonds
which may be outstanding thereunder at any one time or so as to include
financial covenants or events of default that are more restrictive than those
included in the Credit Documents. In any transaction providing for Indebtedness
in excess of $1,000,000, the Company shall not enter into or become bound by any
credit agreement or other document or instrument which (i) contains financial
covenants or events of default that are more restrictive or onerous on the
Company than those covenants or events of default contained in this Agreement or
(ii) provides for, or permits the exercise of, remedies upon the occurrence of
an event of default thereunder which are not provided for in, or permitted to be
exercised under or in respect of, this Agreement (each such covenant, event of
default and provision described in the preceding clauses (i) and (ii) being
herein called a "More Favorable Provision"), unless, prior to or simultaneously
with the Company entering into or becoming bound by such credit agreement or
other document or instrument, (x) the Company executes and delivers to the
Lenders an amendment to this Agreement and such other documents and instruments
as the Managing Agents shall reasonably request, in each case reasonably
satisfactory in form and substance to the Managing Agents, which modify the
provisions of this Agreement and the terms of the transactions contemplated
hereby and by the Credit Documents so as to give the Lenders the benefit of each
More Favorable Provision, and (y) the Company furnishes to the Lenders a copy of
such credit agreement, or other document or instrument.
Insurance. Each of the Company and its Significant Subsidiaries shall
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.
Financial Statements and Reports. Each of the Company and its Subsidiaries
shall maintain a system of accounting in which correct entries shall be made of
all transactions in relation to their business and affairs in accordance with
generally accepted accounting practice. The fiscal year of the Company and its
Subsidiaries shall end on December 31 in each year and the fiscal quarters of
the Company and its Subsidiaries shall end on March 31, June 30, September 30
and December 31 in each year.
Annual Reports. The Company shall furnish to the Lenders as soon as
available, and in any event within 100 days after the end of each fiscal year,
the Consolidated balance sheets of the Company and its Subsidiaries as at the
end of such fiscal year, the Consolidated statements of income and Consolidated
statements of changes in shareholders' equity and of cash flows of the Company
and its Subsidiaries for such fiscal year (all in reasonable detail) and
together, in the case of Consolidated financial statements, with comparative
figures for the immediately preceding fiscal year, all accompanied by:
( ) Reports of Coopers & Lybrand LLP (or, if they cease to be auditors of
the Company and its Subsidiaries, other independent certified public accountants
of recognized national standing selected by the Company), containing no material
qualification, to the effect that they have audited the foregoing Consolidated
financial statements in accordance with generally accepted auditing standards
and that such Consolidated financial statements present fairly, in all material
respects, the financial position of the Company and its Subsidiaries covered
thereby at the dates thereof and the results of their operations for the periods
covered thereby in conformity with GAAP.
(a) The statement of such accountants that they have caused this Agreement
to be reviewed and that in the course of their audit of the Company and its
Subsidiaries no facts have come to their attention that cause them to believe
that any Default exists and in particular that they have no knowledge of any
Default under Sections 6.5 through 6.13 or, if such is not the case, specifying
such Default and the nature thereof. This statement is furnished by such
accountants with the understanding that the examination of such accountants
cannot be relied upon to give such accountants knowledge of any such Default
except as it relates to accounting or auditing matters within the scope of their
audit.
(b) A certificate of the Company signed by a Financial Officer to the
effect that such officer has caused this Agreement to be reviewed and has no
knowledge of any Default, or if such officer has such knowledge, specifying such
Default and the nature thereof, and what action the Company has taken, is taking
or proposes to take with respect thereto and including computations showing
compliance by the Company for and as of the end of such year with the
requirements of Section 6.5.
(c) Supplements to Exhibit 7.3 showing any material changes in the
information set forth in such exhibit not previously furnished to the Lenders in
writing, as well as any material changes in the Charter, Bylaws or incumbency of
officers of the Company from those previously certified to the Managing Agents.
Quarterly Reports. The Company shall furnish to the Lenders as soon as
available and, in any event, within 55 days after the end of each of the first
three fiscal quarters of the Company, the internally prepared Consolidated
balance sheets of the Company and its Subsidiaries as of the end of such fiscal
quarter, the Consolidated statements of income and Consolidated statements of
cash flows of the Company and its Subsidiaries for such fiscal quarter and for
the portion of the fiscal year then ended (all in reasonable detail) and
together, in the case of Consolidated statements, with comparative figures for
the same period in the preceding fiscal year, all accompanied by:
( ) A certificate of the Company signed by a Financial Officer to the
effect that such financial statements have been prepared in accordance with GAAP
and present fairly, in all material respects, the financial position of the
Company and its Subsidiaries covered thereby at the dates thereof and the
results of their operations for the periods covered thereby, subject only to
normal year-end audit adjustments and the addition of footnotes.
(a) A certificate of the Company signed by a Financial Officer to the
effect that such officer has caused this Agreement to be reviewed and has no
knowledge of any Default, or if such officer has such knowledge, specifying such
Default and the nature thereof and what action the Company has taken, is taking
or proposes to take with respect thereto and including computations showing
compliance by the Company for and as of the end of such quarter with the
requirements of Section 6.5.
(b) Supplements to Exhibit 7.3 showing any material changes in the
information set forth in such exhibit not previously furnished to the Lenders in
writing, as well as any material changes in the Charter, Bylaws or incumbency of
officers of the Company from those previously certified to the Managing Agents.
Other Reports. The Company shall promptly furnish to the Lenders:
( ) As soon as prepared and released, the Company's "Financial
Perspective".
(a) All reports furnished generally to the shareholders of the Company.
(b) Such effective registration statements, definitive proxy statements and
regular or periodic reports, including Forms S-1, S-2, S-3, S-4, 10-K, 10-Q and
8-K, as may be filed by the Company or any of its Subsidiaries with the
Securities and Exchange Commission (other than 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
Company or any Subsidiary by Persons other than the Company or such Subsidiary).
(c) Any 90-day letter or 30-day letter from the federal Internal Revenue
Service (or the equivalent notice received from state or other taxing
authorities) asserting material tax deficiencies against the Company or any of
its Subsidiaries.
Notice of Litigation, Defaults, etc. The Company shall promptly furnish to
the Lenders notice (which may be in the form of information in a document
provided by the Company under Section 6.4.3 or other provisions hereof) of any
litigation or any administrative or arbitration proceeding (a) which creates a
material risk of resulting, after giving effect to any applicable insurance, in
the payment by the Company and its Subsidiaries of more than $10,000,000 or (b)
which results, or is likely to result, in a Material Adverse Change. Promptly
upon acquiring knowledge thereof, the Company shall notify the Lenders of the
existence of any Default, specifying the nature thereof and what action the
Company or any Subsidiary has taken, is taking or proposes to take with respect
thereto. Promptly upon acquiring knowledge thereof, the Company shall notify the
Lenders of the existence of any Material Adverse Change, specifying the nature
thereof and what action the Company or any Subsidiary has taken, is taking or
proposes to take with respect thereto.
ERISA Reports. The Company shall furnish to the Managing Agents within 30
days of the Company's preparation of, or receipt of, as applicable, the
following items with respect to any Plan:
( ) any request for a waiver of the minimum funding standards or an
extension of an amortization period, in each case under section 412 of the Code
or section 302 of ERISA,
(a) any notice to the PBGC of a reportable event (as defined in section
4043 of ERISA), unless the notice requirement with respect thereto has been
waived by regulation,
(b) any notice received by any ERISA Group Person that the PBGC has
instituted or intends to institute proceedings to terminate any Plan pursuant to
section 4042 of ERISA, or that any Multiemployer Plan is insolvent or in
reorganization and, in either or both cases, in connection therewith, an ERISA
Group Person has incurred or could reasonably be expected to incur material
liability,
(c) notice of the intent to terminate any Plan other than pursuant to
section 4041(b) of ERISA, and
(d) notice of the intention of any ERISA Group Person to withdraw, in whole
or in part, from any Multiemployer Plan and, in connection therewith, that such
ERISA Group Person could reasonably be expected to incur material liability.
Other Information; Audit. From time to time at reasonable intervals upon
request of any authorized officer of any Lender, each of the Company and its
Subsidiaries shall furnish to the Lenders such other information regarding the
business, assets, financial condition, income or prospects of the Company and
its Subsidiaries as such officer may reasonably request, including copies of
requested tax returns, licenses, agreements, leases and instruments to which any
of the Company or its Subsidiaries is party. The Lenders' authorized officers
and representatives shall have the right during normal business hours upon
reasonable notice and at reasonable intervals to examine the books and records
of the Company and its Subsidiaries, to make copies and notes therefrom for the
purpose of ascertaining compliance with or obtaining enforcement of this
Agreement or any other Credit Document.
Certain Financial Tests.rtain Financial Tests
Consolidated Net Worth. Consolidated Net Worth shall at all times equal or
exceed the sum of (a) $450,000,000 plus (b) the amount by which (i) 100% of the
proceeds to the Company (net of issuance costs) after the Initial Closing Date
resulting from any Equity Transaction of the Company and its Subsidiaries as
determined in accordance with GAAP by Coopers & Lybrand LLP (or, if they cease
to be auditors of the Company and its Subsidiaries, other independent certified
public accountants of recognized national standing selected by the Company)
exceeds (ii) $5,000,000 plus (c) the amount by which (i) 100% of the
Consolidated after-tax gain on sales of assets by the Company and its
Subsidiaries after the Initial Closing Date as determined quarterly in
accordance with GAAP by Coopers & Lybrand LLP (or, if they cease to be auditors
of the Company and its Subsidiaries, other independent certified public
accountants of recognized national standing selected by the Company) exceeds
(iii) $5,000,000.
Common Stock Investment to Total Capitalization. The "Common Stock
Investment" of the Company and its Subsidiaries determined on a Consolidated
basis in accordance with GAAP, and as shown on the Company's Consolidated
balance sheet, shall at all times equal or exceed 35% of "Total Capitalization"
of the Company and its Subsidiaries determined on a Consolidated basis in
accordance with GAAP, as shown on the same balance sheet.
Consolidated Operating Income to Consolidated Interest Expense.
Consolidated Operating Income for each period of four consecutive fiscal
quarters of the Company shall equal or exceed 200% of Consolidated Interest
Expense for such period.
Indebtedness. Neither the Company nor any of its Significant Subsidiaries
shall create, incur, assume or otherwise become or remain liable with respect to
any Indebtedness (or become contractually committed do so), except the
following:
.0. Indebtedness in respect of the Credit Obligations.
.1. Guarantees permitted by Section 6.7.
.2. Indebtedness secured by purchase money mortgages permitted by Section
6.8.8.
.3. Indebtedness in respect of Capitalized Lease Obligations or secured by
purchase money security interests permitted by Section 6.8.9; provided, however,
that the aggregate principal amount of all Indebtedness permitted by this
Section 6.6.4 at any one time outstanding shall not exceed $40,000,000.
.4. Indebtedness of the Company consisting of debt subordinated to the
prior payment of the Credit Obligations on terms approved by the holders of 66
_% of the principal amount of the Revolving Loan at the time outstanding.
.5. Indebtedness outstanding on the date hereof and described in Exhibit
7.3 and (except with respect to the Prior Credit Agreements, which shall be
terminated on the Initial Closing Date) all renewals and extensions thereof in
an aggregate principal amount not in excess of the aggregate principal amount
thereof outstanding immediately prior to such renewal or extension.
.6. Indebtedness of the Company evidenced by General and Refunding Mortgage
Bonds of the Company issued under the General and Refunding Mortgage Indenture,
as it may be amended or supplemented in a manner permitted under Section 6.2.4.
.7. Indebtedness of the Company in respect of its Unsecured Medium Term
Notes, provided that the aggregate principal amount of all Indebtedness
permitted by this Section 6.6.8 at any one time outstanding shall not exceed
$150,000,000.
.8. Indebtedness in respect of unsecured bank debt other than the Credit
Obligations, provided that the aggregate principal amount of all Indebtedness
permitted by this Section 6.6.9 at any one time outstanding shall not exceed
$10,000,000; and further provided that the sum of the aggregate principal amount
of all Indebtedness permitted by this Section 6.6.9 and by Section 6.6.10 and
the principal amount of the Credit Obligations at any one time outstanding shall
not exceed $130,000,000.
.9. Indebtedness of the Company in respect of commercial paper, provided
that the sum of the aggregate principal amount of all Indebtedness permitted by
this Section 6.6.10 and by Section 6.6.9 and the principal amount of the Credit
Obligations at any one time outstanding shall not exceed $130,000,000.
.10. Unsecured long-term Indebtedness issued for the sole purpose of
refunding permitted Indebtedness, provided that such long-term Indebtedness
shall be supported by financial covenants no more restrictive than those
contained in the General and Refunding Mortgage Indenture and shall not begin to
amortize prior to 91 days following the latest Final Maturity Date in effect at
the time of the issuance of such Indebtedness.
Guarantees. Neither the Company nor any of its Significant Subsidiaries
shall become or remain liable with respect to any Guarantee, including
reimbursement obligations, whether contingent or matured, under letters of
credit or other financial guarantees by third parties (or become contractually
committed do to so), except the following:
.0. Guarantees of the Credit Obligations.
.1. Guarantees of Indebtedness permitted by Section 6.6.
.2. Any Guarantee that is given, entered into or created in connection with
or as an inducement to (i) the purchase or sale of capacity or energy (including
support arrangements with respect to generating plants and transmission and
distribution facilities, and contracts for the purchase of capacity and/or
energy) or of fuel, (ii) the installation of energy-saving devices and taking of
other energy-saving measures, and (iii) other operational matters in the
ordinary course of business; provided, however, that no individual Guarantee
permitted under this clause (iii) may present a liability or exposure to the
Company or a Significant Subsidiary in an amount greater than $10,000,000; and
provided, further, that this Section 6.7.3 shall not permit the giving, entering
into or creation, after the date hereof, of any Guarantee (other than as
required under contracts existing on the date hereof) providing support for the
acquisition by the Company or a Significant Subsidiary of generating capacity or
a generating plant (other than in connection with buyouts by the Company of
non-utility generating operations, in connection with power purchases required
by law or in connection with exchanges of capacity or plant entitlements within
the ordinary course of ensuring an adequate power supply to mitigate the
Company's risk, provided that no such exchange shall exceed three years in
duration) which individually presents a liability or exposure to the Company or
a Significant Subsidiary in an amount greater than $10,000,000.
Liens. Neither the Company nor any of its Significant Subsidiaries
shall create, incur or enter into, or suffer to be created or incurred or to
exist, any Lien (or become contractually committed to do so), except the
following:
.0. Liens to secure taxes, assessments and other governmental charges, to
the extent that payment thereof shall not at the time be required by Section
6.1.
.1. Liens made (a) in connection with, or to secure payment of, workers'
compensation, unemployment insurance, old age pensions or other social security,
(b) in connection with casualty insurance maintained in accordance with Section
6.3, (c) to secure the performance of bids, tenders, contracts (other than
contracts relating to Financing Debt) or leases, (d) to secure public or
statutory obligations or surety or appeal bonds, (e) to secure indemnity,
performance or other similar bonds in the ordinary course of business or (f) in
connection with contested amounts to the extent that payment thereof shall not
at that time be required by Section 6.1.
.2. Liens in respect of judgments or awards, to the extent that such
judgments or awards (a) have been in force for less than the applicable appeal
period or (b) in respect of which the Company or any Subsidiary shall at the
time in good faith be prosecuting an appeal or proceedings for review and, in
the case of each of clauses (a) and (b), the Company or each Subsidiary shall
have taken appropriate reserves therefor in accordance with GAAP and execution
of such judgment or award shall not be levied.
.3. Liens of carriers, warehouses, mechanics and similar Liens, which, in
the case of any Lien material to the Company or a Significant Subsidiary, (a)
are in existence fewer than 90 days from the date of creation thereof or (b) if
in existence for 90 days or longer either (i) are not delinquent or (ii) are
being contested in good faith by the Company or any Subsidiary in appropriate
proceedings or actions (so long as, in the case of this clause (ii), the Company
or such Significant Subsidiary shall, if required by GAAP, have set aside on its
books adequate reserves with respect thereto); and deposits to obtain the
release of such Liens.
.4. Encumbrances consisting of or in the nature of (a) zoning restrictions,
(b) easements, (c) reservations or restrictions on the use of tangible property,
(d) landlords' and lessors' Liens on rented premises, (e) leases (other than
Capitalized Leases) and restrictions on transfers or assignment of leases and
(f) defects or irregularities (including any terms, conditions, agreements,
covenants, exceptions and reservations expressed or provided in deeds or other
agreements) in title thereto, which in each case do not materially impair the
conduct of the business of the Company or any Significant Subsidiary.
.5. Restrictions under federal and state securities laws on the transfer of
securities.
.6. Restrictions under Foreign Trade Regulations on the transfer or
licensing of certain assets of the Company and its Significant Subsidiaries.
.7. Liens constituting (a) purchase money Liens on electric property
acquired in the ordinary course of business after the Initial Closing Date, and
(b) the renewal, extension or refunding of any purchase money Lien referred to
in the foregoing clause (a) in a principal amount not to exceed the principal
amount thereof remaining unpaid immediately prior to such renewal, extension or
refunding; provided, however, that each such purchase money Lien shall attach
solely to the particular item of property so acquired (and any improvements
thereon and, in case such item is affixed to land, such Lien may attach to such
land and other land necessary for access to such property), and the principal
amount of Indebtedness secured thereby shall not exceed the cost (including all
such Indebtedness secured thereby, whether or not assumed) of such item of
property to the Company or a Significant Subsidiary.
.8. Liens constituting (a) purchase money Liens (including mortgages,
conditional sales, Capitalized Leases and any other title retention or deferred
purchase devices) in real property, interests in leases or tangible personal
property (other than inventory) existing or created on or within 60 days after
the date on which such property is acquired, and (b) the renewal, extension or
refunding of any security interest referred to in the foregoing clause (a) in a
principal amount not to exceed the principal amount thereof remaining unpaid
immediately prior to such renewal, extension or refunding; provided, however,
that (i) each such security interest shall attach solely to the particular item
of property so acquired (and any improvements thereon and, in case such item is
affixed to land, such Lien may attach to such land and other land necessary for
access to such property), and the principal amount of Indebtedness (including
Indebtedness in respect of Capitalized Lease Obligations) secured thereby shall
not exceed the cost (including all such Indebtedness secured thereby, whether or
not assumed) of such item of property to the Company or a Significant
Subsidiary; and (ii) the aggregate principal amount of all Indebtedness secured
by Liens permitted by this Section 6.8.9 shall not exceed the amount permitted
by Section 6.6.4.
.9. Liens securing obligations neither assumed by the Company or any
Significant Subsidiary nor on account of which any of them customarily pays
interest directly or indirectly, existing, either at the date hereof, or, as to
property hereafter acquired, constructed or improved, at the time of
acquisition, construction or improvement by the Company or a Significant
Subsidiary.
.10. Any right which any municipal or governmental body or agency may have
by virtue of any franchise, license, contract or statute to purchase, or
designate a purchaser of or order the sale of, any property of the Company or
any Significant Subsidiary upon payment of reasonable compensation therefor, or
to terminate any franchise, license or other rights or to regulate the property
and business of the Company or any Significant Subsidiary.
.11. The Lien of judgments covered by insurance, or upon appeal and
covered, if necessary, by the filing of an appeal bond, or if not so covered,
not exceeding at any one time $10,000,000 in aggregate amount.
.12. Any Lien, moneys sufficient for the discharge of which have been
deposited in trust with the trustee or mortgagee under the instrument evidencing
such Lien, with irrevocable authority to such trustee or mortgagee to apply such
moneys to the discharge of such Lien to the extent required for such purpose.
.13. Rights reserved to or vested in others to take or receive any part of
the gas, by-products of gas or steam or electricity generated or produced by or
from any properties of the Company or any Significant Subsidiary or with respect
to any other rights concerning supply, transportation or storage of a commodity
which is used in the ordinary course of business.
.14. The Lien of the General and Refunding Mortgage Indenture, Liens in
effect on the date hereof imposed by the Finance Authority of Maine, and other
Liens in effect on the date hereof, all as described on Exhibit 7.3.
Certain Investments. Neither the Company nor any of its Subsidiaries shall
(a) at any time, permit the aggregate book value of the assets of the
Subsidiaries of the Company to exceed 10% of the aggregate book value of the
Consolidated assets determined in accordance with GAAP or (b) acquire any
ownership interest in any nuclear energy generating plants other than
Investments in such plants outstanding, or required under contracts existing, on
the date hereof.
Asset Dispositions and Mergers. The Company shall not merge into or enter
into a consolidation with another Person, or sell, transfer or otherwise dispose
of (or pledge or assign) any accounts receivable (except for collection or
enforcement in the ordinary course of business). The Company shall not sell,
transfer, sell and lease back or otherwise dispose of other assets for an
aggregate cumulative consideration in excess of $200,000,000 (or become
contractually committed to do so), except the following:
.0. The Company may sell, transfer or otherwise dispose of (a) inventory
and Cash Equivalents in the ordinary course of business and (b) tangible assets
no longer used or useful which are to be replaced in the ordinary course of
business to the extent necessary by other tangible assets of equal or greater
value.
.1. Licensing of products and intangible assets for fair value in the
ordinary course of business.
.2. The Company may grant easements and other similar rights to use its
real estate and properties.
Negative Pledge Clauses. Neither the Company nor any of its Significant
Subsidiaries shall enter into any agreement, instrument, deed or lease which
prohibits or limits the ability of the Company or any of its Significant
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of
their respective properties, assets or revenues, whether now owned or hereafter
acquired, or which requires the grant of any collateral for such obligation if
collateral is granted for another obligation, except the following:
( ) This Agreement, the other Credit Documents, the General and Refunding
Mortgage Indenture and the FAME Loan Agreement.
(a) Covenants in documents creating Liens permitted by Sections 6.8.8 and
6.8.9 prohibiting further Liens on the assets encumbered thereby.
(b) Immaterial agreements, instruments, deeds and leases.
ERISA. Except to the extent that a failure to do so does not result, and is
not likely to result, in the Company or an ERISA Group Person incurring material
liability, the Company and its Subsidiaries shall, and the Company shall use its
best efforts to cause all ERISA Group Persons to, (a) comply, in all material
respects, with the provisions of ERISA and the Code applicable to each Plan, and
(b) meet all minimum funding requirements applicable to them with respect to any
Plan pursuant to section 302 of ERISA or section 412 of the Code.
Environmental Laws. Environmental Laws
Compliance with Law and Permits. Each of the Company and its Significant
Subsidiaries shall use and operate all of its facilities and properties in
material compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance therewith, and
handle all Hazardous Materials in material compliance with all applicable
Environmental Laws, except where (a) compliance shall at the time be contested
in good faith by appropriate proceedings or actions or (b) failure so to comply
has not resulted, or is not likely to result, in any Material Adverse Change.
Notice of Claims, etc. Each of the Company and its Significant Subsidiaries
shall as promptly as practicable notify each Managing Agent, and provide copies
upon receipt, of all written claims, complaints, notices or inquiries from
governmental authorities relating to the condition of its material facilities
and properties or compliance with Environmental Laws with respect to such
material facilities and properties.
Representations and Warranties. In order to induce the Lenders to extend
credit to the Company hereunder, the Company represents and warrants as follows:
Organization and Business.nization and Business
The Company. The Company is a duly organized and validly existing
corporation, in good standing under the laws of Maine, with all power and
authority, corporate or otherwise, necessary to (a) enter into and perform this
Agreement and each other Credit Document to which it is party and (b) own its
properties and carry on the business in all material respects as now conducted
by it. Certified copies of the Charter (Capital Stock Provisions) and By-laws of
the Company have been previously delivered to the Managing Agents and are
correct and complete.
Subsidiaries. Each Significant Subsidiary of the Company is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized, with all power and authority, corporate or otherwise,
necessary to own its properties and carry on the business in all material
respects as now conducted by it. Certified copies of the Charter and By-laws of
each Significant Subsidiary of the Company have been previously delivered to the
Managing Agents and are correct and complete.
Qualification. Each of the Company and its Significant Subsidiaries is duly
and legally qualified to do business as a foreign corporation or other entity
and is in good standing in each state or jurisdiction in which such
qualification is required and is duly authorized, qualified and licensed under
all laws, regulations, ordinances or orders of public authorities, or otherwise,
to carry on its business in the places and in the manner in which it is
conducted, except for failures to be so qualified, in good standing, authorized
or licensed which would not in the aggregate result, or be likely to result, in
any Material Adverse Change.
Capitalization. No options, warrants, conversion rights, preemptive rights
or other statutory or contractual rights to purchase shares of common stock of
any Significant Subsidiary now exist, nor has any Subsidiary authorized any such
right, nor is any Significant Subsidiary obligated in any other manner to issue
shares of its common stock.
Financial Statements and Other Information; Material Agreements.; Material
Agreements
Financial Statements and Other Information. The Company has previously
furnished to the Lenders copies of the following:
( ) The audited Consolidated balance sheets of the Company and its
Subsidiaries as at December 31 in each of 1995, 1994 and 1993 and the audited
Consolidated statements of income and the audited Consolidated statements of
changes in shareholders' equity and of cash flows of the Company and its
Subsidiaries for the fiscal years of the Company then ended.
(a) The unaudited Consolidated balance sheet of the Company and its
Subsidiaries as at June 30, 1996 and the unaudited Consolidated statements of
income and of cash flows of the Company and its Subsidiaries for the portion of
the fiscal year then ended.
(b) The Company's report on 10-K for its fiscal year ended December 31,
1995, as filed with the Securities and Exchange Commission ("1995 10-K").
(c) The five-year financial and operational projections for the Company and
its Subsidiaries dated February 22, 1996.
The audited Consolidated financial statements (including the notes thereto)
referred to in clause (a) above were prepared in accordance with GAAP and fairly
present in all material respects the financial position of the Company and its
Subsidiaries on a Consolidated basis at the respective dates thereof and the
results of their operations for the periods covered thereby. The unaudited
Consolidated financial statements referred to in clause (b) above were prepared
in accordance with GAAP and fairly present in all material respects the
financial position of the Company and its Subsidiaries at the respective dates
thereof and the results of their operations for the periods covered thereby,
subject to normal year-end audit adjustment and the addition of footnotes in the
case of interim financial statements. Neither the Company nor any of its
Subsidiaries has any known contingent liability material to the Company and its
Subsidiaries on a Consolidated basis which is required to be, but is not,
reflected in the balance sheets referred to in clauses (a) or (b) above (or
delivered pursuant to Section 6.4.1 or 6.4.2) or in the notes thereto.
The 1995 10-K contained all information required to be contained therein
and otherwise complied in all material respects with the Exchange Act and the
rules and regulations thereunder. Such 1995 10-K did not contain any untrue
statement of material fact or omit to state a material fact necessary in order
to make the statements contained therein not misleading in the light of the
circumstances under which they were made.
Material Agreements. The Company has previously furnished to the Lenders
correct and complete copies, including all exhibits, schedules and amendments
thereto, of the Material Agreements, each as in effect on the date hereof,
listed in Exhibit 7.2.2.
Agreements Relating to Financing Debt. Exhibit 7.3, as from time to time
hereafter supplemented in accordance with Sections 6.4.1 and 6.4.2, sets forth
(a) the amounts (as of the dates indicated in Exhibit 7.3, as so supplemented)
of all Financing Debt of the Company and its Significant Subsidiaries and (b)
all Liens and Guarantees with respect to such Financing Debt. The Company has
furnished the Lenders with correct and complete copies of any agreements
described in clauses (a) and (b) above requested by the Required Lenders.
Changes in Condition. Since December 31, 1995, (a) no Material Adverse
Change not disclosed in the Pre-Closing 1934 Act Reports has occurred and (b)
neither the Company nor any Significant Subsidiary has entered into any material
transaction outside the ordinary course of business that is not disclosed in the
Pre-Closing 1934 Act Reports or otherwise disclosed to the Lenders.
Title to Assets. The Company and its Significant Subsidiaries have such
title to, or interest in, all assets as is necessary for the operations of their
business as now conducted by them, subject to no Liens except for Liens
permitted by Section 6.8.
Operations in Conformity With Law, etc. The operations of the Company and
its Subsidiaries as now conducted are not in violation of, nor is the Company or
its Subsidiaries in default under, any Legal Requirement presently in effect,
except for such violations and defaults as do not and will not, in the
aggregate, result, or be likely to result, in any Material Adverse Change. The
Company has received no notice of any such violation or default and has no
knowledge of any basis on which the operations of the Company or its
Subsidiaries, as now conducted, would be held so as to violate or to give rise
to any such violation or default.
Litigation. No litigation, at law or in equity, or any proceeding before
any court, board or other governmental or administrative agency or any
arbitrator is pending or overtly threatened which would affect the Credit
Obligations, and, except as disclosed in the Pre-Closing 1934 Act Reports, no
litigation, at law or in equity, or any proceeding before any court, board or
other governmental or administrative agency or any arbitrator is pending, or
overtly threatened which, after giving effect to any applicable insurance, has
resulted or is likely to result in a material adverse effect on the financial
condition, operations or properties or financial or business prospects of the
Company and its Subsidiaries or which seeks to enjoin the consummation, or which
questions the validity, of any of the transactions contemplated by this
Agreement or any other Credit Document. Except as disclosed in the Pre-Closing
1934 Act Reports, no judgment, decree or order of any court, board or other
governmental or administrative agency or any arbitrator has been issued against
or binds the Company or any of its Subsidiaries which has resulted, or is likely
to result, in any Material Adverse Change.
Authorization and Enforceability. The Company has taken all corporate
action required to execute, deliver and perform this Agreement and each other
Credit Document to which it is party. No consent of stockholders of the Company
is necessary in order to authorize the execution, delivery or performance of
this Agreement or any other Credit Document to which the Company is party. Each
of this Agreement and each other Credit Document constitutes the legal, valid
and binding obligation of the Company and is enforceable against the Company in
accordance with its terms.
No Legal Obstacle to Agreements. Neither the execution and delivery of this
Agreement or any other Credit Document, nor the making of any borrowings
hereunder, nor the consummation of any transaction referred to in or
contemplated by this Agreement or any other Credit Document, nor the fulfillment
of the terms hereof or thereof, has constituted or resulted in or will
constitute or result in (it being understood that the Prior Credit Agreements
will be concurrently terminated pursuant to Section 5.1.5):
( ) any breach or termination of the provisions of any agreement,
instrument, deed or lease to which the Company or any of its Subsidiaries is a
party or by which it is bound, or of the Charter or By-laws of the Company or
any of its Subsidiaries (including without limitation any provision of the
Charter of the Company restricting the issuance of unsecured debt securities);
(a) the violation of any law, statute, judgment, decree or governmental
order, rule or regulation applicable to the Company or any of its Subsidiaries;
(b) the creation under any agreement, instrument, deed or lease of any Lien
upon any of the assets of the Company or any of its Subsidiaries; or
(c) any redemption, retirement or other repurchase obligation of the
Company or any of its Subsidiaries under any Charter, By-law, agreement,
instrument, deed or lease.
All approvals, authorizations or other actions by, or declarations to or
filings with, any governmental or administrative authority or any other Person,
required to be obtained or made by the Company or any of its Subsidiaries as a
condition to the execution, delivery and performance of this Agreement, the
Notes or any other Credit Document, the transactions contemplated hereby or
thereby or the making of any borrowing hereunder, have been obtained or made.
Defaults. Neither the Company nor any of its Significant Subsidiaries is in
default under any provision of its Charter or By-laws or of this Agreement or
any other Credit Document. Neither the Company nor any of its Subsidiaries is in
default under any provision of any agreement, instrument, deed or lease to which
it is party or by which it or its property is bound so as to result, or be
likely to result, in any Material Adverse Change. Neither the Company nor any of
its Subsidiaries has violated any law, judgment, decree or governmental order,
rule or regulation, in each case so as to result, or be likely to result, in any
Material Adverse Change.
Licenses, etc. The Company and its Significant Subsidiaries have all
patents, patent applications, patent licenses, patent rights, trademarks,
trademark rights, trade names, trade name rights, copyrights, licenses,
franchises, permits, authorizations and other rights as are necessary for the
conduct in all material respects of the business of the Company and its
Significant Subsidiaries as now conducted by them. All of the foregoing are in
full force and effect in all material respects, and each of the Company and its
Significant Subsidiaries is in substantial compliance with the foregoing without
any known conflict with the valid rights of others which has resulted, or is
likely to result, in any Material Adverse Change. No event has occurred which
permits, or after notice or lapse of time or both would permit, the revocation
or termination of any such license, franchise or other right or which affects
the rights of any of the Company and its Significant Subsidiaries thereunder so
as to result, or be likely to result, in any Material Adverse Change.
Tax Returns. Each of the Company and its Significant Subsidiaries has filed
all material tax and information returns which are required to be filed by it
and has paid, or made adequate provision for the payment of, all taxes which
have or may become due pursuant to such returns or to any assessment received by
it, other than taxes and assessments being contested by the Company and its
Significant Subsidiaries in good faith by appropriate proceedings or actions and
for which adequate reserves have been taken if required by GAAP. Neither the
Company nor any of its Significant Subsidiaries knows of any material additional
assessments or any basis therefor. The Company reasonably believes that the
charges, accruals and reserves on the books of the Company and its Significant
Subsidiaries in respect of taxes or other governmental charges are adequate.
Certain Business Representations.iness Representations
Labor Relations. No dispute or controversy between the Company or any of
its Subsidiaries and any of their respective employees has resulted, or is
likely to result, in any Material Adverse Change.
Burdensome Obligations. Except as disclosed in the Pre-Closing 1934 Act
Reports, neither the Company nor any of its Subsidiaries is party to or bound by
any agreement, instrument, deed or lease or is subject to any Charter, By-law or
other restriction, commitment or requirement which, in the opinion of the
management of such Person, is so unusual or burdensome as in the foreseeable
future to result, or be likely to result, in a Material Adverse Change.
Environmental Regulations.ronmental Regulations
Environmental Compliance. Except as disclosed in the Pre-Closing 1934 Act
Reports, each of the Company and its Subsidiaries is in compliance in all
material respects with the Clean Air Act, the Federal Water Pollution Control
Act, the Marine Protection Research and Sanctuaries Act, RCRA, CERCLA and any
other Environmental Law in effect in any jurisdiction in which any properties of
the Company or any of its Subsidiaries are located or where any of them conducts
its business, and with all applicable published rules and regulations of the
federal Environmental Protection Agency and of any similar agencies in states or
foreign countries in which the Company or its Subsidiaries conducts its
business, except instances of non-compliance which in the aggregate have not
resulted, and are not likely to result, in a Material Adverse Change.
Environmental Litigation. Except as disclosed in the Pre-Closing 1934 Act
Reports, no suit, claim, action or proceeding of which the Company or any of its
Subsidiaries has been given notice or otherwise has knowledge is now pending
before any court, governmental agency or board or other forum, or to the
Company's or any of its Subsidiaries knowledge, threatened by any Person (nor to
the Company's or any of its Subsidiaries' knowledge, does any factual basis
exist therefor) for, and neither the Company nor any of its Subsidiaries have
received written correspondence from any federal, state or local governmental
authority with respect to:
( ) noncompliance by the Company or any of its Subsidiaries with any
Environmental Law;
(a) personal injury, wrongful death or other tortious conduct relating to
materials, commodities or products used, generated, sold, transferred or
manufactured by the Company or any of its Subsidiaries (including products made
of, containing or incorporating asbestos, lead or other hazardous materials,
commodities or toxic substances); or
(b) the release into the environment by the Company or any of its
Subsidiaries of any Hazardous Material generated by the Company or any of its
Subsidiaries whether or not occurring at or on a site owned, leased or operated
by the Company or any of its Subsidiaries; and which in the aggregate for
clauses (a) and (b) and this clause (c) have not resulted, and are not likely to
result, in a Material Adverse Change.
Hazardous Material. Except as disclosed in the Pre-Closing 1934 Act
Reports, any waste disposal or dump sites at which Hazardous Material generated
by either the Company or any of its Subsidiaries has been disposed of directly
by the Company or any of its Subsidiaries and all independent contractors to
whom the Company or any of its Subsidiaries have delivered Hazardous Material,
or to the Company's or any of its Subsidiaries' knowledge, where Hazardous
Material finally came to be located, have not resulted, and are not likely to
result, in a Material Adverse Change.
Pension Plans. Each Plan and, without special inquiry to the knowledge of
the Company, each Multiemployer Plan, is in material compliance with the
applicable provisions of ERISA and the Code. Except to the extent that a failure
to do so has resulted or could reasonably be expected to result in material
liability of the Company, the minimum funding standards of section 412 of the
Code and section 302 of ERISA have been met in connection with all Plans and, to
the knowledge of the Company, no condition exists with respect to which the
institution of proceedings to terminate any Plan under section 4042 of ERISA
could reasonably be expected. To the knowledge of the Company without special
inquiry, no Multiemployer Plan is currently insolvent or in reorganization or
has been terminated within the meaning of ERISA, pursuant to which the Company
has incurred or could reasonably be expected to incur material liability.
Foreign Trade Regulations; Government Regulation; Margin Stock.ulation;
Margin Stock
Foreign Trade Regulations. Neither the execution and delivery of this
Agreement or any other Credit Document, nor the making by the Company of any
borrowings hereunder has constituted or resulted in or will constitute or result
in the violation of any Foreign Trade Regulation.
Government Regulation. The Company is not subject to regulation as a
registered holding company under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Investment Company Act of 1940, as amended, the
Interstate Commerce Act or any statute or regulation which regulates the
incurring by the Company of the Credit Obligations except for regulation by the
State of Maine Public Utilities Commission and the Federal Energy Regulatory
Commission, which on or before the Initial Closing Date shall have authorized
the execution and delivery of this Agreement and the Notes and shall, together
with any necessary renewals, have authorized all borrowing hereunder.
Disclosure. Neither this Agreement nor any other Credit Document to be
furnished to the Lenders by or on behalf of the Company or any of its
Subsidiaries in connection with the transactions contemplated hereby or by such
Credit Document contains any untrue statement of material fact or omits to state
a material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
Defaults.7. Defaults
Events of Default. The following events are referred to as "Events of
Default":
Payment. The Company shall fail to make any payment in respect of:
( ) interest or any fee on or in respect of any of the Credit Obligations
owed by it as the same shall become due and payable, and such failure shall
continue for a period of two Banking Days; or
(a) principal of any of the Credit Obligations owed by it as the same shall
become due, whether at maturity or by acceleration or otherwise.
Specified Covenants. The Company or any of its Subsidiaries shall fail to
perform or observe any of the provisions of Section 6.2.2(b), the second
sentence of Section 6.4.4 or Sections 6.5 through 6.11.
Other Covenants. The Company or any of its Subsidiaries shall fail to
perform or observe any other covenant, agreement or provision to be performed or
observed by it under this Agreement or any other Credit Document, and such
failure shall not be cured to the written satisfaction of the Required Lenders
within 30 days after notice thereof by either Managing Agent or any Lender to
the Company.
Representations and Warranties. Any representation or warranty of or with
respect to the Company or any of its Subsidiaries made to the Lenders or either
Managing Agent in, pursuant to or in connection with this Agreement or any other
Credit Document shall be materially false on the date as of which it was made.
Cross Default, etc.fault, etc.
( ) The Company or any of its Subsidiaries shall fail to make any payment
when due (after giving effect to any applicable grace periods) in respect of any
Financing Debt (other than the Credit Obligations) outstanding in an aggregate
amount of principal (whether or not due) exceeding $10,000,000 ("$10,000,000
Financing Debt");
(a) the Company or any of its Subsidiaries shall fail to perform or observe
the terms of any agreement or instrument relating to such Financing Debt, and
such failure shall continue, without having been duly cured, waived or consented
to, beyond the period of grace, if any, specified in such agreement or
instrument, and such failure shall permit the acceleration of $10,000,000
Financing Debt;
(b) $10,000,000 Financing Debt of the Company or any of its Subsidiaries
shall be accelerated prior to its stated maturity; or
(c) any Lien on any property of the Company or any of its Subsidiaries
securing $10,000,000 Financing Debt shall be enforced by foreclosure or similar
action.
Enforceability, etc. Any material provision of any Credit Document shall
cease for any reason (other than the scheduled termination thereof in accordance
with its terms) to be enforceable in accordance with its terms or in full force
and effect, and such event shall not be rectified or cured to the written
satisfaction of the Required Lenders within 30 days after notice thereof by
either Managing Agent or any Lender to the Company.
Judgments. A final judgment (a) which, with other outstanding final
judgments against the Company and its Subsidiaries, exceeds an aggregate of
$10,000,000 in excess of applicable insurance coverage shall be rendered against
the Company or any of its Subsidiaries, or (b) which grants injunctive relief
that results, or is likely to result, in a Material Adverse Change and in either
case if, (i) within 30 days after entry thereof, such judgment shall not have
been discharged or execution thereof stayed pending appeal or (ii) within 30
days after the expiration of any such stay, such judgment shall not have been
discharged.
ERISA. ERISA
( ) (i) a "reportable event" (as defined in section 4043 of ERISA) shall
have occurred that reasonably could be expected to result in termination of a
Plan or the appointment by the appropriate United States District Court of a
trustee to administer any Plan or the imposition of a Lien in favor of a Plan;
(ii) any ERISA Group Person shall fail to pay when due any amounts which it
shall have become liable to pay to the PBGC or to a Plan under Title IV of
ERISA; (iii) a notice of intent to terminate a Plan shall be filed under Title
IV of ERISA by any ERISA Group Person or administrator other than pursuant to
section 4041(b) of ERISA; or (iv) the PBGC shall institute proceedings under
Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any Plan or a proceeding shall be instituted by a fiduciary of any
Plan against the Company to enforce section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; and
(a) any one or more of the events or conditions specified in clauses (i)
through (iv) of paragraph (a) of this Section 8.1.8 shall occur and result in,
or be likely to result in, a Material Adverse Change.
Bankruptcy, etc. The Company or any of its Significant Subsidiaries shall:
( ) commence a voluntary case under the Bankruptcy Code or authorize, by
appropriate proceedings of its board of directors or other governing body, the
commencement of such a voluntary case;
(a) (i) have filed against it a petition commencing an involuntary case
under the Bankruptcy Code that shall not have been dismissed within 60 days
after the date on which such petition is filed, or (ii) file an answer or other
pleading within such 60-day period admitting or failing to deny the material
allegations of such a petition or seeking, consenting to or acquiescing in the
relief therein provided, or (iii) have entered against it an order for relief in
any involuntary case commenced under the Bankruptcy Code;
(b) seek relief as a debtor under any applicable law, other than the
Bankruptcy Code, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors, or consent to or acquiesce in such relief;
(c) have entered against it under any law referred to in clause (c) above
an order by a court of competent jurisdiction (i) finding it to be bankrupt or
insolvent, (ii) ordering or approving its liquidation or reorganization as a
debtor or any modification or alteration of the rights of its creditors or
(iii) assuming custody of, or appointing a receiver or other custodian for, all
or a substantial portion of its property; or
(d) under any law referred to in clause (c) above, make an assignment for
the benefit of, or enter into a composition with, its creditors, or appoint, or
consent to the appointment of, or suffer to exist a receiver or other custodian
for, all or a substantial portion of its property.
Certain Actions Following an Event of Default. If any one or more Events of
Default shall occur and be continuing, then in each and every such case:
Terminate Obligation to Extend Credit. The Managing Agents on behalf of the
Lenders may (and upon written request of the Required Lenders the Managing
Agents shall) terminate the obligations of the Lenders to make any further
extensions of credit under the Credit Documents by furnishing notice of such
termination to the Company.
Specific Performance; Exercise of Rights. The Managing Agents on behalf of
the Lenders may (and upon written request of the Required Lenders the Managing
Agents shall) proceed to protect and enforce the Lenders' rights by suit in
equity, action at law and/or other appropriate proceeding, either for specific
performance of any covenant or condition contained in this Agreement or any
other Credit Document or in any instrument or assignment delivered to the
Lenders pursuant to this Agreement or any other Credit Document, or in aid of
the exercise of any power granted in this Agreement or any other Credit Document
or any such instrument or assignment.
Acceleration. The Managing Agents on behalf of the Lenders may (and upon
written request of the Required Lenders the Managing Agents shall) by notice in
writing to the Company declare all or any part of the unpaid balance of the
Credit Obligations then outstanding to be immediately due and payable, and
thereupon such unpaid balance or part thereof shall become so due and payable
without presentation, protest or further demand or notice of any kind, all of
which are hereby expressly waived; provided, however, that if a Bankruptcy
Default shall have occurred, the unpaid balance of the Credit Obligations shall
automatically become immediately due and payable.
Enforcement of Payment; Credit Security; Setoff. The Managing Agents on
behalf of the Lenders may (and upon written request of the Required Lenders the
Managing Agents shall) proceed to enforce payment of the Credit Obligations in
such manner as they may elect. The Lenders may offset and apply toward the
payment of the Credit Obligations (and/or toward the curing of any Event of
Default) any Indebtedness from the Lenders to the Company, including any
Indebtedness represented by deposits in any account maintained with the Lenders.
Cumulative Remedies. To the extent not prohibited by applicable law which
cannot be waived, all of the Lenders' rights hereunder and under each other
Credit Document shall be cumulative.
Annulment of Defaults. Once an Event of Default has occurred, such Event of
Default shall be deemed to exist and be continuing for all purposes of the
Credit Documents until the Required Lenders or the Managing Agents (with the
consent of the Required Lenders) shall have waived such Event of Default in
writing, stated in writing that the same has been cured to such Lenders'
reasonable satisfaction or entered into an amendment to this Agreement which by
its express terms cures such Event of Default, at which time such Event of
Default shall no longer be deemed to exist or to have continued. No such action
by the Lenders or the Managing Agents shall extend to or affect any subsequent
Event of Default or impair any rights of the Lenders upon the occurrence
thereof. The making of any extension of credit during the existence of any
Default or Event of Default shall not constitute a waiver thereof.
Waivers. To the extent that such waiver is not prohibited by the provisions
of applicable law that cannot be waived, the Company waives:
( ) all presentments, demands for performance, notices of nonperformance
(except to the extent required by this Agreement or any other Credit Document),
protests, notices of protest and notices of dishonor;
(a) any requirement of diligence or promptness on the part of any Lender in
the enforcement of its rights under this Agreement, the Notes or any other
Credit Document;
(b) any and all notices of every kind and description which may be required
to be given by any statute or rule of law; and
(c) any defense (other than indefeasible payment in full) which it may now
or hereafter have with respect to its liability under this Agreement, the Notes
or any other Credit Document or with respect to the Credit Obligations.
Expenses; Indemnity. Expenses; Indemnity
Expenses. Whether or not the transactions contemplated hereby shall be
consummated, the Company will pay:
( ) all reasonable expenses of the Managing Agents (including the
out-of-pocket expenses related to forming the group of Lenders and reasonable
fees and disbursements of the counsel to the Managing Agents) in connection with
the preparation and duplication of this Agreement and each other Credit
Document, the transactions contemplated hereby and thereby and amendments,
waivers, consents and other operations hereunder and thereunder;
(a) all recording and filing fees and transfer and documentary stamp and
similar taxes at any time payable in respect of this Agreement, any other Credit
Document or the incurrence of the Credit Obligations; and
(b) all other reasonable expenses incurred by the Lenders or the holder of
any Credit Obligation in connection with the enforcement of any rights hereunder
or under any other Credit Document, including costs of collection and reasonable
attorneys' fees (including a reasonable allowance for the hourly cost of
attorneys employed by the Lenders on a salaried basis) and expenses.
General Indemnity. The Company shall indemnify the Lenders and the Managing
Agents and hold them harmless from any liability, loss or damage resulting from
the violation by the Company of Section 2.4. In addition, the Company shall
indemnify each Lender, each Managing Agent, each of the Lenders' or the Managing
Agents' directors, officers and employees, and each Person, if any, who controls
any Lender or either Managing Agent (each Lender, each Managing Agent and each
of such directors, officers, employees and control Persons is referred to as an
"Indemnified Party") and hold each of them harmless from and against any and all
claims, damages, liabilities and reasonable expenses (including reasonable fees
and disbursements of counsel with whom any Indemnified Party may consult in
connection therewith and all reasonable expenses of litigation or preparation
therefor) which any Indemnified Party may incur or which may be asserted against
any Indemnified Party in connection with the Indemnified Party's compliance with
or contest of any subpoena or other process issued against it or any litigation
or investigation, in each case involving this Agreement (but including any
subpoenas or other process demanding disclosure of information provided to the
Lenders in connection with this Agreement, even if such subpoena or other
process arises in a context unrelated to this Agreement), any other Credit
Document or any transaction contemplated hereby or thereby; provided, however,
that the foregoing indemnity shall not apply to litigation commenced by the
Company against the Lenders or the Managing Agents which seeks enforcement of
any of the rights of the Company hereunder or under any other Credit Document
and is determined adversely to the Lenders or the Managing Agents in a final
nonappealable judgment or to the extent such claims, damages, liabilities and
expenses result from a Lender's or either Managing Agent's gross negligence or
willful misconduct.
Operations; Managing Agents.ons; Managing Agents
Interests in Credits. The Percentage Interest of each Lender in the
Revolving Loan and the related Commitments shall be computed based on the
maximum principal amount for each Lender as set forth in the Register, as from
time to time in effect. The current Percentage Interests are set forth in
Exhibit 10.1, which may be updated by the Boston Managing Agent from time to
time to conform to the Register.
Roles of Managing Agents. The Boston Managing Agent shall be responsible
for documentation of the Loans and any amendments, waivers or modifications to
this Agreement or the Notes and any documents and instruments in connection
therewith. The New York Managing Agent shall be responsible for all
disbursements and payments (subject to the obligations of the other Lenders
hereunder), including arranging, pricing and making Loans, receiving payments of
principal, interest, fees and other amounts payable from the Company. Except as
expressly otherwise provided herein, both Managing Agents shall be entitled to
receive all notices required to be provided hereunder by the Company and the
Lenders.
Managing Agents' Authority to Act, etc. Each of the Lenders appoints and
authorizes Bank of Boston and Bank of New York to act for the Lenders as the
Lenders' Managing Agents in connection with the transactions contemplated by
this Agreement and the other Credit Documents on the terms set forth herein. In
acting hereunder, the Boston Managing Agent is acting for the account of Bank of
Boston to the extent of its Percentage Interest and for the account of each
other Lender to the extent of the Lenders' respective Percentage Interests, the
New York Managing Agent is acting for the account of Bank of New York to the
extent of its Percentage Interest and for the account of each other Lender to
the extent of the Lenders' respective Percentage Interests, and all action in
connection with the enforcement of, or the exercise of any remedies (other than
the Lenders' rights of set-off as provided in Section 8.2.4 or in any Credit
Document) in respect of the Credit Obligations and Credit Documents shall be
taken by the Managing Agents.
Company to Pay New York Managing Agent, etc. The Company shall be fully
protected in making all payments in respect of the Credit Obligations to the New
York Managing Agent, in relying upon consents, modifications and amendments
executed by the Managing Agents purportedly on the Lenders' behalf, and in
dealing with the Managing Agents as herein provided. The New York Managing Agent
may charge the accounts of the Company, on the dates when the amounts thereof
become due and payable, with the amounts of the principal of and interest on the
Loan, Facility Fees and all other fees and amounts owing under any Credit
Document.
Lender Operations for Advances, etc.ons for Advances, etc
Advances. Prior to 12:00 noon (New York time) on each Closing Date, each
Lender shall advance to the New York Managing Agent in immediately available
funds such Lender's Percentage Interest in the portion of the Revolving Loan
advanced on such Closing Date (and in the case of Competitive Auction Facility
Loans, each Lender making a Competitive Auction Facility Loan shall advance to
the New York Managing Agent in immediately available funds the amount of such
Competitive Auction Facility Loan advanced on such Closing Date). If such funds
are not received at such time, but all applicable conditions set forth in
Section 5 have been satisfied, each Lender authorizes and requests the New York
Managing Agent to advance for the Lender's account, pursuant to the terms
hereof, the Lender's respective Percentage Interest in such portion of the
Revolving Loan (or, in the case of a Competitive Auction Facility Loan, the
amount of such Competitive Auction Facility Loan) and agrees to reimburse the
New York Managing Agent in immediately available funds for the amount thereof
prior to 2:00 p.m. (New York time) on the day any portion of the Revolving Loan
(or a Competitive Auction Facility Loan) is advanced hereunder; provided,
however, that the New York Managing Agent is not authorized to make any such
advance for the account of any Lender who has previously notified the New York
Managing Agent in writing that such Lender will not be performing its
obligations to make further advances hereunder; and provided, further, that the
New York Managing Agent shall be under no obligation to make any such advance.
New York Managing Agent to Allocate Payments, etc. All payments of
principal and interest in respect of the extensions of credit made pursuant to
this Agreement, Facility Fees and other fees under this Agreement shall, as a
matter of convenience, be made by the Company to the New York Managing Agent in
immediately available funds. The share of each Lender shall be credited to such
Lender by the New York Managing Agent in immediately available funds in such
manner that the principal amount of the Credit Obligations to be paid shall be
paid proportionately in accordance with the Lenders' respective Percentage
Interests in such Credit Obligations, except as otherwise provided in this
Agreement (including with respect to Competitive Auction Facility Loans). Under
no circumstances shall any Lender be required to produce or present its Notes as
evidence of its interests in the Credit Obligations in any action or proceeding
relating to the Credit Obligations.
Delinquent Lenders; Nonperforming Lenders. In the event that any Lender
fails to reimburse the New York Managing Agent pursuant to Section 10.5.1 for
the Percentage Interest (or Competitive Auction Facility Loan) of such Lender (a
"Delinquent Lender") in any credit advanced by the New York Managing Agent
pursuant hereto, overdue amounts (the "Delinquent Payment") due from the
Delinquent Lender to the New York Managing Agent shall bear interest, payable by
the Delinquent Lender on demand, at a per annum rate equal to (a) the Federal
Funds Rate for the first three days overdue and (b) the sum of 2% plus the
Federal Funds Rate for any longer period. Such interest shall be payable to the
New York Managing Agent for its own account for the period commencing on the
date of the Delinquent Payment and ending on the date the Delinquent Lender
reimburses the New York Managing Agent on account of the Delinquent Payment and
the accrued interest thereon (the "Delinquency Period"), whether pursuant to the
assignments referred to below or otherwise. Upon notice by the New York Managing
Agent, the Company will pay to the New York Managing Agent the principal (but
not the interest) portion of the Delinquent Payment. During the Delinquency
Period, in order to make reimbursements for the Delinquent Payment and accrued
interest thereon, the Delinquent Lender shall be deemed to have assigned to the
New York Managing Agent all interest, Facility Fees and other payments made by
the Company under Section 3 that would have thereafter otherwise been payable
under the Credit Documents to the Delinquent Lender. During any other period in
which any Lender is not performing its obligations to extend credit under
Section 2 (a "Nonperforming Lender"), the Nonperforming Lender shall be deemed
to have assigned to each Lender that is not a Nonperforming Lender (a
"Performing Lender") all principal and other payments made by the Company under
Section 4 that would have thereafter otherwise been payable under the Credit
Documents to the Nonperforming Lender. The New York Managing Agent shall credit
a portion of such payments to each Performing Lender in an amount equal to the
Percentage Interest of such Performing Lender divided by one minus the
Percentage Interest of the Nonperforming Lender until the respective portions of
the Revolving Loan owed to all the Lenders are the same as the Percentage
Interests of the Lenders immediately prior to the failure of the Nonperforming
Lender to perform its obligations under Section 2. The foregoing provisions
shall be in addition to any other remedies the New York Managing Agent, the
Performing Lenders or the Company may have under law or equity against the
Delinquent Lender as a result of the Delinquent Payment or against the
Nonperforming Lender as a result of its failure to perform its obligations under
Section 2.
Sharing of Payments, etc. Each Lender agrees that (a) if by exercising any
right of set-off or counterclaim or otherwise, it shall receive payment of (i) a
proportion of the aggregate amount due with respect to its Percentage Interest
in the Revolving Loan which is greater than (ii) the proportion received by any
other Lender in respect of the aggregate amount due with respect to such other
Lender's Percentage Interest in the Revolving Loan and (b) if such inequality
shall continue for more than 10 days, the Lender receiving such proportionately
greater payment shall purchase participations in the Percentage Interests in the
Revolving Loan held by the other Lenders, and such other adjustments shall be
made from time to time (including rescission of such purchases of participations
in the event the unequal payment originally received is recovered from such
Lender through bankruptcy proceedings or otherwise), as may be required so that
all such payments of principal and interest with respect to the Revolving Loan
held by the Lenders shall be shared by the Lenders pro rata in accordance with
their respective Percentage Interests; provided, however, that this Section 10.6
shall not impair the right of any Lender to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such exercise to the
payment of Indebtedness of the Company other than the Company's Indebtedness
with respect to the Revolving Loan. Each Lender that grants a participation in
the Credit Obligations to a Credit Participant shall require as a condition to
the granting of such participation that such Credit Participant agree to share
payments received in respect of the Credit Obligations as provided in this
Section 10.6. The provisions of this Section 10.6 are for the sole and exclusive
benefit of the Lenders and no failure of any Lender to comply with the terms
hereof shall be available to the Company as a defense to the payment of the
Credit Obligations.
Amendments, Consents, Waivers, etc. Except as otherwise set forth herein,
the Managing Agents may (and upon the written request of the Required Lenders
the Managing Agents shall) take or refrain from taking any action under this
Agreement or any other Credit Document, including giving their written consent
to any modification of or amendment to and waiving in writing compliance with
any covenant or condition in this Agreement or any other Credit Document (other
than an Interest Rate Protection Agreement) or any Default or Event of Default,
all of which actions shall be binding upon all of the Lenders;
provided, however, that:
( ) Except as provided below, without the written consent of the Lenders
owning at least a majority of the Percentage Interests (other than Delinquent
Lenders during the existence of a Delinquency Period so long as such Delinquent
Lender is treated the same as the other Lenders with respect to any actions
enumerated below), no written modification of, amendment to, consent with
respect to, waiver of compliance with or waiver of a Default under, any of the
Credit Documents (other than an Interest Rate Protection Agreement) shall be
made.
(a) Without the written consent of the Managing Agents, no written
modification of or amendment to any of the Credit Documents shall be made which
changes the duties of or the benefits to the Managing Agents or any other
provision affecting the Managing Agents in such capacities.
(b) Without the written consent of such Lenders as own 100% of the
Percentage Interests (other than Delinquent Lenders during the existence of a
Delinquency Period so long as such Delinquent Lender is treated the same as the
other Lenders with respect to any actions enumerated below):
( ) No reduction shall be made in (A) the amount of principal of the Loan
or (B) the interest rate on the Loan.
(i) No change shall be made in the stated, scheduled time of payment of all
or any portion of the Loan or interest thereon or fees relating to any of the
foregoing payable to all of the Lenders and no waiver shall be made of any
Default under Section 8.1.1.
(ii) No increase shall be made in the amount, or extension of the term, of
the stated Commitments beyond that provided for under Section 2.
(iii) No alteration shall be made of the Lenders' rights of set-off
contained in Section 8.2.4.
(iv) No change shall be made in the definition of "Required Lenders" in
this Agreement.
(v) No amendment to or modification of this Section 10.7(c) shall be made.
Managing Agent's Resignation. Either Managing Agent may resign at any time
by giving at least 60 days' prior written notice of its intention to do so to
each other of the Lenders and the Company. Upon any such resignation, the
remaining Managing Agent shall automatically become agent with all the rights
and responsibilities formerly held by both Managing Agents; provided, that if at
such time there shall be only one Managing Agent or both Managing Agents shall
be resigning simultaneously, the Required Lenders shall appoint a successor
Managing Agent satisfactory to the Company and the resignation of the retiring
Managing Agent shall take effect upon such appointment. If in a case to which
the proviso to the preceding sentence shall apply, no successor Managing Agent
shall have been so appointed and shall have accepted such appointment within 30
days after the retiring Managing Agent's notice of resignation, then the
retiring Managing Agent may with the consent of the Company, which shall not
unreasonably be withheld, appoint a successor Managing Agent which shall be a
bank or trust company organized under the laws of the United States of America
or any state thereof and having a combined capital surplus and undivided profit
of not less than $100,000,000; provided, that any successor Managing Agent
appointed under this sentence may be removed upon the written request of the
Required Lenders, which request shall also appoint a successor Managing Agent
satisfactory to the Company. Upon the acceptance of any appointment as agent
hereunder by a remaining Managing Agent, such successor agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Managing Agent, and the retiring Managing Agent shall be
discharged from all further duties and obligations under this Agreement. After
any retiring Managing Agent's resignation hereunder as Managing Agent, the
provisions of this Agreement shall continue to inure to the benefit of such
Managing Agent as to any actions taken or omitted to be taken by it while it was
Managing Agent under this Agreement.
Concerning the Managing Agents.g the Managing Agents
Action in Good Faith, etc. The Managing Agents and their officers,
directors, employees and agents shall be under no liability to any of the
Lenders or to any future holder of any interest in the Credit Obligations for
any action or failure to act taken or suffered in good faith, and any action or
failure to act in accordance with an opinion of its counsel shall conclusively
be deemed to be in good faith. The Managing Agents shall in all cases be
entitled to rely, and shall be fully protected in relying, on instructions given
to the Managing Agents by the required holders of Credit Obligations as provided
in this Agreement.
No Implied Duties, etc. The Managing Agents shall have and may exercise
such powers as are specifically delegated to the Managing Agents under this
Agreement or any other Credit Document together with all other powers incidental
thereto. The Managing Agents shall have no implied duties to any Person or any
obligation to take any action under this Agreement or any other Credit Document
except for action specifically provided for in this Agreement or any other
Credit Document to be taken by the Managing Agents. Before taking any action
under this Agreement or any other Credit Document, each Managing Agent may
request an appropriate specific indemnity satisfactory to it from each Lender in
addition to the general indemnity provided for in Section 10.12. Until such
Managing Agent has received such specific indemnity, such Managing Agent shall
not be obligated to take (although it may in its sole discretion take) any such
action under this Agreement or any other Credit Document. Each Lender confirms
that the Managing Agents do not have a fiduciary relationship to it under the
Credit Documents. Each of the Company and its Subsidiaries party hereto confirms
that neither the Managing Agents nor any other Lender has a fiduciary
relationship to it under the Credit Documents.
Validity, etc. Neither Managing Agent shall be responsible to any Lender or
any future holder of any interest in the Credit Obligations (a) for the
legality, validity, enforceability or effectiveness of this Agreement or any
other Credit Document, (b) for any recitals, reports, representations,
warranties or statements contained in or made in connection with this Agreement
or any other Credit Document, (c) for the existence or value of any assets
included in any security for the Credit Obligations, or (d) unless such Managing
Agent shall have failed to comply with Section 10.9.1, for the perfection of any
security for the Credit Obligations.
Compliance. Neither Managing Agent shall be obligated to ascertain or
inquire as to the performance or observance of any of the terms of this
Agreement or any other Credit Document; and in connection with any extension of
credit under this Agreement or any other Credit Document, the Managing Agents
shall be fully protected in relying on a certificate of the Company as to the
fulfillment by the Company of any conditions to such extension of credit.
Employment of Agents and Counsel. Each Managing Agent may execute any of
its duties as Managing Agent under this Agreement or any other Credit Document
by or through employees, agents and attorneys-in-fact and shall not be
responsible to any of the Lenders or the Company for the default or misconduct
of any such agents or attorneys-in-fact selected by such Managing Agent acting
in good faith. Such Managing Agent shall be entitled to advice of counsel
concerning all matters pertaining to the agency hereby created and its duties
hereunder or under any other Credit Document.
Reliance on Documents and Counsel. Each Managing Agent shall be entitled to
rely, and shall be fully protected in relying, upon any affidavit, certificate,
cablegram, consent, instrument, letter, notice, order, document, statement,
telecopy, telegram, telex or teletype message or writing reasonably believed in
good faith by such Managing Agent to be genuine and correct and to have been
signed, sent or made by the Person in question, including any telephonic or oral
statement made by such Person, and, with respect to legal matters, upon an
opinion or the advice of counsel selected by such Managing Agent.
Managing Agents' Reimbursement. Each of the Lenders severally agrees to
reimburse the Managing Agents, in the amount of such Lender's Percentage
Interest, for any reasonable expenses not reimbursed by the Company (without
limiting the obligation of the Company to make such reimbursement): (a) for
which the Managing Agents are entitled to reimbursement by the Company under
this Agreement or any other Credit Document, and (b) after the occurrence of a
Default, for any other reasonable expenses incurred by the Managing Agents on
the Lenders' behalf in connection with the enforcement of the Lenders' rights
under this Agreement or any other Credit Document; provided, however, that a
Managing Agent shall not be reimbursed for any such expenses arising as a result
of its gross negligence or willful misconduct.
Rights as a Lender. With respect to any credit extended by them hereunder,
Bank of Boston and Bank of New York each shall have the same rights, obligations
and powers hereunder as any other Lender and may exercise such rights and powers
as though each were not a Managing Agent, and unless the context otherwise
specifies, Bank of Boston and Bank of New York shall each be treated in its
individual capacity as though it were not a Managing Agent hereunder. Without
limiting the generality of the foregoing, the Percentage Interests of Bank of
Boston and Bank of New York shall be included in any computations of Percentage
Interests. Bank of Boston and Bank of New York and their Affiliates may accept
deposits from, lend money to, act as trustee for and generally engage in any
kind of banking or trust business with the Company, any of its Subsidiaries or
any Affiliate of any of them and any Person who may do business with or own an
equity interest in the Company, any of its Subsidiaries or any Affiliate of any
of them, all as if Bank of Boston and Bank of New York were not the Managing
Agents and without any duty to account therefor to the other Lenders.
Independent Credit Decision. Each of the Lenders acknowledges that it has
independently and without reliance upon the Managing Agents, based on the
financial statements and other documents referred to in Section 7.2, on the
other representations and warranties contained herein and on such other
information with respect to the Company and its Subsidiaries as such Lender
deemed appropriate, made such Lender's own credit analysis and decision to enter
into this Agreement and to make the extensions of credit provided for hereunder.
Each Lender represents to the Managing Agents that such Lender will continue to
make its own independent credit and other decisions in taking or not taking
action under this Agreement or any other Credit Document. Each Lender expressly
acknowledges that neither the Managing Agents nor any of their officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to such Lender, and no act by any Managing Agent
taken under this Agreement or any other Credit Document, including any review of
the affairs of the Company and its Subsidiaries, shall be deemed to constitute
any representation or warranty by the Managing Agents. Except for notices,
reports and other documents expressly required to be furnished to each Lender by
the Managing Agents under this Agreement or any other Credit Document, the
Managing Agents 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, or creditworthiness of the Company
or any Subsidiary which may come into the possession of the Managing Agents or
any of their officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
Indemnification. The holders of the Credit Obligations shall indemnify each
Managing Agent and its officers, directors, employees and agents (to the extent
not reimbursed by the Company and without limiting the obligation of the Company
to do so), pro rata in accordance with their respective Percentage Interests,
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 be imposed on, incurred by or asserted
against either Managing Agent or such Persons relating to or arising out of this
Agreement, any other Credit Document, the transactions contemplated hereby or
thereby, or any action taken or omitted by either Managing Agent in connection
with any of the foregoing; provided, however, that the foregoing shall not
extend to actions or omissions which are taken by either Managing Agent with
gross negligence or willful misconduct.
Successors and Assigns; Lender Assignments and Participations. Any
reference in this Agreement or any other Credit Document to any of the parties
hereto shall be deemed to include the successors and assigns of such party, and
all covenants and agreements by or on behalf of the Company, the Managing Agents
or the Lenders that are contained in this Agreement or any other Credit Document
shall bind and inure to the benefit of their respective successors and assigns;
provided, however, that (a) the Company and its Subsidiaries may not assign
their rights or obligations under this Agreement or any other Credit Document
except for mergers or liquidations permitted by Section 6.10, and (b) the
Lenders shall be not entitled to assign their respective Percentage Interests in
the credits extended hereunder or their Commitments except as set forth below in
this Section 11.
Assignments by Lenders.ssignments by Lenders
Assignees and Assignment Procedures. Each Lender may (a) without the
consent of the Managing Agents or the Company if the proposed assignee is a
Federal Reserve Bank or is an Affiliate of any Lender or (b) otherwise with the
consents of the Managing Agents and (so long as no Event of Default exists) the
Company (which consents will not be unreasonably withheld), in compliance with
applicable laws in connection with such assignment, assign to one or more
commercial banks or other financial institutions (each, an "Assignee") all or a
portion of its interests, rights and obligations under this Agreement and the
other Credit Documents, including all or a portion of its Commitment, the
portion of the Loan at the time owing to it and the Notes held by it ; provided,
however, that:
( ) the aggregate amount of the portion of the Loan owing to the assigning
Lender subject to each such assignment to any Assignee other than another Lender
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the New York Managing Agent) shall be not less than
$5,000,000 and in integral multiples of $1,000,000 in excess thereof; and
(i) the parties to each such assignment shall execute and deliver to the
New York Managing Agent an Assignment and Acceptance (the "Assignment and
Acceptance") substantially in the form of Exhibit 11.1.1, together with the Note
subject to such assignment and a processing and recordation fee of $2,500
payable on a pro rata basis to the Managing Agents by the assigning Lender and
the Assignee.
Upon acceptance and recording pursuant to Section 11.1.4, from and after
the effective date specified in each Assignment and Acceptance (which effective
date shall be at least five Banking Days after the execution thereof unless
waived by the Managing Agents):
(A) the Assignee shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement and
(B) the assigning Lender shall, to the extent provided in such assignment,
be released from its obligations 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 Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
3.3.4, 3.5 and 9, as well as to any fees accrued for its account hereunder and
not yet paid).
Terms of Assignment and Acceptance. By executing and delivering an
Assignment and Acceptance, the assigning Lender and Assignee shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
( ) other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby free and clear of any
adverse claim, such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement, any other Credit Document or any other instrument or document
furnished pursuant hereto;
(a) such assigning Lender makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Company and its
Subsidiaries or the performance or observance by the Company or any of its
Subsidiaries of any of its obligations under this Agreement, any other Credit
Document or any other instrument or document furnished pursuant hereto;
(b) such Assignee confirms that it has received a copy of this Agreement,
together with copies of the most recent financial statements delivered pursuant
to Section 7.2 or Section 6.4 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance;
(c) such Assignee will independently and without reliance upon the Managing
Agents, such assigning Lender 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 decisions in taking or not taking action under this Agreement;
(d) such Assignee appoints and authorizes the Managing Agents to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Managing Agents by the terms hereof, together with such
powers as are reasonably incidental thereto; and
(e) such Assignee agrees that it will perform in accordance with the terms
of this Agreement all the obligations which are required to be performed by it
as a Lender.
Register. The New York Managing Agent shall maintain at the New York Office
a register (the "Register") for the recordation of (a) the names and addresses
of the Lenders and the Assignees which assume rights and obligations pursuant to
an assignment under Section 11.1.1, (b) the Percentage Interest of each such
Lender as set forth in Exhibit 10.1 and (c) the amount of the Loan owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Company, the Managing Agents and the
Lenders may treat each Person whose name is registered therein for all purposes
as a party to this Agreement. The Register shall be available for inspection by
the Company or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
Acceptance of Assignment and Assumption. Upon its receipt of a completed
Assignment and Acceptance executed by an assigning Lender and an Assignee
together with the Note subject to such assignment, the processing and
recordation fee referred to in Section 11.1.1 and (if required under clause (b)
of Section 11.1.1) the written consent of the Company, the New York Managing
Agent shall (a) accept such Assignment and Acceptance, (b) record the
information contained therein in the Register and (c) give prompt notice thereof
to the Company. Within five Banking Days after receipt of notice, the Company,
at its own expense, shall execute and deliver to the New York Managing Agent, in
exchange for the surrendered Note, a new Note to the order of such Assignee in a
principal amount equal to the applicable Commitment and Loan assumed by it
pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained a Commitment and Loan, a new Note to the order of such assigning Lender
in a principal amount equal to the applicable Commitment and Loan retained by
it. Such new Note shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note, and shall be dated the date
of the surrendered Note which it replaces.
Federal Reserve Bank. Notwithstanding the foregoing provisions of this
Section 11, any Lender may at any time pledge or assign all or any portion of
such Lender's rights under this Agreement and the other Credit Documents to a
Federal Reserve Bank; provided, however, that no such pledge or assignment shall
release such Lender from such Lender's obligations hereunder or under any other
Credit Document.
Further Assurances. The Company and its Subsidiaries shall sign such
documents and take such other actions from time to time reasonably requested by
an Assignee to enable it to share in the benefits of the rights created by the
Credit Documents.
Credit Participants. Each Lender may, without the consent of the Company or
the Managing Agents, in compliance with applicable laws in connection with such
participation, sell to one or more commercial banks or other financial
institutions (each a "Credit Participant") participations in all or a portion of
its interests, rights and obligations under this Agreement and the other Credit
Documents (including all or a portion of its Commitment, the Loan and the Notes
held by it); provided, however, that:
( ) such Lender's obligations under this Agreement shall remain unchanged;
(a) such Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations;
(b) the Credit Participant shall be entitled to the benefit of the cost
protection provisions contained in Sections 3.3.4, 3.5 and 9, but shall not be
entitled to receive any greater payment thereunder than the selling Lender would
have been entitled to receive with respect to the interest so sold if such
interest had not been sold; and
(c) the Company, the Managing Agents and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall retain the
sole right as one of the Lenders to vote with respect to the enforcement of the
obligations of the Company relating to the Loan and the approval of any
amendment, modification or waiver of any provision of this Agreement (other than
amendments, modifications, consents or waivers described in clause (c) of the
proviso to Section 10.7).
The Company agrees, to the fullest extent permitted by applicable law, that
any Credit Participant and any Lender purchasing a participation from another
Lender pursuant to Section 11.2 may exercise all rights of payment (including
the right of set-off), with respect to its participation as fully as if such
Credit Participant or such Lender were the direct creditor of the Company and a
Lender hereunder in the amount of such participation.
Replacement of Lender. In the event that any Lender or to the extent
applicable, any Credit Participant (in each case, an "Affected Lender"):
( ) fails to perform its obligations to fund any portion of the Revolving
Loan on any Closing Date when required to do so by the terms of the Credit
Documents, or fails to provide its portion of any Eurodollar Pricing Option
pursuant to Section 3.3.1 or on account of a Legal Requirement as contemplated
by Section 3.3.5;
(a) demands payment under the provisions of Section 3.5 in an amount the
Company deems materially in excess of the amounts with respect thereto demanded
by the other Lenders;
(b) is required to but fails to deliver on a timely basis to the Company
and the New York Managing Agent the forms required of foreign Lenders under
Section 13 hereof;
(c) refuses to consent to a proposed extension of a Final Maturity Date or
a Competitive Auction Facility Loan Maturity Date that is consented to by the
other Lenders; or
(d) refuses to consent to a proposed amendment, modification, waiver or
other action requiring consent of the holders of 100% of the Percentage
Interests under Section 10.7(b) that is consented to by the other Lenders;
then, so long as no Event of Default exists, the Company shall have the
right to seek a replacement lender which is reasonably satisfactory to the
Managing Agents (the "Replacement Lender"). The Replacement Lender shall
purchase the interests of the Affected Lender in the Loan and its Commitment and
shall assume the obligations of the Affected Lender hereunder and under the
other Credit Documents upon execution by the Replacement Lender of an Assignment
and Acceptance and the tender by it to the Affected Lender of a purchase price
agreed between it and the Affected Lender (or, if they are unable to agree, a
purchase price in the amount of the Affected Lender's Percentage Interest in the
Revolving Loan or appropriate credit support for contingent amounts included
therein, and all other outstanding Credit Obligations then owed to the Affected
Lender). No assignment fee pursuant to Section 11.1.1(ii) shall be required in
connection with such assignment. Such assignment by the Affected Lender shall be
deemed an early termination of any Eurodollar Pricing Option to the extent of
the Affected Lender's portion thereof, and the Company will pay to the Affected
Lender any resulting amounts due under Section 3.3.4. Upon consummation of such
assignment, the Replacement Lender shall become party to this Agreement as a
signatory hereto and shall have all the rights and obligations of the Affected
Lender under this Agreement and the other Credit Documents with a Percentage
Interest equal to the Percentage Interest of the Affected Lender, the Affected
Lender shall be released from its obligations hereunder and under the other
Credit Documents, and no further consent or action by any party shall be
required. Upon the consummation of such assignment, the Company, the Managing
Agents and the Affected Lender shall make appropriate arrangements so that a new
Revolving Note is issued to the Replacement Lender if it has acquired a portion
of the Revolving Loan and, if the Replacement Lender so requests, a new
Competitive Auction Facility Note is issued to the Replacement Lender if it has
acquired a portion of the Competitive Auction Facility Loan. The Company shall
sign such documents and take such other actions reasonably requested by the
Replacement Lender to enable it to share in the benefits of the rights created
by the Credit Documents. Until the consummation of an assignment in accordance
with the foregoing provisions of this Section 11.3, the Company shall continue
to pay to the Affected Lender any Credit Obligations as they become due and
payable.
Confidentiality. Each Lender will make no disclosure of confidential
information furnished to it by the Company or any of its Subsidiaries unless
such information shall have become public through no breach of such Lender's
confidentiality obligation under this Section 12, except:
( ) in connection with operations under or the enforcement of this
Agreement or any other Credit Document to Persons who have a reasonable need to
be furnished such confidential information and who agree to comply with the
restrictions contained in this Section 12 with respect to such information;
(a) pursuant to any statutory or regulatory requirement or any mandatory
court order, subpoena or other legal process;
(b) to any parent or corporate Affiliate of such Lender or to any Credit
Participant, proposed Credit Participant or proposed Assignee; provided,
however, that any such Person shall agree to comply with the restrictions set
forth in this Section 12 with respect to such information;
(c) to its independent counsel, auditors and other professional advisors
with an instruction to such Person to keep such information confidential; and
(d) with the prior written consent of the Company, to any other Person.
Foreign Lenders. If any Lender is not incorporated or organized under the
laws of the United States of America or a state thereof, such Lender shall
deliver to the Company and the New York Managing Agent the following:
( ) Two duly completed copies of United States Internal Revenue Service
Form 1001 or 4224 or successor form, as the case may be, certifying in each case
that such Person is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes; and
(a) A duly completed Internal Revenue Service Form W-8 or W-9 or successor
form, as the case may be, to establish an exemption from United States backup
withholding tax.
Each such Lender that delivers to the Company and the New York Managing
Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant to this Section 13
further undertakes to deliver to the Company and the New York Managing Agent two
further copies of Form 1001 or 4224 and Form W-8 or W-9, or successor applicable
form, or other manner of certification, as the case may be, on or before the
date that any such form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form previously delivered by it
to the Company and the New York Managing Agent. Such Forms 1001 or 4224 shall
certify that such Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes. The
foregoing documents need not be delivered in the event any change in treaty, law
or regulation or official interpretation thereof has occurred which renders all
such forms inapplicable or which would prevent such Lender from delivering any
such form with respect to it, or such Lender advises the Company that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax and, in the case of a Form W-8 or W-9, establishing an
exemption from United States backup withholding tax. Until such time as the
Company and the New York Managing Agent have received such forms indicating that
payments hereunder are not subject to United States withholding tax or are
subject to such tax at a rate reduced by an applicable tax treaty, the Company
shall withhold taxes from such payments at the applicable statutory rate without
regard to Section 3.5.
Notices. Except as otherwise specified in this Agreement or any other
Credit Document, any notice required to be given pursuant to this Agreement or
any other Credit Document shall be given in writing. Any notice, consent,
approval, demand or other communication in connection with this Agreement or any
other Credit Document shall be deemed to be given if given in writing (including
telex, telecopy or similar teletransmission) addressed as provided below (or to
the addressee at such other address as the addressee shall have specified by
notice actually received by the addressor), and if either (a) actually delivered
in fully legible form to such address (evidenced in the case of a telex by
receipt of the correct answer back) or (b) in the case of a letter, unless
actual receipt of the notice is required by any Credit Document five days shall
have elapsed after the same shall have been deposited in the United States
mails, with first-class postage prepaid and registered or certified.
If to the Company or any of its Subsidiaries, to it at its address set
forth on the signature page of this Agreement, to the attention of the chief
financial officer.
If to any Lender or either Managing Agent, to it at its address set forth
on the signature pages of this Agreement or in the Register, with a copy to each
Managing Agent.
Course of Dealing; Amendments and Waivers. No course of dealing between any
Lender or either Managing Agent, on one hand, and the Company, on the other
hand, shall operate as a waiver of any of the Lenders' or Managing Agents'
rights under this Agreement or any other Credit Document or with respect to the
Credit Obligations. The Company acknowledges that if the Lenders or the Managing
Agents, without being required to do so by this Agreement or any other Credit
Document, give any notice or information to, or obtain any consent from the
Company, the Lenders and the Managing Agents shall not by implication have
amended, waived or modified any provision of this Agreement or any other Credit
Document, or created any duty to give any such notice or information or to
obtain any such consent on any future occasion. No delay or omission on the part
of any Lender or any Managing Agent in exercising any right under this Agreement
or any other Credit Document or with respect to the Credit Obligations shall
operate as a waiver of such right or any other right hereunder or thereunder. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion. No waiver, consent or amendment with
respect to this Agreement or any other Credit Document shall be binding unless
it is in writing and signed by the Managing Agents or the Required Lenders.
No Strict Construction. The parties have participated jointly in the
negotiation and in the determination of the wording of this Agreement and the
other Credit Documents with counsel sophisticated in financing transactions. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement and the other Credit Documents shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement and the other Credit Documents.
Defeasance. When all Credit Obligations have been paid, performed and
reasonably determined by the Lenders to have been indefeasibly paid in full, and
if at that time no Lender continues to be committed to extend any credit to the
Company hereunder or under any other Credit Document, this Agreement and the
other Credit Documents shall terminate. Thereupon, on the Company's demand and
at its cost and expense, the Managing Agents shall execute proper instruments,
acknowledging satisfaction of and discharging this Agreement and the other
Credit Documents; provided, however, that Sections 3.3.4, 3.5, 9, 10.9.7, 10.12,
12, 18 and 19 shall survive the termination of this Agreement.
Venue; Service of Process. The Company:rocess
( ) Irrevocably submits to the nonexclusive jurisdiction of the state
courts of The Commonwealth of Massachusetts and to the nonexclusive jurisdiction
of the United States District Court for the District of Massachusetts (to the
extent such District Court has subject-matter jurisdiction) for the purpose of
any suit, action or other proceeding arising out of or based upon this Agreement
or any other Credit Document or the subject matter hereof or thereof.
(a) Waives to the extent not prohibited by applicable law that cannot be
waived, and agrees not to assert, by way of motion, as a defense or otherwise,
in any such proceeding brought in any of the above-named courts, any claim that
it is not subject personally to the jurisdiction of such court, that its
property is exempt or immune from attachment or execution, that such proceeding
is brought in an inconvenient forum, that the venue of such proceeding is
improper, or that this Agreement or any other Credit Document, or the subject
matter hereof or thereof, may not be enforced in or by such court.
The Company consents to service of process in any such proceeding in any
manner at the time permitted by Chapter 223A of the General Laws of The
Commonwealth of Massachusetts and agrees that service of process by registered
or certified mail, return receipt requested, at its address specified in or
pursuant to Section 14 is reasonably calculated to give actual notice.
WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT
CANNOT BE WAIVED, EACH OF THE COMPANY, THE MANAGING AGENTS AND THE LENDERS
WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY CREDIT OBLIGATION OR IN ANY WAY
CONNECTED WITH THE DEALINGS OF THE LENDERS, THE MANAGING AGENTS, OR THE COMPANY
IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE. The Company
acknowledges that it has been informed by the Managing Agents that the
provisions of this Section 19 constitute a material inducement upon which each
of the Lenders has relied and will rely in entering into this Agreement and any
other Credit Document, and that it has reviewed the provisions of this
Section 19 with its counsel. Any Lender, any Managing Agent, or the Company may
file an original counterpart or a copy of this Section 19 with any court as
written evidence of the consent of the Company, the Managing Agents and the
Lenders to the waiver of their rights to trial by jury.
General. All covenants, agreements, representations and warranties made in
this Agreement or any other Credit Document or in certificates delivered
pursuant hereto or thereto shall be deemed to have been relied on by each
Lender, notwithstanding any investigation made by any Lender on its behalf, and
shall survive the execution and delivery to the Lenders hereof and thereof. The
invalidity or unenforceability of any provision hereof shall not affect the
validity or enforceability of any other provision hereof. The headings in this
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof. This Agreement and the other Credit Documents
(including any related fee agreements with the Managing Agents or the Lenders)
constitute the entire understanding of the parties with respect to the subject
matter hereof and thereof and with respect to such subject matter supersede all
prior and contemporaneous understandings and agreements, whether written or
oral. This Agreement may be executed in any number of counterparts which
together shall constitute one instrument. This Agreement shall be governed by
and construed in accordance with the laws of The Commonwealth of Massachusetts
applicable to contracts made and to be performed entirely within The
Commonwealth of Massachusetts.
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first above written.
CENTRAL MAINE POWER COMPANY
By ______________________________________
Title:
83 Edison Drive
Augusta, Maine 04336
Telecopy: (207) 626-9588
THE FIRST NATIONAL BANK OF BOSTON
By ______________________________________
Title:
The First National Bank of Boston
Energy & Utilities Division
100 Federal Street
Boston, Massachusetts 02110
Telecopy: (617) 434-3652
Telex: 940581
THE BANK OF NEW YORK
By _____________________________________
Title:
The Bank of New York
One Wall Street
New York, New York 10286
Telecopy: (212) 635-7923
FLEET BANK OF MAINE
By _____________________________________
Title:
Fleet Bank of Maine
Two Portland Square
Portland, Maine 04101
Telecopy: (207) 874-5167
KEYBANK NATIONAL ASSOCIATION
By _____________________________________
Title:
KeyBank National Association
Large Corporate Banking
127 Public Square
MC: OH-01-27-0606
Cleveland, Ohio 44114-1306
Telecopy: (216) 689-4981
COOPERATIEVE-CENTRALE
RAIFEISSEN-BOERLEENBANK, B.A., "RABOBANK
NEDERLAND, NEW YORK BRANCH"
By _____________________________________
Title:
By _____________________________________
Title:
Rabobank Nederland, New York Branch
245 Park Avenue
New York, New York 10167
Telecopy: (212) 916-7837
THE SUMITOMO BANK, LTD.,
New York Branch
By ______________________________________
Title:
The Sumitomo Bank, Ltd., New York Branch
277 Park Avenue
New York, New York 10172
Telecopy: (212) 224-5188
THE TOKAI BANK, LIMITED,
New York Branch
By ______________________________________
Title:
The Tokai Bank, Limited, New York Branch
55 East 52nd Street
New York, New York 10055
Telecopy: (212) 754-2170
EXHIBIT 2.1.4
THREE-YEAR REVOLVING NOTE
$__________________ ____________ __, 199_
FOR VALUE RECEIVED, the undersigned Central Maine Power Company, a
Maine corporation (the "Company"), hereby promises to pay to
(the "Lender") or order, in accordance with the terms
of the Credit Agreement hereinafter referred to, to the extent not sooner
paid, on the Three-Year Final Maturity Date,
DOLLARS ($ ) or such amount as may be advanced by the payee hereof
under the Three-Year Revolving Loan with daily interest from the date hereof,
computed as provided in such Credit Agreement, on the aggregate principal
amount of such advances from time to time unpaid at the per annum rate
applicable to such unpaid principal amount as provided in such Credit
Agreement and to pay interest on overdue principal and, to the extent not
prohibited by applicable law, on overdue installments of interest, fees and
any other overdue amounts at the rate specified in such Credit Agreement, all
such interest being payable at the times specified in such Credit Agreement,
except that all accrued interest shall be paid at the stated or accelerated
maturity hereof or upon the prepayment in full hereof.
Payments hereunder shall be made to The Bank of New York, as New York
Managing Agent for the payee hereof, One Wall Street, New York, New York 10286.
This Note evidences borrowings under and is entitled to the benefits
of and is subject to the provisions of the Credit Agreement dated as of
October 23, 1996, as from time to time in effect, among the Company, The Bank
of New York, for itself and as New York Managing Agent, The First National
Bank of Boston, for itself and as Boston Managing Agent, and certain other
Lenders from time to time party thereto (the "Credit Agreement"). The
principal of this Note is prepayable in the amounts and under the
circumstances set forth in the Credit Agreement, and may be prepaid in whole
or from time to time in part, all as set forth in the Credit Agreement. Terms
defined in the Credit Agreement and not otherwise defined herein are used
herein with the meanings so defined.
In case an Event of Default (as defined in the Credit Agreement)
shall occur, the entire principal amount of this Note may become or be
declared due and payable in the manner and with the effect provided in the
Credit Agreement.
This Note shall be governed by and construed in accordance with the
laws of the The Commonwealth of Massachusetts applicable to contracts made and
to be performed entirely within The Commonwealth of Massachusetts.
The parties hereto, including the Company and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance
and enforcement of this Note, except as specifically otherwise provided in the
Credit Agreement, and assent to extensions of time of payment, or forbearance
or other indulgence without notice.
CENTRAL MAINE POWER COMPANY
By_________________________
Title:
EXHIBIT 2.2.4
364-DAY REVOLVING NOTE
$__________________ ____________ __, 199_
FOR VALUE RECEIVED, the undersigned Central Maine Power Company, a
Maine corporation (the "Company"), hereby promises to pay to
(the "Lender") or order, in accordance with the terms
of the Credit Agreement hereinafter referred to, to the extent not sooner
paid, on the 364-Day Final Maturity Date, DOLLARS
($ ) or such amount as may be advanced by the payee hereof under the
364-Day Revolving Loan with daily interest from the date hereof, computed as
provided in such Credit Agreement, on the aggregate principal amount of such
advances from time to time unpaid at the per annum rate applicable to such
unpaid principal amount as provided in such Credit Agreement and to pay
interest on overdue principal and, to the extent not prohibited by applicable
law, on overdue installments of interest, fees and any other overdue amounts
at the rate specified in such Credit Agreement, all such interest being
payable at the times specified in such Credit Agreement, except that all
accrued interest shall be paid at the stated or accelerated maturity hereof or
upon the prepayment in full hereof.
Payments hereunder shall be made to The Bank of New York, as New York
Managing Agent for the payee hereof, One Wall Street, New York, New York 10286.
This Note evidences borrowings under and is entitled to the benefits
of and is subject to the provisions of the Credit Agreement dated as of
October 23, 1996, as from time to time in effect, among the Company, The Bank
of New York, for itself and as New York Managing Agent, The First National
Bank of Boston, for itself and as Boston Managing Agent, and certain other
Lenders from time to time party thereto (the "Credit Agreement"). The
principal of this Note is prepayable in the amounts and under the
circumstances set forth in the Credit Agreement, and may be prepaid in whole
or from time to time in part, all as set forth in the Credit Agreement. Terms
defined in the Credit Agreement and not otherwise defined herein are used
herein with the meanings so defined.
In case an Event of Default (as defined in the Credit Agreement)
shall occur, the entire principal amount of this Note may become or be
declared due and payable in the manner and with the effect provided in the
Credit Agreement.
This Note shall be governed by and construed in accordance with the
laws of the The Commonwealth of Massachusetts applicable to contracts made and
to be performed entirely within The Commonwealth of Massachusetts.
The parties hereto, including the Company and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance
and enforcement of this Note, except as specifically otherwise provided in the
Credit Agreement, and assent to extensions of time of payment, or forbearance
or other indulgence without notice.
CENTRAL MAINE POWER COMPANY
By__________________________________
Title:
r:\yearly\10k\1996\ex231.doc
EXHIBIT 2.3.1
COMPETITIVE AUCTION FACILITY LOAN BID REQUEST
Date:
To: The Bank of New York, as New York Managing Agent under the Credit
Agreement (as defined below)
Re: Credit Agreement dated as of October 23, 1996, as from time to time
in effect (the "Credit Agreement"), among Central Maine Power Company and
certain Lenders for which The Bank of New York and The First National Bank of
Boston are acting as Managing Agents.
The undersigned hereby gives notice pursuant to Section 2.3.1 of the
Credit Agreement that the undersigned requests bids from the Lenders with
respect to the following Competitive Auction Facility Loan(s):
Competitive Auction Facility Loan Closing
Date1 (Date of Borrowing): ____________________
Designation of Competitive Auction Facility Loan(s)
(either Three-Year or 364-Day): __________________
Principal Amount(s)2 Competitive Auction3 Competitive Auction4
of Requested Competitive Facility Loan Interest Facility Loan
Auction Facility Loan(s) Payment Dates (if any) Maturity Date(s)
Such Competitive Auction Facility Loan bids should offer a Competitive Auction
Facility Rate.
The sum of the aggregate principal amount of Three-Year Competitive
Auction Facility Loans outstanding, after giving effect to the Three-Year
Competitive Auction Facility Loans requested hereby, plus the Three-Year
Revolving Loan will be $________.5
The sum of the aggregate principal amount of 364-Day Competitive
Auction Facility Loans outstanding, after giving effect to the 364-Day
Competitive Auction Facility Loans requested hereby, plus the 364-Day
Revolving Loan will be $________.6
Aggregate number of Eurodollar Pricing Options and Competitive
Auction Facility Loans outstanding, after giving effect to the Competitive
Auction Facility Loans requested hereby.7 __________
Terms defined in the Credit Agreement and not otherwise defined
herein are used herein with the meanings so defined.
Very truly yours,
CENTRAL MAINE POWER COMPANY
By__________________________
Title:
1 Must be the Banking Day following the applicable Request Date.
2 Aggregate amount must be a minimum of $1,000,000, and if larger, in
integral multiples of $500,000.
3 Must pay accrued and unpaid interest on the 90th day after the
Competitive Auction Facility Loan Closing Date if the Competitive Auction
Facility Loan Maturity Date is more than 90 days after the Competitive Auction
Facility Loan Closing Date.
4 Not earlier than seven days following the applicable Competitive Auction
Facility Loan Closing Date and not later than the earlier of (i) the 180th day
following the applicable Competitive Auction Facility Loan Closing Date and (ii)
the applicable Final Maturity Date.
5 Must not exceed the Maximum Amount of Three-Year Revolving Credit as
determined by Section 2.1.2 of the Credit Agreement.
6 Must not exceed the Maximum Amount of 364-Day Revolving Credit as
determined by Section 2.2.2 of the Credit Agreement.
7 Must not exceed 10.
EXHIBIT 2.3.2
INVITATION TO BID ON COMPETITIVE AUCTION FACILITY LOAN
Date:
To: Lenders Participating in the Competitive Auction Facility Loan Bid
Auction under the Credit Agreement
Re: Invitation to Bid on Competitive Auction Facility Loan
Pursuant to Section 2.3.2 of the Credit Agreement dated as of October
23, 1996, as from time to time in effect (the "Credit Agreement"), among
Central Maine Power Company and certain Lenders for which The Bank of New York
and The First National Bank of Boston are acting as Managing Agents, we are
pleased on behalf of Central Maine Power Company to invite you to submit bids
with respect to the following Competitive Auction Facility Loan(s):
Competitive Auction Facility Loan Closing
Date (Date of Borrowing): ____________________
Designation of Competitive Auction Facility Loan(s)
(either Three-Year or 364-Day): __________________
Principal Amount(s) Competitive Auction Competitive Auction
of Requested Competitive Facility Loan Interest Facility Loan
Auction Facility Loan(s) Payment Dates (if any) Maturity Date(s)
Such Competitive Auction Facility Loan bids should offer a Competitive Auction
Facility Rate.
Please respond to this invitation by no later than 10:00 a.m. (New
York time) on the Competitive Auction Facility Loan Closing Date.
Terms defined in the Credit Agreement and not otherwise defined
herein are used herein with the meanings so defined.
Very truly yours,
THE BANK OF NEW YORK,
as New York Managing Agent
under the Credit Agreement
By____________________________________
Title:
EXHIBIT 2.3.3A
COMPETITIVE AUCTION FACILITY LOAN BID
Date:
The Bank of New York,
as New York Managing Agent
under the Credit Agreement
(as defined below)
One Wall Street
New York, New York 10286
Attention: [insert]
Re: Central Maine Power Company
In response to your invitation on behalf of Central Maine Power
Company (the "Borrower") dated ____________________, the undersigned (the
"Bidding Lender") hereby submits the following Competitive Auction Facility
Loan bid(s) with respect to the following Competitive Auction Facility Loan(s):
1. Bidding Lender: ____________________
2. Person to contact at Bidding Lender: ____________________
3. Competitive Auction Facility Loan Closing
Date (Date of Borrowing): ____________________
4. Designation of Competitive Auction Facility Loan(s)
(either Three-Year or 364-Day): ____________________
5. The undersigned hereby offers to make to the Borrower, on the
Competitive Auction Facility Loan Closing Date specified above, the following
Competitive Auction Facility Loan(s):
<TABLE>
Competitive Auction
<S> <C>
Principal Amount(s)1 Facility Loan Competitive Auction
of Offered Competitive Interest Payment Facility Loan Competitive Auction2
Auction Facility Loan(s) Dates (if any) Maturity Date(s) Facility Rate(s)
</TABLE>
The undersigned understands and agrees that the offer(s) set forth
above, subject to the satisfaction of the applicable conditions set forth in
the Credit Agreement dated as of October 23, 1996 as from time to time in
effect (the "Credit Agreement"), among Central Maine Power Company and certain
Lenders for which The Bank of New York and The First National Bank of Boston
are acting as Managing Agents, obligates the undersigned to make the
Competitive Auction Facility Loan(s) for which any offer(s) are accepted in
whole or in part by the Borrower.
Terms defined in the Credit Agreement and not otherwise defined
herein are used herein with the meanings so defined.
Very truly yours,
[NAME OF LENDER]
By______________________________
Title:
EXHIBIT 2.3.3B
LIST OF COMPETITIVE AUCTION FACILITY LOAN BIDS
Date:
Central Maine Power Company
83 Edison Drive
Augusta, Maine 04336
Attention: Manager of Treasury Operations
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of October 23,
1996, as from time to time in effect (the "Credit Agreement"), among Central
Maine Power Company and certain Lenders for which The Bank of New York and The
First National Bank of Boston are acting as Managing Agents. Terms defined in
the Credit Agreement and not otherwise defined herein are used herein with the
meanings so defined.
Notice is hereby given that pursuant to Section 2.3.3 of the Credit
Agreement, the following Lenders have offered to make to Central Maine Power
Company on ____________________, the following Competitive Auction Facility
Loan(s) in the amount(s) and at the rate(s) specified below:
Lender(s):
Designation of Competitive Auction
Facility Loan(s)
Principal Amount(s) of Offered
Competitive Auction Facility Loan(s): $___________________
Competitive Auction Facility Loan
Interest Payment Dates (if any) ____________________
Competitive Auction Facility Loan
Maturity Date(s):
Competitive Auction Facility Rate(s): ____________________%
Very truly yours,
THE BANK OF NEW YORK,
as New York Managing Agent
under the Credit Agreement
By________________________________
Title:
EXHIBIT 2.3.4A
LIST OF ACCEPTANCES AND NON-ACCEPTANCES
OF COMPETITIVE AUCTION FACILITY LOAN BIDS
The Bank of New York,
as New York Managing Agent
under the Credit Agreement
(as defined below)
One Wall Street
New York, New York 10286
Attention: [insert]
Ladies and Gentlemen:
Reference is made to (a) the Credit Agreement dated as of October 23,
1996, as from time to time in effect (the "Credit Agreement"), among Central
Maine Power Company (the "Company") and certain Lenders for which you are
acting as New York Managing Agent and (b) the bid notices (the "Bid Notices")
received from you on [insert applicable Competitive Auction Facility Loan
Closing Date]. Terms defined in the Credit Agreement and not otherwise
defined herein are used herein with the meanings so defined.
[Pursuant to Section 2.3.4 of the Credit Agreement, the Company
hereby irrevocably accepts the offer(s) of the Lender(s) specified below to
make the following Competitive Auction Facility Loans:
Lender(s): ____________________
Competitive Auction Facility Loan
Closing Date: ____________________
Designation of Competitive Auction
Facility Loan(s) (either Three-Year
or 364-Day) ____________________
Principal Amount(s) of Offered
Competitive Auction Facility Loan(s): $____________________
Competitive Auction Facility Rate(s): ____________________%
Competitive Auction Facility Loan
Maturity Date(s): ____________________
Competitive Auction Facility Loan
Interest Payment Dates (if any): ____________________]
[repeat for each accepted bid]
[Except as provided above,] all offers to make Competitive Auction
Facility Loans described in the Bid Notices are hereby rejected.
Very truly yours,
CENTRAL MAINE POWER COMPANY
By__________________________
Title:
EXHIBIT 2.3.4B
ACCEPTANCE OF COMPETITIVE AUCTION FACILITY LOAN BIDS
Date:
To: Lenders Participating in the Competitive Auction Facility Loan Bid
Auction under the Credit Agreement
Reference is made to the Credit Agreement dated as of October 23,
1996, as from time to time in effect (the "Credit Agreement"), among Central
Maine Power Company and certain Lenders for which The Bank of New York and The
First National Bank of Boston are acting as Managing Agents.
Pursuant to Section 2.3.4 of the Credit Agreement, notification has
been received from Central Maine Power Company that it has accepted the
following bids:
Lender(s): ____________________
Designation of Competitive Auction
Facility Loan(s) ____________________
Principal Amount(s) of Offered
Competitive Auction Facility Loan(s): $____________________
Competitive Auction Facility Loan
Interest Payment Dates (if any): ____________________
Competitive Auction Facility Loan
Maturity Date(s): ____________________
Competitive Auction Facility Rate(s): ____________________%
If your quote has been accepted, funds should be transferred to The
Bank of New York [insert transfer instructions] and should be immediately
available as of 2:30 p.m. (New York time) on _________________.
Following are the Competitive Auction Facility Loan bids which were submitted
by the Lenders in today's auction:
Lender(s): ____________________
Designation of Competitive Auction
Facility Loan(s) ____________________
Principal Amount(s) of Offered
Competitive Auction Facility Loan(s): $____________________
Competitive Auction Facility Loan
Interest Payment Dates (if any): ____________________
Competitive Auction Facility Loan
Maturity Date(s): ____________________
Competitive Auction Facility Rate(s): ____________________%
Very truly yours,
THE BANK OF NEW YORK,
as New York Managing Agent
under the Credit Agreement
By________________________________
Title:
EXHIBIT 2.3.4C
NON-ACCEPTANCE OF COMPETITIVE AUCTION FACILITY LOAN BIDS
Date:
To: Lenders Participating in the Competitive Auction Facility Loan Bid
Auction under the Credit Agreement
Reference is made to the Credit Agreement dated as of October 23,
1996, as from time to time in effect (the "Credit Agreement"), among Central
Maine Power Company and certain Lenders for which The Bank of New York and The
First National Bank of Boston are acting as Managing Agents.
Pursuant to Section 2.3.4 of the Credit Agreement, notification has
been received from the Company that it has not accepted any of the following
bids:
Lender(s): ____________________
Designation of Competitive Auction
Facility Loan(s) ____________________
Principal Amount(s) of Offered
Competitive Auction Facility Loan(s): $____________________
Competitive Auction Facility Loan
Interest Payment Dates (if any): ____________________
Competitive Auction Facility Loan
Maturity Date(s): ____________________
Competitive Auction Facility Rate(s): ____________________%
Following are the Competitive Auction Facility Loan bids which were
submitted by the Lenders in today's auction:
Lender(s): ____________________
Designation of Competitive Auction
Facility Loan(s) ____________________
Principal Amount(s) of Offered
Competitive Auction Facility Loan(s): $____________________
Competitive Auction Facility Loan
Interest Payment Dates (if any): ____________________
Competitive Auction Facility Loan
Maturity Date(s): ____________________
Competitive Auction Facility Rate(s): ____________________%
Very truly yours,
THE BANK OF NEW YORK,
as New York Managing Agent
under the Credit Agreement
By___________________________________
Title:
EXHIBIT 2.3.4D
NOTICE OF COMPETITIVE AUCTION FACILITY LOAN
Date:
Central Maine Power Company
83 Edison Drive
Augusta, Maine 04336
Attention: Manager of Treasury Operations
[Each Lender]
[Address]
Attention:
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of October 23,
1996, as from time to time in effect (the "Credit Agreement"), among Central
Maine Power Company and certain Lenders for which the undersigned is acting as
New York Managing Agent. Terms defined in the Credit Agreement and not
otherwise defined herein are used herein with the meanings so defined.
Pursuant to Section 2.3.4 of the Credit Agreement, the undersigned
hereby notifies you that the following Competitive Auction Facility Loan(s)
became effective on the date hereof:
Designation of Principal Amount of Competitive Auction
Competitive Auction Competitive Auction Facility Loan
Facility Loans Facility Loan(s) Maturity Date(s)
Very truly yours,
THE BANK OF NEW YORK,
as New York Managing Agent
under the Credit Agreement
By_______________________________
Title:
EXHIBIT 2.3.5
COMPETITIVE AUCTION FACILITY NOTE
No. ___ _______________, 199_
$_______________ New York, New York
FOR VALUE RECEIVED, the undersigned Central Maine Power Company, a
Maine corporation (the "Borrower"), hereby promises to pay to
______________________ (the "Holder") or order, on [insert Competitive Auction
Facility Loan Maturity Date], ___________________________________ DOLLARS
($_______________) or, if less, the aggregate unpaid Competitive Auction
Facility Loan made to the Borrower by the Holder, with daily interest from the
date hereof, computed as provided in the Credit Agreement referred to below,
on the principal amount of such Competitive Auction Facility Loan from time to
time unpaid at a rate per annum of [insert Competitive Auction Facility Rate]
plus an additional rate per annum on the occurrence and continuation of an
Event of Default, as provided for in the Credit Agreement. Accrued interest
shall be payable on [insert Competitive Auction Facility Loan Interest Payment
Date, if any] [and on] [insert Competitive Auction Facility Loan Maturity
Date] except that all accrued interest shall be paid at the accelerated
maturity hereof or upon the prepayment in full hereof.
Payments hereunder shall be made to The Bank of New York, as New York
Managing Agent for the payee hereof, at One Wall Street, New York, New York
10286.
This Note evidences a Competitive Auction Facility Loan under and is
entitled to the benefits and subject to the provisions of the Credit Agreement
dated as of October 23, 1996, as from time to time in effect (the "Credit
Agreement"), among Central Maine Power Company and certain Lenders for which
The Bank of New York and The First National Bank of Boston are acting as
Managing Agents. The principal of this Note may be due and payable in whole
or in part prior to the maturity date stated above and is subject to required
prepayment in the amounts and under the circumstances set forth in the Credit
Agreement. Other than in circumstances under which the Company is required
under the Credit Agreement to prepay, the Company may not prepay any principal
amount outstanding under this Note. This Note may not be assigned or
otherwise transferred except in accordance with the Credit Agreement.
In case an Event of Default (as defined in the Credit Agreement)
shall occur, the entire principal amount of this Note may become or be
declared due and payable in the manner and with the effect provided in the
Credit Agreement.
This Note shall be governed by and construed in accordance with the
laws of the The Commonwealth of Massachusetts applicable to contracts made and
to be performed entirely within The Commonwealth of Massachusetts.
The undersigned maker, and all guarantors and endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note, except as specifically otherwise provided in the Credit Agreement, and
assent to extensions of time of payment or forbearance or other indulgence
without notice.
CENTRAL MAINE POWER COMPANY
By__________________________________
Title:
1 Principal amount of bids may not exceed principal amount requested. Bids
must be for a minimum of $1,000,000, and if larger, in integral multiples of
$500,000.
2 Specify rate of interest per annum (each rounded to the nearest 1/100%).
EXHIBIT 5.1.1
OFFICER'S CERTIFICATE
Pursuant to Section 5.1.1 of the Credit Agreement dated as of October
23, 1996 among Central Maine Power Company, a Maine corporation (the
"Company"), The First National Bank of Boston, for itself and as Boston
Managing Agent, The Bank of New York, for itself and as New York Managing
Agent, and certain other Lenders from time to time party thereto (the "Credit
Agreement"), the Company certifies that (i) the representations and warranties
contained in Section 7 of the Credit Agreement are true and correct on and as
of the date hereof with the same force and effect as though originally made on
and as of the date hereof (except as to any representation or warranty which
is limited to a specific earlier date) and (ii) no Default exists on the date
hereof.
Terms defined in the Credit Agreement and not otherwise defined
herein are used herein with the meanings so defined.
This certificate has been executed by a duly authorized Financial
Officer this 23rd day of October, 1996.
CENTRAL MAINE POWER COMPANY
By_______________________________
Title:
EXHIBIT 10.1
REVOLVING LOAN PERCENTAGE INTERESTS
The Percentage Interest of each Lender in the Three-Year Revolving
Loan and the 364-Day Revolving Loan, and the related Commitments, shall be
computed based on the maximum principal amounts for each Lender as follows:
Maximum Principal Maximum Principal
Amount in Three Amount in 364
Year Revolving Loan Day Revolving Loan
Percentage
Interest
Lender
The Bank of New York $9,000,000 $13,500,000 18%
The First National Bank of $9,000,000 $13,500,000 18%
Boston
Fleet Bank of Maine $8,000,000 $12,000,000 16%
Rabobank Nederland, New $7,200,000 $10,800,000 14.4%
York Branch
KeyBank National $5,600,000 $8,400,000 11.2%
Association
The Sumitomo Bank, Ltd., $5,600,000 $8,400,000 11.2%
New York Branch
The Tokai Bank, Limited, $5,600,000 $8,400,000 11.2%
New York Branch
TOTAL $50,000,000 $75,000,000 100%
EXHIBIT 11.1.1
ASSIGNMENT AND ACCEPTANCE
This Agreement, dated as of ____________, 199_, is between
_______________, a Lender under the Credit Agreement referred to below (the
"Assignor"), and _______________ (the "Assignee").
For valuable consideration, the receipt of which is hereby acknowledged,
the Assignor agrees with the Assignee as follows:
Reference to Credit Agreement and Definitions. Reference is made to the
Credit Agreement dated as of October 23, 1996, as from time to time in effect,
among Central Maine Power Company, a Maine corporation (the "Company"), The
First National Bank of Boston, for itself and as Boston Managing Agent, The Bank
of New York, for itself and as New York Managing Agent, and certain other
Lenders from time to time party thereto (the "Credit Agreement"). Terms defined
in the Credit Agreement and not otherwise defined herein are used herein with
the meanings so defined.
2. Assignment and Assumption. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, a __%
interest in and to all the Assignor's interests, rights and obligations under
the Credit Agreement and the other Credit Documents as of the Assignment Date
(as defined below), including without limitation such percentage interest in the
Commitment of the Assignor on the Assignment Date and such percentage interest
in the Revolving Loan outstanding on the Assignment Date, together with such
percentage interest in all unpaid interest with respect to the Revolving Loan
and all fees arising pursuant to the Credit Agreement accrued to the Assignment
Date (but excluding any Competitive Auction Facility Loan currently outstanding
advanced by the Assignor). [If an assignment of a Competitive Auction Facility
Loan or portion thereof is to be made, add appropriate language.]
3. Representations, Warranties, etc.
3.1. Assignor's Representations and Warranties. The Assignor:
(a) represents that as of the date hereof, its Commitment is $____________
and the outstanding principal balance of its portion of the Revolving Loan is
$___________ with respect to the 364-Day Revolving Loan and $___________ with
respect to the Three-Year Revolving Loan;
(b) makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with the Credit Agreement or the other Credit Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or the other Credit Documents or any other instrument or
document furnished pursuant thereto, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; and
(c) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company and its Subsidiaries or the
performance of any of the obligations of the Company under the Credit Agreement,
any of the Credit Documents or any other instrument or document furnished
pursuant hereto or thereto.
3.2. Assignee's Representations, Warranties and Agreements. The Assignee:
(a) represents and warrants that it is legally authorized to enter into
this Agreement;
(b) confirms that it has received a copy of the Credit Agreement and
certain other Credit Documents it has requested, together with copies of the
most recent financial statements delivered pursuant to Section 6.4 or 7.2 of the
Credit Agreement and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Agreement;
(c) agrees that it will, independently and without reliance upon the
Managing Agents, Assignor or any other Person which has become a Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement and the other Credit Documents;
(d) agrees that it will be bound by the provisions of the Credit Agreement
and the other Credit Documents and will perform in accordance with their terms
all the obligations which are required to be performed by it as a Lender; and
(e) agrees to appoint and authorize the Managing Agents to take such action
as agent on its behalf and to exercise such powers under the Credit Agreement as
are delegated to the Managing Agents by the terms thereof, together with such
powers as are reasonably incidental thereto.
4. Assignment Date. The effective date of this Agreement shall be
____________, 199_ (the "Assignment Date").
5. Assignee Party to Credit Agreement; Assignor Release of Obligations.
From and after the Assignment Date, (a) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Agreement, have the rights
and obligations of a Lender thereunder and under the Credit Documents and (b)
the Assignor shall, to the extent provided in this Agreement, relinquish its
rights and be released from its obligations under the Credit Agreement and the
other Credit Documents.
6. Notices. All notices and other communications required to be given or
made to the Assignee under this Agreement, the Credit Agreement or any other
Credit Documents shall be given or made at the address of the Assignee set forth
on the signature page hereof or at such other address as the Assignee shall have
specified to the Assignor, the Managing Agents and the Company in writing.
7. Further Assurances. The parties hereto agree to execute and deliver such
other instruments and documents and to take such other actions as any party
hereto may reasonably request in connection with the transactions contemplated
by this Agreement.
8. General. This Agreement, the Credit Agreement and the other Credit
Documents constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and supersede all current and prior agreements and
understandings, whether written or oral. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. The invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of any other term or
provision hereof. This Agreement may be executed in any number of counterparts,
which together shall constitute one instrument, and shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns,
including as such successors and assigns all holders of any Credit Obligation.
This Agreement shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of the jurisdiction in which the
principal office of the Assignor is located. Each of the Assignor and the
Assignee has caused this Agreement to be executed and delivered by its duly
authorized officer under seal as of the date first written above.
[ASSIGNOR]
By___________________________
Title:
[ASSIGNEE]
By_____________________________
Title:
[Street Address
City, State Zip Code]
Telecopy:
Telex:
The foregoing is hereby consented to:
THE FIRST NATIONAL BANK OF BOSTON, as Boston Managing
Agent
By____________________________________
Title:
THE BANK OF NEW YORK, as New York Managing Agent
By____________________________________
Title:
CENTRAL MAINE POWER COMPANY
By____________________________________
Title:
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 Maine 100.0
Aroostook Valley Electric Company Maine 100.0
MaineCom Services Maine 100.0
TeleSmart Maine 100.0
*Maine Industries, Inc. is inactive.
Exhibit 23-1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Central Maine Power Company on Form S-3 (File Nos. 33-56939; 33-36679;
33-39826; 33-44754; 33-51611) of our report dated January 23, 1997, on our
audits of the consolidated financial statements and financial statement
schedule of Central Maine Power Company and subsidiary as of December 31, 1996
and 1995, and for the years ended December 31, 1996, 1995, and 1994, which
report is included in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Portland, Maine
March 25, 1997
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